Fortune REIT net property income reaches record HK$1.32b in FY2013

Revenue also notched a new high.

ARA Asset Management (Fortune) Limited, the manager of Fortune Real Estate Investment Trust (Fortune REIT), announced the latter's financial results for the year ended 31 December 2013 (FY2013), revealing record-breaking milestones for revenue and net property income.

Marking ten consecutive years of continuous growth, Fortune REIT saw its total revenue and net property income increasing by 18.3% and 17.8% year-on-year to HK$1,317.5 million and HK$928.3 million, respectively.

"This sustained performance was underpinned by its commitment to excellence in the three core competencies of investment, asset management and asset enhancement," the official press release accompanying the results said.

During the Reporting Year, Fortune REIT has continued to achieve strong operational performance: portfolio occupancy further rose to 98.7% as at 31 December 2013 while a solid 20.4% rental reversion was recorded for renewals, reflecting strong demand.

"The remarkable returns from completed asset enhancement initiatives (AEIs), additional income contributed by Fortune Kingswood acquired in October 2013, as well as the full-year income from Belvedere Square and Provident Square have all led to Fortune REIT’s exceptional result," the release said.

Income available for distribution increased by 16.9% year-on-year to HK$642.4 million for FY2013. The DPU for FY2013 was 36.00 HK cents (FY2012: 32.35 HK cents), representing a distribution yield of 5.8%.

Fortune REIT completed the acquisition of Fortune Kingswood in October 2013, representing the largest and most significant acquisition in its history. The addition of Fortune Kingswood has not only increased Fortune REIT’s total gross rentable area by 27.2% to 3.11 million sq. ft, but has also enabled Fortune REIT to capitalize on robust demand for retail space in northwest New Territories, helping spur further growth.

Using proactive leasing strategies and seamless integration into Fortune REIT’s portfolio, Fortune Kingswood has already seen some operational improvements within three months after its acquisition. Its occupancy rate as at 31 December 2013 has notably improved to 99.0% when compared with its occupancy rate of 95.5% as at 30 June 2013. Fortune Kingswood is expected to further benefited from the enhanced infrastructure linkage with Mainland China’s border as well as other parts of Hong Kong.

All three asset enhancement projects at Fortune City One (FCO), Ma On Shan Plaza and Jubilee Square have been completed on schedule with enormous success during the Reporting Year. All have outperformed their respective return on investment (ROI) target, reinforcingFortune REIT’s strong track record.

The last phase of FCO’s AEIs, which involved the FCO Market, was completed in October 2013. Occupancy at FCO Market improved significantly to almost 100% from 75% previously. The HK$20 million AEIs have achieved a ROI of more than 25% and marked the successful debut of the first-ever wet market AEIs. Renovation of the three floors at Jubilee Square was completed in June 2013. The HK$15 million AEIs have yielded a ROI of more than 25%. The net property income of Jubilee Square for the Reporting Year was boosted significantly by 57.4% year-on-year as a result. In December 2013, the HK$15 million AEIs at Ma On Shan Plaza was also completed. Total monthly rental income from the 59,000 sq.ft. renovated zone has improved by more than 70% and thus provided a spectacular ROI of 60%.

Mr. Anthony Ang, Chief Executive Officer of the Manager, said, “We are very pleased to witness Fortune REIT’s significant leap forward over the past decade. Although Hong Kong’s economy is forecast to grow in 2014 supported by resilient domestic consumption, the global economic environment remains fragile and uncertain. Notwithstanding the uncertainties, we are confident that Fortune REIT’s resilient retail portfolio and healthy financial position will continue to provide a strong foundation for the delivery of stable returns, leading to another decade of successes and achievements.”

Ms. Justina Chiu, Deputy Chief Executive Officer of the Manager, added, “Through proactive management of our asset portfolio, AEIs and acquiring properties that generate long-term benefits, Fortune REIT has managed to deliver continuous growth. Looking ahead, we are planning to embark on the next major AEIs at Belvedere Square in 2014, in which Phase 3, with a gross rentable area of approximately 133,750 sq.ft., will be fully upgraded to offer an enhanced shopping ambiance, and therefore attract more shoppers and retailers. At the same time, we intend to continue our pursuit of strategic acquisition opportunities and asset management that focus on enhancing the tenant mix, thus creating greater value for our Unitholders and ensuring further advancements.”