What Investors Should Know About Fortune Real Estate Investment Trust’s Latest Performance, Historical Growth, And Ability To Improve Its Assets

Fortune Real Estate Investment Trust (SGX: F25U) is dual-listed in both Singapore and Hong Kong and its portfolio comprises 17 retail malls that have a collective gross floor area of 3.18 million square feet.

The REIT is currently managed by a subsidiary of ARA Asset Management Limited (SGX: D1R). ARA Asset Management is currently in the process of being privatised by a consortium of investors that include its founder and chief executive, John Lim.

Here are three things about Fortune REIT’s business that would be of interest to investors:

1. Performance in 2016 so far

Source: Fortune REIT earnings release

The table above shows a number of important financial metrics for Fortune REIT. We can see that the first six months of 2016 has been a good for the REIT – its revenue, net property income, income available for distribution, and distribution per unit have all been able to grow.

It’s worth noting too that the REIT achieved this performance despite having some of its assets undergo asset enhancement initiatives.

2. Historical growth

Source: Fortune REIT investor presentation

Fortune REIT has managed to grow its net property income in consecutive years over the past few years, as illustrated by the chart above. But that’s not all – the REIT has also managed to consistently improve its distributions on a per unit basis.

The first-half of 2016 has so far seen Fortune REIT extend its winning streak.

3. Track record of improving the quality of its assets:

Source: Fortune REIT investor presentation

REITs often undertake asset enhancement initiatives (AEIs), which can be simply understood as improvements being made to a REIT’s properties. The end goal of AEIs is to allow a REIT to gain higher rental income from a property, either by freeing up more space to lease out, repurposing the property, or improving the property’s features so that existing tenants are willing to pay a higher rent.

AEIs can be a particularly attractive option for a REIT to drive revenue growth if it has retail properties that are located in prime areas with high traffic flow since there is little location risk as compared to investing in an entirely new asset.

And in a more general sense, AEIs can also be a less risky way for REITs to grow their revenues since the capital involved is way smaller when compared to what is required for the acquisition of new properties.

Fortune REIT has proven to be able to drive returns from its AEIs, given the high ROI (return on investment) on many of its past projects.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.