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Fortune Real Estate Investment Trust Increases Its 2018 Distribution per Unit on the Back of Record Gross Revenue

Fortune Real Estate Investment Trust (SGX: F25U) is a real estate investment trust (REIT) with a portfolio of 16 retail properties in Hong Kong. Yesterday, the REIT announced its financial results for the year ended 31 December 2018. Let’s look at some of the key highlights here.

Financial highlights

Revenue and net property income for 2018 inched up by 0.2% and 1.0% respectively to reach a record high of HK$1.94 billion and HK$1.47 billion. The increase was due to “positive rental reversion from the retail portion as well as increased car park income”. The REIT owns 2,713 car parking spaces.

Fortune REIT divested Provident Square during the year while Fortune Kingswood is currently undergoing asset enhancement initiatives (AEIs), which began in June 2018. Excluding these properties, on a like-for-like basis, revenue and net property income would have grown by 3.9% and 4.5% respectively.

Meanwhile, 2018’s income available for distribution rose 1.6% to HK$986.2 million, and distribution per unit (DPU) climbed 1% to 51.28 HK cents, up from 50.78 HK cents in 2017.

As of 31 December 2018, the REIT’s net asset value per unit grew 18.2% to HK$16.61 from HK$14.05 at the end of 2017. Its gearing ratio fell to 20.9% from 27.4%, with no refinancing needs until 2020.

Operational highlights

The retail uptrend in Hong Kong and resilient domestic spending have given rise to a strong operational performance for the REIT.

Fortune REIT’s portfolio posted a positive rental reversion of 12.7% while its occupancy was high at 93.1%, despite major AEIs at Fortune Kingswood, the REIT’s largest asset. The tenant retention rate was resilient at 68%.

The rejuvenation of the west block of Fortune Kingswood, which would bring about enhanced food and beverages and retail offerings, is expected to be completed by the end of this year. The revitalisation plan for the east block is currently in the planning stage. There is an aim to connect the east block with the west through more experiential offerings in lifestyle and entertainment.

Looking ahead

Fortune REIT said the following with regards to its plans:

“With a resilient portfolio of neighbourhood malls in Hong Kong and a successful track record spanning 15 years, Fortune REIT is well positioned to deliver consistent results and sustainable returns for our Unitholders. We will continue to strengthen our core competencies by executing a proactive leasing strategy, adding value to our malls through AEIs, seeking yield-accretive investment opportunities and maintaining a healthy capital structure.”

Fortune REIT’s unit price is currently at HK$9.69, translating to a price-to-book ratio of 0.58 and a distribution yield of 5.3%.

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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 Sudhan P doesn’t own shares in any companies mentioned.