Sunday, January 1, 2012

Fortune REIT intends to buy 2 Hong Kong properties for HK$1.9bil

Fortune REIT is looking to acquire two retail properties in Hong Kong for a total consideration of HK$1.9bil (S$319mil) that will bring its gross rentable area up by 23 per cent. Belvedere Garden Property comes with a price tag of HK$1.25bil, while Provident Centre Property costs HK$650mil. They will increase the gross rentable area of Fortune Reit's retail portolio by some 23% to 2.4mil sq.

The total consideration to be paid of HK$1.9bil is below the respective valuations (as at Sept 30, 2011) of HK$1.98bil and HK$2.02bil by independent valuers Knight Frank and Savills. It expects the purchases to be yield‐accretive.

Fortune will have to pay HK$49mil in fees and expenses for the acquisitions, raising the total cost of the acquisition to HK$1.949bil. It does not have plans to raise new equity  ‐  it will fund the HK$1.9bil using both debt and internal funds. Its aggregate leverage, at 20.1% as at Sept 30, is expected to go up to around 26.3% immediately after the transactions.

Fortune REIT believes that the deals will be yield accretive. The two properties generated a net property income yield of 4.2% for the year ended Dec 31, 2010 ‐ higher than the yield of 3.9% from its existing 14 properties.

It estimated that if it had owned the properties since Jan 1 this year, its distribution per unit for the six months ended June 30 would have been 6.7% higher, at 13.66 HK cents.Fortune REITs units closed at HK$3.77 after the news was released.

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