I recently looked into a hot favorite of institutional banks, private bankers - Fortune REIT listed on SGX and HKEX market....I must say that while I am not impressed with the yield. The book value was attractive enough to consider a look. Below are my findings from a very RESPONSIVE Investor Relations. Thumbs up guys.
Here's the very useful information for you guys to start with.
Query
Hi there, I am a retail investor and I like to understand more about the assets in terms of.
1. Remaining tenure (leasehold / freehold)
2. Weighted Average Lease to Expiry (WALE) and Weighted Average Lease Term (WALT)of the portfolio as a whole
3. Interest coverage ratio & weighted average debt maturity?
1. Remaining tenure (leasehold / freehold)
2. Weighted Average Lease to Expiry (WALE) and Weighted Average Lease Term (WALT)of the portfolio as a whole
3. Interest coverage ratio & weighted average debt maturity?
4. Any additional future plans from the management looking beyond HK assets?
5. What the management is doing differently from its competition to retain tenants/attract tenants?
Appreciate the details. Thank you!
5. What the management is doing differently from its competition to retain tenants/attract tenants?
Appreciate the details. Thank you!
Response
Land tenure
Land in Hong Kong basically all belong to government and therefore are all leasehold. Similar to most other leases in Hong Kong, majority of the land lease of Fortune REIT’s properties expire in 2047 with two of them expiring beyond 2047.
Lease Term and Lease Expiry
For the new leases commencing during 2018, the weighted average lease expiry based on the date of commencement of the leases was 2.0 years. As at 31 December 2018, the weighted average lease expiry was 1.5 years.
Interest coverage and debt maturity
Interest coverage based on earnings before interest and tax (EBIT) in 2018 was 5.9%. Fortune REIT’s gearing was 20.9% as at 31 December 2018 with no refinancing needs until 2020. As at 31 December 2018, Fortune REIT has total outstanding debt of HK$8,505M with HK$3,505M (41.2%), HK$3,800M (44.7%) and HK$1,200M (14.1%) maturing in 2020, 2021 and 2022 respectively.
Investment strategies
Our investment mandate allows us to invest outside Hong Kong while our current focus would still be in Hong Kong neighborhood malls. We like the resilience and income stability of the non-discretionary retail.
Asset management
We have been doing a good job in retaining quality tenants in our portfolio as our tenant retention always remains high (> 70%). Proactive asset management forms part of our overall growth strategies. We always aim to negotiate lease renewal with tenants in advance, regularly optimize tenant mix to keep Fortune Malls relevant to shoppers and proactively engage our customers through exciting festive promotion.
Should you have any further questions, please feel free to let us know. Thanks.
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