An existing Fortune REIT property in Hong KongFortune REIT has indicated that it will use proceeds from the sale of Nob Hill Square to repay existing loans.

Hong Kong-focused retail real estate investment trust Fortune REIT (SGX:F25U) announced on 2 January that it has established new banking facilities for an amount of up to HKD1.6 billion through two wholly-owned subsidiaries.

The arrangements, comprising of a term loan facility and a revolving credit facility, will be used to partly fund the acquisition of Laguna Plaza. The REIT announced in December 2014 that it will be acquiring the shopping mall for HKD1.9 billion (SGD324.2 million).

Laguna Plaza, intended to boost the REIT’s presence in Hong Kong’s East Kowloon area, is valued at HKD2.08 billion and estimated to have a property yield of 4.3%. The property is said to have a committed occupancy rate of 96.7%.

Fortune REIT has paid a 5% deposit of HKD95.9 million for the property while the rest will be paid upon completion of the acquisition.

The new banking facilities established to support this acquisition are namely a HKD1.2 billion 5-year secured term loan facility with United Overseas Bank Limited and a 2-year unsecured revolving credit facility with the same lender.

The new loan facilities are expected to raise Fortune REIT’s gearing from 29.9% to 33.9%.

Units of Fortune REIT closed the trading day at HKD7.75 on the Singapore Exchange.

Fortune REIT property in Hong Kong
Fortune REIT property in Hong Kong

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.