An existing Fortune REIT property in Hong Kong

Singapore-listed Hong Kong-focused real estate investment trust, Fortune REIT (SGX:F25U), announced on 3 April that it has completed the divestment of its property in Kwai Chung known as Nob Hill Square.

The REIT first announced in February 2015 that it was disposing the property for HKD648 million (SGD113 million). Nob Hill Square has been a property in Fortune REIT’s initial portfolio since it was listed in 2003. The sale represents Fortune REIT’s first ever asset divestment in its 11 years of operating history.

Fortune REIT has described the sale as a strategy to unlock value from the property. “The sale price of HKD648 million represents a 48% premium over the appraised value of HKD438 million”, said Fortune REIT in a February 2015 statement, adding that that a disposal gain of approximately HKD200 million is expected to be recorded from the disposal.

“The divestment is accretive to the net asset value of Fortune REIT and it enables the manager to streamline its operations and allocate resources more efficiently”, the REIT added.

Fortune REIT has indicated that it will use proceeds from the divestment to repay existing loans. “Upon completion, Fortune REIT’s gearing ratio is expected to be reduced to approximately 31.8%”, the REIT said, adding that a lower gearing would enable it to pursue better-yielding opportunities as they arise.

Units of Fortune REIT are currently listed on the Singapore Exchange at HKD8.15(SGD1.43).

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

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.