Fortune REIT is marking its first foray outside Hong Kong by acquiring the Stars of Kovan asset in Singapore for SGD 88 million (HKD501 million).

The acquisition consideration represents a 7.4% discount from the independent valuation as at 30 June 2022.

The asset is located in the north-east region of Singapore within a residential neighbourhood in the Hougang area.

It consists of 36 shop units and a public car park within Stars of Kovan.

The 22,638 square feet retail space together with 80 car parking spaces offer a 3.4% net property yield.

Stars of Kovan was developed by CK Assets Holding Limited and completed in 2019.

“We are pleased to expand our footprint outside of Hong Kong as we look to diversify and enhance the stability of Fortune REIT's income”, said Justina Chiu, Chief Executive Officer of Fortune REIT’s manager.

“The Stars of Kovan Property is a strategic fit with our existing portfolio of 16 neighbourhood retail assets in Hong Kong.

“With a 100% occupancy underpinned by a stable income stream from non-discretionary trade sectors, the property is expected to improve Fortune REIT's earnings and distributions upon completion of the acquisition”.

The acquisition will be predominantly funded with Singapore dollar bank borrowings, an SGD100 million five-year sustainability-linked revolving facility, to provide a natural currency hedge.

Based on Fortune REIT’s consolidated financial position as at 30 June 2022, the pro-forma gearing ratio is expected to increase slightly from 22.4% to 23.4% upon completion of the transaction, scheduled for October 2022.

By Shariffa Al-Habshee

Shariffa joined REITsWeek in 2017, and monitors Asia-Pacific REITs for the publication.