Prosperity REIT 2012 Interim Results Announcement
- Interim DPU uplifted by 10.9% year-on-year
- Surge in revenue and net property income driven by outstanding asset performance
- Remarkable rental reversion rate of 33.1%
- Reaping benefits from continuing office decentralization trend
Hong Kong, 16 August 2012 – Prosperity Real Estate Investment Trust (“Prosperity REIT”) [SEHK: 808] today announced its unaudited interim results for the six months ended 30 June 2012.
Uplift in distribution to unitholders
The strong set of results delivered by Prosperity REIT in the first half of 2012, amid a slowing economy, reflects the success of the REIT Manager’s proactive lease management strategy, as well as the benefits reaped from the on-going office decentralization trend. Revenue rose 10.8% and distributable income to unitholders was up by 12.7% year-on-year (“YoY”).
The REIT Manager is pleased to announce a distribution per unit (“DPU”) of HK$0.0660 for the first half of 2012. The interim DPU represents a YoY increase of 10.9%, and an annualized distribution yield of 7.5%1.
Outstanding asset performance
Prosperity REIT’s portfolio occupancy rate further improved to 99.0% as at 30 June 2012. Effective unit rent was up by 9.8% YoY, to a satisfactory HK$16.22 per square foot, primarily due to a remarkable rental reversion rate of 33.1%. Tenant retention rate also recorded a strong 80.0% during the first half of 2012.
These highly encouraging results attest the REIT Manager’s proactive approach in lease management and effective tenant recruitment strategy, pursued since Prosperity REIT’s listing in 2005.
Surge in revenue and net property income
Supported by the outstanding asset performance, Prosperity REIT recorded an increase of 10.8% in revenue to HK$149.3 million in the first half of 2012, compared with the last corresponding half year. The revenue comprised HK$126.2 million of rental and car park income, plus HK$23.1 million of rental related income.
The high tenant retention rate also resulted in savings in operating expenses. With cost-to-revenue ratio remaining stable at 22.0%, net property income rose 11.4% YoY to HK$116.5 million.
Sound financial position and increased asset value
The valuation of Prosperity REIT’s properties was HK$7,312 million as at 30 June 2012, an increase of 4.6% over the December 2011 valuation. Several asset enhancement works were completed in the first half of 2012, reflecting the REIT Manager’s continued commitment to enhance the value of the portfolio.
Thanks to the successful 5-year refinancing secured and the plain vanilla interest rate swap agreement arranged in 2010, finance costs remained largely stable. Financial position was healthy with a gearing level at 24.2% as at 30 June 2012.
Prosperity REIT achieved a 5.5% rise in net asset value per unit over the first half of the year to HK$3.82.
Reaping benefits from office decentralization trend
The REIT Manager believes that decentralized commercial areas are firmly entrenched in a sustainable growth path. Driven by the continued relocation demand from cost-sensitive tenants, office rents in non-core districts proved to be relatively resilient during the first half of 2012. In contrast, downward pressure in rental was experienced by the office spaces in prime districts amid sour business sentiment.
Kowloon East, in particular, is set to benefit from exciting urban redevelopment and new infrastructure, facilitated by the HKSAR Government’s long term vision to transform it into Hong Kong’s next generation Central Business District.
With a portfolio of properties situated in decentralized districts, Prosperity REIT is well positioned to benefit from the growth arising from the office decentralization trend.
Looking towards the remainder of 2012, external economic uncertainties and challenges from the global economy, especially the Euro crisis, may continue to create headwinds for the Hong Kong economy. Nevertheless, since Prosperity REIT’s listing in 2005, we have demonstrated persistence to navigate through volatile economic conditions and deliver stable distributions to unitholders. The solid business foundations of Prosperity REIT are evidenced by the strong interim results in this first half year.
The REIT Manager shall strive to advance our competitive position by leveraging on the future potentials arising from the policies of the HKSAR Government, focusing on Kowloon East redevelopment and by maintaining our properties at premier standard with the professional support of Goodwell-Prosperity Property Services Limited, the property manager of Prosperity REIT.
Barring any unforeseen circumstances, demand in commercial property in decentralized area will grow steadily. We shall continue to benefit from the office decentralization trend and deliver stable and sustainable returns to our unitholders.
About Prosperity REIT
Prosperity REIT (Stock Code: 808) is a Hong Kong collective investment scheme authorized under section 104 of the Securities and Futures Ordinance (Chapter 571 of Laws of Hong Kong). Prosperity REIT owns a diverse portfolio of seven commercial properties in the decentralized business districts of Hong Kong, comprising all, or a portion of, three Grade A office buildings, three industrial/office buildings and one industrial building. The total gross rentable area is 1,215,579 sq. ft., with a total of 407 car park spaces.
About ARA Asset Management (Prosperity) Limited, the REIT Manager
Prosperity REIT is managed by ARA Asset Management (Prosperity) Limited, a wholly-owned subsidiary of ARA Asset Management Limited, which is listed on the Main Board of the Singapore Exchange Securities Trading Limited.
The information contained in this press release does not constitute an offer or invitation to sell or the solicitation of an offer or invitation to purchase or subscribe for units in Prosperity REIT in Hong Kong or any other jurisdiction.
Media and Investor Contact
Investor Relations Manager
Tel: (852) 3605 9127
Fax: (852) 2169 0968
1 Based on Prosperity REIT’s closing unit price of HK$1.77 as at 29 June 2012