Prosperity REIT 2011 Interim Results Announcement
Prosperity REIT's 1H 2011 DPU Grows 7.2% Year-on-Year
Annualized distribution yield at 6.5%1
Locked-in interest cost and increase in asset value
Office decentralization trend provides momentum in coming years
Hong Kong, 12 August 2011 – Prosperity Real Estate Investment Trust ("Prosperity REIT") [SEHK: 0808] today announced its unaudited interim results for the six months ended 30 June 2011 (the "Reporting Period").
Stable distribution and attractive distribution yield
Building on the solid financial foundations established over the years, Prosperity REIT achieved strong results during the first half of 2011. In particular, the total finance costs were reduced by 35.9% year-on-year ("YoY") attributed to the prudent financial management policies adopted by the ARA Asset Management (Prosperity) Limited (the "REIT Manager"). The saving in financial costs, together with our stable rental revenue, resulted in a YoY increase of 7.2% in distribution per unit ("DPU") for the Reporting Period.
The REIT Manager is pleased to announce that the unaudited distributable income to unitholders of Prosperity REIT was HK$80.6 million, and the interim DPU was HK$0.0595 for the Reporting Period. This represents an annualized distribution yield of 6.5%1.
Locked-in interest cost and increased asset value
Following the successful refinancing of the five-year term loan of HK$1.77 billion with maturity in August 2015 and the subsequent plain vanilla interest rate swap agreement entered into in December 2010 to hedge 80% of the term loan at a lower rate of 2.145%, apart from the immediate interest savings registered in the first half of the year, Prosperity REIT will be in a secured position against fluctuation in interest rate in the medium term.
The property appraised value of Prosperity REIT increased by 11.9% over the first half of the year to HK$6,643 million as of 30 June 2011. This is attributed to a continuous strong office market in the first half of 2011.
Solid asset numbers and performance
Prosperity REIT’s portfolio recorded a strong rental reversion rate of 12.3% and a revenue of HK$134.7 million during the Reporting Period. The occupancy rate of our portfolio reached an optimal level of 98.5% as at 30 June 2011. The average effective unit rent was HK$14.77 per sq. ft. The cost-to-revenue ratio and gearing ratio remained sound at 22.4% and 29.8%, respectively.
These encouraging figures are attributable to the REIT Manager’s professional management expertise and effective tenant recruitment strategies.
Revenue and Net Property Income
During the Reporting Period, revenue improved to HK$134.7 million, being HK$1.1 million or 0.8% higher than the last corresponding half year. The revenue comprised HK$113.8 million rental and car park income, plus HK$20.9 million rental related income. Rental and car park income was HK$1.2 million or 1.1% higher than the last corresponding half year.
For the Reporting Period, the net property income was HK$104.6 million, which falls behind the last corresponding half year by HK$1.2 million or 1.1%. This was mainly due to the adverse impact brought forward from the negative rental reversion in 2010. The impact is expected to be mitigated as a result of the strong comeback of rental reversion in the first half of 2011. The cost-to-revenue ratio was 22.4%.
Office decentralization trend provides extra momentum for growth in coming years
Positive business prospects are propelling demand for office space in Hong Kong. Given the limited supply of office space in the near future, the demand for quality office space will drive rental rates up further. The trend of office relocation to decentralized business districts is expected to continue, with Prosperity REIT being well-positioned to benefit from this trend in the coming years.
Looking forward, we are confident that Prosperity REIT will continue to benefit from the stable growth of the Hong Kong’s economy. The REIT Manager expects the increase in demand for office space and the growing trend for decentralization of office space to continue. These factors are advantageous to the continuous good performance of Prosperity REIT.
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 geographically 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 with a total gross rental area of about 1.22 million square feet.
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 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.
1 Based on Prosperity REIT's closing unit price of HK$1.83 as at 30 June 2011