Fortune Real Estate Investment Trust · HKEX:778
Fortune Real Estate Investment Trust — FY2023 Earnings Presentation
51 slides from Fortune Real Estate Investment Trust's earnings presentation, Mar 5, 2024
Slide 1: Financial Results
Financial Results For the year ended 31 December 2023 5 March 2024
Slide 2: Fortune Goes Green, Goes Paperless
Fortune Goes Green, Goes Paperless Scan the QR Codes for our FY2023 Financial Results Presentation Announcement FORTUNE REIT | FY2023 Financial Results | Page 2
Slide 3: Results Overview
Results Overview Capital Management Portfolio Performance Marketing Campaigns Enhancement Initiatives Sustainability Progress Outlook & Strategies Appendix
Slide 4: FY2023 Results Overview
FY2023 Results Overview (HK$’M) 2023 2022 Change Revenue 1,785.9 1,764.4 +1.2% 100% Payout Property operating expenses (446.2) (434.2) +2.8% Net property income 1,299.4 1,290.2 +0.7% Finance costs (351.1) (241.6) +45.3% 8.1% Income available for distribution 810.6 877.3 -7.6% Yield DPU (HK$ cents) 4
Slide 5: Improvement in All Revenue Streams
Improvement in All Revenue Streams FY 2023 Revenue HK$1,785.9M 1.2% 78.8% Base rental1: HK$1,406.4M 0.1% FY2023 Revenue 13.7% Charge-out income2: HK$243.9M 5.1% HK$1,785.9M 6.8% Carpark income: HK$122.0M 4.8% 0.6% Turnover rent: HK$11.3M 36.5% 0.1% Other income: HK$2.3M 10.7% Notes: 1. Including lic
Slide 6: Capital Management
Results Overview Capital Management Portfolio Performance Marketing Campaigns Enhancement Initiatives Sustainability Progress Outlook & Strategies Appendix
Slide 7: Prudent Debt Management
Prudent Debt Management Debt Maturity Profile1 (HK$M) Loan in HKD Loan in SGD3 24.6% 3.6% No refinancing need Gearing Effective borrowing cost2 3,800 until Oct 2025 2,500 2.9 yrs 2.2 yrs 588 1,800 Avg. debt maturity Avg. swap maturity 1,200 800 2024 0 2025 2026 2027 2028 Un-committed 3.3x ~62% Inter
Slide 8: Stable Portfolio Valuation
Stable Portfolio Valuation Portfolio Total Hong Kong Portfolio Singapore Asset HK$ 38,997M HK$ 38,439M SG$ 95M 1.3% from Dec 2022 1.3% from Dec 2022 Remains Unchanged Per sf (G) retail HK$12,100 psf NAV Per Unit Acquisition of Stars of HK$ 13.94 Per carpark lot HK$784,000 Kovan Property 4.0% from De
Slide 9: Portfolio Performance
Results Overview Capital Management Portfolio Performance Marketing Campaigns Enhancement Initiatives Sustainability Progress Outlook & Strategies Appendix
Slide 10: Portfolio Performance Highlights
Portfolio Performance Highlights Occupancy 12 out of 17 malls Expects +WOO to pick up 94.4% with occupancy above 97% occupancy as AEIs approach for completion in 2Q2024 As at 31 Dec 2023 Retention Leasing momentum picked up during FY2023. Signed 83% leases (including new lettings and renewals) for a
Slide 11: A Strategic Focus on Necessity Trades
A Strategic Focus on Necessity Trades Necessity Trades WALE Lease Expiry in 2024 71% 1.5 Yrs 1million sq.ft OR 36% of rental By rental income By rental income By Gross Rentable Area Tenant’s Trade Mix By Gross Rental Income (as at 31 Dec 2023) 1.7% Community Services 0.7% 26.1% Food & Beverages 28.9
Slide 12: Leasing Momentum Picking Up for F&B
Leasing Momentum Picking Up for F&B First-in F&B Tenants Expanding F&B Chains Fortune City One Waldorf Avenue +WOO Metro Town FORTUNE REIT | FY2023 Financial Results | Page 12
Slide 13: More Experiential, Leisure and Lifestyle Offerings
More Experiential, Leisure and Lifestyle Offerings Sports & Wellness Electric Vehicles Entertainment & Others 5 fitness centers across 5 malls MG Motor entered as 1st NEV Attract a diverse range of visitors, with total rental area of 45k sq. ft. tenant including families and kids seeking Res
Slide 14: Gradual Recovery in Hourly Carpark Income and Footfall
Gradual Recovery in Hourly Carpark Income and Footfall Hourly Carpark Income Footfall As % of 2018-average As % of 2018-average 2018-Avg 2023 2022 2018-Avg 2023 2022 140% 140% 122% 120% 111% 113% 110% 104% 107% 120% 92% 107% 99% 101% 91% 102% 94% 90% 99% 88% 92% 91% 92% 100% 94% 107% 107% 100% 103%
Slide 15: Marketing Campaigns
Results Overview Capital Management Portfolio Performance Marketing Campaigns Enhancement Initiatives Sustainability Progress Outlook & Strategies Appendix
Slide 16: Marketing to Drive Footfall and Tenants’ Sales
Marketing to Drive Footfall and Tenants’ Sales Festive celebrations to delight shoppers Car shows drove footfall & atrium income Education open day Targeted promotions On Consumption On night Voucher Scheme hour spending Wet market promotion F&B e-Voucher program Tapping opportunity on Government’s
Slide 17: Fortune REIT’s 20th Anniversary Celebration
Fortune REIT’s 20th Anniversary Celebration A large-scale CSR campaign Fortune Malls – Caring and Supporting the Community for Two Decades was held to celebrate with our shoppers and strengthen our ties with communities Lucky draw and redemption Stage performance by popular girls group Thematic mall
Slide 18: Fortune REIT’s 20th Anniversary Celebration
Fortune REIT’s 20th Anniversary Celebration Over 250 staff participated in a 20- day charity event, collecting 2 million calories worth of food for donating to the community Celebrating with staffs and communities FORTUNE REIT | FY2023 Financial Results | Page 18
Slide 19: Enhancement Initiatives
Results Overview Capital Management Portfolio Performance Marketing Campaigns Enhancement Initiatives Sustainability Progress Outlook & Strategies Appendix
Slide 20: Continuous AEIs Pipeline
Continuous AEIs Pipeline Metro Town +WOO Phase 2 Fortune Metropolis Completed in 1Q2023 Scheduled completion To commence works in 2Q2024 in 4Q2024 2023 2024 2025 FORTUNE REIT | FY2023 Financial Results | Page 20
Slide 21: Metro Town - Space Reconfiguration and Tenant Repositioning
Metro Town - Space Reconfiguration and Tenant Repositioning CAPEX Completion Return on Investment HK$5.3M Jan 2023 11% Subdivided a 8,500 sq.ft. vacant kindergarten together with 2 adjacent shops into three shops to cater for new demand Introduced new F&B and Household tenants More efficient l
Slide 22: +WOO - AEIs On Track for Completion
+WOO - AEIs On Track for Completion Interactive video game at new LED screen CAPEX HK$300M Stage 2 completion New ceiling to enhance Target Completion lighting and re- 2Q2024 alignment of escalators Stage 3 AEIs to improve traffic flow Works in progress FORTUNE REIT | FY2023 Financial Results | Page
Slide 23: +WOO - AEIs Attract New Tenants and Drive Footfall
+WOO - AEIs Attract New Tenants and Drive Footfall Popular F&B line up Shanghai Cuisine Thai Cuisine Japanese Cuisine Asian Cuisine Enhanced retail offerings Fashion & Beauty Gifts & Toys Jewelry FORTUNE REIT | FY2023 Financial Results | Page 23
Slide 24: +WOO – HK’s 1st Mall AEIs to Receive Green Building Certification
+WOO – HK’s 1st Mall AEIs to Receive Green Building Certification 100 pieces of solar panel on roof top EV chargers at carpark 2023 Gold rating BEAM Plus Interiors Enhance indoor environment through Adopt eco-friending materials to ventilation and natural lighting minimize carbon footprint FORTUNE R
Slide 25: Fortune Metropolis – Unlocking its Full Potential
Fortune Metropolis – Unlocking its Full Potential CAPEX Commencement HK$200M 4Q2024 Improved accessibility Hung Hom Station now becomes a major interchange of 2 MTR 4 lines; ~7 mins to Admiralty Traffic congestion at Cross 4 Harbour Tunnel is largely eased 6 Fortune Metropolis 3 New residence fo
Slide 26: Sustainability Progress
Results Overview Capital Management Portfolio Performance Marketing Campaigns Enhancement Initiatives Sustainability Progress Outlook & Strategies Appendix
Slide 27: Sustainability Achievements
Sustainability Achievements 5-Star 1st HK REIT Received SBTi’s approval Highest rating in GRESB for near-term emission reduction for 3 consecutive years target 7-Yr AA- Low Risk in consecutive Sustainability Rating by Morningstar Hang Seng Corporate Hong Kong Quality Assurance Sustainalytics ESG Ris
Slide 28: Persistent Commitments to Sustainability
Persistent Commitments to Sustainability 85% GRA 100% Equipped with BMS HK assets certified as Green Buildings 1,000+ 25 CSR Solar Panels in 5 malls Events in 2023 To avoid 154 tons GHG p.a. 62% 209 kgs of produce Sustainability-linked Grown and donated by Loans Farm@Fortune in 2023 FORTUNE REIT | F
Slide 29: Outlook & Strategies
Results Overview Capital Management Portfolio Performance Marketing Campaigns Enhancement Initiatives Sustainability Progress Outlook & Strategies Appendix
Slide 30: Outlook and Strategies
Outlook and Strategies Market Cost and Portfolio Dynamics Capital Management Optimization Continued revival of inbound tourism Cost optimization and operational Upcoming AEIs completion at +WOO and local consumption as driving efficiency initiatives to ease pressure to attract new tenants and
Slide 31: Three Growth Strategies
Three Growth Strategies 03 02 01 Yield- Asset accretive Enhancement Acquisitions Active Leasing Management Initiatives FORTUNE REIT | FY2023 Financial Results | Page 31
Slide 32: Appendix
Results Overview Capital Management Portfolio Performance Marketing Campaigns Enhancement Initiatives Sustainability Progress Outlook & Strategies Appendix
Slide 33: Investment Highlights
Investment Highlights HK$10B HK$39B HK$13.94 71% income MSCI index Highest 5-Star Market Portfolio NAV from non-discretionary Inclusion in World GRESB Rating Cap Valuation per Unit trades Small Cap Fortune City One Ma On Shan Plaza +WOO Fortune Metropolis Laguna Plaza 20+ years A pure-play in of pro
Slide 34: A Hong Kong-Focused Neighborhood Mall Portfolio
A Hong Kong-Focused Neighborhood Mall Portfolio 17 Assets 2 Flagship Malls in HK 16 neighborhood malls in Hong Kong 1 suburban retail property in Singapore 1 Fortune City One New 3 10 Territories 2 +WOO Tai Wai 1 City One 8 5 Fortune Metropolis 15 16 6 Tsuen Wan West 11 3 million sq.ft. 12 Kowloon D
Slide 35: Portfolio Valuation Breakdown
Portfolio Valuation Breakdown (13) Stars of Kovan Portfolio Valuation1 (HK$M) Property 1.4% (1) Fortune City One 7,974 Portfolio valuation (2) +WOO 7,638 (3) Ma On Shan Plaza 5,593 HK$38,997M (4) Metro Town 3,549 (9) 3.1% (1) 20.4% (5) Belvedere Square 2,462 (8) 4.4% (6) Laguna Plaza 2,383 (7) Fortu
Slide 36: Stable Portfolio Occupancy
Stable Fortune REIT’s portfolio GRA(sq.ft.) Occupancy Portfolio 31 Dec 23 30 Jun 23 31 Dec 22 1. Fortune City One 414,469 97.8% 98.7% 98.0% Occupancy 2. +WOO 665,244 91.8% 89.1% 89.4% 3. Ma On Shan Plaza 310,084 98.7% 99.2% 99.4% 4. Metro Town 180,822 100% 100% 93.7% 5. Fortune Metropolis 332,168 86
Slide 37: Resilient Asset Class with Attractive Yield
Resilient Asset Class An attractive distribution yield of 8.1% with Attractive Yield 8.1% 6.4% 4.0% 3.2% 2.1% Fortune REIT's HS Property Index HS Index HK 10-yr Govt. HK Composite Dividend Yield 1 Dividend Yield2 Dividend Yield 2 Bond Yield 2 Interest Rate2 Sources: Company Data, Hang Seng Indexes,
Slide 38: Income Statement (FY2023)
Income (HK$’M) 2023 2022 YoY% Statement Revenue 1,785.9 1,764.4 +1.2% Property operating expenses (446.2) (434.2) +2.8% (FY2023) Manager’s performance fee (40.2) (39.9) +0.7% Net property income 1,299.4 1,290.2 +0.7% Manager’s base fee (118.2) (118.4) -0.2% Finance costs 1 (548.1) 307.4 N/A Change i
Slide 39: Income Statement (2H2023)
Income (HK$’M) 2H2023 2H2022 YoY% Statement Revenue 877.2 896.9 -2.2% Property operating expenses (230.2) (220.4) +4.5% (2H2023) Manager’s performance fee (19.4) (20.3) -4.3% Net property income 627.5 656.2 -4.4% Manager’s base fee (59.4) (59.9) -0.8% Finance costs 1 (340.6) 13.1 N/A Change in fair
Slide 40: Balance Sheet
Balance Sheet HK$’000 31 Dec 2023 31 Dec 2022 Gearing ratio Current assets 205,134 322,410 24.6% Non-current assets 39,305,164 40,012,773 Total assets 39,510,298 40,335,183 Portfolio valuation Current liabilities 1,774,536 3,243,964 HK$38,997M Non-current liabilities 9,685,662 8,163,918 Total liabil
Slide 41: Distribution Details
DISTRIBUTION DETAILS 25 March 2024 E x -d a te 18.02 HK cents 26 March 2024 F in a l D P U f o r t he ye a r e n d e d 3 1 D e c 2 0 2 3 Record Date 19 April 2024 P a ym e nt D a te FORTUNE REIT | FY2023 Financial Results | Page 41
Slide 42: Acquisitions for Growth
Acquisitions for Growth Asset Portfolio grew >11 times in 20 years AUM increased to HK$39.0 billion from HK$3.3 billion since IPO 17 17 17 14 16 Malls Malls 16 Malls Malls Malls 11 Malls Malls +WOO Laguna Plaza Stars of Kovan Property 5 +1 Provident Square Metro Town Belvedere Square Malls +1 +1 Rhi
Slide 43: Proven Track Record in AEIs
Proven Track Record in AEIs Property / Enhanced Area Completion CAPEX (HK$) ROI1 Metro Town –10,000 sf 1Q 2023 5.3M 11% +WOO Phase 1 – 200,000 sf 3Q 2019 150M 10.5% Belvedere Square - 126,000 sf 4Q 2015 80M 20.3% Ma On Shan Plaza - 59,000 sf 4Q 2013 15M 60% (previously a supermarket) Fortune City On
Slide 44: AEIs at Belvedere Square
AEIs at Belvedere Square Phase 3 CAPEX Completion ROI HK$80M 4Q2015 >20% Enhanced offerings after AEIs F&B Toy Shop Health Food FORTUNE REIT | FY2023 Financial Results | Page 44
Slide 45: AEIs at Fortune City One
AEIs at Fortune City One CAPEX Completion ROI HK$150M 3Q2013 >20% FORTUNE REIT | FY2023 Financial Results | Page 45
Slide 46: Hong Kong Economy – Improving Macro Conditions
Hong Kong Economy – Improving Macro Conditions 4.3 GDP 3.0 3.1 2.9 2.6 1.9 3.4 3.4 +4.3% YoY 1.1 -3.6 -3.5 4.8 -4.3 YoY % Change GDP in real terms Q4 2023 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 5.7 4.3 4.9 Composite 3.7 2.9 2.4 2.5 2.4
Slide 47: Hong Kong Retail Sales and Restaurant Receipts
Hong Kong Retail Sales and Restaurant Receipts Retail Sales Value (as % of 2018 level) In 2023, total retail sales value increased 16.2% YoY but only reached 110% 80.9% of 2018-level in Dec 2023. 94.3% Supermarkets 90% Benefited from the gradual recovery of 80.9% Total Retail Sales inbound visit
Slide 48: Tourist Arrivals and Outbound Travels
Tourist Arrivals and Outbound Travels Inbound Tourist Arrivals 66% 69% 60% 4,500,000 80% 4,000,000 59% 59% 55% 70% 34 million tourists (i.e. an average of 2.8 3,500,000 55% 57% 58% 60% million per month) visited HK in 2023. 49% 3,000,000 50% About 79% came from Mainland China. 2,500,000 40% 2,000,
Slide 49: Singapore - Retail Market Performance
Singapore - Retail Market Performance Retail sales picking up steadily post-covid +1.1% GDP S$B 5.00 50% YoY +2.2% YoY in 4Q2023 +1.0% YoY in 3Q2023 Retail Sales Value (Excl. Motor Vehicles) Online Sales Proportion 4.19 For 2023 4.00 3.52 40% 3.00 30% +2.1% Retail Sales1,2 2.00 20% YoY -2.8% YoY in
Slide 50: Disclaimer
Disclaimer This document has been prepared by ARA Asset Management (Fortune) Limited, in of the Fortune REIT’s financial or trading position or prospects. This document its capacity as the manager (“REIT Manager”) of Fortune Real Estate Investment may contain forward looking statements. Investors ar
Slide 51: Contact Us
CONTACT US ARA Asset Management (Fortune) Limited Justina Chiu Chief Executive Officer justina.chiu@esr.com Jenny Hung Deputy Chief Executive Officer jenny.hung@esr.com Maggie Mui Assistant Director, Investor Relations maggie.mui@esr.com www.fortunereit.com www.fortunemalls.com.hk
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