Fortune Real Estate Investment Trust · HKEX:778
Fortune Real Estate Investment Trust — H1 2023 Earnings Presentation
45 slides from Fortune Real Estate Investment Trust's earnings presentation, Aug 8, 2023
Slide 1: Financial Results
Financial Results For the six months ended June 2023 8 August 2023
Slide 2: Results Overview
Results Overview Capital Management Portfolio Performance Marketing Campaigns Enhancement Initiatives Sustainability Progress Outlook & Strategies FORTUNE REIT | 1H2023 Financial Results | Page 2
Slide 3: 1H2023 Financial Performance
1H2023 Financial Performance (HK$’M) 1H 2023 1H 2022 YoY% Revenue 908.7 867.5 +4.7% 100% Payout Property operating expenses (216.0) (213.9) +1.0% Net property income 671.9 634.0 +6.0% Finance costs (152.2) (99.0) +53.8% 8.0% Income available for distribution 447.7 456.9 -2.0% Yield DPU (HK$ cents) 2
Slide 4: Income Contribution
Income Contribution 1H2023 Revenue HK$908.7M 79.0% Base rental1: HK$717.5M 1H2023 Revenue 13.4% Charge-out income2: HK$121.8M HK$908.7M 6.8% Carpark income: HK$61.4M 0.7% Turnover rent: HK$6.5M 0.2% Other income: HK$1.5M Notes: 1. Including license income and atrium income. 2. Charge-out income incl
Slide 5: Capital Management
Results Overview Capital Management Portfolio Performance Marketing Campaigns Enhancement Initiatives Sustainability Progress Outlook & Strategies FORTUNE REIT | 1H2023 Financial Results | Page 5
Slide 6: Prudent Debt Management
Prudent Debt Management Debt Maturity Profile1 (HK$M) 23.8% 3.2% Loan in HKD Loan in SGD3 3,800 Gearing Effective borrowing cost2 2,500 2.5 yrs 2.7 yrs 579 Avg. debt maturity Avg. swap maturity 1,500 Due in 1,200 Oct 2023 800 2023 0 2024 2025 2026 2027 Un-committed 4.6x ~63% Interest coverage Intere
Slide 7: Portfolio Valuation
Portfolio Valuation Portfolio Total Hong Kong Portfolio Singapore Asset HK$ 39,537M HK$ 38,987M SG$ 95M 0.1% from Dec 2022 0.1% from Dec 2022 Remains Unchanged Per sf (G) retail HK$12,300 psf NAV Per Unit Acquisition of Stars of HK$14.39 Per carpark lot HK$784,000 Kovan Property 0.9% from Dec 2022 c
Slide 8: Portfolio Performance
Results Overview Capital Management Portfolio Performance Marketing Campaigns Enhancement Initiatives Sustainability Progress Outlook & Strategies FORTUNE REIT | 1H2023 Financial Results | Page 8
Slide 9: Portfolio Performance Highlights
Portfolio Performance Highlights Occupancy Retention Rental 94.1% 77% Mixed As at 30 Jun 2023 For 1H2023 Performance ▪ Portfolio occupancy remained ▪ Signed leases for a total of ▪ Mixed recovery pace in healthy despite major AEIs 378k sq.ft., representing 12.5% different sectors underway at +WOO of
Slide 10: Lease expiry profile and trade mix
Lease expiry profile and trade mix Necessity Trades WALE Lease Expiry in 2H 2023 69% 1.3 Yrs 563k sq.ft OR 18% of rental By rental income By rental income By Gross Rentable Area Tenant’s Trade Mix By Gross Rental Income (as at 30 Jun 2023) 2.3% Community Services 0.9% 25.8% Food & Beverages 27.5% 4.
Slide 11: Leasing momentum picking up
Leasing momentum picking up F&B, Fortune Metropolis Increased leasing enquiries for new space F&B and Household are among the top expanding sectors F&B, Metro Town Gifts & Toys, Ma On Shan Plaza FORTUNE REIT | 1H2023 Financial Results | Page 11
Slide 12: Hourly Carpark Income and Footfall
Hourly Carpark Income and Footfall Hourly Carpark Income Footfall As % of 2018 Pre-COVID average As % of 2018 Pre-COVID average Pre-COVID 2023 2022 Pre-COVID 2023 2022 140% 140% 122% 120% 111% 120% 107% 102% 99% 106% 105% 94% 100% 100% 100% 85% 87% 89% 88% 91% 94% 80% 80% 89% 87% 85% 60% 60% 40% 40%
Slide 13: Marketing Campaigns
Results Overview Capital Management Portfolio Performance Marketing Campaigns Enhancement Initiatives Sustainability Progress Outlook & Strategies FORTUNE REIT | 1H2023 Financial Results | Page 13
Slide 14: Marketing to draw footfall and drive tenants' sales
Marketing to draw footfall and drive tenants’ sales Festive celebration and stage event EV carshows bring in footfall & atrium income +WOO Targeted promotion and redemption Fortune City One Laguna Plaza Fortune Metropolis FORTUNE REIT | 1H2023 Financial Results | Page 14
Slide 15: Enhancement Initiatives
Results Overview Capital Management Portfolio Performance Marketing Campaigns Enhancement Initiatives Sustainability Progress Outlook & Strategies FORTUNE REIT | 1H2023 Financial Results | Page 15
Slide 16: AEIs at +WOO
AEIs at +WOO Phase 2 CAPEX Target Completion HK$300M 1H 2024 ▪ To solidify +WOO’s leadership position in Tin Shui Wai and capture new demand from the expanding population fueled by Northern Metropolis development plan ▪ 82% leasing commitment achieved for Stage 1 and Stage 2 so far ▪ Stage 2 of the
Slide 17: +WOO Phase 2 - AEIs attract new tenants and drive footfall
+WOO Phase 2 - AEIs attract new tenants and drive footfall Enhanced retails offerings Fashion & Beauty Gifts & Toys Jewelry Popular F&B lineup Shanghai Cuisine Thai Cuisine Japanese Cuisine Asian Cuisine FORTUNE REIT | 1H2023 Financial Results | Page 17
Slide 18: +WOO – HK's first Interior Green Certification for a shopping mall
+WOO – HK’s first Interior Green Certification for a shopping mall AEIs 100 pieces of solar panel on roof top 6 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 F
Slide 19: 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 ▪ Enhance offerings and bring in new F&B and Household tenants
Slide 20: Sustainability Progress
Results Overview Capital Management Portfolio Performance Marketing Campaigns Enhancement Initiatives Sustainability Progress Outlook & Strategies FORTUNE REIT | 1H2023 Financial Results | Page 20
Slide 21: Sustainability Achievements
Sustainability Achievements 1st HK REIT Received SBTi approval for near term emission reduction target 5-Star 6-Yr in consecutive Highest rating in GRESB Hang Seng Corporate for 2 consecutive years Sustainability Benchmark Index BEAM PLUS certification on wide range of aspects across the portfolio 2
Slide 22: Persistent commitments to ESG
Persistent commitments to ESG 1,000+ 10 CSR Solar Panels in 5 malls Events in 1H2023 To avoid 154 tons GHG p.a. 85% GRA 100% HK assets certified as Equips with BMS by 2023 Green Buildings 45% 143 kg Grown and donated by Sustainable Loans Farm@Fortune in 1H2023 FORTUNE REIT | 1H2023 Financial Results
Slide 23: Outlook & Strategies
Results Overview Capital Management Portfolio Performance Marketing Campaigns Enhancement Initiatives Sustainability Progress Outlook & Strategies FORTUNE REIT | 1H2023 Financial Results | Page 23
Slide 24: Outlook and Strategies
Outlook and Strategies Portfolio Cost and Market Optimization capital management recovery ▪ Proactive lease management to ▪ Focus on ways to mitigate the ▪ HKSAR’s “Happy Hong Kong improve occupancy elevating operating cost including Campaign” to attract tourist and labour and utilities cost stimula
Slide 25: Additional Information
ADDITIONAL INFORMATION Active Leasing Asset Enhancement Yield-accretive THREE Management Initiatives Acquisitions GROWTH STRATEGIES FORTUNE REIT | 1H2023 Financial Results | Page 25
Slide 26: Investment highlights
Investment highlights HK$11.3B HK$39.5B HK$14.39 69% income MSCI index Highest 5-Star Market Portfolio NAV from non-discretionary Inclusion in World GRESB Rating Cap Valuation per Unit trades Small Cap Fortune City One Ma On Shan Plaza +WOO Fortune Metropolis Laguna Plaza 20 years A pure-play in of
Slide 27: A Hong Kong-Focused Neighbourhood Mall Portfolio
A Hong Kong-Focused Neighbourhood Mall Portfolio 17 Assets 2 Flagship Malls in HK 16 neighborhood malls in Hong Kong 1 suburban retail property in Singapore 1 Fortune City One New 3 10 2 +WOO Territories Tai Wai 1 8 5 Fortune Metropolis 15 16 6 Tsuen Wan West 11 3 million sq.ft. 12 Kowloon Diamond H
Slide 28: Resilient Asset Class with Attractive Yield
Resilient Asset Class An attractive distribution yield of 8.0% with Attractive Yield 8.0% 5.2% 3.5% 3.7% 2.4% Fortune REIT's HS Property Index HS Index HK 10-yr Govt. HK Composite Dividend Yield 1 Dividend Yield 2 Dividend Yield 2 Bond Yield 2 Interest Rate 2 Sources: Company Data, Hang Seng Indexes
Slide 29: Income Statement (YoY comparison)
Income (HK$’M) 1H2023 1H2022 YoY% Statement Revenue 908.7 867.5 +4.7% Property operating expenses (216.0) (213.9) +1.0% (YoY comparison) Manager’s performance fee (20.8) (19.6) +6.1% Net property income 671.9 634.0 +6.0% Manager’s base fee (58.8) (58.5) +0.5% Finance costs 1 (207.5) 294.3 N/A Change
Slide 30: Income Statement (HoH comparison)
Income (HK$’M) 1H2023 2H2022 HoH% Statement Revenue 908.7 896.9 +1.3% Property operating expenses (216.0) (213.9) +1.0% (HoH comparison) Manager’s performance fee (20.8) (20.3) +2.5% Net property income 671.9 656.2 +2.4% Manager’s base fee (58.8) (59.9) -1.8% Finance costs 1 (207.5) 13.1 N/A Change
Slide 31: Balance sheet
Balance sheet HK$’000 30 Jun 2023 31 Dec 2022 Gearing ratio Current assets 289,148 322,410 23.8% Non-current assets 39,972,507 40,012,773 Total assets 40,261,655 40,335,183 Portfolio valuation Current liabilities 3,262,103 3,243,964 HK$39,537M Non-current liabilities 8,182,032 8,163,918 Total liabil
Slide 32: Portfolio occupancy
Portfolio Fortune REIT’s portfolio GRA(s.f.) Occupancy occupancy 30 Jun 23 31 Dec 22 30 Jun 22 1. Fortune City One 414,469 98.7% 98.0% 98.0% 2. +WOO 665,244 89.1% 89.4% 88.6% 3. Ma On Shan Plaza 310,084 99.2% 99.4% 99.5% 4. Metro Town 180,822 100% 93.7% 99.0% 5. Fortune Metropolis 332,168 82.9% 82.3
Slide 33: Distribution Details
DISTRIBUTION DETAILS 23 August 2023 E x - d a te 22.36 HK cents 24 August 2023 D P U f o r the 6 m o n ths e n d e d 3 0 J u n 2 0 2 3 R e co r d D a te 22 September 2023 P a ym e nt D a te FORTUNE REIT | 1H2023 Financial Results | Page 33
Slide 34: Portfolio valuation breakdown
Portfolio valuation breakdown (13) Stars of Kovan Portfolio Valuation1 (HK$M) Property 1.4% (1) Fortune City One 8,105 Portfolio valuation (2) +WOO 7,895 HK$39,537M (3) Ma On Shan Plaza 5,613 (4) Metro Town 3,606 (9) 3.1% (1) 20.5% (5) Belvedere Square 2,465 (8) 4.5% (6) Laguna Plaza 2,412 (7) Fortu
Slide 35: Acquisitions for Growth
Acquisitions for Growth Asset Portfolio grew >11 times in 19 years AUM increased to HK$39.5 billion from HK$3.3 billion since IPO 17 17 17 14 16 Malls Malls 16 Malls Malls Malls 11 Malls Malls +WOO Laguna Plaza Stars of Kovan Property 5 Provident Square Malls Rhine Avenue Metro Town Caribbean Square
Slide 36: Proven Track Record in AEIs
Proven Track Record in AEIs Property / Enhanced Area Completion CAPEX (HK$) 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 37: 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 | 1H2023 Financial Results | Page 37
Slide 38: AEIs at Fortune City One
AEIs at Fortune City One CAPEX Completion ROI HK$150M 3Q2013 >20% FORTUNE REIT | 1H2023 Financial Results | Page 38
Slide 39: Food court renovation at Fortune Metropolis
Food court renovation at Fortune Metropolis Area CAPEX Completion 15,000 sq.ft HK$16M 1Q2022 A new dining experience via digitalized food ordering and rejuvenated seating area FORTUNE REIT | 1H2023 Financial Results | Page 39
Slide 40: Hong Kong Economy – Improving Macro Conditions
Hong Kong Economy – Improving Macro Conditions 3.4 3.4 GDP 3.0 3.1 2.9 2.6 1.9 1.1 YoY % Change -3.6 -3.5 4.8 -4.1 1.5 +1.5% YoY GDP in real terms GDP Q2 2023 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 5.7 4.3 4.9 Composite 3.7 2.4 2.5 2.9 2.4 +1.
Slide 41: Hong Kong Retail Sales and Restaurant Receipts
Hong Kong Retail Sales and Restaurant Receipts Retail Sales Value (as % of 2018 pre-COVID level) ▪ For 6M2023, total retail sales 120% value increased 21% YoY 100% 95.1% Supermarkets ▪ Benefited from the surge of 87.7% Total Retail Sales inbound visitors, tourist-driven 80% 83.7% sectors such as Jew
Slide 42: Tourist Spending partially offset by Outbound Travels
Tourist Spending partially offset by Outbound Travels Inbound Tourist Arrival 3,500,000 70% ▪ Tourist arrivals averaged at about 2.8 Total arrivals as % of 2018 55% 57% 58% million per month in 2Q2023, recovering 3,000,000 60% 49% to 56% of 2018 pre-COVID level 2,500,000 From Others 50% 2,000,000 Fr
Slide 43: Singapore - Retail market performance
Singapore - Retail market performance S$B Retail sales picking up steadily post-covid +0.6% GDP 5.00 50% MTI expects GDP to grow by YoY 0.5% to 2.5% in 2023 Retail Sales Value (Excl. Motor Vehicles) Online Sales Proportion 3.91 4.31 3.83 3.57 For 1H 2023 4.00 3.52 3.59 3.51 3.47 3.43 3.63 3.48 40% 3
Slide 44: 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 are cautioned
Slide 45: 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 www.fortunereit.com www.fortunemalls.com.hk
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