Prosperity REIT (HK: 808) has purchased an office building from Hutchison Whampoa (HK: 13) for 1.01 billion hkd, which represented 5.08% discount to valuation.
Prosperity REIT acquired the entire equity interest at No.9 Chong Yip Street, Kwun Tong, Hong Kong where a 25-storey Grade-A office building is situated, with the building having a total lettable area of 136,600 square feet, representing a price of 7,394 hkd/sq ft.
ARA Asset Management (Prosperity) Ltd, as manager of Prosperity REIT, said that HSBC Institutional Trust Services (Asia) Ltd -- on behalf of Prosperity REIT and acting on the instructions of the REIT Manager -- entered into the share purchase agreement for the Hong Kong commercial property.
Upon completion, Prosperity REIT will, through Clifton Properties Ltd, hold the property, which is strategically located in the mature decentralized business district of Kowloon East (CBD2).
The property is in close proximity to the Ngau Tau Kok MTR station and is easily accessible by private and public transportation such as taxis and buses.
Furthermore, the property is adjacent to one of Prosperity REIT’s existing properties -- Prosperity Center -- and is only 10 minutes away from another of Prosperity REIT's flagship properties, Prosperity Place.
“The acquisition is expected to be yield accretive and improve the earnings and DPU to existing unitholders.
“The relatively low initial net property income of the property is a result of over 50% of the tenancies being due for expiry in 2014, which are below current market rental, thus offering substantial reversionary upside,” said REIT Manager CEO Ms. Mavis Wong.
The acquisition will also diversify the tenant base of Prosperity REIT’s portfolio in the Kowloon East district, which currently includes Prosperity Place (commercial use), Prosperity Center (industrial and office use) and will include, upon completion, the Chong Yip Property (office use).
The broadened tenant base will reinforce Prosperity REIT's stable income stream in the long term, the company added.
Prosperity Real Estate Investment Trust was the first private sector REIT to list on Hong Kong's Main Board with exposure to the Hong Kong office and industrial/office sectors in decentralized business districts. Cheung Kong (Holdings) Ltd together with Hutchison Whampoa Ltd make up the single largest unitholder of Prosperity REIT. Prosperity REIT owns and invests in a diverse, income producing portfolio of commercial properties which enjoys high growth potential. Through Prosperity REIT, investors can have direct exposure to one of the most vibrant real estate markets in Asia today.
The portfolio currently features seven high-quality properties with a total of 1,215,579 square feet. The properties are strategically located with direct access to the mass transportation network of Hong Kong. The properties include The Metropolis Tower, Prosperity Millennia Plaza, Harbourfront Landmark (portion), Prosperity Place, Trendy Centre, Prosperity Center (portion) and New Treasure Centre (portion). Prosperity REIT is managed by ARA Asset Management (Prosperity) Ltd, a highly experienced and visionary management team.
Jefferies: Tougher year ahead expected for PRC PROPERTY
Jefferies said China’s listed real estate developers are expected to face greater headwinds in 2014 following a standout performance this year.
The research house believes weaker demand and macroeconomic measures meant to bridle the fast-growing sector will likely make next year a tougher go for property plays.
"We expect rising affordable housing to curb demand, and expect property taxes in tier one and two cities to be implemented in the next 12-18 months."
Jefferies added that real estate enterprises are confronting declining margins and less generous financing terms.
The capital city of Beijing itself is aiming to supply 50,000 units of price-capped housing to help control runaway residential prices next year.
“Property tax, levied annually on asset value, could trigger a potential sell-off," the research house said.
In the PRC, new property taxes are currently being levied on a trial basis in Shanghai and Chongqing.
“The new policy orientation and its enforcement will be more effective than in the past,” Jefferies added.