Commercial & Industrial Property News Update

Hong Kong - Champion REIT Fears Office Woes

August 15, 2012

After posting a 6.4% y-o-y increase in revenue for H1 2012, Champion REIT is bracing for pressure on office rents for the rest of the year.

Revenue may have gone up for Champion Real Estate Investment Trust (Champion REIT), but the fund predicts that the second half of the year could bring with it downward pressure on office rents.

Champion REIT posted total revenue of HKD 1.01 billion for H1 2012, representing a y-o-y increase of 6.4%.

"Rents for offices in Central are expected to contract in the second half, as tenants in the district- mainly the banking sector and mainland-funded institutions - are reluctant to renew leasing contracts amid a weakened economy," chief executive Adrian Lee Ching-ming said.

Champion REIT is the owner of two landmark developments in Hong Kong - Citibank Plaza in Central and Langham Place in Mong Kok. Citibank Plaza saw office occupancy rates drop to 88.7% over H1 2012, from 90.4% in January. Occupancy at Langham Place, however, remained steady at 98%.

"Retail rents in Langham Place have risen 10% to 100%, and are expected to maintain strong growth for the rest of the year," Lee said, adding that Champion REIT is unlikely to be affected by competition from new commercial buildings in East Kowloon due to the superior geographical location of Mong Kok.

The REIT reported an 8.5% rise in net property income for the first half of the year to HKD 830 million. Two-thirds of the total net property income came from Citibank Plaza, which saw revenue rise by 4.7%. Meanwhile, office space revenue from Langham Place increased by 2%, while retail space revenue shot up by 12.2%.

Champion REIT also reported that net asset value per unit increased to HKD 7.94, an advance of 1.5%.

Eligible shareholders stand to receive 11.6 HK cents per unit, up 11.1% from a year ago. This represents an annualised dividend yield of about 6.6%, based on a recent closing price of HKD 3.53.

Tags: Real estate investment, Business space, Income properties


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