HK-Listed Champion REIT Raises Distributions 15%

Hong Kong-listed real estate investment trust Champion REIT raised its distributions per unit for the first half of 2016 by 15 percent compared to the same period last year, following solid growth in rental income from its portfolio of commercial properties, according to financial results released this week.

Champion, which owns the former Citibank Plaza (recently renamed Three Garden Road) as well as Langham Place Mall and Office Tower, saw distributable income rise by 15.2 percent to HK$705 million during the period from January to June of this year, according to financial results released by new CEO Ada Wong this week.

Distributions per unit rose by 14.9 percent to HK$0.1096 and the annualized distribution yield is 5.3 percent based on the closing price of HK$4.38 as at 30 June 2016.

Rising rents also helped nudge upward the appraised value of the trust’s properties, which climbed 2.1 percent to HK$66,160 million as at 30 June 2016. Net asset value per unit was up 2.6 percent to HK$8.62 by the end of the period, and at a unit price of HK$4.38, the discount to net asset value is 49.2 percent.

Former Citibank Plaza Drives Champion Returns

With Hong Kong facing a retail slump, Champion earned much of its improving results from the performance of the former Citibank Plaza, which it renamed as Three Garden Road at the end of June. Rental income from the office property rose 22.2 percent to HK$567 million during the period, as occupancy climbed to 95.1 percent from 91.2 percent at the end of 2015.

The latest achieved rents in the commercial project stand at HK$100 per square foot of net lettable area, according to Champion, considerably higher than the property’s existing passing rent of HK$76.59 per square foot.

The REIT saw single digit increases in rental income on its Langham Place Mall and Office Tower.

The trust, which owns and manages 2.93 million square feet of Hong Kong commercial space, says that it expects continued revenue growth in the second half of 2016, thanks to ongoing strong performance of Three Garden Road, and a lack of new grade A office space in the city’s Central business district. However, in its projections it warned that the outlook for 2017 could be at risk due to “uncertainties in the retail market and the general economy.”

The results for the first half of 2016 were the first financials released under Wong’s leadership, after she was promoted to chief executive in June of this year. Prior to taking on her new role, the one-time Citi Group and JP Morgan executive had served as Champion’s deputy CEO for two years.