Citigroup has issued a research report expressing a positive outlook on Fortune REIT (00778), highlighting its robust 96% occupancy rate, supported by an 83% lease renewal rate and new leases following asset enhancement initiatives. The trust is expected to further improve space productivity by reconfiguring areas occupied by underperforming tenants. Financing costs remained stable at 3.5% semi-annually, with 50% of these costs tied to floating interest rates. Based on a 6.4% yield and an expectation that the downturn has bottomed out, Citigroup maintains a "Buy" rating on the trust. The target price has been raised from HK$5.56 to HK$6. The report notes an encouraging year-on-year improvement in tenant sales and footfall across most sectors, excluding supermarkets, attributed to portfolio upgrades, a 26% increase in experiential businesses last year, and enhanced marketing efforts. Pressure on rental uplift mainly stems from supermarkets—where rents are projected to drop significantly by 20–30%, with two supermarket leases up for renewal this year—and real estate agencies, although the decline in the latter has narrowed. Rental growth is anticipated to stabilize starting next year as market rates normalize, with eight instances of rental increases already observed in sectors such as dining and lifestyle services during renewals.
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