Champion REIT vacancy to reach 20% this year

A lower number is targeted for 2015.

According to Barclays, enquiries for space at Citibank Plaza remain high but demand is still mainly coming from smaller space users who are looking for 2,000-3,000sf. With effective rents now around HK$70s psf, Champion believes Citibank Plaza is already competitively priced and it is not looking to cut rents further.

Occupancy has rebounded slightly from 85% as of December 2013 to 87% currently. But with the departure of an anchor tenant in 4Q13, vacancy is expected to climb to 20% by year end. Champion targets to get vacancy back down to 10% by end 2015.

Here’s more from Barclays:

On the retail front, Langham Place has continued to outperform overall the Hong Kong retail market with mid-teens retail sales growth in both March 2014 and 1Q14.

Given the limited exposure to jewellery, last year’s ‘gold rush’ is likely to have a limited impact on Langham Place. Currently, mainland visitors only contribute around one-quarter of total retail sales at the mall.

The refinancing of the HK$7bn loan due in May 2014 is close to being finalised. The loan is expected to be refinanced into a three- and a five-year tranche at Hibor plus 120bps and Hibor plus 140bps.

On a blended basis, this is expected to result in a slight increase in Champion’s blended interest cost from 1.99% to 2.15-2.22%.

Given the high cost of hedging, Champion continues to keep 80% of its debt on a floating rate basis.