Page 22 - Forterra

20 ANNUAL REPORT 2012
COMMERCIAL REAL ESTATE PORTFOLIO
 The HQ 3
Construction of the superstructure is scheduled to
commence during Q2 2013 following the successful
completion of the 4 level basement reaching 22 metres
into the earth.
LEASING PROGRESS
The leasing pre-commitment program currently
represents 41.8% of the expanded retail area. Given the
immediacy of the refurbishment of The HQ 1 podium and
The HQ 2 pedestrian mall and food street, the bulk of the
early leasing activity is centred on these two areas which
have achieved just on 50% of pre-leasing. There are a
number of transactions currently being pursued which
are expected to advance the pre-leasing commitment
well beyond its current level during 2013.
FINANCIAL IMPACT
Based on current projections The HQ development
is expected to produce a gross yield on cost of
approximately 10% per annum. Clearly this is significantly
accretive to Forterra’s current Profit & Loss and as such
provides the board with significant flexibility as to its
distribution policy to be instituted no later than 2015. In
accordance with the Forterra Trust Deed, distributions
made after June 2013 must reflect a minimum of 50% of
Distributable Income.
OTHER PORTFOLIO MATTERS
With respect to the remainder of the portfolio and more
specifically the Shanghai based office portfolio, the
market remained strong through to year end assisting
Forterra to deliver a portfolio occupancy of 96.1% as at
year end. The early termination of the Parkson lease and
the drive to empty the retail podium understandably
impacted gross revenue for 2012 and will do so again
in 2013. However the business remains focused on a
successful completion of The HQ to an international
standard and the substantial improvement in every
financial metric for the business that this will deliver.
totaling 41.8% as at 31 December 2012 (up from 37.8%
as at the end of Q3 2012).
2. Total office space available for lease of
approximately 110,000 square metres including
the existing office towers of 85,000 square metres
which as at 31 December 2012 had an occupancy
rate of 93.9%.
3. Average retail rents for The HQ, incorporating the
individual elements of The HQ 1, The HQ 2 and The
HQ 3 of between RMB13.0 and RMB14.0/square
metre/day.
4. Office rents averaging RMB8.35/square metre/day
are expected for the new The HQ3 office tower
The retail leasing market in Shanghai remains vibrant as
does the overall consumer environment which as at
31 December 2012 recorded year-on-year retail sales
growth of 9.1%. The introduction of international tenants
to the Shanghai retail market continues apace, reflected
in the very competitive vacancy rate of just 4.8% as at
the end of December 2012.
With respect to the individual components of The HQ
the following is to be noted:
 The HQ 1
Parkson Department Stores, who occupied
approximately 50% of the existing retail podium, vacated
the premises, by agreement approximately five months
ahead of their scheduled lease expiry date. This has
facilitated an early commencement to the refurbishment
process and as at 30 November 2012 all of the tenants
excluding the cinema, which vacated in January 2013,
terminated their respective leases and moved from the
premises.
 The HQ 2
All design elements for the revamped pedestrian mall
and food street have been finalized including the
off-street taxi rank and escalator access from ground
level to the retail boulevard area in the basement linking
the Ole Supermarket in The HQ1 to the new retail area
being constructed in The HQ 3.