CONTENTS
Corporate Information 2
Chairman
’
s Statement 3
Property Portfolio 7
Report of the REIT Manager 17
Director and Executive Officer Profiles 39
Corporate Governance Report 43
Connected Party Transactions 59
Disclosure of Interests 66
Audited Financial Statements 68
Consolidated Statement of Profit or Loss 68
Consolidated Statement of Comprehensive Income 69
Consolidated Statement of Financial Position 70
Consolidated Statement of Changes in Net Assets 72
Attributable To Unitholders
Distribution Statement 73
Consolidated Statement of Cash Flows 74
Notes to Consolidated Financial Statements 76
Independent Auditor
’
s Report 119
Performance Table 124
Trustee
’
s Report 125
Valuation Report 126
Summary of Property Portfolio 186
Summary Financial Information 188
Annual Report 2023
2
CORPORATE INFORMATION
MANAGER OF REGAL REIT
Regal Portfolio Management Limited (the
“
REIT Manager
”
)
Unit No. 2001, 20th Floor,
68 Yee Wo Street,
Causeway Bay,
Hong Kong.
Tel: 2805-6336
Fax: 2577-8686
Email: [email protected]
BOARD OF DIRECTORS OF THE REIT MANAGER
Non-executive Directors
Lo Yuk Sui (Chairman)
Lo Po Man (Vice Chairman)
Jimmy Lo Chun To
Kenneth Ng Kwai Kai
Executive Directors
Johnny Chen Sing Hung
Simon Lam Man Lim
Independent Non-executive Directors
John William Crawford, JP
Bowen Joseph Leung Po Wing, GBS, JP
Kai Ole Ringenson
Abraham Shek Lai Him, GBS, JP
AUDIT COMMITTEE OF THE REIT MANAGER
John William Crawford, JP (Chairman)
Bowen Joseph Leung Po Wing, GBS, JP
Kai Ole Ringenson
Abraham Shek Lai Him, GBS, JP
Kenneth Ng Kwai Kai
DISCLOSURE COMMITTEE OF THE REIT MANAGER
John William Crawford, JP (Chairman)
Johnny Chen Sing Hung
Simon Lam Man Lim
Kenneth Ng Kwai Kai
Kai Ole Ringenson
NOMINATION COMMITTEE OF THE REIT MANAGER
Lo Yuk Sui (Chairman)
John William Crawford, JP
Bowen Joseph Leung Po Wing, GBS, JP
Kai Ole Ringenson
Abraham Shek Lai Him, GBS, JP
Kenneth Ng Kwai Kai
RESPONSIBLE OFFICERS OF THE REIT MANAGER
Johnny Chen Sing Hung
Simon Lam Man Lim
Peony Choi Ka Ka
SECRETARY OF THE REIT MANAGER
Peony Choi Ka Ka
TRUSTEE OF REGAL REIT
DB Trustees (Hong Kong) Limited (the
“
Trustee
”
)
AUDITOR
Ernst & Young
Registered Public Interest Entity Auditor
PRINCIPAL VALUER
Colliers International (Hong Kong) Limited
PRINCIPAL BANKERS
Bank of Communications (Hong Kong) Limited
The Bank of East Asia, Limited
Cathay United Bank Company, Limited, Hong Kong Branch
China Construction Bank (Asia) Corporation Limited
Chong Hing Bank Limited
Hang Seng Bank Limited
Hua Xia Bank Co., Limited Hong Kong Branch
Industrial and Commercial Bank of China (Asia) Limited
Oversea-Chinese Banking Corporation Limited,
Hong Kong Branch
United Overseas Bank Limited
LEGAL ADVISER
Baker & McKenzie
UNIT REGISTRAR
Computershare Hong Kong Investor Services Limited
Shops 1712-1716, 17th Floor,
Hopewell Centre,
183 Queen
’
s Road East,
Wan Chai,
Hong Kong.
WEBSITE
www.RegalREIT.com
Annual Report 2023
3
CHAIRMAN
’
S STATEMENT
Dear Unitholders,
I have pleasure to present, on behalf of the Board of Directors of Regal Portfolio Management Limited as the REIT
Manager, the 2023 Annual Report of Regal Real Estate Investment Trust.
FINANCIAL RESULTS
For the year ended 31st December, 2023, Regal REIT recorded a consolidated profit before distributions to Unitholders of
HK$265.7 million, as compared to a profit of HK$929.9 million for the 2022 financial year. The profit recorded for the
year under review was principally attributable to the gain of HK$366.9 million arising from the increase in the fair value
of Regal REIT
’
s investment property portfolio, as compared to its appraised value as at 31st December, 2022, while for the
2022 financial year, a fair value gain of HK$754.7 million was recorded. However, if the effects of these fair value changes
are excluded, Regal REIT would report a core operating loss of HK$101.2 million for the year under review, as compared to
a core operating profit of HK$175.2 million for the preceding year. The core operating loss incurred was mainly due to the
substantial increase in financial expenses, which amounted to HK$611.2 million (2022 - HK$281.8 million), as the Hong
Kong Interbank Offered Rates (HIBOR), on which the borrowing costs of Regal REIT
’
s bank loans were based, had risen
rapidly in the second half of 2023.
Annual Report 2023
4
Consequently, Regal REIT recorded an adjusted loss of HK$127.6 million for 2023 (2022 - total distributable income of
HK$204.8 million), which precludes any distribution for the year. Therefore, same as with the interim period, the Board of
Directors of the REIT Manager has decided not to declare any final distribution for the year ended 31st December, 2023
(2022 - final distribution of HK$0.010 per Unit and total distributions for the year of HK$0.061 per Unit).
HOTEL MARKET AND BUSINESS REVIEW
After a strong initial rebound from the depths of the COVID pandemic, the pace of recovery in the global economy in 2023
has overall moderated. Economic activity was still falling short of pre-pandemic projections, especially in the emerging
market and developing economies. Aggregate economic growth in advanced economies was resilient for most of last year,
slowing less than previously expected, which largely reflected the recovering status in the United States where consumer
spending has remained fairly robust.
In spite of some domestic challenges and external pressures, China was able to accomplish the major targets set for 2023.
Growth in its Gross Domestic Product (GDP) for the year picked up by 5.2%, which was in line with the official growth
target and exceeded the 3% growth attained in 2022. In Hong Kong, the overall economic conditions have been very
challenging under the high interest rates environment. The city recorded a 3.2% growth in its GDP in 2023, which was 0.8
percentage point below the low end of the Government
’
s growth forecast in August 2023.
Following the removal of all travel restrictions early last year, Hong Kong received a total of about 34 million visitors in
2023. Though this reflected an increase of 55 times year-on-year due to the low comparative base, it only represented
about 55% of the aggregate visitor arrivals in the pre-COVID times. Visitors from China remained the most important
market segment in the local tourism sector.
According to a hotel survey published by the Hong Kong Tourism Board, the average hotel occupancy rate for all the
surveyed hotels in different categories in Hong Kong in 2023 was 82.0%, an increase of 16.0 percentage points from
2022, while the industry-wide average room rate improved by 30.7%, with the average Revenue per Available Room
(RevPAR) having an overall increase of 62.3% year-on-year.
Being one of the major hotel owners in Hong Kong, Regal REIT presently owns a portfolio of nine operating hotels,
comprising five hotels under the full-service
“
Regal
”
brand (the
“
Initial Hotels
”
) and four hotels under the select-service
“
iclub
”
brand, together commanding a total room count of over 4,900 guestrooms and suites.
Apart from the iclub Wan Chai Hotel which is owned and self-operated by Regal REIT, all the five Initial Hotels and the
three other iclub Hotels are leased to a wholly-owned subsidiary of Regal Hotels International Holdings Limited (
“
RHIHL
”
),
the immediate listed holding company of Regal REIT, for hotel operations.
As mentioned in my Chairman
’
s Statement in the 2023 Interim Report of Regal REIT, due to the different operating modes
and revenue structures of the three Initial Hotels (namely, the Regal Airport Hotel, Regal Kowloon Hotel and Regal Oriental
Hotel) and the two iclub Hotels (namely, iclub Fortress Hill Hotel and iclub To Kwa Wan Hotel) when they were operating
under various government hotel quarantine schemes in 2022, the aggregate net operating income of these five hotels for
2023 was as a whole still below the level attained in 2022, despite the continuing improvements that have been achieved
in their operating performance since the lifting of travel restrictions early last year. However, for those hotels that have
all along been operating normal hotel business (namely, the Regal Hongkong Hotel, Regal Riverside Hotel, iclub Sheung
Wan Hotel and iclub Wan Chai Hotel), their business operations in 2023 have strongly rebounded, recording significant
increases in their aggregate net property income (
“
NPI
”
) of about 200.0% over the level attained in 2022.
Annual Report 2023
5
In accordance with the terms of the 2023 market rental packages, the Initial Hotels generated aggregate base rent of
HK$480.0 million. The market rental reviews for the Initial Hotels for 2024 were completed in September 2023 and their
aggregate annual base rent for 2024 was determined to be HK$544.0 million, which is approximately 13.3%, or HK$64.0
million, above the aggregate base rent for 2023. Variable rent will continue to be based on 50% sharing of the excess of
the aggregate NPI of the Initial Hotels over their aggregate base rent.
The other three iclub Hotels (namely, the iclub Sheung Wan Hotel, the iclub Fortress Hill Hotel and the iclub To Kwa Wan
Hotel) leased to the RHIHL lessee generated rental receipts of HK$98.0 million for 2023, which included aggregate variable
rent of HK$6.0 million earned by the iclub Sheung Wan Hotel and iclub Fortress Hill Hotel.
Based on the market rental reviews determined by the independent professional property valuer under the terms of the
leases, the aggregate base rent for these three iclub Hotels for 2024 was fixed at HK$118.0 million, which is approximately
28.3%, or HK$26.0 million, above the aggregate base rent in 2023, with variable rent similarly to be based on 50%
sharing of the excess of the NPI over the base rent of each individual hotel.
The iclub Wan Chai Hotel was the first iclub hotel in Hong Kong and has been self-operated by Regal REIT since 2011. The
NPI (including the lease rentals from the non-hotel portions) of this property has increased by 88.6% as compared to 2022.
At the extraordinary general meeting (the
“
EGM
”
) held on 31st January, 2024, the independent Unitholders approved,
among others, the extensions and amendments of the existing lease agreements and lease guarantees for the iclub Sheung
Wan Hotel and iclub Fortress Hill Hotel for another ten years to 31st December, 2034, with the market rental packages
for the extended terms continuing to be determined annually by a jointly appointed independent professional property
valuer. At the same EGM, the independent Unitholders also approved the extensions and amendments of the existing hotel
management agreements for these two hotels, which will also run through to 31st December, 2034.
Regal REIT concluded the refinancing exercises for the iclub Sheung Wan Hotel, iclub Fortress Hill Hotel and iclub To Kwa
Wan Hotel in the second half of 2023, with the tenure of the refinancing loans staggered from 2 years to 5 years. Further
information on the hotel properties owned by Regal REIT, including their detailed lease terms and their 2023 operating
data, is contained in the Report of the REIT Manager in the 2023 Annual Report.
BUSINESS OUTLOOK
According to a recent research from the World Bank Group, global growth is expected to slow to 2.4% in 2024, the third
consecutive year of deceleration, reflecting the lagged and ongoing effects of tight monetary policies to rein in inflation,
restrictive credit conditions, and weak global trade and investment.
Despite the progress to date, there is still considerable distance before Hong Kong
’
s economy can recover fully to the
pre-pandemic level. Ongoing headwinds and challenges, including slackened global demand, increasing geoeconomic
fragmentation and tightened monetary conditions, would continue to adversely impact on the pace and extent of its
economic recovery.
In the 2023 Policy Address, tourism was stated to be one of the major driving forces of the Hong Kong economy and
the Government is taking positive steps to enhance the attractions of Hong Kong as a major tourist city. Under the
coordination of the Government, there will be over 80 mega events to be hosted in Hong Kong in just the first half of this
year. These events can drive the businesses of multiple sectors, including tourism, hotels, catering and retail, and bring
significant economic benefits to Hong Kong. In addition, effective from 6th March, 2024, the Individual Visit Scheme
was further expanded to a total of 51 Mainland China cities by adding Xi
’
an and Qingdao. Together with the potential
resumption of
“
multiple-entry
”
endorsements for Shenzhen residents, these should give an extra boost to the business of
the local tourist and hotel industries.
Annual Report 2023
6
On the financial front, the hike cycle of the United States interest rates should already be at its peak. It is now widely
expected that its interest rates may start to ease in mid-2024, although this is set against the backdrop that the inflation
will stabilise further. By the nature of its business and financial structure, the financial performance of Regal REIT is highly
sensitive to fluctuations in interest rates. Although the interest rates in Hong Kong have slowly receded from their high
levels that prevailed in late 2023, Regal REIT has entered into several interest rate swap transactions in early February 2024
to swap the interest expenses on parts of its outstanding bank loans from floating rates to fixed rates. It is anticipated this
could reduce the financial expenses of Regal REIT in the near term, while at the same time hedge against any unexpected
reversionary upward movements in the interest rates.
The REIT Manager is optimistic that the tourist and hotel markets in Hong Kong will continue to recover. The REIT Manager
is also optimistic that when the interest rates in Hong Kong gradually settle to more normal levels, Regal REIT will be able
to resume distributions to Unitholders.
Finally, I would also like to express my appreciation and gratitude to my other fellow Directors, all the staff members as
well as all the Unitholders for their continued support during the past year.
Lo Yuk Sui
Chairman
Regal Portfolio Management Limited
(as the REIT Manager of Regal REIT)
Hong Kong, 27th March, 2024
Annual Report 2023
7
NEW TERRITORIES
Hong Kong
Convention &
Exhibition Centre
HONG KONG
Hong Kong
International Airport
LANTAU ISLAND
AsiaWorld-Expo
HONG KONG ISLAND
KOWLOON PENINSULA
Hong Kong
Disneyland
Room Count
Opening Year
Approx. Covered
Floor Area (sq. m.)
Ballroom
Meeting Room
Business Centre
Gross Floor Area (sq. m.)
Restaurant
Bar / Lounge
Swimming Pool
Spa
Club Lounge
Regal Airport Hotel
Regal Hongkong Hotel
Regal Kowloon Hotel
Regal Oriental Hotel
Regal Riverside Hotel
iclub Wan Chai Hotel
iclub Sheung Wan Hotel
iclub Fortress Hill Hotel
iclub To Kwa Wan Hotel
Key to Hotel Facility Icons
1 6
7
8
9
2
3
4
5
PROPERTY PORTFOLIO
Location of the Hotel Properties in Hong Kong
5
4
9
8
3
2
1
6
7
Annual Report 2023
8
9 Cheong Tat Road,
Hong Kong International Airport,
Chek Lap Kok, Hong Kong.
Tel: (852) 2286 8888
Fax: (852) 2286 8686
Email: [email protected]
Website: airport.regalhotel.com
• The only hotel connected directly to the airport passenger terminals
• Close to the Hong Kong-Zhuhai-Macao Bridge
• State-of-the-art meeting and conference venues of approximately 3,300 sq. m.
with a built-in giant high-definition LED wall (9m x 4m) and 3D Projection Mapping
Technology
• Easy access to AsiaWorld-Expo, Hong Kong Disneyland and The Big Buddha
• MASTERCHEF Recommendation Restaurant – Rouge (2020-2023)
• Gold Benchmarking Certificate by EarthCheck (2018-2023)
• Trusted Cleanliness Badge by TrustYou (2020-2021)
• Anti-epidemic Hygiene Measures Certification by Hong Kong Quality Assurance Agency
(2020)
• Certificate of Excellence by TripAdvisor (2016-2020)
• World
’
s Best Airport Hotel by Business Traveller UK Magazine for 13 years (2008-2019)
• Best Airport Hotel Asia Pacific by Travel Weekly Asia for 3 consecutive years (2017-
2019 and 2023)
• Travel Hall of Fame Award by TTG Asia Media Pte Ltd for 5 years (2015-2018 and
2023)
• Best Airport Hotel in Asia-Pacific by Business Traveller Asia-Pacific Magazine for 17
consecutive years (2001-2017)
• Best Airport Hotel in Asia-Pacific by TTG Asia Media Pte Ltd for 10 consecutive years
(2005-2014)
• World
’
s Best Airport Hotel and Best Airport Hotel Asia in the Skytrax Awards for 4
consecutive years (2011-2014)
1,171 1,050 sq. m.
1999 27
83,400 sq. m. 1
71,988 sq. m. 2
5 1
1 1
Café Aficionado Presidential Suite Regal Ballroom
REGAL AIRPORT HOTEL
Annual Report 2023
9
Executive Club Lounge
88 Yee Wo Street,
Causeway Bay, Hong Kong.
Tel: (852) 2890 6633
Fax: (852) 2881 0777
Email: [email protected]
Website: hongkong.regalhotel.com
• Located in the heart of Causeway Bay, one of the popular shopping and
commercial districts in Hong Kong
• Within walking distance from Victoria Park, Hong Kong Stadium - home to the
annual spectacular Rugby Sevens Tournament and Happy Valley Racecourse
where exciting horse races are staged regularly
• Convenient location to the Hong Kong Convention and Exhibition Centre
• Regal Ballroom and The Forum (meeting and conference centre) provide a full
range of facilities catering to the needs of business travellers, meeting and
exhibition delegates
• Executive Club Floor features a collection of 81 tastefully appointed guestrooms
and suites with a private lounge
• HACCP Certification by SGS Hong Kong (2022-2025)
• Caring Company 10 Years+ Award by The Hong Kong Council of Social Service
(2018-2024)
• Gold Benchmarking Certificate by EarthCheck (2018-2023)
• MASTERCHEF Recommendation Restaurant – Regal Palace (2020-2023)
• Travellers
’
Choice Award by TripAdvisor (2020-2023)
• Quality Restaurant Certification (15 years+) by Hong Kong Tourism Board –
Regal Palace (2023)
• Top Producing Hotel by Trip.com (2022)
• Trusted Cleanliness Badge by TrustYou (2020-2022)
• Best Business Hotel by Ctrip (2019)
• Certificate of Excellence by TripAdvisor (2019)
481 239 sq. m.
1993 14
32,000 sq. m. 1
25,090 sq. m. 1
3 1
1
Executive Suite
Regal Palace
REGAL HONGKONG HOTEL
Annual Report 2023
10
71 Mody Road, Tsimshatsui,
Kowloon, Hong Kong.
Tel: (852) 2722 1818
Fax: (852) 2369 6950
Email: [email protected]
Website: kowloon.regalhotel.com
• Conveniently located in Tsim Sha Tsui East, a commercial and tourist district
• Within walking distance from the Tsim Sha Tsui (
“
TST
”
), East TST and Hung Hom MTR
stations, 10-minute drive to the Hong Kong West Kowloon Station - the terminus
of High Speed Rail (Hong Kong Section) with easy access to other cities of Mainland
China
• Close to TST
’
s waterfront with promenade, major shopping centres and entertainment
areas
• Nearby popular tourist attractions including K11 Musea, Hong Kong Science Museum,
Hong Kong Space Museum, Hong Kong Museum of Art, Hong Kong Cultural Centre,
Clock Tower and the Star Ferry, etc.
• HACCP Certification by SGS Hong Kong (2022-2025)
• Caring Company Award by The Hong Kong Council of Social Service (2018-2024)
• Gold Benchmarking Certificate by EarthCheck (2020-2023)
• Anti-epidemic Hygiene Measures Certification by Hong Kong Quality Assurance Agency
(2020-2023)
• Travellers
’
Choice Award by TripAdvisor (2021-2023)
• MASTERCHEF Recommendation Restaurant - Regal Court (2019-2023) & Mezzo (2021-
2023)
• Trusted Cleanliness Badge by TrustYou (2020-2021)
• Loved by Guests Award by Hotels.com (2020)
• Certificate of Excellence by TripAdvisor (2016-2017 and 2019)
600 1
1982 353 sq. m.
43,500 sq. m. 12
31,746 sq. m. 1
3 1
Regal Court Luxembourg Room Royal Suite
REGAL KOWLOON HOTEL
Annual Report 2023
11
Suite
30-38 Sa Po Road, Kowloon City,
Kowloon, Hong Kong.
Tel: (852) 2718 0333
Fax: (852) 2718 4111
Email: [email protected]
Website: oriental.regalhotel.com
• The only full-service hotel located in the heart of Hong Kong
’
s heritage district,
Kowloon City, neighboring the Kai Tak Development Area including the world-
class Kai Tak Cruise Terminal
• Vicinity to historic landmarks such as Wong Tai Sin Temple and Chi Lin Nunnery
• 5-minute walking distance to Sung Wong Toi MTR station of the Tuen Ma Line,
with easy inter-change to Mong Kok and other business and shopping districts
• Spacious and quiet rooms set up with 1 King, 2 Queen or up to 4 single beds
are offered to cater for different needs. Facilities include private lounge and
gymnasium in a compact and cozy environment
• Gold Benchmarking Certificate by EarthCheck (2018-2023)
• Halal Certificate by The lncorporated Trustees of The Islamic Community Fund
of Hong Kong (2013-2022)
• Trusted Cleanliness Badge by TrustYou (2021)
• Indoor Air Quality Certificate – Excellent Class by Environmental Protection
Department (2014-2019)
• Caring Company 5 Years+ Award by The Hong Kong Council of Social Service
(2014-2019)
• Carbon Reduction Certificate by the Environmental Campaign Committee
(2016-2019)
•
”
Good Employer Charter
”
Certificate by Labour Department (2018-2019)
• 10-year QTS Merchant Recognition for The China Coast Pub + Restaurant by
Hong Kong Tourism Board (2019)
494 1
1982 345 sq. m.
27,300 sq. m. 7
22,601 sq. m.
4
The China Coast Pub+Restaurant
Communal Lounge
REGAL ORIENTAL HOTEL
Annual Report 2023
12
34-36 Tai Chung Kiu Road, Shatin,
New Territories, Hong Kong.
Tel: (852) 2649 7878
Fax: (852) 2637 4748
Email: [email protected]
Website: riverside.regalhotel.com
• The largest hotel in Shatin overlooking the Shing Mun River
• Easy access to Hong Kong Island, Kowloon and the mainland border
• Within walking proximity to Shatin New Town Plaza, a mega shopping complex
featuring over 400 shops and restaurants
• Close to Sha Tin Racecourse, Hong Kong Science & Technology Parks, The Chinese
University of Hong Kong and the Ten Thousand Buddhas Monastery
• Executive Club Lounge provides comprehensive facilities that bring a truly comfortable
and convenient stay
• Gold Benchmarking Certificate by EarthCheck (2018-2023)
• MASTERCHEF Recommendation Restaurant – Dragon Inn (2020-2023)
• MASTERCHEF Recommendation Restaurant – Vi (2021-2023)
• Popular Hotel of the Year by Meituan Hotel Award (2022-2023)
• Hala Certificate by The Incorporated Trustees of The Islamic Community Fund of Hong
Kong (2023)
• MASTERCHEF Recommendation Restaurant – Regal Terrace (2023)
• U Favourite Food Awards – My Favourite Buffet Restaurant – L
’
Eau (2023)
• 15-year QTS Quality Merchant Recognition by Hong Kong Tourism Board – L
’
Eau and
Avanti Pizzeria (2023)
• Outstanding QTS Merchant Silver Award by Hong Kong Tourism Board – L
’
Eau (2022)
• Anti-epidemic Hygiene Measures Certification by Hong Kong Quality Assurance Agency
(2020-2022)
• Trusted Cleanliness Badge by TrustYou (2020-2021)
• MameAwards – Mame
’
s Best Choice of Postpartum Hotel (2021)
• Squarefoot Serviced Apartment Awards 2020 – Best Serviced Apartment Provider
(2020)
• Certificate of Appreciation by Christian Action
’
s Signature Employer Program
(2018-2020)
• Trip.com Best Selling Hotel Awards (2020)
• Certificate of Appreciation in Hong Kong No Air-Con Night from Green Sense
(2012-2020)
1,147 549 sq. m.
1986 9
69,100 sq. m. 1
59,668 sq. m. 1
8 1
2 1
Deluxe Suite OM Spa Riverside Ballroom
REGAL RIVERSIDE HOTEL
Annual Report 2023
13
iPlus Premier
211 Johnston Road,
Wan Chai, Hong Kong.
Tel: (852) 3963 6000
Fax: (852) 3963 6022
Email: [email protected]
Website: wanchai.iclub-hotels.com
• 99 chic and trendy guestrooms and suites with interactive services and
innovative facilities
• Convenient location within walking distance to Wan Chai MTR station and
Hong Kong Convention and Exhibition Centre
• Centrally located on Hong Kong Island - 2 MTR stations from Central and 1
MTR station from Causeway Bay
• Flexible room configuration accommodates up to 4 guests, ideal for families and
travelling groups
• Rooms on high floors feature fascinating view of exciting city vistas
• Daily complimentary morning refreshments and coffee & tea throughout the day
in the multi-functional indoor iLounge
• New kitchen equipment for long stay guests
• Newly equipped entertainment corner with board games
• 24-hour self-service laundry and drying facilities
• 24-hour complimentary use of computers in iEngage
• 24-hour complimentary use of fitness facilities in Sweat Zone
• A completely smoke-free hotel
• Gold Benchmarking Certificate by EarthCheck (2024)
• Gold Circle Award by Agoda (2023)
• Travellers
’
Choice Award by TripAdvisor (2020-2021)
• Trusted Cleanliness Badge by TrustYou (2020)
• Customer Review Award by Agoda (2020)
• Anti-epidemic Hygiene Measures Certification by Hong Kong Quality Assurance
Agency (2020)
• Certificate of Excellence by TripAdvisor (2019)
• Guest Rated Award
“
Good
”
by Expedia.com (2018)
99
2009
5,530 sq. m.
5,326 sq. m.
1
1
iSuite Premier
iLounge
iclub WAN CHAI HOTEL
Annual Report 2023
14
iPlus Premier
138 Bonham Strand,
Sheung Wan, Hong Kong.
Tel: (852) 3963 6100
Fax: (852) 3963 6122
Email: [email protected]
Website: sheungwan.iclub-hotels.com
• A contemporary select-service hotel with 248 chic and trendy guestrooms and suites
• Convenient location with 3-minute walking distance to Sheung Wan MTR station,
7-minute walking distance to Hong Kong Macau Ferry Terminal and walking distance
to Hollywood Road and SoHo area
• Flexible room configuration accommodates up to 6 guests in a room, ideal for families
and travelling groups
• Daily complimentary morning refreshments and coffee & tea throughout the day in
iLounge
• 24-hour self-service laundry and drying facilities
• 24-hour complimentary use of computers in iEngage
• 24-hour complimentary use of fitness facilities in Sweat Zone
• A completely smoke-free hotel
• Gold Benchmarking Certificate by EarthCheck (2024)
• Popular Hotel of the Year by MeiTuan Hotel (2023)
• Gold Circle Award by Agoda (2023)
• Traveller Review Awards by Booking.com (2020-2022)
• Loved by Guests Award by Hotels.com (2020-2021)
• Travellers
’
Choice Award by TripAdvisor (2020-2021)
• Trusted Cleanliness Badge by TrustYou (2021)
• Anti-epidemic Hygiene Measures Certification by Hong Kong Quality Assurance Agency
(2020)
• Certificate of Excellence by TripAdvisor (2019)
• Guest Rated Award
“
Excellent
”
by Expedia.com (2018)
• Best Serviced Apartment Award by GoHome.com.hk (2017-2018)
• Guest Review Awards by Booking.com (2015-2018)
248
2014
9,600 sq. m.
7,197 sq. m.
1
1
iBusiness
Lobby
iclub SHEUNG WAN HOTEL
Annual Report 2023
15
Connecting Room
18 Merlin Street,
North Point, Hong Kong.
Tel: (852) 3963 6300
Fax: (852) 3963 6322
Email: [email protected]
Website: fortresshill.iclub-hotels.com
• A contemporary select-service hotel with 338 chic and trendy guestrooms
• Convenient location within walking distance to Fortress Hill or Tin Hau MTR stations
• 2 MTR stations away from the Hong Kong Convention & Exhibition Centre and
commercial hub in Eastern District (Tai Koo Place)
• Easy access to East Coast Park and Victoria Park, the biggest park on Hong Kong
Island
• The only pet-friendly hotel in Fortress Hill providing designated floor and pets
playground
• Newly equipped family iSuite with microwave
• New kitchen equipment for long stay guests
• Relaxed outdoor garden with exclusive clubhouse-like experiences
• Newly equipped entertainment corner with board games
• Connecting rooms for travelling group
• Rooms on higher floors feature fascinating harbour view and Hong Kong skyline
• Daily complimentary morning refreshments and coffee & tea throughout the day in
iLounge
• 24-hour self-service laundry and drying facilities
• 24-hour complimentary use of computers in iEngage
• 24-hour complimentary use of fitness facilities in Sweat Zone
• A completely smoke-free hotel
• Gold Benchmarking Certificate by EarthCheck (2024)
• Popular Hotel of The Year by MeiTuan Hotel (2023)
• Best Performance by Trip.com Group (2023)
• Trusted Cleanliness Badge by TrustYou (2020)
• Travellers
’
Choice Award by TripAdvisor (2020)
• Anti-epidemic Hygiene Measures Certification by Hong Kong Quality Assurance Agency
(2020)
• Certificate of Excellence by TripAdvisor (2019)
• Carbon Reduction Certificate by Hong Kong Green Organisation Certification (2018)
338
2014
9,400 sq. m.
6,849 sq. m.
1
1
Carpark
iLounge
iclub FORTRESS HILL HOTEL
Annual Report 2023
16
iBusiness Premier
iSelect Premier
Hotel Lobby
8 Ha Heung Road,
To Kwa Wan, Hong Kong.
Tel: (852) 3963 6600
Fax: (852) 3963 6622
Email: [email protected]
Website: tokwawan.iclub-hotels.com
• A contemporary select-service hotel opened in 2017 with 340 chic and trendy
guestrooms
• Close to To Kwa Wan MTR station of the Tuen Ma Line
• 3-minute walking distance to the airport bus station
• Flexible room configuration accommodates up to 6 guests in a room, ideal for families
and travelling group
• Rooms on higher floors feature fascinating harbour view and Hong Kong skyline
• Daily complimentary morning refreshments
• 24-hour self-service laundry and drying facilities
• 24-hour complimentary use of computers in iEngage
• 24-hour complimentary use of fitness facilities in Sweat Zone
• A completely smoke-free hotel
• Silver Benchmarking Certificate by EarthCheck (2024)
• Outstanding Partner Award by MeiTuan Hotel (2023)
• Travellers
’
Choice Award by TripAdvisor (2020-2021)
• Anti-epidemic Hygiene Measures Certification by Hong Kong Quality Assurance Agency
(2020)
• Trusted Cleanliness Badge by TrustYou (2020)
• City Hotel of the Year 2018 by GHM (Guangdong, Hong Kong, Macao) Hotel General
Managers Society (2018)
• Indoor Air Quality Certificate – Good Class by Environmental Protection Department
(2017-2018)
340
2017
9,490 sq. m.
6,298 sq. m.
1
1
iclub TO KWA WAN HOTEL
Annual Report 2023
17
REPORT OF THE REIT MANAGER
The Directors of the REIT Manager herein present their report together with the audited consolidated financial statements
of Regal Real Estate Investment Trust (
“
Regal REIT
”
) and its subsidiaries (collectively, the
“
Group
”
) for the year ended 31st
December, 2023.
LONG-TERM OBJECTIVES AND VISION OF REGAL REIT
The primary objectives of Regal REIT and the REIT Manager are to provide long-term stable, growing distributions and
capital growth for the unitholders of Regal REIT (the
“
Unitholders
”
) through active ownership of hotels and strategic
investment in hotels, serviced apartments and/or commercial properties (including office and retail properties).
The vision of Regal REIT and the REIT Manager is to build up the existing portfolio of hotel properties in Hong Kong and to
be a pre-eminent owner of quality international hotels and other properties with a primary focus in Hong Kong as well as
to reinforce Regal REIT
’
s status as a growing attractive option for investors.
ORGANISATION AND STRUCTURE OF REGAL REIT
Regal REIT was constituted by a trust deed dated 11th December, 2006 (as amended and restated by a first amending
and restating deed dated 23rd March, 2021 and a second amending and restating deed dated 31st January, 2024) (the
“
Trust Deed
”
) entered into between the REIT Manager and the Trustee of Regal REIT. Regal REIT is a collective investment
scheme established in the form of a unit trust under Hong Kong laws and its units (the
“
Units
”
) have been listed on the
main board of The Stock Exchange of Hong Kong Limited (the
“
HK Stock Exchange
”
) since 30th March, 2007 (the
“
Listing
Date
”
).
Regal REIT is regulated by the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the
“
SFO
”
), the
Code on Real Estate Investment Trusts (the
“
REIT Code
”
) and the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the
“
Listing Rules
”
), as if they were applicable to Regal REIT.
As at 31st December, 2023, the property portfolio of Regal REIT was comprised of (a) Regal Airport Hotel, Regal Hongkong
Hotel, Regal Kowloon Hotel, Regal Oriental Hotel and Regal Riverside Hotel (collectively, the
“
Initial Hotels
”
); and (b) iclub
Wan Chai Hotel, iclub Sheung Wan Hotel, iclub Fortress Hill Hotel and iclub To Kwa Wan Hotel (collectively, the
“
iclub
Hotels
”
).
The REIT Manager and the Trustee
The REIT Manager is licensed by the Securities and Futures Commission in Hong Kong (the
“
SFC
”
) to undertake the
regulated activity of asset management. The REIT Manager does not manage the five Initial Hotels or the four iclub Hotels
directly.
The Trustee is DB Trustees (Hong Kong) Limited, a wholly-owned subsidiary of Deutsche Bank AG. The Trustee is qualified
to act as a trustee for collective investment schemes authorised under the SFO. In this role, the Trustee holds the assets
of Regal REIT in trust for the benefit of the Unitholders as a whole and oversees the activities of the REIT Manager for
compliance with the Trust Deed and all regulatory requirements.
Annual Report 2023
18
The RHIHL Lessee and the Hotel Manager
The Initial Hotels are leased to Favour Link International Limited (the
“
RHIHL Lessee
”
), a wholly-owned subsidiary of Regal
Hotels International Holdings Limited (
“
RHIHL
”
, together with its relevant subsidiaries, collectively, the
“
RHIHL Group
”
),
with lease terms expiring on 27th December, 2028 (for Regal Airport Hotel) and 31st December, 2030 (for each of Regal
Hongkong Hotel, Regal Kowloon Hotel, Regal Oriental Hotel and Regal Riverside Hotel) under the relevant lease agreements
and supplemental lease agreements (together, the
“
Initial Hotels Lease Agreements
”
). The market rental packages for each
of the Initial Hotels will be determined annually by a jointly appointed independent professional property valuer.
Regal Hotels International Limited, a wholly-owned subsidiary of RHIHL, was appointed as the hotel manager (the
“
Hotel
Manager
”
) under long-term hotel management agreements to operate the Initial Hotels (the
“
Initial Hotels Management
Agreements
”
) for a term of twenty years from 16th March, 2007. On 20th December, 2019, Regal REIT entered into a
hotel management agreement with the Hotel Manager for the operation of the hotel portion of iclub Wan Chai Hotel for
a term of ten years from 1st January, 2021 to 31st December, 2030 (the
“
Wan Chai Hotel Management Agreement
”
) and
the iclub Wan Chai Hotel is self-operated and not leased out by Regal REIT.
The iclub Sheung Wan Hotel is leased to the RHIHL Lessee with the lease term expiring on 31st December, 2024 under
a lease agreement (the
“
SW Lease Agreement
”
). The Hotel Manager was appointed as the hotel manager of the iclub
Sheung Wan Hotel under a 10-year hotel management agreement (the
“
SW Hotel Management Agreement
”
) commencing
on 10th February, 2014. On 11th January, 2024, Regal REIT and the RHIHL Lessee entered into supplemental deeds
amending (a) the SW Lease Agreement to extend the lease term of ten years from 1st January, 2025 to 31st December,
2034; and (b) the SW Hotel Management Agreement to extend its term from the expiry date of its current term (i.e., 9th
February, 2024) to 31st December, 2034 with the inclusion of a new non-fault based early termination provision exercisable
only by the lessor, respectively. The market rental packages for the extended lease term of the iclub Sheung Wan Hotel will
continue to be determined annually by a jointly appointed independent professional property valuer. Such extended terms
for the SW Lease Agreement and the SW Hotel Management Agreement were approved by the independent Unitholders at
the extraordinary general meeting of Regal REIT held on 31st January, 2024.
The iclub Fortress Hill Hotel is leased to the RHIHL Lessee with the lease term expiring on 31st December, 2024 under a
lease agreement (the
“
FH Lease Agreement
”
). The Hotel Manager was also appointed as the hotel manager of the iclub
Fortress Hill Hotel under a 10-year hotel management agreement (the
“
FH Hotel Management Agreement
”
) commencing
on 28th July, 2014. On 11th January, 2024, Regal REIT and the RHIHL Lessee entered into supplemental deeds amending (a)
the FH Lease Agreement to extend the lease term of ten years from 1st January, 2025 to 31st December, 2034; and (b) the
FH Hotel Management Agreement to extend its term from the expiry date of its current term (i.e., 27th July, 2024) to 31st
December, 2034 with the inclusion of a new non-fault based early termination provision exercisable only by the lessor,
respectively. The market rental packages for the extended lease term of the iclub Fortress Hill Hotel will continue to be
determined annually by a jointly appointed independent professional property valuer. Such extended terms for the FH Lease
Agreement and the FH Hotel Management Agreement were approved by the independent Unitholders at the extraordinary
general meeting of Regal REIT held on 31st January, 2024.
On 4th September, 2017, Regal REIT acquired the iclub To Kwa Wan Hotel and leased it to the RHIHL Lessee for hotel
operations for a term of five years commencing on 4th September, 2017 under a lease agreement (the
“
TKW Lease
Agreement
”
), which is extendable at the option of Regal REIT for a further term to 31st December, 2027. On 29th
December, 2021, Regal REIT exercised its options to extend the lease term of the iclub To Kwa Wan Hotel for a further
term, commencing from 4th September, 2022 and expiring on 31st December, 2027 (both days inclusive). On 8th June,
2022, Regal REIT and the RHIHL Lessee entered into the supplemental deed amending the TKW Lease Agreement to
formally effect the extension of the abovementioned lease term. The Hotel Manager was appointed as the hotel manager
of the iclub To Kwa Wan Hotel under a 10-year hotel management agreement (the
“
TKW Hotel Management Agreement
”
)
commencing on 4th September, 2017.
Annual Report 2023
19
HOTEL PORTFOLIO
The portfolio of nine hotel properties of Regal REIT are strategically located in different districts in Hong Kong, enabling
hotel guests to have easy and convenient access to the mass transit network and other public transportation networks.
The Regal REIT
’
s hotel portfolio is comprised of two hotel types, namely, full-service hotels, which offer a wide range of
services including food and beverage outlets and other facilities, and select-service hotels, which offer contemporary design
and are equipped with tech-savvy facilities.
Hotel Types District Location No. of Rooms Operations Mode
Full-service hotels:
Regal Airport Hotel Chek Lap Kok 1,171 Under Lease
Regal Hongkong Hotel Causeway Bay 481 Under Lease
Regal Kowloon Hotel Tsim Sha Tsui 600 Under Lease
Regal Oriental Hotel Kowloon City 494 Under Lease
Regal Riverside Hotel Shatin 1,147 Under Lease
3,893
Select-service hotels:
iclub Wan Chai Hotel Wan Chai 99 Self-operated
iclub Sheung Wan Hotel Sheung Wan 248 Under Lease
iclub Fortress Hill Hotel Fortress Hill 338 Under Lease
iclub To Kwa Wan Hotel To Kwa Wan 340 Under Lease
1,025
Total 4,918
RENTAL AND REVENUE STRUCTURE
Initial Hotels – Rental Revenue Derived from Hotel Operations
Rental revenues, represented by base rent and variable rent in respect of the Initial Hotels, are derived from hotel
operations, that is, from the hotel businesses leased to the RHIHL Group and managed by the Hotel Manager.
Specifically, total hotel revenue consists of the following:
Room revenue, which is primarily driven by hotel room occupancy rates and achieved average room rates;
Food and beverage revenue (
“
F&B Revenue
”
), which is primarily driven by banquet business, local patron and hotel
room guests
’
usage of bars and restaurants; and
Other income, which consists of ancillary hotel revenue and other items, which is mainly driven by hotel room
occupancy rates which, in turn, affect telephone, internet and business centre usage, spa and health centres, parking
and dry cleaning/laundry services.
Hotel operating costs and expenses consist of direct costs and expenses attributable to the respective operating
departments, e.g. rooms department, food and beverage department, etc. as well as costs and expenses attributable to
overhead departments such as the administration department, the sales and marketing department and the repairs and
maintenance department.
Annual Report 2023
20
Most categories of variable expenses, such as certain labour costs in housekeeping and utility costs, fluctuate with changes
in the levels of room occupancies. The cost of goods sold in the hotel business, such as food products and beverages,
fluctuate with guest frequency of dining in restaurants, bars and banquets.
The following performance indicators are commonly adopted in the hotel industry:
Room occupancy rates;
Average room rates; and
RevPAR, room revenue divided by rooms available, or a product of the occupancy rates and the average room rates
(RevPAR does not include F&B Revenue or other income, i.e. only room revenue).
Initial Hotels – Rental Structure and Market Rental Packages
Pursuant to the Initial Hotels Lease Agreements, for the years 2011 to 2028 (for Regal Airport Hotel) and 2030 (for the
other four Initial Hotels), respectively, the rental packages in respect of the Initial Hotels are determined on a yearly basis
by a jointly appointed independent professional property valuer. The determinations comprise the amount of market
rents (inclusive of the amount of base rent (the
“
Base Rent
”
) for each Initial Hotel, the variable rent (the
“
Variable Rent
”
)
sharing percentage and the RHIHL Lessee
’
s contributions to the furniture, fixtures and equipment (the
“
FF&E
”
) reserve
calculated as a percentage of total hotel revenue) to be applied for each of the Initial Hotels for the relevant respective
years from 2011 to 2028 (for Regal Airport Hotel) and 2030 (for the other four Initial Hotels), respectively, together with
the amount of the security deposit required (collectively, the
“
IH Market Rental Package
”
).
IH Market Rental Package for 2023
According to the IH Market Rental Package for 2023, the aggregate Base Rent for the Initial Hotels was determined at
HK$480.0 million, to be payable by cash by the RHIHL Lessee on a monthly basis. Regal REIT would be entitled to receive
Variable Rent based on 50% sharing of any excess of the aggregate NPI over the aggregate Base Rent. No FF&E reserve is
required to be contributed by the RHIHL Lessee and the obligation for such contribution rests with the Lessors. The RHIHL
Lessee has provided third party guarantees as security deposits for an aggregate amount of HK$120.0 million, which is
equivalent to three months
’
Base Rent.
IH Market Rental Package for 2024
An independent professional property valuer, Ms. Stella Ho, was jointly appointed by the lessors and the RHIHL Lessee in
June 2023 to conduct rent reviews for the Initial Hotels for 2024. According to the determination of the IH Market Rental
Package for 2024, the aggregate amount payable by the RHIHL Lessee as Base Rent was determined to be HK$544.0
million, with Variable Rent continuing to be based on sharing 50% of the excess of the aggregate NPI from the operations
of the Initial Hotels over the aggregate Base Rent thereof in 2024. No FF&E reserve is required to be contributed by the
RHIHL Lessee and the obligation for such contribution rests with the lessors.
The RHIHL Lessee has provided third party guarantees as security deposits, effective on 1st January, 2024, for an aggregate
amount of HK$136.0 million, which is equivalent to three months
‘
aggregate Base Rent of the Initial Hotels for 2024,
issued by a licensed bank in Hong Kong. Details of the IH Market Rental Package for 2024 can be referred to in an
announcement published by the REIT Manager on 12th September, 2023.
Annual Report 2023
21
iclub Wan Chai Hotel – Revenue Structure
Hotel Portion
The hotel portion of iclub Wan Chai Hotel, which is under an owner-operate mode, is managed by the Hotel Manager
under the Wan Chai Hotel Management Agreement. Gross hotel revenue and the associated operating costs and expenses
are accounted for directly by Regal REIT.
Non-hotel Portions
iclub Wan Chai Hotel – non-hotel portions, comprised of a portion of the ground floor and the 27th to 29th floors of the
premises, are let out for generating monthly rental income.
iclub Sheung Wan Hotel – Rental Structure and Market Rental Package
Pursuant to the SW Lease Agreement and its supplemental deed, the RHIHL Lessee is obligated to pay rentals in respect
of the iclub Sheung Wan Hotel to Regal REIT for the period from 10th February, 2014 to 31st December, 2034, with fixed
rentals for the first three years of the lease term.
After the lapse of the three initial lease years, market rental reviews by a jointly appointed independent professional
property valuer take place annually for each of the remaining periods of the lease term to determine the market rental
components (comprising the Base Rent, Variable Rent and lessee
’
s contribution to the FF&E reserve) together with the
amount of the security deposit required (collectively, the
“
SW Market Rental Package
”
).
SW Market Rental Package for 2023
According to the determination of SW Market Rental Package for 2023, the Base Rent payable by the RHIHL Lessee was
HK$32.0 million, with Variable Rent to be based on 50% of the excess of the NPI over the Base Rent. No FF&E reserve is
required to be contributed by the RHIHL Lessee and the obligation for such contribution rests with the lessor. The RHIHL
Lessee has provided a third party guarantee as a security deposit for an amount of HK$8.1 million, which is equivalent to
three months
’
Base Rent together with rates and Government rent of the iclub Sheung Wan Hotel for 2023.
SW Market Rental Package for 2024
The same independent professional property valuer, Ms. Stella Ho, was jointly appointed in June 2023 to determine the
SW Market Rental Package for 2024. According to the determination of the SW Market Rental Package for 2024, the Base
Rent to be payable by the RHIHL Lessee is HK$42.0 million, with Variable Rent to be based on 50% of the excess of the
NPI over the Base Rent. No FF&E reserve is required to be contributed by the RHIHL Lessee and the obligation for such
contribution rests with the lessor. The RHIHL Lessee is required to provide a third party guarantee as a security deposit,
effective on 1st January, 2024, for an amount of HK$10.6 million, which is equivalent to three months
’
Base Rent together
with rates and Government rent of the iclub Sheung Wan Hotel for 2024. Details of the SW Market Rental Package for
2024 can be referred to in an announcement published by the REIT Manager on 12th September, 2023.
Annual Report 2023
22
iclub Fortress Hill Hotel – Rental Structure and Market Rental Package
Pursuant to the FH Lease Agreement and its supplemental deed, the RHIHL Lessee is obligated to pay rentals in respect of
the iclub Fortress Hill Hotel to Regal REIT for the period from 28th July, 2014 to 31st December, 2034, with fixed rentals
for the first three years of the lease term.
After the lapse of the three initial lease years, market rental reviews by a jointly appointed independent professional
property valuer take place annually for each of the remaining periods of the lease term to determine the market rental
components (comprising the Base Rent, Variable Rent and lessee
’
s contribution to the FF&E reserve) together with the
amount of the security deposit required (collectively, the
“
FH Market Rental Package
“
).
FH Market Rental Package for 2023
According to the determination of FH Market Rental Package for 2023, the Base Rent payable by the RHIHL Lessee was
HK$30.0 million, with Variable Rent to be based on 50% of the excess of the NPI over the Base Rent and no FF&E reserve
is required to be contributed by the RHIHL Lessee and the obligation for such contribution rests with the lessor. The RHIHL
Lessee has provided a third party guarantee as a security deposit for an amount of HK$7.8 million, which is equivalent to
three months
’
Base Rent together with rates and Government rent of the iclub Fortress Hill Hotel for 2023.
FH Market Rental Package for 2024
Concurrent with the appointment as independent professional property valuer for the SW Market Rental Package 2024,
Ms. Stella Ho was also appointed in June 2023 to determine the FH Market Rental Package for 2024. According to the
determination of the FH Market Rental Package for 2024, the Base Rent to be payable by the RHIHL Lessee is HK$40.0
million, with Variable Rent to be based on 50% of the excess of the NPI over the Base Rent. No FF&E reserve is required
to be contributed by the RHIHL Lessee and the obligation for such contribution rests with the lessor. The RHIHL Lessee is
required to provide a third party guarantee as a security deposit, effective on 1st January, 2024, for an amount of HK$10.3
million, which is equivalent to three months
’
Base Rent together with rates and Government rent of the iclub Fortress Hill
Hotel for 2024. Details of the FH Market Rental Package for 2024 can be referred to in an announcement published by the
REIT Manager on 12th September, 2023.
iclub To Kwa Wan Hotel – Rental Structure
Pursuant to the TKW Lease Agreement and its supplemental deed, the RHIHL Lessee is obligated to pay rentals in respect
of the iclub To Kwa Wan Hotel to Regal REIT for the period from 4th September, 2017 to 31st December, 2027, with fixed
rentals for the first five years of the lease term.
After the lapse of the five initial lease years, market rental reviews by a jointly appointed independent professional property
valuer take place annually for each of the remaining periods of the lease term to determine the market rental components
(comprising the Base Rent, Variable Rent and the lessee
’
s contribution to the FF&E reserve) together with the amount of
security deposit required (collectively, the
“
TKW Market Rental Package
”
).
Annual Report 2023
23
TKW Market Rental Package for 2022/23
The same independent professional property valuer, Ms. Stella Ho, was jointly appointed in March 2022 to conduct the
first rent review for the iclub To Kwa Wan Hotel for the period from 4th September, 2022 to 31st December, 2023 (the
“
TKW 2022/23 Lease Year
”
). According to the determination of the TKW Market Rental Package for the TKW 2022/23
Lease Year, the pro-rated Base Rent payable by the RHIHL Lessee for the first period of the TKW 2022/23 Lease Year (from
4th September, 2022 to 31st December, 2022) is HK$8.775 million, while the Base Rent for the second period of the
TKW 2022/23 Lease Year (from 1st January, 2023 to 31st December, 2023) is HK$30.0 million, with Variable Rent to be
based on 50% of the excess of the NPI over the Base Rent and no FF&E reserve is required to be contributed by the RHIHL
Lessee and the obligation for such contribution rests with the lessor for the whole period of the TKW 2022/23 Lease Year.
The RHIHL Lessee has provided a third party guarantee as a security deposit for an amount of HK$7.0 million (for the first
period of the TKW 2022/23 Lease Year) and HK$7.8 million (for the second period of the TKW 2022/23 Lease Year).
TKW Market Rental Package for 2024
The same independent professional property valuer, Ms. Stella Ho, was jointly appointed in June 2023 to determine the
TKW Market Rental Package for 2024. According to the determination of the TKW Market Rental Package for 2024, the
Base Rent to be payable by the RHIHL Lessee is HK$36.0 million, with Variable Rent to be based on 50% of the excess of
the NPI over the Base Rent. No FF&E reserve is required to be contributed by the RHIHL Lessee and the obligation for such
contribution rests with the lessor. The RHIHL Lessee is required to provide a third party guarantee as a security deposit,
effective on 1st January, 2024, for an amount of HK$9.3 million, which is equivalent to three months
’
Base Rent together
with rates and Government rent of the iclub To Kwa Wan Hotel for 2024. Details of the TKW Market Rental Package for
2024 can be referred to in an announcement published by the REIT Manager on 12th September, 2023.
Furniture, Fixtures & Equipment Reserve
Regal REIT is obligated under the respective Initial Hotels Lease Agreements, the Wan Chai Hotel Management Agreement,
the SW Lease Agreement and its supplemental deed, the FH Lease Agreement and its supplemental deed and the TKW
Lease Agreement and its supplemental deed to maintain a reserve to fund expenditures for replacements of FF&E in the
respective hotels during the year.
During the year, Regal REIT contributed amounts equal to 2% of the total hotel revenue (i.e. the total of room revenue,
food and beverage revenue and/or other income of the hotel properties) for each month and, as a result, HK$28.1 million
was contributed to the FF&E reserve with corresponding expenditures of HK$32.4 million being recorded for the purposes
intended.
Capital Addition Projects
As an ongoing initiative, Regal REIT invests in capital addition projects for continuous upgrade on the quality and
standards of the rooms and facilities for its hotel properties. Regal REIT undertakes, in addition to the FF&E reserve, the
funding of capital addition projects with the objective of improving portfolio competitiveness and product offerings to
enhance income generating capabilities, profitability of the hotel property portfolio and enable special utilisations. Other
enhancement projects may also be conducted to comply with updated licensing requirements or to conform to legislation
enactments and standards from time to time.
Annual Report 2023
24
REVIEW OF OPERATIONS AND FINANCIAL RESULTS
The results of the Group for the year ended 31st December, 2023 are set out in the consolidated financial statements.
Review of the Economic Environment in 2023
According to research issued by the International Monetary Fund (IMF) in late 2023, the pace of recovery has moderated,
after a strong initial rebound from the depths of the COVID-19 pandemic. Several forces are holding back the recovery.
Some reflect the long-term consequences of the pandemic, war in Ukraine, and increasing geoeconomic fragmentation.
Others are more cyclical, including the effects of monetary policy tightening necessary to reduce inflation, withdrawal of
fiscal support amid high debt, and extreme weather events
1
.
Despite signs of economic resilience in earlier 2023 and progress in reducing headline inflation, economic activity is still
generally falling short of pre-pandemic projections. The strongest recovery among major economies has been in the United
States, where GDP in 2023 is estimated to exceed its pre-pandemic path. The euro area has recovered, though less strongly
and below pre-pandemic projections, reflecting greater exposure to the war in Ukraine and the associated adverse terms-
of-trade shock, as well as a spike in imported energy prices
1
.
GDP growth in China reached 5.2%
2
in 2023 and growth momentum is fading following a COVID-19 reopening surge in
early 2023. Real estate investment and housing prices continue to decline, putting pressure on local governments
’
revenues
from land sales and threatening already fragile public finances
1
.
For 2023 as a whole, Hong Kong
’
s GDP increased by 3.2%
3
in real terms over 2022, following a contraction of 3.7% in
2022. Exports of services staged a strong rebound, benefitting from the revival of visitor arrivals after the resumption of
normal travel with the Mainland and the rest of the world. Private consumption expenditure turned to a notable increase
after the removal of anti-epidemic measures, supported by rising household incomes and the Government
’
s various
initiatives. Overall investment expenditure reverted to growth in tandem with the economic recovery. Yet, total exports of
goods fell further amid the challenging external environment
4
.
According to statistics published by the Census and Statistics Department of the Hong Kong Government, the seasonally
adjusted unemployment rate of Hong Kong stood at 2.9% in October - December 2023, same as that in September -
November 2023. This is 0.6 percentage point lower than the same period last year. The unemployment rates of the various
sectors stayed low in October - December 2023. Compared with the preceding three-month period, the unemployment
rates of most sectors either declined or stayed unchanged. The underemployment rate also remained unchanged at 1.0%
in the two periods. Movements in the underemployment rate in different industry sectors varied, but the magnitudes were
generally not large
5
.
1
Source: Publications, International Monetary Fund,
“
World Economic Outlook – Navigating Global Divergences
”
, 10th October,
2023.
2
Source: Press Release, National Bureau of Statistics of China,
“
National Economy Witnessed Momentum of Recovery with Solid
Progress in High-quality Development in 2023
”
, 17th January, 2024.
3
Source: Budget Speech, The 2024-25 Budget,
“
Economic Situation in 2023
”
, 28th February, 2024.
4
Source: Press Release, Census & Statistics Department,
“
Advance estimates on Gross Domestic Product for fourth quarter and
whole year of 2023
”
, 31st January, 2024.
5
Source: Press Release, Census and Statistics Department,
“
Unemployment and underemployment statistics for October – December
2023
”
, 18th January, 2024.
Annual Report 2023
25
Visitor Arrivals in Hong Kong, 2023 versus 2022
6
Visitors to Hong Kong by
Geographical Regions
2023
(Percentage
of total
visitors)
2023
(No. of
visitors)
2022
(No. of
visitors)
Variance
(No. of
visitors)
Variance
(%)
Mainland China 78.71% 26,760,453 375,130 26,385,323 7,033.6%
South & Southeast Asia 7.12% 2,420,644 78,491 2,342,153 2,984.0%
North Asia 2.20% 749,388 15,664 733,724 4,684.1%
Taiwan 2.31% 783,778 24,249 759,529 3,132.2%
Europe, Africa & the Middle East 2.54% 864,031 44,542 819,489 1,839.8%
The Americas 2.66% 904,205 41,735 862,470 2,066.5%
Australia, New Zealand & South Pacific 0.86% 293,145 14,528 278,617 1,917.8%
Macau SAR/Not identified 3.60% 1,224,016 10,225 1,213,791 11,870.8%
Totals 100% 33,999,660 604,564 33,395,096 5,523.8%
Overnight visitors included in above 50.5% 17,159,320 567,785 16,591,535 2,922.2%
Following the removal of all travel restrictions early last year, Hong Kong received a total of about 34 million visitors in
2023. Due to the low comparative base, this reflected an increase of 55 times year-on-year, but, as a matter of fact, it only
represented about 55% of the aggregate visitor arrivals in the pre-COVID times. Visitors from China continued to account
for the largest share in the local tourism sector. As per the Hong Kong Tourism Board (HKTB), the trend for overnight-
visitors percentage improved and stood at 50% in the fourth quarter, with an average stay of about 3.6 nights
7
.
Mainland China visitors increased and recorded a growth rate of 70 times, with arrivals aggregating approximately 26.8
million, representing 78.7% of the total visitor arrivals to Hong Kong in 2023.
Arrivals from short-haul markets comprising other Asian regions (including North Asia, South & Southeast Asia, Taiwan and
Macau) were reported as 5.2 million and accounted for 15.2% of total arrivals, representing a growth rate of 39 times as
compared to 2022.
For the long-haul markets, a growth rate of nearly 20 times was recorded, with total arrivals of approximately 2.1 million.
Visitors from the Americas also displayed an increase with a growth rate of 21 times and represented 2.7% of the total
number of visitors. Overall, visitor arrivals from the European, Africa and the Middle East markets recorded an aggregate
growth of 18 times, with the visitor number reaching 0.9 million and accounting for 2.5% of total arrivals.
Similar to other international gateway cities, in-bound visitor numbers drive the core lodging demand for the local hotel
industry. Overnight visitors aggregated approximately 17.2 million, representing 50.5% of total arrivals and showing an
increase of 29 times year-on-year.
6
Source: Research, Hong Kong Tourism Board,
“
Visitor Arrival Statistics – Dec 2023
”
, January 2024;
“
Visitor Arrival Statistics – Dec
2022
”
, January 2023; the REIT Manager.
7
Source: News, The Standard,
“
Hong Kong welcomes 34 million tourists in 2023 with mainland being largest market
”
, 13th
January, 2024.
Annual Report 2023
26
Review of Hotel Room Supply in Hong Kong in 2023 and Forecast for 2024
In 2023, the hotel room supply in Hong Kong reported growth of 1.0% over 2022. This represented an annual increase
of 904 units from 89,205 to 90,109 rooms. During the year under review, 2 new hotel properties were opened and the
number rose from 319 to 321, posting year-on-year growth of 0.6%. A continuing increase in the new room supply by
616 units in 2024 with 2 new hotels is anticipated. By the end of 2024, it is projected that the hotel room supply will
reach 90,725 with an increase of about 0.7% over the preceding year
8
.
Industry Performance
Room Occupancy Rates, Average Room Rates and RevPAR (Revenue per available room) of the different category of hotels
are summarized below.
Hong Kong Hotel Market Performance (2023 versus 2022)
9
Room Occupancy Rates Average Room Rates RevPAR
2023 2022 2023 2022 2023 2022
Category % % HK$ HK$ HK$ HK$
High Tariff A 76 56 2,347 1,707 1,784 956
High Tariff B 84 72 1,098 824 922 593
Medium Tariff 84 66 730 664 613 438
All Hotels 82 66 1,392 1,065 1,141 703
According to the hotel performance survey published by the HKTB, the average hotel occupancy rate for all the surveyed
hotels in different categories in Hong Kong in 2023 was 82.0%, an increase of 16.0 percentage points over 2022. While
the industry-wide average room rate improved by 30.7%, with the average Revenue per Available Room (RevPAR) of
HK$1,141, resulting in an overall increase by 62.3% or an increase of HK$438 on a year-on-year basis.
Performance Highlights of Regal REIT
Being one of the major hotel owners in Hong Kong, Regal REIT presently owns a portfolio of nine operating hotels
strategically located in different districts in Hong Kong, comprising five hotels under the full-service
“
Regal
”
brand (the
“
Initial Hotels
”
) and four hotels under the select-service
“
iclub
”
brand, commanding an aggregate of 4,918 guestrooms
and suites.
The financial performance of Regal REIT with regard to operating results and net asset value relies on the underlying
performance of the respective hotel businesses operated by the RHIHL Lessee and the self-operated iclub Wan Chai Hotel,
all under the management of the Hotel Manager.
While 2023 was seen as the first year after the pandemic, with the hotels shifting from the quarantine mode in 2022 and
returning to the normal hotel operating mode and, therefore, the operating statistics of the hotels owned by Regal REIT for
2023 as highlighted below may bear less reference to that for 2022 owing to the change in the business mode.
8
Source: Research, Hong Kong Tourism Board,
“
Hotel Supply Situation – as at Dec 2023
”
, March 2024; the REIT Manager.
9
Source: Research, Hong Kong Tourism Board,
“
Hotel Room Occupancy Report – Dec 2023
”
, January 2024; the REIT Manager.
Annual Report 2023
27
For year 2023 as a whole, the five Initial Hotels operated with satisfactory results, especially for those hotels in the city
area. During the year, the Initial Hotels generated aggregate total hotel revenue of HK$1,185.3 million, or an increase of
11.2% year-on-year, despite the fact that three of them operated as quarantine hotels in 2022 with higher occupancy
rates, average room rates and RevPAR under the quarantine hotel operations mode. As they shifted from the quarantine
hotel operations back to the normal hotel operations, the Initial Hotels recorded a combined average occupancy rate of
69.4% in 2023 as compared to 62.3% in the prior year.
Likewise, the other four iclub Hotels recorded satisfactory results, with individual occupancy rates all surpassing 80%, and
in particular, iclub Sheung Wan Hotel recorded a year-round occupancy rate of 90.5%.
Further details on the Individual hotel performance data and statistics for 2023 are further elaborated on the following
sections and in the valuation report section of the respective hotel property in pages 126 to 185.
Performance of the Initial Hotels
Total hotel revenue, gross operating profit (
“
GOP
”
), NPI and statistics for the combined Initial Hotels for FY2023 versus
FY2022 are set out below.
FY2023 FY2022 Variance Variance
HK$
’
million HK$
’
million HK$
’
million %
Operating Results
Room revenue 862.0 775.8 86.2 11.1%
Food and beverage revenue 305.2 235.7 69.5 29.5%
Other income 18.1 54.8 (36.7) (67.0%)
Total hotel revenue 1,185.3 1,066.3 119.0 11.2%
Operating expenses (795.1) (673.8) (121.3) (18.0%)
Gross operating profit 390.2 392.5 (2.3) (0.6%)
Other expenses (44.6) (42.9) (1.7) (4.0%)
Net rental income 37.2 40.6 (3.4) (8.4%)
Net property income 382.8 390.2 (7.4) (1.9%)
Statistics
Average room rate HK$874.20 HK$875.97 (HK$1.77) (0.2%)
Occupancy rate 69.4% 62.3% 7.1% 11.4%
RevPAR HK$606.61 HK$545.99 HK$60.62 11.1%
Total available room nights 1,420,945 1,420,945
— —
Occupied room nights 986,001 885,672 100,329 11.3%
Annual Report 2023
28
During the year under review, total hotel revenue of the Initial Hotels recorded a combined result of HK$1,185.3 million
(2022 - HK$1,066.3 million), representing an increase of HK$119.0 million or 11.2% year-on-year. GOP and NPI were
HK$390.2 million and HK$382.8 million, respectively, reflecting satisfactory results upon resumption of normal hotel
operations.
The combined average occupancy rate of the Initial Hotels in 2023 was 69.4%, as compared to 62.3% in the prior year.
While the combined average room rate remained steady and their combined average RevPAR has risen by 11.1% to
HK$606.61 year-on-year.
Base Rent
According to the IH Market Rental Package for 2023, Regal REIT received Base Rent in the form of cash for each Initial
Hotel on a monthly basis. During the year under review, Regal REIT received aggregate Base Rent of HK$480.0 million,
representing a monthly Base Rent of HK$40.0 million.
Variable Rent
Regal REIT is entitled to receive Variable Rent through the sharing of the excess aggregate NPI from the Initial Hotels
’
operations over the annual Base Rent. For the year under review, the aggregate NPI from hotel operations of the Initial
Hotels amounted to HK$382.8 million, which was below the aggregate Base Rent of HK$480.0 million. Therefore, no
Variable Rent was earned for the year.
Performance of iclub Wan Chai Hotel
The hotel portion of the iclub Wan Chai Hotel recorded an average room rate of HK$902.96 in 2023, compared to
HK$562.25 in 2022. With the year-round occupancy rate of 94.3% in 2023 (2022 - 92.6%), the RevPAR achieved for
2023 was HK$851.06 as compared to HK$520.87 for the previous year. Meanwhile, the non-hotel portions of the iclub
Wan Chai Hotel, comprised the portion of the ground floor and other areas on the 27th to 29th floors of the premises,
continued to be leased to tenants throughout the year.
Hotel portion
For the year ended 31st December, 2023, the hotel portion contributed gross hotel revenue of HK$31.3 million and
incurred operating costs and expenses of HK$14.9 million.
Non-hotel portions
For the year ended 31st December, 2023, rental income of HK$5.8 million was generated from the leasing of the non-
hotel portions.
Annual Report 2023
29
Performance of iclub Sheung Wan Hotel
For 2023, the iclub Sheung Wan Hotel achieved an overall occupancy rate of 90.5%, as compared to 86.6% in 2022. Its
average room rate of HK$823.49 (2022 - HK$510.52) increased by 61.3%, resulting in a year-on-year growth of 68.7% in
its average RevPAR.
Base Rent
According to the SW Market Rental Package for 2023, Regal REIT received Base Rent in the form of cash on a monthly
basis. During the year, Regal REIT received HK$32.0 million.
Variable Rent
Regal REIT is entitled to receive Variable Rent through the sharing of the excess NPI from the iclub Sheung Wan Hotel
’
s
operations over the Base Rent. For the year under review, as the NPI from hotel operations was HK$39.3 million, which
exceeded the Base Rent of HK$32.0 million, Variable Rent of HK$3.6 million was earned.
Performance of iclub Fortress Hill Hotel
For 2023, the iclub Fortress Hill Hotel achieved an overall occupancy rate of 84.7%, as compared to 72.6% in 2022. Its
average room rate of HK$609.55 (2022 - HK$969.31) decreased by 37.1%, resulting in a year-on-year contraction of
26.6% in its average RevPAR.
Base Rent
According to the FH Market Rental Package for 2023, Regal REIT received Base Rent in the form of cash on a monthly
basis. During the year, Regal REIT received HK$30.0 million.
Variable Rent
Regal REIT is entitled to receive Variable Rent through the sharing of the excess NPI from the iclub Fortress Hill Hotel
’
s
operations over the Base Rent. For the year under review, as the NPI from hotel operations was HK$34.7 million, which
exceeded the Base Rent of HK$30.0 million, Variable Rent of HK$2.4 million was earned.
Performance of iclub To Kwa Wan Hotel
For 2023, the iclub To Kwa Wan Hotel achieved an overall average occupancy rate of 80.8%, as compared to 70.0%
in 2022. Its average room rate of HK$579.32 (2022 - HK$1,003.43) decreased by 42.3%, resulting in a year-on-year
contraction of 33.4% in its average RevPAR, owing to the fact that it operated as a quarantine hotel in 2022.
Base Rent
According to the TKW Market Rental Package for the second period of the TKW 2022/23 Lease Year (from 1st January,
2023 to 31st December, 2023), Regal REIT received Base Rent in the form of cash on a monthly basis. During the year,
Regal REIT received HK$30.0 million.
Variable Rent
Regal REIT is entitled to receive Variable Rent through the sharing of the excess NPI from the iclub To Kwa Wan Hotel
’
s
operations over the Base Rent. For the year under review, as the NPI from hotel operations was HK$29.3 million, which fell
short of the Base Rent of HK$30.0 million, no Variable Rent was earned.
Annual Report 2023
30
Net Rental and Hotel Income
The aggregate net rental and hotel income for Regal REIT for the year ended 31st December, 2023 (as compared to the
prior year) is set out below.
2023 2022
HK$
’
million % HK$
’
million %
Initial Hotels
Base Rent 480.0 77.7 475.0 77.1
Variable Rent
— — — —
Other income 2.6 0.4 2.3 0.3
iclub Sheung Wan Hotel
Base/Variable Rents 35.6 5.8 27.0 4.4
iclub Fortress Hill Hotel
Base/Variable Rents 32.4 5.2 37.8 6.1
iclub To Kwa Wan Hotel
Rental income 30.0 4.9 50.0 8.1
iclub Wan Chai Hotel
Gross hotel revenue 31.3 5.1 18.9 3.1
Rental income 5.8 0.9 5.4 0.9
Gross rental and hotel income 617.7 100.0 616.4 100.0
Property operating expenses (3.8) (0.6) (3.5) (0.6)
Hotel operating expenses (14.9) (2.4) (12.3) (2.0)
Net rental and hotel income 599.0 97.0 600.6 97.4
During the year under review, net rental and hotel income represented 97.0% of the gross rental and hotel income after
the deduction of property and hotel operating expenses. The management services of the hotel properties are provided
by the Hotel Manager under the relevant hotel management agreements with respect to the Initial Hotels, iclub Wan Chai
Hotel, iclub Sheung Wan Hotel, iclub Fortress Hill Hotel and iclub To Kwa Wan Hotel.
Annual Report 2023
31
Valuation of the Property Portfolio
As at 31st December, 2023, Regal REIT
’
s overall property portfolio was valued at HK$23,988.0 million (31st December,
2022 - HK$23,553.0 million). The property portfolio is comprised of (i) the five Initial Hotels, the iclub Sheung Wan Hotel,
the iclub Fortress Hill Hotel, the iclub To Kwa Wan Hotel and the non-hotel portions of iclub Wan Chai Hotel that are
classified as investment properties for an aggregate amount of HK$23,352.0 million; and (ii) the owner-operated hotel
portion of the iclub Wan Chai Hotel which is classified as property, plant and equipment for an amount of HK$636.0
million.
Valuations of the properties as at 31st December, 2023 and 31st December, 2022 are tabulated below.
31 Dec 2023 31 Dec 2022 %
Property Location Valuation Valuation Change
HK$ million HK$ million
Initial Hotels:
Regal Airport Hotel Lantau Island 1,429 1,710 -16.4%
Regal Hongkong Hotel HK Island 4,322 4,250 +1.7%
Regal Kowloon Hotel Kowloon 5,953 5,808 +2.5%
Regal Oriental Hotel Kowloon 1,805 1,790 +0.8%
Regal Riverside Hotel New Territories 5,146 4,920 +4.6%
18,655 18,478 +1.0%
iclub Hotels:
iclub Wan Chai Hotel HK Island 833 800 +4.1%
iclub Sheung Wan Hotel HK Island 1,579 1,472 +7.3%
iclub Fortress Hill Hotel HK Island 1,560 1,503 +3.8%
iclub To Kwa Wan Hotel Kowloon 1,361 1,300 +4.7%
Overall property portfolio 23,988 23,553 +1.8%
The valuations of the properties in the portfolio as at 31st December, 2023 were conducted by Colliers lnternational
(Hong Kong) Limited (
“
Colliers
”
), the principal valuer of Regal REIT appointed by the Trustee, for a term of three years
commencing from December 2021 pursuant to the provisions of the REIT Code.
Colliers, an independent professional property valuer, assessed the market values of the properties portfolio subject to
the lease agreements, hotel operations and the hotel management agreements in accordance with
“
The HKIS Valuation
Standards (2020 Edition)
”
, the Listing Rules and the REIT Code. Colliers used the discounted cash flow (
“
DCF
”
) method
based on key assumptions such as hotel room occupancies, hotel average room rates, terminal capitalisation rates and
discount rates. The market approach was also used as a check on the valuation derived from the DCF method.
Annual Report 2023
32
FINANCIAL REVIEW AND FINANCING STRATEGY
The REIT Manager has continued to adopt a prudent approach to ensure that the leverage ratios do not exceed thresholds
prescribed under the REIT Code and strive to secure loan facilities for Regal REIT
’
s portfolio under appropriate financial
covenants and terms.
Loan Financing
As at 31st December, 2023, Regal REIT
’
s loan facilities aggregating HK$10,459.5 million, with varying maturity terms, were
comprised of: (a) term and revolving loan facilities of up to HK$5,000.0 million secured by four of the five Initial Hotels;
(b) a term loan facility of HK$2,900.0 million secured by Regal Kowloon Hotel; (c) a term loan facility of HK$405.0 million
secured by the iclub Wan Chai Hotel; (d) a term loan facility of HK$749.5 million secured by the iclub Sheung Wan Hotel;
(e) a term loan facility of HK$755.0 million secured by the iclub Fortress Hill Hotel; and (f) a term loan facility of HK$650.0
million secured by the iclub To Kwa Wan Hotel.
Financing for the Initial Hotels
The facility agreement for a term loan facility of HK$4,500.0 million and a revolving loan facility of up to HK$500.0 million
(the
“
2021 IH Facilities
”
), concluded on 10th August, 2021 through Regal REIT
’
s wholly-owned subsidiaries, were secured
by four of the five Initial Hotels, namely, the Regal Airport Hotel, the Regal Hongkong Hotel, the Regal Oriental Hotel and
the Regal Riverside Hotel. The 2021 IH Facilities have a term of five years and carries interest based on HIBOR. As at 31st
December, 2023, the 2021 IH Facilities had an outstanding amount of HK$4,965.4 million, representing the full amount of
the term loan facility and an amount of HK$465.4 million under the revolving loan facility.
On 8th March, 2018, Regal REIT arranged, through a wholly-owned subsidiary, a bilateral term loan facility of HK$3,000.0
million (the
“
2018 RKH Facility
”
), secured by a mortgage over the Regal Kowloon Hotel. This facility bore HIBOR-based
interest and had a term of five years to March 2023. In late June 2022, Regal REIT concluded a 5-year term loan facility of
HK$2,950.0 million (the
“
2022 RKH Facility
”
) with a new lender, similarly secured by the Regal Kowloon Hotel, which was
used to refinance the 2018 RKH Facility. The 2022 RKH Facility carries interest based on HIBOR and has its loan maturity in
June 2027. As at 31st December, 2023, the outstanding amount of the 2022 RKH Facility was HK$2,900.0 million, after an
installment repayment of HK$50.0 million in June 2023, representing the full amount of the term loan.
Financing for iclub Wan Chai Hotel
A term loan facility agreement for a principal amount of HK$440.0 million (the
“
2019 WC Facility
”
), with a term of five
years to July 2024, was entered into by a wholly-owned subsidiary of Regal REIT on 19th July, 2019. The 2019 WC Facility
was secured by the iclub Wan Chai Hotel and bears HIBOR-based interest throughout its term and its principal amount
was revised to HK$405.0 million on 22nd June, 2020 for compliance with the terms of the facility agreement. As at 31st
December, 2023, the outstanding facility amount of the 2019 WC Facility remained at HK$405.0 million.
Annual Report 2023
33
Financing for iclub Sheung Wan Hotel
On 17th October, 2023, Regal REIT arranged, through a wholly-owned subsidiary, a new bilateral term loan facility of
HK$749.5 million secured by the iclub Sheung Wan Hotel (the
“
2023 SW Facility
”
) to replace the maturing term and
revolving loan facilities of HK$790.0 million. The 2023 SW Facility bears HIBOR-based interest with a four-year term
to October 2027. As at 31st December, 2023, the outstanding amount of the 2023 SW Facility was HK$749.5 million,
representing the full amount of the term loan.
Financing for iclub Fortress Hill Hotel
On 27th November, 2023, Regal REIT arranged, through a wholly-owned subsidiary, another new bilateral term loan facility
of HK$755.0 million secured by the iclub Fortress Hill Hotel (the
“
2023 FH Facility
”
) to replace the maturing term and
revolving loan facilities of HK$825.0 million. The 2023 FH Facility bears HIBOR-based interest and has a term of five years
to November 2028. As at 31st December, 2023, the outstanding amount of the 2023 FH Facility was HK$755.0 million,
representing the full amount of the term loan.
Financing for iclub To Kwa Wan Hotel
On 15th November, 2023, Regal REIT arranged, through a wholly-owned subsidiary, a new term loan facility of HK$650.0
million, secured by the iclub To Kwa Wan Hotel (the
“
2023 TKW Facility
”
), with a term of two years to November 2025
and bearing HIBOR-based interest to replace the maturing term loan facility of HK$621.0 million. As at 31st December,
2023, the outstanding amount of the 2023 TKW Facility was HK$650.0 million, representing the full amount of the term
loan.
Managing Fluctuations in Interest Rates
During the year under review, HIBOR was on an upward trend, with the 1-month rate fluctuating within a range of around
2.121% per annum to around 5.659% per annum and staying at 5.268% per annum on 31st December, 2023
10
. The
interest cost components in respect of all the loan facilities of Regal REIT were subject to floating HIBOR-based interest
rates.
Although the interest rates in Hong Kong have slowly receded from their high levels that prevailed in late 2023, Regal REIT
has entered into several interest rate swap transactions in early February 2024 to swap the interest expenses on parts of
its outstanding bank loans from floating rates to fixed rates. It is anticipated this could reduce the financial expenses of
Regal REIT in the near term, while at the same time hedge against any unexpected reversionary upward movements in the
interest rates. The REIT Manager will continue to monitor the interest rate trends and to assess any further need to contain
or hedge the exposure of the interest rate fluctuations.
Gearing and Cash
As at 31st December, 2023, the gearing ratio of Regal REIT was 42.7% (2022 - 43.1%), being the gross amount of the
outstanding loans aggregating HK$10,424.9 million, which takes into account: (a) the 2021 IH Facilities of HK$4,965.4
million; (b) the 2022 RKH Facility of HK$2,900.0 million; (c) the 2019 WC Facility of HK$405.0 million; (d) the 2023 SW
Facility of HK$749.5 million; (e) the 2023 FH Facility of HK$755.0 million; and (f) the 2023 TKW Facility of HK$650.0
million, as compared to the total gross assets of Regal REIT of HK$24,392.3 million. The gearing ratio is below the
maximum 50% permitted under the REIT Code.
10
Source: Bloomberg, Hong Kong Dollar HIBOR Fixings 1-Month: 2023.01.01 to 2023.12.31.
Annual Report 2023
34
Regal REIT had a total of HK$45.9 million in unrestricted and HK$330.4 million in restricted cash balances and bank
deposits, and unutilised revolving loan facilities of HK$34.6 million as at 31st December, 2023. Regal REIT maintains
adequate cash reserves and revolving loan facilities and receives timely payments of rental income to satisfy its financial
commitments as well as working capital requirements on an on-going basis.
As at 31st December, 2023, all nine Regal REIT properties with an aggregate carrying value of HK$23,988.0 million were
pledged to secure its bank loan facilities.
DISTRIBUTABLE INCOME AND DISTRIBUTION POLICY
Total Distributable Income (as defined in the Trust Deed) is
“
the amount calculated by the REIT Manager (based on the
audited financial statements of Regal REIT for that Financial Year) as representing the consolidated audited net profit after
tax of Regal REIT and the Special Purpose Vehicles (as defined in the offering circular dated 19th March, 2007 issued in
connection with the listing of Units) for that Financial Year, as adjusted for the Adjustments
”
. Adjustments are made to
the distributable income to eliminate the effects of certain non-cash items and cash items which have been recorded in
Regal REIT
’
s consolidated income statement, including
“
difference in accounting rental income and contractual cash rental
income
”
,
“
fair value changes on investment properties
”
,
“
amounts set aside for the FF&E reserve
”
,
“
amortisation of debt
establishment costs
”
,
“
depreciation
”
and
“
deferred tax charges
”
.
Pursuant to the Trust Deed, Regal REIT is required to ensure that the total amount distributed to Unitholders shall not be
less than 90% of Regal REIT
’
s Total Distributable Income for each financial year and the current policy of the REIT Manager
is to comply with such requirement.
Distributions for 2023
Regal REIT recorded an adjusted loss of HK$127.6 million for 2023 (2022 - total distributable income of HK$204.8 million),
which precludes any distribution for the year. Therefore, same as with the interim period, the Board of Directors of the
REIT Manager has decided not to declare any final distribution for the period from 1st July, 2023 to 31st December, 2023.
As there was no interim distribution for the period from 1st January, 2023 to 30th June, 2023, there was no distribution
for the 2023 year (2022 - final distribution of HK$0.010 per Unit and total distributions for the year of HK$0.061 per Unit).
Annual Report 2023
35
OUTLOOK FOR 2024
As per recent research from the IMF, global growth is projected at 3.1% in 2024 and 3.2% in 2025. The projection for
global growth in 2024 and 2025 is below the historical (2000–19) annual average of 3.8%, reflecting restrictive monetary
policies and withdrawal of fiscal support, as well as low underlying productivity growth. Advanced economies are expecting
to see growth decline slightly in 2024 before rising in 2025, with a recovery in the euro area from low growth in 2023
and a moderation of growth in the United States. Emerging market and developing economies are expected to experience
stable growth through 2024 and 2025, with regional differences. Global headline inflation is expected to fall from an
estimated 6.8% in 2023 (annual average) to 5.8% in 2024 and 4.4% in 2025
11
.
The latest Policy Address proposed to maintain Hong Kong as an International Trade Centre, International Financial Centre,
International Aviation Hub and Shipping Centre, together with the development in innovative technology industries
12
, all
of which are conducive to the few economic driving sectors. The unemployment rate is expected to maintain at a healthy
level, staying below the pre-COVID level of around 3% in 2018
13
.
Looking into 2024, the challenging external environment and high interest rates will continue to impact Hong Kong
’
s
merchandise trade and investments. Business confidence is also expected to become more cautious. It is expected that
the overall economic performance in the second half of 2024 will be better than the first half due to the high chance
of interest rate cuts by the US Federal Reserve. With the implementation of policies to attract tourists and further
enhancement of the capacity to receive visitors, the tourism industry is expected to continue its recovery. This is anticipated
to drive Hong Kong
’
s service trade to achieve a double-digit growth rate
14
. As per the 2024-2025 Budget, Hong Kong
’
s
economic growth is expected to reach between 2.5% to 3.5%
15
which indicates that the economy will continue to recover.
11
Source: Publications, International Monetary Fund,
“
World Economic Outlook UPDATE – Moderating Inflation and Steady Growth
Open Path to Soft Landing
”
, 30th January, 2024.
12
Source: The Chief Executive
’
s 2023 Policy Address, 25th October, 2023.
13
Source: Press Release, Census and Statistics Department,
“
Unemployment and underemployment statistics for October – December
2018
”
, 17th January, 2019.
14
Source: Market Information, Bank of China (Hong Kong) Limited,
“
Steady Recovery amidst Challenges - 2024 Hong Kong Economic
Outlook
”
, December 2023.
15
Source: Budget Speech, The 2024-25 Budget,
“
Economic Outlook for 2024 and the Medium Term
”
, 28th February, 2024.
Annual Report 2023
36
GROWTH STRATEGY
The REIT Manager
’
s primary strategy is to maintain and grow a strong and balanced investment portfolio of hotels and
hospitality-related properties. The REIT Manager intends to achieve its objective of long-term growth in distributions and in
the net asset value per Unit through a combination of two core strategies as follows:
Internal Growth Strategy: The core growth strategy for the hotel portfolio is to maximise value for Unitholders
through pro-active asset management achieving higher total revenue, RevPAR and NPI performance; and
External Growth Strategy: The core strategy for growing the portfolio of hotels is to selectively acquire additional
hotel and other properties that meet the REIT Manager
’
s investment criteria.
In evaluating potential acquisition opportunities, the REIT Manager will focus on the following criteria:
The expected yield enhances returns to Unitholders;
Target the first tier international gateway cities worldwide with a focus on Hong Kong and Mainland China on
markets and locations in urban centres and popular resort areas with growth potential;
Value-adding opportunities, e.g. properties that may be undermanaged or in need of capital investment and/or which
may benefit from market re-positioning and the Regal brand and/or which may be extended or have other asset
enhancement opportunities;
Majority ownership of assets acquired; and
Targeting income and cashflow generating properties.
While Regal REIT will focus on hotels and hospitality-related properties in Greater China, its investment scope also includes
serviced apartments, offices and retail and entertainment complexes and the geographical scope goes beyond Greater
China. Regal REIT
’
s investment scope allows for flexibility in its growth through acquisition of, for example, mixed-use
developments containing hotels, and other investment opportunities overseas.
The targeted properties may be unfinished and require furnishing and fit-out. However, the value of unfinished properties
should, under the current terms of the Trust Deed, represent less than 10% of Regal REIT
’
s gross asset value at the time of
acquisition.
Subsequent to the relaxation of the REIT Code to allow REITs to undertake property development activities and invest in
certain financial instruments and the relevant amendments to the Trust Deed, Regal REIT will be able to enjoy a larger
degree of flexibility in its expanded investment scope.
The REIT Manager continues to actively evaluate opportunities in target markets, while remaining committed to the set
investment criteria.
Regal REIT intends to hold its properties on a long-term basis. However, if in the future any hotel property no longer fits
its investment objectives or when an attractive offer, given prevailing market conditions, is received, the REIT Manager may
consider disposing of the property for cash, so that its investment capital can be redeployed according to the investment
strategies outlined above.
Annual Report 2023
37
MATERIAL ACQUISITIONS OR DISPOSALS OF REAL ESTATE
Regal REIT did not enter into any real estate acquisition or disposal transactions during the year.
OTHER INVESTMENTS
Regal REIT did not engage or participate in any Property Development and Related Activities (as defined in the REIT Code)
nor invest in any Relevant Investments (as defined in the REIT Code) and any real estate other than Non-qualified Minority-
owned Properties (as defined in the REIT Code), including in all Qualified Minority-owned Properties (as defined in the REIT
Code), during the year.
BUY-BACK, SALE OR REDEMPTION OF UNITS
There were no buy-backs, sales or redemptions of Units during the year.
EMPLOYEES
Regal REIT is managed by the REIT Manager and the Trustee. By contracting out such services, Regal REIT does not employ
any staff in its own right.
MAJOR REAL ESTATE AGENTS
Save for the RHIHL Lessee and/or the Hotel Manager which had been delegated to take the responsibility for the operation
and management of the five Initial Hotels and the four iclub Hotels pursuant to the respective related lease agreements
and the hotel management agreements, and as disclosed in this Annual Report, Regal REIT did not engage any real estate
agents to conduct any services or work for the five Initial Hotels and the four iclub Hotels during the year.
MAJOR CONTRACTORS
In 2023, the aggregate value of service contracts of the top three contractors engaged by Regal REIT and their respective
value of services rendered and percentages in terms of property and hotel operating expenses were as follows:
Contractors Nature of Services Value of Services Percentage
HK$
’
000
Regal Hotels International Limited iclub Wan Chai Hotel management fees 1,491 8.0%
Regal Hotels International Limited Marketing fees 313 1.7%
Paliburg Estate Management Limited Building management fees 632 3.3%
2,436 13.0%
Save for the above three transaction areas, there were no other major contractors engaged by Regal REIT during the year.
Annual Report 2023
38
SUSTAINABILITY REPORT
The 2023 Sustainability Report of Regal REIT will be published as a separate report in due course.
ANNUAL GENERAL MEETING
An Annual General Meeting of Regal REIT (the
“
2024 AGM
”
) will be convened on Wednesday, 22nd May, 2024. Relevant
notice of the Meeting will be published and sent to the Unitholders, together with this Annual Report.
CLOSURE OF REGISTER OF UNITHOLDERS
For the purpose of ascertaining Unitholders
’
entitlement to attend and vote at the 2024 AGM, the Register of Unitholders
will be closed from Friday, 17th May, 2024 to Wednesday, 22nd May, 2024, both days inclusive, during which period no
transfers of Units will be effected. In order to be entitled to attend and vote at the 2024 AGM, all Unit certificates with
completed transfer forms must be lodged with Regal REIT
’
s Unit registrar, Computershare Hong Kong Investor Services
Limited, no later than 4:30 p.m. on Thursday, 16th May, 2024.
On behalf of the Board
Regal Portfolio Management Limited
(as the REIT Manager of Regal REIT)
Johnny Chen Sing Hung and Simon Lam Man Lim
Executive Directors
Hong Kong, 27th March, 2024
Annual Report 2023
39
DIRECTOR AND EXECUTIVE OFFICER PROFILES
DIRECTOR PROFILES
Mr. Lo Yuk Sui, aged 79, Chairman and Non-executive Director – Mr. Lo was appointed as the Chairman and Non-
executive Director of the REIT Manager in 2006. He is an executive director, the chairman and chief executive officer of
Regal Hotels International Holdings Limited (
“
RHIHL
”
) of which Regal REIT is a listed subsidiary. He has held the position as
the chairman and managing director of RHIHL since 1989 when RHIHL was established in Bermuda as the holding company
for the RHIHL group and was designated as chief executive officer in 2007. He has been the managing director and
chairman of the predecessor listed company of the RHIHL group since 1984 and 1987, respectively. He is also an executive
director, the chairman and chief executive officer of Century City International Holdings Limited (
“
CCIHL
”
) and Paliburg
Holdings Limited (
“
PHL
”
), of which Regal REIT is a listed subsidiary, and Cosmopolitan International Holdings Limited
(
“
Cosmopolitan
”
), of which Regal REIT is a listed fellow subsidiary. Mr. Lo oversees the overall policy and decision making
of the CCIHL group. He is a qualified architect. Mr. Lo is the father of Miss Lo Po Man and Mr. Jimmy Lo Chun To.
Miss Lo Po Man, aged 44, Vice Chairman and Non-executive Director – Miss Lo was appointed as a Non-executive
Director of the REIT Manager in 2012 and elected as the Vice Chairman of the REIT Manager in 2013. She graduated from
Duke University, North Carolina, U.S.A. with a Bachelor
’
s Degree in Psychology. She is currently an executive director and a
vice chairman of CCIHL and Cosmopolitan, an executive director of PHL, and an executive director, a vice chairman and the
managing director of RHIHL. Miss Lo oversees the sales and marketing functions of the RHIHL group and also undertakes
responsibilities in the business development of the CCIHL group. Miss Lo is the daughter of Mr. Lo Yuk Sui and the sister
of Mr. Jimmy Lo Chun To.
Mr. Johnny Chen Sing Hung, aged 56, Executive Director and Responsible Officer – Mr. Chen joined the REIT Manager
as the Director – Asset Management and was appointed as an Executive Director in 2014. Mr. Chen is responsible for,
among other things, overseeing and managing the asset management activities of Regal REIT and, jointly with Mr. Simon
Lam Man Lim, for making disclosures and communications of Regal REIT to investors. Mr. Chen holds a Master of Business
Administration degree, a Bachelor of Administrative Studies degree and a Bachelor of Arts degree (major in mathematics
for commerce). He is a Fellow member of the Hong Kong Institute of Directors, a former member of the Chinese People
’
s
Political Consultative Conference, Yuexiu District, Guangzhou City, China, and a Fellow member of Hong Kong Securities
and Investment Institute. Mr. Chen has over 30 years of business development, trading, property investment, development
and management experience. Prior to joining the REIT Manager, Mr. Chen was the Vice President - Business Development
of Century City Holdings Limited, a subsidiary of CCIHL, from May 2013 to July 2014. Prior to that, he held various
management and controller positions in different major Hong Kong companies and multinational corporations, including
Silver Base Group Holdings Limited, Faithful Trading (H.K.) Ltd, Gome Home Appliances (HK) Limited and Chevalier Group.
Annual Report 2023
40
Mr. Lam Man Lim (Alias: Simon), aged 67, Executive Director and Responsible Officer – Mr. Lam joined the REIT Manager
as the Director of Finance and Investment and Investor Relations in 2010. He was appointed as an Executive Director in
2011. Mr. Lam is responsible for, among other things, overseeing and managing the finance, accounting and investment
activities of Regal REIT. He is also responsible, jointly with Mr. Johnny Chen Sing Hung, for making the disclosures and
communications of Regal REIT to investors. Mr. Lam holds a Master of Business Administration degree and is a Fellow
member of The Hong Kong Institute of Certified Public Accountants, a Fellow member of The Hong Kong Institute of
Directors and an associate member of The Chartered Institute of Management Accountants. Mr. Lam has over 40 years of
finance and commercial experience in various business sectors and industries. Prior to joining the REIT Manager, he was
an executive director and chief financial officer of Binhai Investment Company Limited, a listed company on the HK Stock
Exchange. Prior to that, he held executive financial and investment management positions in Hong Kong listed companies
and multinational corporations, including Link Asset Management Limited (the REIT manager of Link REIT), Johnson Electric,
Motorola Asia Pacific Limited and Philips Electronics Group.
Mr. John William Crawford, JP, aged 81, Independent Non-executive Director – Mr. Crawford was appointed as an
Independent Non-executive Director of the REIT Manager in 2006. He was one of the founders of Ernst & Young, Hong
Kong office, and was vice-chairman of the firm when he retired at the end of 1997. During his 25 years in public practice,
he was also the chairman of the audit division of Ernst & Young and was active in a number of large private and public
company takeover and/or restructuring exercises. He has continued to undertake consultancy/advisory work in a private
capacity since retirement, is active in the education sector and is the chairman of International Quality Education Limited.
He also remains active in various community service areas such as having been a founding member of UNICEF Hong
Kong Committee and the Hong Kong Institute of Directors. In 1997, he was appointed as a Justice of the Peace in Hong
Kong. He currently acts as an independent non-executive director and the chairman of the audit committee for Melco
International Development Limited, which is listed on the HK Stock Exchange. He also currently acts as an independent
non-executive director and the chairman of the audit and risk committee for Melco Resorts & Entertainment Limited, which
is listed on the NASDAQ.
Mr. Bowen Joseph Leung Po Wing, GBS, JP, aged 74, Independent Non-executive Director – Mr. Leung was appointed
as an Independent Non-executive Director of the REIT Manager in 2016. Mr. Leung previously served the Hong Kong
Government for over 32 years until his retirement as the Director of the Office of the Government of the Hong Kong
Special Administrative Region in Beijing (
“
Beijing Office
”
) in November 2005. He joined the Administrative Service in June
1973 and rose to the rank of Administrative Officer Staff Grade A1 in June 1996. During his service in the Administrative
Service, Mr. Leung had served in various policy bureaux and departments. Senior positions held by Mr. Leung included:
Deputy Secretary for District Administration (later retitled as Deputy Secretary for Home Affairs); Deputy Secretary for
Planning, Environment and Lands; Private Secretary, Government House, Secretary for Planning, Environment and Lands
and Director of the Beijing Office. Mr. Leung has extensive experience in corporate leadership and public administration.
During his tenure as the Director of the Beijing Office, he made commendable efforts in promoting Hong Kong in the
Mainland, as well as fostering closer links and co-operation between Hong Kong and the Mainland. Mr. Leung is an
independent non-executive director and a member of the Audit Committee for PHL and Quali-Smart Holdings Limited, both
are listed on the HK Stock Exchange.
Annual Report 2023
41
Mr. Lo Chun To (Alias: Jimmy), aged 50, Non-executive Director – Mr. Lo was appointed as a Non-executive Director
of the REIT Manager in 2006. He is an executive director and a vice chairman of CCIHL, an executive director, the
vice chairman and the managing director of PHL, an executive director, a vice chairman and the managing director of
Cosmopolitan and an executive director of RHIHL. He graduated from Cornell University, New York, U.S.A. with a Bachelor
of Architecture degree. He is primarily involved in overseeing the Cosmopolitan group
’
s property projects in the People
’
s
Republic of China and, in addition, undertakes responsibilities in the business development of the CCIHL group. He is the
son of Mr. Lo Yuk Sui and the brother of Miss Lo Po Man.
Mr. Ng Kwai Kai (Alias: Kenneth), aged 69, Non-executive Director – Mr. Ng was appointed as a Non-executive Director
of the REIT Manager in 2012. He is a Chartered Secretary. He is currently an executive director and the chief operating
officer of CCIHL and an executive director of PHL, RHIHL and Cosmopolitan. Mr. Ng is in charge of the corporate finance,
company secretarial and administrative functions of CCIHL group.
Mr. Kai Ole Ringenson, aged 74, Independent Non-executive Director – Mr. Ringenson was redesignated as an
Independent Non-executive Director of the REIT Manager in 2012. He was the Chief Executive Officer and Executive
Director of the REIT Manager in 2006 and a Responsible Officer of the REIT Manager in 2007 until he became a Non-
executive Director in March 2010. He has extensive experience in international hotel management and asset management.
He has managed hotels in Asia, Europe and the United States and has managed numerous hotel turn-around situations.
He obtained a Bachelor of Science (Hotel) degree from Cornell University, New York, U.S.A.. He joined the RHIHL group
in 2001 and was an executive director of RHIHL and the chief operating officer of Regal Hotels International Limited, a
wholly-owned subsidiary of RHIHL, from 2002 until he became a non-executive director of RHIHL in 2004. He resigned as
a non-executive director of RHIHL in 2006 to become the sole Executive Director and Chief Executive Officer of the REIT
Manager in 2006.
Mr. Abraham Shek Lai Him (Alias: Abraham Razack), GBS, JP, aged 78, Independent Non-executive Director – Mr. Shek
was appointed as an Independent Non-executive Director of the REIT Manager in 2006. He holds a Bachelor of Arts degree
from the University of Sydney and a Juris Doctor degree from City University of Hong Kong. He is an Honorary Member
of the Court of The Hong Kong University of Science and Technology, a member of both of the Court and the Council of
The University of Hong Kong, a member of the Court of City University of Hong Kong and a court member of Hong Kong
Metropolitan University. Mr. Shek is the honorary chairman, an independent non-executive director and the chairman of
Audit Committee of Chuang
’
s China Investments Limited, the joint vice chairman, an independent non-executive director
and a member of the audit committee of ITC Properties Group Limited, an independent non-executive director and the
chairman of the audit committee of Chuang
’
s Consortium International Limited, an independent non-executive director and
a member of the audit committee of China Resources Building Materials Technology Holdings Limited (formerly known as
China Resources Cement Holdings Limited), Cosmopolitan, CSI Properties Limited, Everbright Grand China Assets Limited,
Far East Consortium International Limited, Hao Tian International Construction Investment Group Limited, NWS Holdings
Limited, PHL and Shin Hwa World Limited (formerly known as Landing International Development Limited), all of which are
companies listed on the HK Stock Exchange. He also acts as an independent non-executive director of Alliance International
Education Leasing Holdings Limited (formerly known as International Alliance Financial Leasing Co., Ltd.) and Lai Fung
Holdings Limited, which are companies listed on the HK Stock Exchange. He is an independent non-executive director and
the chairman of the audit committee of Eagle Asset Management (CP) Limited which is the manager of Champion Real
Estate Investment Trust, the units of which are listed on the HK Stock Exchange.
Annual Report 2023
42
EXECUTIVE OFFICER PROFILES
Ms. Peony Choi Ka Ka, Senior Executive Manager, Company Secretary and Responsible Officer – Ms. Choi joined the
REIT Manager in 2006 as the Compliance Manager and Company Secretary and is further appointed as Senior Executive
Manager and Responsible Officer in 2022. Ms. Choi is responsible for, among other things, overseeing and managing the
compliance and company secretarial functions of Regal REIT and, jointly with Mr. Johnny Chen Sing Hung and Mr. Simon
Lam Man Lim, for overseeing the asset management of property portfolio and participating the investment management
activities of Regal REIT. Ms. Choi holds a Bachelor of Laws degree and a Master of Arts degree in Professional Accounting
and Information Systems. Ms. Choi is also an associate member of The Chartered Governance Institute and The Hong Kong
Chartered Governance Institute. Ms. Choi has over 20 years of industry experience in compliance, corporate governance
and company secretarial matters as well as asset management of Regal REIT.
Ms. Charlotte Cheung Wing Shan, Internal Auditor – Ms. Cheung is responsible for, among other things, reviewing
the accuracy and completeness of records of the operations and transactions of Regal REIT and ensuring that the
risk management and internal control systems function properly and effectively. She holds a Bachelor of Business
Administration degree majoring in Professional Accountancy and a Master of Laws degree. She is an associate member of
the Hong Kong Institute of Certified Public Accountants. Before joining the REIT Manager, she worked in an international
audit firm where she provided audit services to local and multinational companies in a variety of industries and including
listed companies. She is familiar with internal audit matters and internal control systems for companies in various business
sectors.
Annual Report 2023
43
CORPORATE GOVERNANCE REPORT
Regal REIT is committed to maintaining the highest level of corporate governance practices and procedures. The REIT
Manager has adopted a compliance manual for use in relation to the management and operation of Regal REIT (the
“
Compliance Manual
”
) which sets out the key processes, systems, and policies and procedures to guide operations and,
thereby, set a high standard of corporate governance to ensure relevant regulations and legislation are adhered to. Set out
below is a summary of the key components of the corporate governance policies that have been adopted and complied
with by the REIT Manager and Regal REIT.
AUTHORISATION STRUCTURE
Regal REIT is a collective investment scheme authorised by the SFC under section 104 of the SFO and regulated by the
provisions of the REIT Code and constituted by the Trust Deed.
The REIT Manager is licensed by the SFC under the SFO to conduct regulated activities related to asset management.
During the year under review, Mr. Johnny Chen Sing Hung, Mr. Simon Lam Man Lim and Ms. Peony Choi Ka Ka have acted
as the Responsible Officers of the REIT Manager.
The Trustee is registered as a trust company and is qualified to act as a trustee for collective investment schemes authorised
under the SFO pursuant to the REIT Code.
ROLES OF THE TRUSTEE AND THE REIT MANAGER
The Trustee is responsible under the Trust Deed for the safe custody of the assets of Regal REIT for the benefit of the
Unitholders as a whole and oversees the activities of the REIT Manager for compliance with the Trust Deed and regulatory
requirements.
The REIT Manager was appointed under the Trust Deed to manage Regal REIT and, in particular, to ensure that the
financial and economic aspects of Regal REIT
’
s assets are professionally managed in the sole interests of the Unitholders.
The Trustee and the REIT Manager are functionally independent of each other.
Under the regulatory regime of the SFC by classifying eight core functions, each of the core functions has been assigned to
designated management personnel as Managers-in-charge (MIC) as set out below.
Core functions MICs
1. Overall Management Oversight • Executive Director – Finance
Executive Director – Asset Management
2. Key Business Line • Executive Director – Finance
Executive Director – Asset Management
Senior Executive Manager
3. Operational Control and Review • Executive Director – Finance
Executive Director – Asset Management
Internal Auditor
4. Risk Management • Internal Auditor
5. Finance and Accounting • Executive Director – Finance
Accounting Manager
6. Information Technology • Executive Director – Finance
7. Compliance • Senior Executive Manager
8. Anti-Money Laundering and
Counter-Terrorist Financing
• Executive Director – Finance
Executive Director – Asset Management
Annual Report 2023
44
BOARD OF DIRECTORS OF THE REIT MANAGER
Functions of the Board
The board of directors of the REIT Manager (the
“
Board
”
) is responsible for overseeing the overall corporate governance
of the REIT Manager and the day-to-day management of the REIT Manager
’
s affairs and the conduct of its business. The
Board has established a framework for the management of Regal REIT, including systems of internal control and business
risk management processes.
The Board is also responsible for ensuring that the REIT Manager discharges its duties under the Trust Deed which includes
but not limited to managing Regal REIT in accordance with the Trust Deed in the best interests of the Unitholders; ensuring
sufficient oversight of the daily operations and financial conditions of Regal REIT; and monitoring the REIT Manager
and Regal REIT are in compliance with the licensing and authorisation conditions and any other legal and regulatory
requirements.
All material policies and decisions remain within the authority of the Board as a whole. Subject to the matters specifically
reserved to the Board as set out in the Compliance Manual, the Board delegates certain management and supervisory
functions to the management team and relevant committees of the Board.
Board Composition and Board Diversity
With the objective of creating a Board structure that is both effective and balanced, the size of the Board was set to
provide for a minimum of five directors and a maximum of twenty directors. Pursuant to a specific REIT Manager corporate
governance policy, independent non-executive directors must be individuals who fulfill the independence criteria as set out
in the Compliance Manual.
The composition of the Board is determined using the following key principles:
the Chairman of the Board must be a Non-executive Director of the REIT Manager;
at least one-third of the Board should be Independent Non-executive Directors with a minimum of three Independent
Non-executive Directors; and
the Board must comprise Directors with a broad range of commercial experience including expertise in hotel
investment and management, in fund and asset management and/or in the property industry.
The nomination committee of the REIT Manager (the
“
Nomination Committee
”
) is responsible for the review of the
composition of the Board regularly to ensure that the Board has the appropriate mix of expertise and experience, and that
the Directors being appointed have the relevant expertise and experience in discharging their duties. A Board Diversity
Policy has been adopted to set out the policy for designing the composition of the Board, aiming to achieve diversity with
balanced skills and expertise. In reviewing the composition and diversity of the Board, the Nomination Committee and
the Board has to be satisfied that different aspects of diversity as set out in the Board Diversity Policy, including but not
limited to age, gender, ethnicity, cultural and educational background, professional acumen, industry experience as well as
knowledge of Regal REIT
’
s businesses and operations, has been achieved during the year.
Annual Report 2023
45
The Board presently comprises two Executive Directors, four Non-executive Directors and four Independent Non-executive
Directors. The positions of Chairman and Executive Directors are held by different persons in order to maintain an effective
segregation of duties.
The Board currently comprises the following members:
Chairman and Non-executive Director
Lo Yuk Sui
Vice Chairman and Non-executive Director
Lo Po Man
Executive Directors
Johnny Chen Sing Hung
Simon Lam Man Lim
Non-executive Directors
Jimmy Lo Chun To
Kenneth Ng Kwai Kai
Independent Non-executive Directors
John William Crawford, JP
Bowen Joseph Leung Po Wing, GBS, JP
Kai Ole Ringenson
Abraham Shek Lai Him, GBS, JP
The following table shows the diversity profile of the Board as at 31st December, 2023:
No. of Directors
Gender: Male 9
Female 1
Age Group: 41-50 2
51-60 1
61-70 2
71-80 4
>80 1
Length of Service (years): 1-10 4
11-15 1
>15 5
Annual Report 2023
46
Collective Industrial Experience and Professional Knowledge of Directors:
• Hotel and property development and management
• Corporate management
• Architectural
• Financial and audit
• Environmental, social and governance
• Public administrative services
• Legal and compliance
The Board currently has one female Director out of ten Directors and is committed to improving gender diversity as and
when suitable candidates are identified.
In striving to maintain gender diversity, similar considerations are used when selecting and recruiting key management and
other personnel in the employ of the REIT Manager. As at 31st December, 2023, the REIT Manager maintained a 7:3 ratio
of female to male in the workplace (including senior management).
The biographical details of the Directors, including the relationship among them, are disclosed in the preceding section
“
Director and Executive Officer Profiles
”
contained in this Annual Report.
Appointment and Removal of Directors
The appointment and removal of Directors is a matter for the Board and the shareholder of the REIT Manager to determine
in accordance with the provisions of the Compliance Manual and the Articles of Association of the REIT Manager. All
Directors (including Non-executive Directors and Independent Non-executive Directors) of the REIT Manager were not
appointed for specific terms but, in accordance with the Compliance Manual, the maximum term of an Independent Non-
executive Director is nine years. If an Independent Non-executive Director has served on the Board for more than nine
years, his/her further appointment will be subject to a separate resolution to be approved by Unitholders.
Directors may be nominated for appointment and/or removal by the Board following recommendations made by the
Nomination Committee. In considering persons for appointment as Directors, the Board will consider a number of matters
as set out in the Compliance Manual in assessing whether such persons are fit and proper to be Directors.
Directors
’
Time Commitments
During the year ended 31st December, 2023, each of the Directors has spent sufficient time and attention to the affairs of
Regal REIT.
Directors
’
Interests in Transactions, Arrangements or Contracts
Save as otherwise disclosed, there were no transactions, arrangements or contracts of significance subsisting during or at
the end of the reporting period in which a Director or an entity connected with a Director is or was materially interested,
either directly or indirectly.
None of the Directors had a service contract, which is not determinable within one year without payment of compensation
(other than statutory compensation), with Regal REIT or any of its subsidiaries during the year.
Annual Report 2023
47
Conflicts of Interest
The REIT Manager has instituted the following policies to deal with issues of conflict of interest:
(i) The REIT Manager is a dedicated manager to Regal REIT and will not manage any other real estate investment trusts
or be involved in any other real property businesses.
(ii) All of the Executive Officers will be employed by the REIT Manager on a full time basis and will not maintain any
other roles apart from their roles within the REIT Manager.
(iii) All connected party transactions are to be managed in accordance with the provisions set out in the Compliance
Manual.
(iv) Where any Director or executive officer has a material interest in any transaction relating to Regal REIT or the REIT
Manager which gives rise to an actual or potential conflict of interest in relation to such transaction, he or she shall
not advise on or deal in relation to such transaction unless he or she has disclosed such material interest or conflict
to the Board and has taken all reasonable steps to ensure fair treatment of both the REIT Manager and Unitholders.
Permitted Indemnity Provision
A permitted indemnity provision for the benefits of the Directors of the REIT Manager is currently in force and was in force
throughout the year. During the year under review, appropriate investment management insurance has been taken out and
maintained for providing appropriate cover for the Directors and officers of the REIT Manager.
Independence of Independent Non-executive Directors
The REIT Manager has received from each of the four Independent Non-executive Directors of the REIT Manager an annual
confirmation of independence pursuant to the
“
Criteria for Independence of INEDs
”
as set out in the Compliance Manual,
on terms no less exacting than those set out in the Listing Rules, for assessing the independence of a Non-executive
Director. The REIT Manager considered that all these Independent Non-executive Directors are independent.
Mechanisms for Ensuring Independent Views and Input
During the year, the following mechanisms were in place and remain effective in ensuring independent views and input
were available to the Board:
(i) A sufficient number of four Independent Non-executive Directors (representing more than one-third of the Board)
having extensive experience and in-depth knowledge continuing to provide independent views and input to the
Board on the business affairs of Regal REIT.
(ii) The Nomination Committee assesses the independence of each Independent Non-executive Directors on an annual
basis and the reappointment of any long-serving Independent Non-executive Director is subject to the approval of the
Unitholders at the annual general meeting by way of ordinary resolution.
(iii) Policy and procedures are in place to avoid any potential conflict of interests. Any Director who has a material
interest in any transaction relating to Regal REIT or the REIT Manager shall abstain from voting on any Board
resolution approving the same.
(iv) The Chairman meets the Independent Non-executive Directors without presence of other Directors to provide an
effective platform for the Independent Non-executive Directors to express independent views to the Chairman on
various issues concerning Regal REIT.
(v) The Board and its committees are entitled to seek independent professional advice on issues relevant to Regal REIT
from external professional consultants and advisors as deemed necessary.
Annual Report 2023
48
Change of Information of Directors
Subsequent to publication of the 2023 interim report of Regal REIT, the REIT Manager was informed of the following
changes of Directors
’
information:
Name of Director Details of changes
Mr. Abraham Shek Lai Him,
GBS, JP
– Resigned as the chairman and an executive director of Goldin Financial Holdings
Limited (In liquidation), a company was ordered to be wound up by the Supreme
Court of Bermuda under the provisions of the Bermuda Companies Act 1981 on
11th August, 2023 and delisted on the HK Stock Exchange, with effect from 31st
October, 2023.
– Appointed as a court member of Hong Kong Metropolitan University with effect
from 8th December, 2023.
– Resigned as an independent non-executive director of Country Garden Holdings
Company Limited, a company listed on the HK Stock Exchange, with effect from
15th March, 2024.
Continuous Professional Development of Directors
During the year under review, the Directors have participated in continuous professional development to develop and
refresh their knowledge and skills to ensure their contribution to the Board remains informed and relevant. In 2023, the
REIT Manager arranged for the distribution of reading materials covering topics on Paperless Regime for Listed Companies
and Other Listing Rules Updates to Directors. The training received by the Directors during the year under review is
summarised below:
Names of Directors Types of training
Chairman and Non-executive Director
Lo Yuk Sui B
Vice Chairman and Non-executive Director
Lo Po Man A,B
Executive Directors
Johnny Chen Sing Hung A,B
Simon Lam Man Lim A,B
Non-executive Directors
Jimmy Lo Chun To B
Kenneth Ng Kwai Kai A,B
Independent Non-executive Directors
John William Crawford, JP A,B
Bowen Joseph Leung Po Wing, GBS, JP B
Kai Ole Ringenson A,B
Abraham Shek Lai Him, GBS, JP A,B
A – Attending briefings/seminars/conferences/forums
B – Reading/studying training or other materials
Annual Report 2023
49
Meetings
The Board conducts regular meetings and generally meets no less than four times in each financial year, at approximate
quarterly intervals, to discuss and decide on major corporate, strategic, business and operational issues. Appropriate and
sufficient information is provided to the members of the Board in a timely manner in order to enable them to discharge
their duties.
Four full Board meetings of the REIT Manager and one general meeting of the Unitholders were held during the year
ended 31st December, 2023 and the attendance rates of individual Board members were as follows:
Names of Directors
Attendance/
No. of
General Meeting
Attendance/
No. of
Board Meetings
Chairman and Non-executive Director
Lo Yuk Sui 1/1 4/4
Vice Chairman and Non-executive Director
Lo Po Man 1/1 4/4
Executive Directors
Johnny Chen Sing Hung 1/1 4/4
Simon Lam Man Lim 1/1 4/4
Non-executive Directors
Jimmy Lo Chun To 1/1 4/4
Kenneth Ng Kwai Kai 1/1 4/4
Independent Non-executive Directors
John William Crawford, JP 1/1 2/4
Bowen Joseph Leung Po Wing, GBS, JP 1/1 4/4
Kai Ole Ringenson 1/1 4/4
Abraham Shek Lai Him, GBS, JP 1/1 4/4
Annual Report 2023
50
AUDIT COMMITTEE
The audit committee of the REIT Manager (the
“
Audit Committee
”
) was established with specific terms of reference that
deal with its authority and duties.
The Audit Committee currently comprises the following Directors:
Independent Non-executive Directors
John William Crawford, JP (Chairman of the Committee)
Bowen Joseph Leung Po Wing, GBS, JP
Kai Ole Ringenson
Abraham Shek Lai Him, GBS, JP
Non-executive Director
Kenneth Ng Kwai Kai
The Audit Committee is responsible for, among other matters, (a) reviewing the completeness, accuracy, clarity and
fairness of Regal REIT
’
s financial statements; (b) considering the scope, approach and nature of both internal and external
audit reviews; (c) the overall adequacy of risk management and internal control measures; (d) reviewing and monitoring
connected party transactions; and (e) nominating the external auditor including the approval of the remuneration,
reviewing the adequacy of external audits and guiding management to take appropriate actions to remedy faults or
deficiencies in any issues of internal control which may be identified.
In addition to informal or ad hoc meetings and discussions, three formal Audit Committee meetings of the REIT Manager
were held during the year ended 31st December, 2023 to consider and review, among other things, the 2022 final results,
the 2023 interim results, internal audit reports, connected party transactions, risk management, annual budgets and
forecasts and other compliance matters of Regal REIT. The attendance rates of the individual members were as follows:
Attendance/
Names of Audit Committee Members No. of Meetings
John William Crawford, JP (Chairman of the Committee) 2/3
Bowen Joseph Leung Po Wing, GBS, JP 3/3
Kai Ole Ringenson 3/3
Abraham Shek Lai Him, GBS, JP 3/3
Kenneth Ng Kwai Kai 3/3
Annual Report 2023
51
DISCLOSURE COMMITTEE
The disclosure committee of the REIT Manager (the
“
Disclosure Committee
”
) is responsible for, among other matters,
reviewing all areas relating to the regular, urgent and forward looking disclosures of information to Unitholders and public
announcements.
The Disclosure Committee currently comprises the following Directors:
Independent Non-executive Directors
John William Crawford, JP (Chairman of the Committee)
Kai Ole Ringenson
Executive Directors
Johnny Chen Sing Hung
Simon Lam Man Lim
Non-executive Directors
Kenneth Ng Kwai Kai
Two formal Disclosure Committee meetings of the REIT Manager were held during the year ended 31st December, 2023 to
consider and review, among other things, the 2022 final results announcement, the 2022 annual report, the 2023 interim
results announcement, the 2023 interim report and other corporate disclosure issues of Regal REIT. The attendance rates of
the individual members were as follows:
Attendance/
Names of Disclosure Committee Members No. of Meetings
John William Crawford, JP (Chairman of the Committee) 1/2
Johnny Chen Sing Hung 2/2
Simon Lam Man Lim 2/2
Kenneth Ng Kwai Kai 2/2
Kai Ole Ringenson 2/2
Annual Report 2023
52
NOMINATION COMMITTEE
The Nomination Committee of the REIT Manager was established with specific terms of reference that deal with
its authority and duties. The Nomination Committee is responsible for, among other matters, (a) the making of
recommendations to the Board on relevant matters relating to the appointment and reappointment of Directors and
succession planning for Directors; (b) the assessment of the independence of the Independent Non-executive Directors;
(c) reviewing the structure, size and composition (including the skills, knowledge and experience) of the Board at least
annually and making recommendations on any proposed changes to the Board to complement the strategy of Regal
REIT
’
s corporate strategy; (d) identifying individuals suitably qualified to become members of the Board and selecting or
making recommendations to the Board on the selection of individuals nominated for directorships; and (e) monitoring the
implementation and reviewing the Board Diversity Policy of the REIT Manager.
The Nomination Committee currently comprises the following Directors:
Non-Executive Directors
Lo Yuk Sui (Chairman of the Committee)
Kenneth Ng Kwai Kai
Independent Non-executive Directors
John William Crawford, JP
Bowen Joseph Leung Po Wing, GBS, JP
Kai Ole Ringenson
Abraham Shek Lai Him, GBS, JP
One formal Nomination Committee meeting of the REIT Manager was held during the year ended 31st December, 2023
to review, among other things, the composition and diversity of the Board and the Board Diversity Policy. The attendance
rates of the individual members were as follows:
Names of Nomination Committee
Attendance/
No. of Meeting
Lo Yuk Sui (Chairman of the Committee) 1/1
Kenneth Ng Kwai Kai 1/1
John William Crawford, JP 1/1
Bowen Joseph Leung Po Wing, GBS, JP 1/1
Kai Ole Ringenson 1/1
Abraham Shek Lai Him, GBS, JP 1/1
AUDITOR
‘
S REMUNERATION
The remuneration to Messrs. Ernst & Young, the external auditor of Regal REIT, in respect of the audit and non-audit
services rendered for the year ended 31st December, 2023 were HK$1.4 million (2022 - HK$1.9 million) and HK$0.5
million (2022 - HK$0.7 million), respectively. The non-audit services included the interim review of the financial statements
of Regal REIT for the six months ended 30th June, 2023, report of factual findings on connected party transactions, and
compliance and other services to Regal REIT.
Annual Report 2023
53
OTHER DISCLOSURE ON REMUNERATION
Regal REIT is managed by the REIT Manager and the Trustee. By contracting out such services, Regal REIT does not employ
any staff in its own right and, therefore, no remuneration of Directors and staff of the REIT Manager is paid by Regal REIT.
All remuneration payable to the Directors and staff of the REIT Manager is paid and borne by the REIT Manager out of its
own resources.
Both the REIT Manager fees and the Trustee fees are paid by Regal REIT in accordance with the terms of the Trust Deed.
REPORTING AND TRANSPARENCY
Regal REIT prepares its financial statements in accordance with generally accepted accounting principles in Hong Kong
and has a financial year ending 31st December with a financial half year period ending 30th June. In accordance with the
REIT Code, the annual report and financial statements of Regal REIT are to be published and despatched to Unitholders no
later than four months following each financial year end and the interim report no later than three months following each
financial half year period end.
As required by the REIT Code, the REIT Manager ensures all public announcements of material information and
developments with respect to Regal REIT are made on a timely basis in order to keep Unitholders apprised of the position
of Regal REIT.
UNITHOLDERS COMMUNICATION POLICY
The REIT Manager adopted the Unitholders Communication Policy to promote effective and comprehensive communications
with Unitholders and the investment community with the aim of ensuring ready, equal and timely access to balanced and
understandable information about Regal REIT. The Unitholders Communication Policy is reviewed on an annual basis to
ensure its implementation and effectiveness.
During the year under review, Regal REIT
’
s website was updated on a regular basis to maintain effective ongoing
communications with Unitholders which enable Unitholders to access the latest Regal REIT information and Unitholders
were also provided with opportunities to communicate with the Directors directly at the annual general meeting. Enquires
from Unitholders and the investment community were responded to within specific timeframes and the Board is of the
view that the Unitholders Communication Policy is effective.
UNITHOLDERS
’
RIGHTS
Regal REIT will hold a general meeting each year as its annual general meeting in addition to any other meetings deemed
necessary during the year. The Trustee or the REIT Manager may (and the REIT Manager will at the request in writing of
not less than two Unitholders registered as together holding not less than 10% of the Units for the time being in issue
and outstanding) at any time convene a meeting of the Unitholders. Such written requisition must state the purposes of
the meeting, and be signed by the requisitionor(s) and deposited at the office of the REIT Manager at Unit No. 2001, 20th
Floor, 68 Yee Wo Street, Causeway Bay, Hong Kong (for the attention of the Executive Directors). Notices convening an
annual general meeting and other general meetings of Unitholders will be given to the Unitholders in accordance with the
requirements of the Trust Deed, the REIT Code and the applicable Listing Rules, and such notices will specify the time and
place of the meetings and the resolutions to be proposed.
Annual Report 2023
54
Two or more Unitholders present in person or by proxy registered as holding together not less than 10% of the Units for
the time being in issue and outstanding will form a quorum for the transaction of all business, except for the purpose of
passing special resolutions. The quorum for passing a special resolution will be two or more Unitholders present in person
or by proxy registered as holding together not less than 25% of the Units for the time being in issue and outstanding. At
any meeting of the Unitholders, a resolution put to the meeting shall be decided on a poll.
In addition, Unitholders may also send written enquiries to the REIT Manager for putting forward any enquiries or proposals
about Regal REIT to the Board at the abovementioned REIT Manager
’
s office (for the attention of the Executive Directors).
MATTERS TO BE DECIDED BY THE UNITHOLDERS BY SPECIAL RESOLUTION
Pursuant to the Trust Deed, decisions with respect to certain matters require specific prior approval of Unitholders by way
of special resolution. Such matters include, among other things:
(a) any change in the REIT Manager
’
s investment policies/strategies for Regal REIT;
(b) disposal of any real estate investment of Regal REIT or shares in any special purpose vehicles holding such real estate
investment within two years of acquisition;
(c) any increase in the rate of the REIT Manager fees above the permitted limit or any change in the structure of the
REIT Manager fees;
(d) any increase in the rate of the Trustee fees above the permitted limit or any change in the structure of the Trustee
fees;
(e) any increase in the rate of the acquisition fees above the permitted limit or any change in the structure of the
acquisition fees;
(f) any increase in the rate of the divestment fees above the permitted limit or any change in the structure of the
divestment fees;
(g) certain modifications of the Trust Deed;
(h) termination of Regal REIT;
(i) merger of Regal REIT;
(j) removal of Regal REIT
’
s external auditor; and
(k) removal of the Trustee.
As stated above, the quorum for passing a special resolution is two or more Unitholders present in person or by proxy
registered as holding together not less than 25% of the Units in issue and outstanding. A special resolution may only
be passed by 75% or more of the votes of those present and entitled to vote in person or by proxy at a duly convened
meeting and the votes shall be taken by way of poll.
Annual Report 2023
55
ISSUE OF FURTHER UNITS POST-LISTING
To minimise the possible material dilution of holdings of Unitholders, any further issues of Units need to comply with the
pre-emption provisions contained in the REIT Code and the Trust Deed. Any further issues of Units must be first offered
on a pro rata pre-emptive basis to all existing Unitholders except that Units may be issued, or agreed (conditionally or
unconditionally) to be issued, in any financial year (whether directly or pursuant to any Convertible Instruments (as defined
in the Trust Deed)), otherwise than on a pro rata basis to all existing Unitholders and without the approval of Unitholders
subject to conditions as more particularly set out in the Trust Deed.
Any issue, grant or offer of Units or Convertible Instruments to a connected person of Regal REIT (the
“
Connected Person
”
)
will require specific prior approval of Unitholders by way of an Ordinary Resolution (as defined in the Trust Deed), unless
such issue, grant or offer is made under the following circumstances (where, for the avoidance of doubt, no Unitholders
’
approval will be required):
(i) the Connected Person receives a pro rata entitlement to Units and/or Convertible Instruments in its capacity as a
Unitholder; or
(ii) Units are issued to a Connected Person under Clauses 14.1.1 and/or 14.1.2 of the Trust Deed in or towards the
satisfaction of the REIT Manager fees; or
(iii) Units and/or Convertible Instruments are issued to a Connected Person within 14 days after such Connected Person
has executed an agreement to reduce its holding in the same class of Units and/or Convertible Instruments by placing
such Units and/or Convertible Instruments to or with any person(s) who is/are not its associate(s), provided always
that (a) the new Units and/or Convertible Instruments must be issued at a price not less than the placing price (which
may be adjusted for the expenses of the placing); and (b) the number of Units and/or Convertible Instruments issued
to the Connected Person must not exceed the number of Units and/or Convertible Instruments placed by it; or
(iv) the Connected Person is acting as underwriter or sub-underwriter of an issue or offer of Units or other securities by
or on behalf of Regal REIT or any Special Purpose Vehicle (as defined in the Trust Deed), provided that:
(a) the issue or offer is made under and in accordance with Clause 5.1.6 of the Trust Deed; and
(b) the issue or offer is in compliance with any applicable provisions of the Listing Rules where a Connected Person
is acting as an underwriter or sub-underwriter of an offer of shares or other securities by a listed company,
with necessary changes being made, as if the provisions therein are applicable to real estate investment trusts;
or
(v) the excess application and the taking up of pro rata entitlements by the Connected Person in respect of a pro rata
issue of Units and/or Convertible Instruments under Clause 5.1.6 of the Trust Deed or an open offer by Regal REIT on
a pro rata basis; or
(vi) Units are issued to a Connected Person pursuant to a reinvestment of a distribution in accordance with Clause 11.10
of the Trust Deed.
During the year, no new Units was allotted and issued.
Annual Report 2023
56
CODE GOVERNING DEALINGS IN UNITS BY DIRECTORS, THE REIT MANAGER OR SIGNIFICANT
UNITHOLDERS
The REIT Manager has adopted the
“
Code Governing Dealings in Units by Directors or the REIT Manager
”
(the
“
Units
Dealings Code
”
) governing dealings in the securities of Regal REIT by the Directors and the REIT Manager as set out in the
Compliance Manual, on terms no less exacting than the required standards of the Model Code for Securities Transactions
by Directors of Listed Issuers as set out in Appendix C3 of the Listing Rules (the
“
Model Code
”
). The Units Dealings Code
may be extended to senior executives, officers and other employees of the REIT Manager as the Board may determine.
Pursuant to the Units Dealings Code, any Directors or the REIT Manager who wish to deal in the securities of Regal
REIT must first have regard to the provisions of Parts XIII and XIV of the SFO with respect to insider dealing and market
misconduct, as if the SFO applies to the securities of Regal REIT. In addition, a Director or the REIT Manager must not
make any disclosures of confidential information or make any use of such information for the advantage of himself/itself or
others.
Directors or the REIT Manager who are aware of or privy to any negotiations or agreements related to intended acquisitions
or disposals which are designated transactions or connected party transactions under the REIT Code or notifiable
transactions or connected transactions under the Listing Rules or any inside information must refrain from dealing in the
Units as soon as they become aware of or privy to such information until proper disclosure thereof in accordance with
the REIT Code and any applicable Listing Rules. Directors and the REIT Manager who are privy to relevant negotiations or
agreements or any inside information should caution those Directors or the REIT Manager who are not so privy that there
may be unpublished inside information and that they must not deal in Regal REIT
’
s securities for a similar period.
The REIT Manager has also adopted procedures for the monitoring of disclosures of interests by Directors and the REIT
Manager. The relevant provisions of Part XV of the SFO shall be deemed to apply to the REIT Manager and the Directors of
the REIT Manager and each Unitholder and all persons claiming through or thereunder.
Under the Trust Deed and by virtue of the deemed application of Part XV of the SFO, Unitholders with a holding of 5% or
more of the Units will be required to notify the HK Stock Exchange, the REIT Manager and the Trustee of their holdings in
Regal REIT. The REIT Manager shall keep a register for these purposes and it shall record in the register, against a person
’
s
name, the particulars provided pursuant to the notification and the date of entry of such record. The said register shall be
available for inspection at all times by the Trustee and any Unitholder.
Following specific enquiries, the Directors and the REIT Manager have confirmed that they have complied with the required
standards under the Model Code and the Units Dealings Code during the year ended 31st December, 2023.
Annual Report 2023
57
RISK MANAGEMENT AND INTERNAL CONTROL
The REIT Manager has an internal audit function and procedures in place to provide independent assessments of the risk
management and internal control systems and operational functions so as to identify, evaluate and manage significant
risks, and review their adequacy and effectiveness on an ongoing basis. Such systems were designed to manage rather
than to eliminate the risk of failure in achieving business objectives, and to provide reasonable and not absolute assurance
against material misstatements or losses. The Internal Auditor of the REIT Manager prepares annual audit plans and
conducts audit reviews focused on financial, operational and compliance controls of Regal REIT.
The Board acknowledges its responsibility for overseeing Regal REIT
’
s risk management (including Environmental, Social
and Governance risks) and internal control systems and compliance procedures and for reviewing the effectiveness of such
systems. During the year, through the design, implementation and on-going reviews of the systems and updates by the
internal auditor and related senior executives, the Audit Committee and the Board fulfilled its corporate governance role
in financial, operational and compliance controls of Regal REIT in identifying any significant management and operational
risks, control failings or weaknesses, and any control improvements in order to respond to changes in the business and
external environment. The Board, through the Audit Committee, conducts annual reviews on the effectiveness of the
risk management and internal control systems. Based on the audit plans, regular management reports and internal audit
reviews, the Board ensures effective implementation of the risk management and internal control systems and compliance
procedures to mitigate any damage arising from identified risks and control weaknesses. Management confirmed to the
Audit Committee and the Board that the risk management and internal control systems were adequate and effective and
no material deficiencies were noted during the year.
The Board, through the Audit Committee and the Disclosure Committee, has established policies and meets periodically, to
ensure that inside information is disseminated to the public in an equal and timely manner in accordance with applicable
laws and regulations.
WHISTLEBLOWING AND ANTI-CORRUPTION POLICIES
The REIT Manager has adopted a Whistleblowing Policy to ensure that proper arrangements are put in place for employees
and those who deal with the REIT Manager, Regal REIT and its subsidiaries to report any concerns, including suspected
improprieties, misconducts or malpractices within the Group. The aim of the Whistleblowing Policy is to provide reporting
channels and guidance on reporting possible improprieties in matters of financial reporting, internal control or other
matters, and reassurance to whistleblowers of the protection that the Group will extend to them against unfair dismissal or
victimisation for any genuine reports made under this Whistleblowing Policy.
Furthermore, the REIT Manager regards honesty, business integrity and fair play as core values of Regal REIT that must
be upheld by all Directors and employees of the REIT Manager at all times. The REIT Manager has also adopted an Anti-
corruption Policy which sets out the minimum standards of conducts and strictly prohibiting all Directors and employees of
the REIT Manager from soliciting, accepting or offering any bribe in the course of business of the Group. All Directors and
employees of the REIT Manager are required to comply with this Anti-corruption Policy. During the year, the REIT Manager
was not aware of any incidents of non-compliance with laws and regulations in relation to anti-corruption.
Annual Report 2023
58
AMENDMENT TO THE TRUST DEED
In order to provide additional flexibility to the REIT Manager and Unitholders in relation to the conduct of general meetings
of Unitholders, after obtaining the approval from the Unitholders at the extraordinary general meeting held on 31st
January, 2024, Regal REIT and the Trustee entered into a Second Amending and Restating Deed to amend the Trust Deed
to, inter alia, (a) to provide that the REIT Manager may, in its absolute discretion, determine whether to hold a general
meeting (including, inter alia, an annual general meeting, any adjourned meeting or postponed meeting) as a physical,
hybrid or virtual meeting, where Unitholders may attend, participate and vote via electronic means or attend and vote
physically at the meeting location which may be in any part of the world and at one or more locations; (b) to require
notices of general meetings to specify additional details regarding the physical, hybrid or virtual meeting to be held; (c) to
provide that the chairman of the general meeting may, at his/her absolute discretion, without the consent of the general
meeting, and before or after the meeting has started and irrespective of whether a quorum is present, interrupt or adjourn
the meeting from time to time (or indefinitely) under certain prescribed circumstances; (d) to provide for the proceedings of
general meetings which are held at one or more locations, or as a hybrid meeting or a virtual meeting, and the powers of
the Board and the chairman of the general meeting in relation thereto; (e) to allow the REIT Manager to postpone or make
changes to a general meeting when it in its absolute discretion consider it is inappropriate, impracticable, unreasonable or
undesirable to hold the general meeting on or at the scheduled date or time or place or in the scheduled form; (f) to allow
for votes to be cast by such means, electronic or otherwise as the REIT Manager or the chairman of the general meeting
may determine; and (g) to provide for modes of electronic communication between the REIT Manager and Trustee.
PUBLIC FLOAT
As at 31st December, 2023, there were 3,257,431,189 Units in issue.
Based on the information that is publicly available to the REIT Manager and as reported to the Directors of the REIT
Manager, more than 25% of the Units were held by independent public Unitholders as at 31st December, 2023.
COMPLIANCE
Regal REIT and the REIT Manager have complied with the provisions of the Compliance Manual and, where applicable, the
code provisions in the Corporate Governance Code as set out in Appendix C1 of the Listing Rules during the year.
REVIEW OF ANNUAL REPORT
The Disclosure Committee and the Audit Committee of the REIT Manager have reviewed this Annual Report for the year
ended 31st December, 2023, in conjunction with Regal REIT
’
s external auditor. This Annual Report was approved by the
Board of the REIT Manager on 27th March, 2024.
The Directors of the REIT Manager acknowledge their responsibility for the preparation of a true and fair presentation
of the financial statements of Regal REIT for the year ended 31st December, 2023 in accordance with the Hong Kong
Financial Reporting Standards, the relevant provisions of the Trust Deed and the relevant disclosure requirements set out in
the REIT Code.
The statement by the Regal REIT external auditor, Messrs. Ernst & Young, about their reporting responsibilities on the
financial statements of Regal REIT for the year ended 31st December, 2023 is set out in the section
“
Independent Auditor
’
s
Report
”
contained in this Annual Report.
Annual Report 2023
59
CONNECTED PARTY TRANSACTIONS
During the year under review, Regal REIT and the other companies or entities held or controlled by Regal REIT (collectively,
the
“
Regal REIT Group
”
) entered into a number of continuing transactions with its connected persons (defined in
paragraph 8.1 of the REIT Code), as listed below, which constitute connected party transactions of Regal REIT within the
meaning of the REIT Code:
(i) the REIT Manager and the other companies or entities held or controlled by Regal Hotels International Holdings
Limited (
“
RHIHL
”
) (collectively, the
“
RHIHL Connected Persons Group
”
); and
(ii) the Trustee and companies within the same group or otherwise
“
associated
”
with the Trustee (collectively, the
“
Trustee Connected Persons Group
”
).
RHIHL CONNECTED PERSONS GROUP
(a) Initial Hotels Lease Agreements
Regal REIT (via Bauhinia Hotels Limited, Cityability Limited, Gala Hotels Limited, Regal Riverside Hotel Limited and
Ricobem Limited, the direct owners of the Initial Hotels, respectively, (collectively, the
“
Initial Hotel – Property
Companies
”
and each referred to as the
“
Initial Hotel – Property Company
”
)) entered into separate Initial Hotels
Lease Agreements with Favour Link International Limited (the
“
RHIHL Lessee
”
) in relation to the leasing of the
Initial Hotels on 16th March, 2007 (as may be amended from time to time) with lease terms which expired on
31st December, 2020. On 20th December, 2019, each of the Initial Hotel – Property Companies entered into the
supplemental lease agreement with the RHIHL Lessee to extend the leases (the
“
IH Lease Extensions
”
) for the
Regal Airport Hotel to 27th December, 2028 and the other four Initial Hotels, namely, Regal Hongkong Hotel,
Regal Kowloon Hotel, Regal Oriental Hotel and Regal Riverside Hotel, to 31st December, 2030, (together, the
“
IH Extended Period
”
), with the market rental packages for the IH Extended Period continuing to be determined
annually by a jointly appointed independent professional property valuer. As a result, the total lease term of each
Initial Hotels Lease Agreement is now from 30th March 2007 to 27th December, 2028 (for Regal Airport Hotel)
and 31st December, 2030 (for the other four Initial Hotels). The abovementioned supplemental lease agreements
were approved by the independent Unitholders at the extraordinary general meeting held on 15th January, 2020.
References can be made to the related announcements dated 20th December, 2019 and 15th January, 2020 and the
related circular to Unitholders dated 20th December, 2019, as published by the REIT Manager for further details of
the IH Lease Extensions. The RHIHL Lessee is a member of the RHIHL Connected Persons Group.
During the year, the cash market rental income and other income under the Initial Hotels Lease Agreements
amounted to approximately HK$489.2 million.
(b) Initial Hotels Management Agreements
Under the terms of each Initial Hotels Lease Agreement, the RHIHL Lessee has delegated the operation and
management of the relevant Initial Hotel to Regal Hotels International Limited (the
“
Hotel Manager
”
) by entering
into the Initial Hotels Management Agreement with the Hotel Manager for a term of twenty years from 16th March,
2007. The RHIHL Lessee and the Hotel Manager are both members of the RHIHL Connected Persons Group.
Each Initial Hotel – Property Company is also a party to the Initial Hotels Management Agreement on terms including
that, upon the expiry or termination of any Initial Hotels Lease Agreement, the Hotel Manager will continue to
manage the relevant Initial Hotel in accordance with the Initial Hotels Management Agreement.
Annual Report 2023
60
(c) Initial Hotels Lease Guarantees
RHIHL, a member of the RHIHL Connected Persons Group, has guaranteed to pay all amounts from time to time
owing or payable by the RHIHL Lessee to the Initial Hotel – Property Companies under the Initial Hotels Lease
Agreements by entering into the lease guarantees (as may be amended from time to time) (the
“
Initial Hotels Lease
Guarantees
”
). The Initial Hotels Lease Guarantees also contain indemnities in respect of all guaranteed liabilities. On
20th December, 2019, the supplemental lease guarantees in respect of each Initial Hotels were entered into with the
Trustee and RHIHL to make consequential amendments in light of the IH Lease Extensions, so that RHIHL
’
s obligation
to maintain a third party guarantee will cover the IH Extended Period.
(d) Initial Hotels Deed of Trade Mark Licence
Regal International Limited, a member of the RHIHL Connected Persons Group, entered into a deed of trade mark
licence (the
“
Initial Hotels Deed of Trade Mark Licence
”
) with the REIT Manager and Regal REIT Group on 2nd March,
2007. Regal International Limited granted to the REIT Manager and each Initial Hotel – Property Company, inter alia,
a non-exclusive and non-transferable licence to use its registered trade marks or service marks, in any jurisdiction
where such marks are registered and free of any royalty, for the purpose of describing the ownership of each Initial
Hotel and/or uses in connection with the business of each Initial Hotel.
(e) Wan Chai Hotel Management Agreement
On 20th December, 2019, Regal REIT (via Sonnix Limited (the
“
iclub Wan Chai Hotel – Property Company
”
)) entered
into the Wan Chai Hotel Management Agreement with the Hotel Manager, a member of the RHIHL Connected
Persons Group, in respect of the management of the business of iclub Wan Chai Hotel for a term of ten years from
1st January, 2021 and expiring on 31st December, 2030 with a non-fault based early termination provision. The
Wan Chai Hotel Management Agreement was approved by the independent Unitholders at the extraordinary general
meeting held on 15th January, 2020. References can be made to the related announcements dated 20th December,
2019 and 15th January, 2020 and the related circular to Unitholders dated 20th December, 2019, as published by
the REIT Manager for further details of the Wan Chai Hotel Management Agreement.
During the year, total management fees under the Wan Chai Hotel Management Agreement amounted to
approximately HK$1.5 million.
(f) SW Lease Agreement
Regal REIT (via Tristan Limited (the
“
iclub Sheung Wan Hotel – Property Company
”
)) entered into the SW Lease
Agreement in relation to the leasing of the iclub Sheung Wan Hotel with the RHIHL Lessee, a member of the
RHIHL Connected Persons Group, on 10th February, 2014, with lease term expiring on 31st December, 2024. On
11th January, 2024, Regal REIT and the RHIHL Lessee entered into a supplemental deed amending the SW Lease
Agreement to extend the lease term of ten years from 1st January, 2025 to 31st December, 2034 (the
“
SW Extended
Period
”
), with the market rental packages for the extended lease term continuing to be determined annually by a
jointly appointed independent professional property valuer (the
“
SW Lease Extension
”
). As a result, the total lease
term of the SW Lease Agreement is now from 10th February, 2014 to 31st December, 2034. This supplemental lease
agreement was approved by the independent Unitholders at the extraordinary general meeting held on 31st January,
2024. References can be made to the related announcements dated 11st January, 2024 and 31st January, 2024 and
the related circular to Unitholders dated 11st January, 2024, as published by the REIT Manager for further details of
the SW Lease Extension.
During the year, the market rental income under the SW Lease Agreement amounted to HK$35.6 million.
Annual Report 2023
61
(g) SW Lease Guarantee
RHIHL, a member of the RHIHL Connected Persons Group, has guaranteed to pay all amounts from time to
time owing or payable by the RHIHL Lessee to the iclub Sheung Wan Hotel – Property Company under the SW
Lease Agreement by entering into the lease guarantee (as may be amended from time to time) (the
“
SW Lease
Guarantee
”
). On 11th January, 2024, a supplemental deed amending the SW Lease Guarantee was entered into
with the Trustee and RHIHL to make consequential amendments in light of the SW Lease Extension, so that RHIHL
’
s
obligation to maintain a third party guarantee will cover the SW Extended Period.
(h) SW Hotel Management Agreement
Regal REIT (via the iclub Sheung Wan Hotel – Property Company) entered into the SW Hotel Management Agreement
with the Hotel Manager, a member of the RHIHL Connected Persons Group, in respect of the management of the
business of iclub Sheung Wan Hotel for a 10-year term commencing on 10th February, 2014. On 11th January,
2024, Regal REIT and the Hotel Manager entered into a supplemental deed amending the SW Hotel Management
Agreement to extend its term from the expiry date of its current term (i.e., 9th February, 2024) to 31st December,
2034 with the inclusion of a new non-fault based early termination provision exercisable only by the lessor (the
“
SW HMA Extension
”
). This supplemental hotel management agreement was approved by the independent
Unitholders at the extraordinary general meeting held on 31st January, 2024. References can be made to the related
announcements dated 11st January, 2024 and 31st January, 2024 and the related circular to Unitholders dated 11st
January, 2024, as published by the REIT Manager for further details of the SW HMA Extension.
(i) FH Lease Agreement
Regal REIT (via Wise Decade Investments Limited (the
“
iclub Fortress Hill Hotel – Property Company
”
)) entered into
the FH Lease Agreement in relation to the leasing of the iclub Fortress Hill Hotel with the RHIHL Lessee, a member
of the RHIHL Connected Persons Group, on 28th July, 2014, with lease term expiring on 31st December, 2024. On
11th January, 2024, Regal REIT and the RHIHL Lessee entered into a supplemental deed amending the FH Lease
Agreement to extend the lease term of ten years from 1st January, 2025 to 31st December, 2034 (the
“
FH Extended
Period
”
), with the market rental packages for the extended lease term continuing to be determined annually by a
jointly appointed independent professional property valuer (the
“
FH Lease Extension
”
). As a result, the total lease
term of the FH Lease Agreement is now from 28th July, 2014 to 31st December, 2034. This supplemental lease
agreement was approved by the independent Unitholders at the extraordinary general meeting held on 31st January,
2024. References can be made to the related announcements dated 11st January, 2024 and 31st January, 2024 and
the related circular to Unitholders dated 11st January, 2024, as published by the REIT Manager for further details of
the FH Lease Extension.
During the year, the market rental income under the FH Lease Agreement amounted to HK$32.4 million.
(j) FH Lease Guarantee
RHIHL, a member of the RHIHL Connected Persons Group, has guaranteed to pay all amounts from time to time
owing or payable by the RHIHL Lessee to the iclub Fortress Hill Hotel – Property Company under the FH Lease
Agreement by entering into the lease guarantee (as may be amended from time to time) (the
“
FH Lease Guarantee
”
).
On 11th January, 2024, a supplemental deed amending the FH Lease Guarantee was entered into with the Trustee
and RHIHL to make consequential amendments in light of the FH Lease Extension, so that RHIHL
’
s obligation to
maintain a third party guarantee will cover the FH Extended Period.
Annual Report 2023
62
(k) FH Hotel Management Agreement
Regal REIT (via the iclub Fortress Hill Hotel – Property Company) entered into the FH Hotel Management Agreement
with the Hotel Manager, a member of the RHIHL Connected Persons Group, in respect of the management of the
business of iclub Fortress Hill Hotel for a 10-year term commencing on 28th July, 2014. On 11th January, 2024,
Regal REIT and the Hotel Manager entered into a supplemental agreement amending the FH Hotel Management
Agreement to extend its term from the expiry date of its current term (i.e., 27th July, 2024) to 31st December, 2034
with the inclusion of a new non-fault based early termination provision exercisable only by the lessor (the
“
FH HMA
Extension
”
). This supplemental hotel management agreement was approved by the independent Unitholders at the
extraordinary general meeting held on 31st January, 2024. References can be made to the related announcements
dated 11st January, 2024 and 31st January, 2024 and the related circular to Unitholders dated 11st January, 2024,
as published by the REIT Manager for further details of the FH HMA Extension.
(l) Tenancy Agreement
On 17th January, 2020, Regal REIT (via the iclub Wan Chai Hotel – Property Company), as landlord (the
“
Landlord
”
),
entered into a tenancy agreement with Cheerview Limited, a member of the RHIHL Connected Persons Group, as
tenant (the
“
RHIHL Tenant
”
), for the leasing of Shop Nos. A and B, G/F., No. 211 Johnston Road, Wanchai, Hong
Kong (the
“
Premises
”
), which is part of the iclub Wan Chai Hotel, for a 3-year term commencing on 20th January,
2020 (the
“
Tenancy Agreement
”
) with the inclusion of a right for the RHIHL Tenant to early terminate the tenancy
after a period of six months from 20th January, 2020 by serving a two months
’
prior written notice, at a rental of
HK$130,000 per calendar month (exclusive of air-conditioning charges, management fees, government rates and
other outgoing expenses) payable monthly in advance. Pursuant to the terms of the Tenancy Agreement, the RHIHL
Tenant shall be entitled to an option to renew the Tenancy Agreement for a further three years from the date of
expiry of the Tenancy Agreement at a market rent to be determined by the principal valuer of Regal REIT.
On 19th October, 2022, pursuant to the terms of the Tenancy Agreement, the RHIHL Tenant exercised the option
granted to it to renew the tenancy of the Premises for a further term of three years commencing from 20th January,
2023 and expiring on 19th January, 2026 (both days inclusive), at a market rent of HK$130,000 per calendar
month (exclusive of air-conditioning charges, management fees, government rates and other outgoing expenses),
as determined by the principal valuer of Regal REIT, payable monthly in advance. Save for the option to renew the
tenancy term, all the other terms and conditions of the Tenancy Agreement remain unchanged. References can be
made to the related announcements dated 21st October, 2022 and 15th November, 2022, as published by the REIT
Manager for further details of the renewal of the Tenancy Agreement. The RHIHL Tenant has served a written early
termination notice to the Landlord and both parties agreed to early terminate the Tenancy Agreement with effect
from 14th August, 2023 without any compensation.
During the year, total contractual lease income under the Tenancy Agreement amounted to approximately HK$1.0
million.
Annual Report 2023
63
(m) TKW Lease Agreement
Regal REIT (via Land Crown International Limited (the
“
iclub To Kwa Wan Hotel – Property Company
”
)) entered into
the TKW Lease Agreement in relation to the leasing of the iclub To Kwa Wan Hotel with the RHIHL Lessee, a member
of the RHIHL Connected Persons Group, on 4th September, 2017. The term of the TKW Lease Agreement expired on
3rd September, 2022, which is extendable at the option of Regal REIT for a further term to 31st December, 2027. On
29th December, 2021, pursuant to the terms of the TKW Lease Agreement, the iclub To Kwa Wan Hotel – Property
Company (as the Lessor) exercised the option granted to it to extend the lease term for a further term, commencing
from 4th September, 2022 and expiring on 31st December, 2027 (both days inclusive). On 8th June, 2022, the iclub
To Kwa Wan Hotel – Property Company and the RHIHL Lessee entered into the supplemental deed amending the
TKW Lease Agreement to formally effect the extension of the abovementioned lease term. Save for the extension
of the lease term as mentioned above, all the other existing terms and conditions of the TKW Lease Agreement will
remain unchanged.
During the year, the contractual cash rental receipts under the TKW Lease Agreement amounted to approximately
HK$30.0 million.
(n) TKW Lease Guarantee
Pursuant to a lease guarantee entered into on 4th September, 2017 (the
“
TKW Lease Guarantee
”
), RHIHL, a member
of the RHIHL Connected Person Group, has guaranteed to pay all amounts from time to time owing or payable by
the RHIHL Lessee to the iclub To Kwa Wan Hotel – Property Company under the TKW Lease Agreement.
(o) TKW Hotel Management Agreement
Regal REIT (via the iclub To Kwa Wan Hotel – Property Company) entered into the TKW Hotel Management
Agreement with the Hotel Manager, a member of the RHIHL Connected Persons Group, in respect of the
management of the business of iclub To Kwa Wan Hotel for a 10-year term commencing on 4th September, 2017.
REIT Manager Fees
Regal Portfolio Management Limited, a member of the RHIHL Connected Persons Group, was appointed as the REIT
Manager of Regal REIT. REIT Manager fees aggregating approximately HK$91.1 million for such services rendered during
the year were settled and/or are to be settled pursuant to the provisions of the Trust Deed.
Waivers from Strict Compliance
(a) A waiver (the
“
Initial Hotels – RHIHL Connected Persons Group
’
s Waiver
”
) from strict compliance with the disclosure
and Unitholders
’
approval requirements under Chapter 8 of the REIT Code, in respect of the Initial Hotels Lease
Agreements, Initial Hotels Management Agreements, Initial Hotels Lease Guarantees and Initial Hotels Deed of Trade
Mark Licence described above, was granted by the SFC on 5th March, 2007 subject to the terms and conditions as
set out in the offering circular dated 19th March, 2007 issued by the REIT Manager (the
“
Offering Circular
”
).
On 15th January, 2020, the SFC extended its waiver term for the Initial Hotels – RHIHL Connected Persons Group
’
s
Waiver in respect of the Initial Hotel Lease Agreements, so that such waiver will only cease on the date of expiry
(being (i) 27th December, 2028 for Regal Airport Hotel; and (ii) 31st December, 2030 for the other four Initial Hotels)
or termination of such agreements, whichever is earlier. Reference can be made to the related announcement dated
15th January, 2020 published by the REIT Manager.
During the year, Regal REIT complied with the terms and conditions of the Initial Hotels – RHIHL Connected Persons
Group
’
s Waiver.
Annual Report 2023
64
(b) On 17th July, 2013, the SFC granted (subject to the terms and conditions as set out in the announcement dated
18th July, 2013 published by the REIT Manager) a waiver from strict compliance with the disclosure and Unitholders
’
approval requirements under Chapter 8 of the REIT Code in respect of the original terms of each of the SW Lease
Agreement, the SW Lease Guarantee, the SW Hotel Management Agreement, the FH Lease Agreement, the FH Lease
Guarantee and the FH Hotel Management Agreement described above (the
“
SW & FH Hotels – RHIHL Connected
Persons Group
’
s Waiver
”
).
During the year, Regal REIT complied with the terms and conditions of the SW & FH Hotels – RHIHL Connected
Persons Group
’
s Waiver.
(c) On 20th July, 2017, the SFC granted (subject to the terms and conditions as set out in the announcement dated
20th July, 2017 published by the REIT Manager) a waiver from strict compliance with the disclosure and Unitholders
’
approval requirements under Chapter 8 of the REIT Code in respect of the TKW Lease Agreement, the TKW Lease
Guarantee and the TKW Hotel Management Agreement described above (the
“
TKW Hotel – RHIHL Connected
Persons Group
’
s Waiver
”
).
During the year, Regal REIT complied with the terms and conditions of the TKW Hotel – RHIHL Connected Persons
Group
’
s Waiver.
(d) On 15th January, 2020, the SFC granted (subject to the terms and conditions as set out in the announcement
dated 15th January, 2020 published by the REIT Manager) a waiver from strict compliance with the disclosure and
Unitholders
’
approval requirements under Chapter 8 of the REIT Code in respect of the Wan Chai Hotel Management
Agreement described above (the
“
WC Hotel – RHIHL Connected Persons Group
’
s Waiver
”
).
During the year, Regal REIT complied with the terms and conditions of the WC Hotel – RHIHL Connected Persons
Group
’
s Waiver.
TRUSTEE CONNECTED PERSONS GROUP
Both the REIT Manager and the Trustee have confirmed that, other than those banking transactions of which the members
of the Trustee Connected Persons Group acted as custodian and/or agent and conducted agency transactions with
Regal REIT Group, there were no corporate finance transactions or other connected party transactions with the Trustee
Connected Persons Group during the year.
Trustee Fees
DB Trustees (Hong Kong) Limited, a member of the Trustee Connected Persons Group, was appointed as the Trustee of
Regal REIT. Trustee fees aggregating approximately HK$3.8 million were recorded during the year for services rendered in
this capacity.
Waiver from Strict Compliance
A waiver (the
“
Trustee Connected Persons Group
’
s Waiver
”
) from strict compliance with the disclosure and Unitholders
’
approval requirements under Chapter 8 of the REIT Code, in respect of the above transactions with connected persons (as
defined in paragraph 8.1 of the REIT Code) of the Trustee was granted by the SFC on 5th March, 2007 subject to certain
terms and conditions as set out in the Offering Circular.
During the year, Regal REIT complied with the terms and conditions of the Trustee Connected Persons Group
’
s Waiver.
Annual Report 2023
65
REPORT ON FACTUAL FINDINGS
Pursuant to all Waivers from Strict Compliance granted by the SFC as disclosed herein, the external auditor of Regal REIT
was engaged to report on findings of agreed-upon procedures performed in relation to the Regal REIT Group
’
s continuing
connected party transactions in accordance with Hong Kong Standard on Related Services 4400 (Revised)
“
Agreed-Upon
Procedures Engagements
”
and with reference to terms and conditions set out in the Waivers from Strict Compliance. The
external auditor issued the report on factual findings and the report was presented to the Board of Directors of the REIT
Manager. The report will also be provided by the REIT Manager to the SFC.
CONFIRMATION BY THE INDEPENDENT NON-EXECUTIVE DIRECTORS
The Independent Non-executive Directors of the REIT Manager have reviewed all relevant connected party transactions
including those connected party transactions with the RHIHL Connected Persons Group and the Trustee Connected Persons
Group and were satisfied that those transactions were entered into:
(a) in the ordinary and usual course of business of Regal REIT;
(b) on normal commercial terms (to the extent that there are comparable transactions) or, where there are insufficient
comparable transactions to assess whether they are on normal commercial terms, on terms no less favourable to
Regal REIT than terms available to or from (as appropriate) independent third parties; and
(c) in accordance with the relevant agreements and deeds and the REIT Manager
’
s internal procedures governing them (if
any) on terms that are fair and reasonable and in the best interests of Unitholders as a whole.
Annual Report 2023
66
DISCLOSURE OF INTERESTS
The REIT Code requires Connected Persons (as defined in paragraph 8.1 of the REIT Code) of Regal REIT to disclose their
interests in the Units. As well, the provisions of Part XV of the SFO are deemed by the Trust Deed to apply to the REIT
Manager, the directors or the chief executives of the REIT Manager, and to persons interested in the Units.
HOLDINGS OF SUBSTANTIAL UNITHOLDERS
As at 31st December, 2023, the interests of the Substantial Unitholders (as defined in paragraph 8.1 of the REIT Code) (not
being a director or chief executive of the REIT Manager) in Units, as recorded in the register (the
“
Register
”
) required to be
kept under the Trust Deed, were as follows:
Approximate
percentage of the
Total number of issued Units as at
Names of Substantial Unitholders issued Units held 31st December, 2023
(x)
Century City International Holdings Limited (
“
CCIHL
”
) 2,443,033,102 74.99%
(Note i)
Century City BVI Holdings Limited (
“
CCBVI
”
) 2,443,033,102 74.99%
(Notes i & ii)
Paliburg Holdings Limited (
“
PHL
”
) 2,440,346,102 74.92%
(Notes iii & iv)
Paliburg Development BVI Holdings Limited (
“
PDBVI
”
) 2,440,346,102 74.92%
(Notes iii & v)
Regal Hotels International Holdings Limited (
“
RHIHL
”
) 2,439,613,739 74.89%
(Notes vi & vii)
Regal International (BVI) Holdings Limited (
“
RBVI
”
) 2,439,613,739 74.89%
(Notes vi & viii)
Complete Success Investments Limited 1,817,012,072 55.78%
(Note ix)
Great Prestige Investments Limited 373,134,326 11.45%
(Note ix)
Notes:
(i) The interests in 2,443,033,102 Units held by each of CCIHL and CCBVI were the same parcel of Units, which were directly held by
RBVI and wholly-owned subsidiaries of CCBVI, PDBVI and RBVI, respectively.
(ii) CCBVI is a wholly-owned subsidiary of CCIHL and its interests in Units are deemed to be the same interests held by CCIHL.
(iii) The interests in 2,440,346,102 Units held by each of PHL and PDBVI were the same parcel of Units, which were directly held by
RBVI and wholly-owned subsidiaries of PDBVI and RBVI, respectively.
Annual Report 2023
67
(iv) PHL is a listed subsidiary of CCBVI, which held an approximately 62.28% shareholding interest in PHL as at 31st December, 2023,
and its interests in Units are deemed to be the same interests held by CCBVI.
(v) PDBVI is a wholly-owned subsidiary of PHL and its interests in Units are deemed to be the same interests held by PHL.
(vi) The interests in 2,439,613,739 Units held by each of RHIHL and RBVI were the same parcel of Units, which were directly held by
RBVI and its wholly-owned subsidiaries, respectively.
(vii) RHIHL is a listed subsidiary of PDBVI, which held an approximately 69.25% shareholding interest in RHIHL as at 31st December,
2023, and its interests in Units are deemed to be the same interests held by PDBVI.
(viii) RBVI is a wholly-owned subsidiary of RHIHL and its interests in Units are deemed to be the same interests held by RHIHL.
(ix) These companies are wholly-owned subsidiaries of RBVI and their respective direct interests in Units are deemed to be the same
interests held by RBVI.
(x) The approximate percentages were calculated based on 3,257,431,189 Units in issue as at 31st December, 2023.
Save as disclosed herein, there were no other persons who, as at 31st December, 2023, had interests in Units which are
required to be recorded in the Register.
HOLDINGS OF THE REIT MANAGER, DIRECTORS AND CHIEF EXECUTIVE OF THE REIT MANAGER
As at 31st December, 2023, the interests of the REIT Manager, directors and chief executives of the REIT Manager in Units,
as recorded in the Register, were as follows:
Name of Director of the REIT Manager
Total number of
issued Units held
Approximate
percentage of the
issued Units as at
31st December, 2023
(ii)
LO Yuk Sui 2,443,033,102 74.99%
(Note i)
Notes:
(i) The interests in 2,443,033,102 Units were the same parcel of Units held through CCIHL in which Mr. Lo Yuk Sui held approximately
67.43% shareholding interest as at 31st December, 2023.
(ii) The approximate percentages were calculated based on 3,257,431,189 Units in issue as at 31st December, 2023.
Save as disclosed herein, as at 31st December, 2023, none of the REIT Manager, the Directors and the chief executives of
the REIT Manager had any interests in Units, which are required to be recorded in the Register. Save for the interests of the
Substantial Unitholders and the Director of the REIT Manager (also being the Connected Persons of the Regal REIT) in Units
as disclosed herein, the REIT Manager is not aware of any other Connected Persons of Regal REIT holding any Units.
Annual Report 2023 Annual Report 2023
68
AUDITED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For the year ended 31st December, 2023
Notes 2023 2022
HK$
’
000 HK$
’
000
REVENUE
Gross rental revenue 5 586,439 597,566
Gross hotel revenue 5 31,323 18,875
617,762 616,441
Property and hotel operating expenses (18,724) (15,842)
Net rental and hotel income 5 599,038 600,599
Interest income 875 438
Depreciation 11 (7,726) (7,935)
Fair value changes on investment properties 12 366,920 754,688
REIT Manager fees 6 (91,053) (89,595)
Trust, professional and other expenses 7 (10,547) (10,249)
Finance costs – excluding distributions to Unitholders 8 (611,183) (281,849)
PROFIT BEFORE TAX AND DISTRIBUTIONS TO UNITHOLDERS 246,324 966,097
Income tax credit/(expense) 9 19,412 (36,201)
PROFIT FOR THE YEAR, BEFORE DISTRIBUTIONS
TO UNITHOLDERS 265,736 929,896
Finance costs – distributions to Unitholders (32,574) (299,684)
PROFIT FOR THE YEAR, AFTER DISTRIBUTIONS
TO UNITHOLDERS 233,162 630,212
EARNINGS PER UNIT ATTRIBUTABLE TO UNITHOLDERS
Basic and diluted 10 HK$0.082 HK$0.285
Annual Report 2023
69
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31st December, 2023
Notes 2023 2022
HK$
’
000 HK$
’
000
PROFIT FOR THE YEAR, BEFORE DISTRIBUTIONS
TO UNITHOLDERS 265,736 929,896
OTHER COMPREHENSIVE INCOME
Other comprehensive income that will not be reclassified to
profit or loss in subsequent periods:
Gain on revaluation of property 11 39,338 36,815
Income tax effect 22 (6,491) (6,074)
Net other comprehensive income that will not be reclassified to
profit or loss in subsequent periods 32,847 30,741
OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX 32,847 30,741
TOTAL COMPREHENSIVE INCOME FOR THE YEAR,
BEFORE DISTRIBUTIONS TO UNITHOLDERS 298,583 960,637
Annual Report 2023
70
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31st December, 2023
Notes 2023 2022
HK$
’
000 HK$
’
000
Non-current assets
Property, plant and equipment 11 636,000 604,000
Investment properties 12 23,352,000 22,949,000
Finance lease receivables 13 998 7,468
Total non-current assets 23,988,998 23,560,468
Current assets
Accounts receivable 14 6,511 884
Prepayments, deposits and other receivables 15 9,369 6,500
Due from related companies 27(b) 2,228 2,747
Tax recoverable 2,532 5,871
Finance lease receivables 13 6,470 6,351
Restricted cash 16 330,360 124,354
Cash and cash equivalents 17 45,877 141,336
Total current assets 403,347 288,043
Total assets 24,392,345 23,848,511
Current liabilities
Accounts payable 18 40,242 70,028
Deposits received 182 10,151
Due to related companies 27(b) 183,722 521
Other payables and accruals 72,125 60,775
Contract liabilities 19 461 1,096
Interest-bearing bank borrowings 21 919,360 5,727,031
Lease liabilities 20 6,470 6,351
Tax payable 600 6,726
Total current liabilities 1,223,162 5,882,679
Net current liabilities (819,815) (5,594,636)
Total assets less current liabilities 23,169,183 17,965,832
Annual Report 2023
71
Notes 2023 2022
HK$
’
000 HK$
’
000
Non-current liabilities, excluding net assets
attributable to Unitholders
Interest-bearing bank borrowings 21 9,421,072 4,454,189
Lease liabilities 20 998 7,468
Deposits received 2,867
—
Deferred tax liabilities 22 670,373 696,311
Total non-current liabilities 10,095,310 5,157,968
Total liabilities, excluding net assets attributable
to Unitholders 11,318,472 11,040,647
Net assets attributable to Unitholders 13,073,873 12,807,864
Number of Units in issue 23 3,257,431,189 3,257,431,189
Net asset value per Unit attributable to Unitholders 24 HK$4.014 HK$3.932
The consolidated financial statements on pages 68 to 118 were approved and authorised for issue by Regal Portfolio
Management Limited as the Manager of Regal REIT on 27th March, 2024 and were signed on its behalf by:
SIMON LAM MAN LIM LO YUK SUI
Executive Director Chairman
Annual Report 2023
72
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS
For the year ended 31st December, 2023
Property
Capital revaluation Retained
Units reserve reserve profits Total
HK$
’
000 HK$
’
000 HK$
’
000 HK$
’
000 HK$
’
000
Net assets as at 1st January, 2023 8,432,356 15,876 189,477 4,170,155 12,807,864
Profit for the year
— — —
265,736 265,736
Other comprehensive income
for the year:
Gain on revaluation of property,
net of tax
— —
32,847
—
32,847
Total comprehensive income
for the year, before
distributions to Unitholders
— —
32,847 265,736 298,583
Transfer of depreciation
on a hotel property
— —
(1,874) 1,874
—
Finance costs – distributions
to Unitholders
— — —
(32,574) (32,574)
Net assets as at 31st December, 2023 8,432,356 15,876 220,450 4,405,191 13,073,873
For the year ended 31st December, 2022
Property
Capital revaluation Retained
Units reserve reserve profits Total
HK$
’
000 HK$
’
000 HK$
’
000 HK$
’
000 HK$
’
000
Net assets as at 1st January, 2022 8,432,356 15,876 160,350 3,538,329 12,146,911
Profit for the year
— — —
929,896 929,896
Other comprehensive income
for the year:
Gain on revaluation of property,
net of tax
— —
30,741
—
30,741
Total comprehensive income
for the year, before
distributions to Unitholders
— —
30,741 929,896 960,637
Transfer of depreciation
on a hotel property
— —
(1,614) 1,614
—
Finance costs – distributions
to Unitholders
— — —
(299,684) (299,684)
Net assets as at 31st December, 2022 8,432,356 15,876 189,477 4,170,155 12,807,864
Annual Report 2023
73
DISTRIBUTION STATEMENT
For the year ended 31st December, 2023
Notes 2023 2022
HK$
’
000 HK$
’
000
Profit for the year, before distributions to Unitholders 265,736 929,896
Adjustments:
Difference in accounting rental income and contractual
cash rental income
—
4,675
Amounts set aside for the furniture, fixtures and equipment reserve (d) (28,120) (24,104)
Amortisation of debt establishment costs 26,395 24,713
Fair value changes on investment properties (366,920) (754,688)
Depreciation 7,726 7,935
Deferred tax charge/(credit) (32,429) 16,332
Distributable income/(adjusted loss) for the year (a) (127,612) 204,759
HK$ HK$
Distributions per Unit:
Interim (b)
—
0.051
Final (c)
—
0.010
—
0.061
Notes:
(a) Pursuant to the Trust Deed, Regal REIT is required to ensure that the total amount distributed to Unitholders shall be no less than
90% of Regal REIT
’
s total distributable income as defined in the Trust Deed (
“
Total Distributable Income
”
) for each financial year.
The current policy of the REIT Manager is to distribute to Unitholders no less than 90% of Regal REIT
’
s Total Distributable Income
for each financial year.
(b) The amount of any distribution for the interim period of each financial year is at the discretion of the REIT Manager. Regal REIT
recorded an adjusted loss of HK$19.4 million for the six months ended 30th June, 2023, while there was a total distributable
income of HK$183.1 million for the six months ended 30th June, 2022.
(i) The REIT Manager decided not to declare an interim distribution for the six months ended 30th June, 2023.
(ii) An interim distribution of HK$0.051 per Unit for the six months ended 30th June, 2022 was made, involving a distribution
amount of HK$166.1 million.
(c) Regal REIT recorded an adjusted loss of HK$127.6 million for the year under review, while there was a total distributable income of
HK$204.8 million in 2022.
(i) The REIT Manager decided not to declare any final distribution for the year ended 31st December, 2023.
(ii) The final distribution of HK$0.010 per Unit for the period from 1st July, 2022 to 31st December, 2022 amounted to
HK$32.6 million. Together with the interim distribution of HK$0.051 per Unit, the total distribution for the financial year
2022 was HK$0.061 involving a total distribution amount of HK$198.7 million which was equivalent to a payout ratio of
97.0% for that year.
(d) Amounts set aside by Regal REIT for the furniture, fixtures and equipment reserve (the
“
FF&E Reserve
”
) with respect to Regal
Airport Hotel, Regal Hongkong Hotel, Regal Kowloon Hotel, Regal Oriental Hotel and Regal Riverside Hotel (collectively, the
“
Initial
Hotels
”
and each referred to as the
“
Initial Hotel
”
), iclub Wan Chai Hotel, iclub Sheung Wan Hotel, iclub Fortress Hill Hotel and
iclub To Kwa Wan Hotel aggregated HK$28.1 million (2022: HK$24.1 million).
Annual Report 2023
74
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31st December, 2023
Notes 2023 2022
HK$
’
000 HK$
’
000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax and distributions to Unitholders 246,324 966,097
Adjustments for:
Difference in accounting rental income and contractual
cash rental income 5
—
4,675
Fair value changes on investment properties 12 (366,920) (754,688)
Interest income (875) (438)
Finance costs - excluding distributions to Unitholders 8 611,183 281,849
Depreciation 11 7,726 7,935
497,438 505,430
Increase in accounts receivable (5,627) (640)
Decrease/(increase) in prepayments, deposits and other receivables (837) 428
Increase/(decrease) in amounts due from related companies 519 (1,328)
Increase in restricted cash (20) (2)
Increase/(decrease) in accounts payable (29,786) 37,923
Increase/(decrease) in deposits received (7,102) 7,276
Increase in amounts due to related companies 183,201 120
Increase/(decrease) in other payables and accruals (5,238) 26,829
Increase/(decrease) in contract liabilities (635) 656
Cash generated from operations 631,913 576,692
Interest received 3,018 439
Interest paid (572,375) (244,512)
Hong Kong profits tax paid (15,804) (35,950)
Net cash flows from operating activities 46,752 296,669
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of items of property, plant and equipment (388) (120)
Additions to investment properties (36,080) (45,312)
Principal portion of finance lease received 6,351 6,821
Decrease/(increase) in restricted cash 8,879 (7,493)
Decrease in time deposit with an original maturity of
more than three months
—
10,000
Net cash flows used in investing activities (21,238) (36,104)
Annual Report 2023
75
Notes 2023 2022
HK$
’
000 HK$
’
000
CASH FLOWS FROM FINANCING ACTIVITIES
Bank borrowings, net of debt establishment costs 2,523,817 3,360,750
Repayment of bank borrowings (2,391,000) (3,200,000)
Principal portion of lease payments (6,351) (6,821)
Distributions paid (32,574) (299,684)
Increase in restricted cash (214,865) (17,626)
Net cash flows used in financing activities (120,973) (163,381)
NET CHANGE IN CASH AND CASH EQUIVALENTS (95,459) 97,184
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 141,336 44,152
CASH AND CASH EQUIVALENTS AT END OF THE YEAR 45,877 141,336
ANALYSIS OF BALANCE OF CASH AND CASH EQUIVALENTS
Cash and bank balances 17 45,877 141,336
Annual Report 2023
76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31st December, 2023
1. GENERAL
Regal Real Estate Investment Trust (
“
Regal REIT
”
) is a Hong Kong collective investment scheme authorised under
section 104 of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and its units (the
“
Units
”
) were listed on The Stock Exchange of Hong Kong Limited (the
“
Stock Exchange
”
) on 30th March, 2007.
Regal REIT is governed by a trust deed (the
“
Trust Deed
”
) dated 11th December, 2006 (date of establishment),
made between Regal Portfolio Management Limited (the
“
REIT Manager
”
) and DB Trustees (Hong Kong) Limited
(the
“
Trustee
”
) (as amended and restated by the first amending and restating deed dated 23rd March, 2021 and the
second amending and restating deed dated 31st January, 2024) and the Code on Real Estate Investment Trusts (the
“
REIT Code
”
) issued by the Hong Kong Securities and Futures Commission (the
“
SFC
”
).
The principal activity of Regal REIT and its subsidiaries (collectively, referred to as the
“
Group
”
) is to own and invest
in income- producing hotels, serviced apartments or commercial properties (including office premises) with the
objectives of producing stable and growing distributions to the unitholders of Regal REIT (the
“
Unitholders
”
) and to
achieve long- term growth in the net asset value per Unit.
The addresses of the registered office of the REIT Manager and the Trustee are Unit No. 2001, 20th Floor, 68 Yee
Wo Street, Causeway Bay, Hong Kong and Level 60, International Commerce Centre, 1 Austin Road West, Kowloon,
Hong Kong, respectively.
2. ACCOUNTING POLICIES
2.1 BASIS OF PREPARATION
These consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting
Standards (
“
HKFRSs
”
) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards
(
“
HKASs
”
) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (
“
HKICPA
”
). In
addition, these consolidated financial statements have been prepared in accordance with the relevant provisions of
the Trust Deed and the relevant disclosure provisions of Appendix C of the REIT Code. The consolidated financial
statements have been prepared under the historical cost convention, except for property, plant and equipment and
investment properties which have been measured at fair value. These consolidated financial statements are presented
in Hong Kong dollars, the functional currency of Regal REIT, and all values are rounded to the nearest thousand
except when otherwise indicated.
As at 31st December, 2023, the Group
’
s current liabilities exceeded its current assets by HK$819,815,000. The net
current liabilities position was mainly due to the term loans which mature within twelve months and the revolving
loan that could be rolled-over on a monthly basis, which in aggregate amounted to HK$920,400,000 and classified
under current liabilities as at the end of the reporting period. Taking into account the stable operating cash inflows
to be generated from rental income, the planned refinancing of the loan facility maturing within the next twelve
months and the Group
’
s unutilised revolving loan facility, the REIT Manager considers the Group has adequate
resources to meet its liabilities, commitments and funding requirements as and when they fall due within one year
from the end of the reporting period. Accordingly, the REIT Manager continues to adopt the going concern basis in
preparing the consolidated financial statements.
Annual Report 2023
77
Basis of consolidation
The consolidated financial statements include the financial statements of the Group for the year ended 31st
December, 2023. A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by Regal
REIT. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give
the Group the current ability to direct the relevant activities of the investee).
Generally, there is a presumption that a majority of voting rights results in control. When Regal REIT has less than
a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in
assessing whether it has power over an investee, including:
(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group
’
s voting rights and potential voting rights.
The financial statements of the subsidiaries are prepared for the same reporting period as Regal REIT, using consistent
accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains control,
and continue to be consolidated until the date that such control ceases.
All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between
members of the Group are eliminated in full on consolidation.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes
to one or more of the three elements of control described above. A change in the ownership interest of a subsidiary,
without a loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, any non-
controlling interest and the exchange fluctuation reserve; and recognises the fair value of any investment retained
and any resulting surplus or deficit in profit or loss. The Group
’
s share of components previously recognised in other
comprehensive income is reclassified to profit or loss or retained profits, as appropriate, on the same basis as would
be required if the Group had directly disposed of the related assets or liabilities.
Annual Report 2023
78
2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
The Group has adopted the following new and revised HKFRSs for the first time for the current year
’
s financial
statements.
HKFRS 17
Insurance Contracts
Amendments to HKAS 1 and
HKFRS Practice Statement 2
Disclosure of Accounting Policies
Amendments to HKAS 8
Definition of Accounting Estimates
Amendments to HKAS 12
Deferred Tax related to Assets and Liabilities arising from
a Single Transaction
Amendments to HKAS 12
International Tax Reform – Pillar Two Model Rules
The nature and the impact of the new and revised HKFRSs that are applicable to the Group are described below.
(a) Amendments to HKAS 1 require entities to disclose their material accounting policy information rather than
their significant accounting policies. Accounting policy information is material if, when considered together
with other information included in an entity
’
s financial statements, it can reasonably be expected to influence
decisions that the primary users of financial statements make on the basis of those financial statements.
Amendments to HKFRS Practice Statement 2
Making Materiality Judgements
provide non-mandatory guidance
on how to apply the concept of materiality to accounting policy disclosures. The Group has disclosed the
material accounting policy information in note 2 to the financial statements. The amendments, therefore, did
not have any impact on the measurement, recognition or presentation of any items in the Group
’
s financial
statements.
(b) Amendments to HKAS 8 clarify the distinction between changes in accounting estimates and changes in
accounting policies. Accounting estimates are defined as monetary amounts in financial statements that
are subject to measurement uncertainty. The amendments also clarify how entities use measurement
techniques and input to develop accounting estimates. Since the Group
’
s approach and policies align with the
amendments, the amendments had no impact on the Group financial statements.
Annual Report 2023
79
2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS
The Group has not applied the following revised HKFRSs, that have been issued but are not yet effective, in these
financial statements. The Group intends to apply these revised HKFRSs, if applicable, when they become effective.
Amendments to HKFRS 10 and HKAS 28
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture
3
Amendments to HKFRS 16
Lease Liability in a Sale and Leaseback
1
Amendments to HKAS 1
Classification of Liabilities as Current or Non-current
(the
“
2020 Amendments
”
)
1, 4
Amendments to HKAS 1
Non-current Liabilities with Covenants
(the
“
2022 Amendments
”
)
1, 4
Amendments to HKAS 7 and HKFRS 7
Supplier Finance Arrangements
1
Amendments to HKAS 21
Lack of Exchangeability
2
1
Effective for annual periods beginning on or after 1st January, 2024
2
Effective for annual periods beginning on or after 1st January, 2025
3
No mandatory effective date yet determined but available for adoption
4
As a consequence of the 2020 Amendments and 2022 Amendments, Hong Kong Interpretation 5
Presentation of Financial
Statements - Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause
was revised to
align the corresponding wording with no change in conclusion
Further information about those HKFRSs that are expected to be applicable to the Group is described below.
The 2020 Amendments clarify the requirements for classifying liabilities as current or non-current, including what
is meant by a right to defer settlement and that a right to defer must exist at the end of the reporting period.
Classification of a liability is unaffected by the likelihood that the entity will exercise its right to defer settlement.
The amendments also clarify that a liability can be settled in its own equity instruments, and that only if a conversion
option in a convertible liability is itself accounted for as an equity instrument would the terms of a liability not
impact its classification. The 2022 Amendments further clarify that, among covenants of a liability arising from a loan
arrangement, only those with which an entity must comply on or before the reporting date affect the classification of
that liability as current or non-current. Additional disclosures are required for non-current liabilities that are subject
to the entity complying with future covenants within 12 months after the reporting period. The amendments shall
be applied retrospectively with early application permitted. An entity that applies the 2020 Amendments early is
required to apply simultaneously the 2022 Amendments, and vice versa. The Group is currently assessing the impact
of the amendments and whether existing loan agreements may require revision. Based on a preliminary assessment,
the amendments are not expected to have any significant impact on the Group
’
s financial statements.
Amendments to HKAS 7 and HKFRS 7 clarify the characteristics of supplier finance arrangements and require
additional disclosure of such arrangements. The disclosure requirements in the amendments are intended to assist
users of financial statements in understanding the effects of supplier finance arrangements on an entity
’
s liabilities,
cash flows and exposure to liquidity risk. Earlier application of the amendments is permitted. The amendments
provide certain transition reliefs regarding comparative information, quantitative information as at the beginning of
the annual reporting period and interim disclosures. The amendments are not expected to have any significant impact
on the Group
’
s financial statements.
Annual Report 2023
80
2.4 MATERIAL ACCOUNTING POLICIES
Unitholders
’
funds
In accordance with the Trust Deed, Regal REIT has a limited life of eighty years less one day from the date of its
commencement, and it is required to distribute to the Unitholders no less than 90% of its Total Distributable Income
for each financial year. Accordingly, Regal REIT has contractual obligations to the Unitholders to pay cash dividends
and also, upon the termination of Regal REIT, a share of all net cash proceeds derived from the sale or realisation
of the assets of Regal REIT less any liabilities, in accordance with the proportionate interests of the Unitholders in
Regal REIT at the date of its termination. The Unitholders
’
funds are, therefore, classified as financial liabilities in
accordance with HKAS 32
Financial Instruments: Presentation
.
Fair value measurement
The Group measures its property, plant and equipment and investment properties at fair value at the end of each
reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value measurement is based on
the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market
for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or
liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset
or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant
’
s ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant that
would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data
are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:
Level 1 – based on quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 – based on valuation techniques for which the lowest level input that is significant to the fair value
measurement is observable, either directly or indirectly
Level 3 – based on valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines
whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest
level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
Annual Report 2023
81
The policies and procedures for both recurring fair value measurement, such as investment properties and property,
plant and equipment, and non-recurring measurement are determined by the Trust Deed. The REIT Manager shall
select and recommend one or more property valuers to the Trustee and the Trustee shall, subject to the provisions
in the Trust Deed and the REIT Code, on the written instructions of the REIT Manager, appoint a property valuer
recommended by the REIT Manager for the valuation of the Group
’
s properties.
The REIT Manager has discussions with the external valuer on the valuation assumptions and valuation results twice a
year when the valuation is performed for interim and annual financial reporting.
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
Impairment of non-financial assets
Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than
financial assets and investment properties), the asset
’
s recoverable amount is estimated. An asset
’
s recoverable
amount is the higher of the asset
’
s or cash-generating unit
’
s value in use and its fair value less costs of disposal, and
is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent
of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-
generating unit to which the asset belongs. In testing a cash-generating unit for impairment, a portion of the
carrying amount of a corporate asset (e.g., a headquarters building) is allocated to an individual cash-generating unit
if it can be allocated on a reasonable and consistent basis or, otherwise, to the smallest group of cash-generating
units.
An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss
is charged to the consolidated statement of profit or loss in the period in which it arises, unless the asset is carried
at a revalued amount, in which case the impairment loss is accounted for in accordance with the relevant accounting
policy for that revalued asset.
An assessment is made at the end of each reporting period as to whether there is an indication that previously
recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable
amount is estimated. A previously recognised impairment loss of an asset is reversed only if there has been a change
in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the
carrying amount that would have been determined (net of any depreciation) had no impairment loss been recognised
for the asset in prior years. A reversal of such an impairment loss is credited to the consolidated statement of profit
or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the reversal of
the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.
Annual Report 2023
82
Related parties
A party is considered to be related to the Group if:
(a) the party is a person or a close member of that person
’
s family and that person
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the Group;
or
(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow
subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity
related to the Group;
(vi) the entity is controlled or jointly controlled by a person identified in (a);
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key
management personnel of the entity (or of a parent of the entity); and
(viii) the entity, or any member of a group of which it is a part, provides key management personnel services
to the Group or to the parent of the Group.
Property, plant and equipment and depreciation
Property, plant and equipment are stated at valuation less accumulated depreciation and any impairment losses. The
initial cost of an item of property, plant and equipment comprises its purchase price and any directly attributable
costs of bringing the asset to its working condition and location for its intended use.
Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs
and maintenance, is normally charged to the consolidated statement of profit or loss in the period in which it is
incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised
in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are
required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and
depreciates them accordingly.
Valuations are performed frequently enough to ensure that the fair value of a revalued asset does not differ
materially from its carrying amount. Changes in the values of property, plant and equipment are dealt with as
movements in the asset revaluation reserve. If the total of this reserve is insufficient to cover a deficit, on an
individual asset basis, the excess of the deficit is charged to the consolidated statement of profit or loss. Any
subsequent revaluation surplus is credited to the consolidated statement of profit or loss to the extent of the
deficit previously charged. An annual transfer from the asset revaluation reserve to retained profits is made for the
difference between the depreciation based on the revalued carrying amount of an asset and the depreciation based
on the asset
’
s original cost. On disposal of a revalued asset, the relevant portion of the asset revaluation reserve
realised in respect of previous valuations is transferred to retained profits as a movement in reserves.
Annual Report 2023
83
Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and
equipment to its residual value over its estimated useful life. The principal annual rates used for hotel properties are
over the lease term (for land) and over the shorter of the lease term and 2.5% (for buildings together with furniture,
fixtures and equipment).
Where parts of an item of property, plant and equipment have different useful lives, the cost of such items are
allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives
and the depreciation methods are reviewed, and adjusted if appropriate, at least at each financial year end.
An item of property, plant and equipment including any significant part initially recognised is derecognised upon
disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal
or retirement recognised in the consolidated statement of profit or loss in the year the asset is derecognised is the
difference between the net sales proceeds and the carrying amount of the relevant asset.
Investment properties
Investment properties are interests in land and buildings (including right-of-use assets) held to earn rental income
and/or for capital appreciation. Such properties are measured initially at cost, including transaction costs. Subsequent
to initial recognition, investment properties are stated at fair values, which reflect market conditions at the end of
the reporting period.
Gains or losses arising from changes in the fair values of investment properties are included in the consolidated
statement of profit or loss in the year in which they arise.
Any gains or losses on the retirement or disposal of an investment property are recognised in the consolidated
statement of profit or loss in the year of the retirement or disposal.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost.
The classification of financial assets at initial recognition depends on the financial asset
’
s contractual cash flow
characteristics and the Group
’
s business model for managing them. With the exception of accounts receivable that
do not contain a significant financing component or for which the Group has applied the practical expedient of not
adjusting the effect of a significant financing component, the Group initially measures such financial asset at its
fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Accounts
receivable that do not contain a significant financing component or for which the Group has applied the practical
expedient are measured at the transaction price determined under HKFRS 15 in accordance with the policies set out
for
“
Revenue recognition
”
below.
In order for a financial asset to be classified and measured at amortised cost, it needs to give rise to cash flows that
are solely payments of principal and interest (
“
SPPI
”
) on the principal amount outstanding.
Annual Report 2023
84
The Group
’
s business model for managing financial assets refers to how it manages its financial assets in order to
generate cash flows. The business model determines whether cash flows will result from collecting contractual cash
flows, selling the financial assets, or both. Financial assets classified and measured at amortised cost are held within
a business model with the objective to hold financial assets in order to collect contractual cash flows.
Purchases or sales of financial assets that require delivery of assets within the period generally established by
regulation or convention in the marketplace are recognised on the trade date, that is, the date that the Group
commits to purchase or sell the asset.
Subsequent measurement of financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the effective interest method and are subject
to impairment. Gains and losses are recognised in the consolidated statement of profit or loss when the asset is
derecognised, modified or impaired.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is
primarily derecognised (i.e., removed from the Group
’
s consolidated statement of financial position) when:
the rights to receive cash flows from the asset have expired; or
the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay
the received cash flows in full without material delay to a third party under a
“
pass-through
”
arrangement; and
either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has
neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control
of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through
arrangement, it evaluates if, and to what extent, it has retained the risk and rewards of ownership of the asset.
When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred
control of the asset, the Group continues to recognise the transferred asset to the extent of the Group
’
s continuing
involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated
liability are measured on a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the
original carrying amount of the asset and the maximum amount of consideration that the Group could be required to
repay.
Annual Report 2023
85
Impairment of financial assets
The Group recognises an allowance for expected credit losses (
“
ECLs
”
) for all debt instruments not held at fair value
through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with
the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original
effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit
enhancements that are integral to the contractual terms.
General approach
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit
risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within
the next 12 months (a 12 month ECL). For those credit exposures for which there has been a significant increase in
credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of
the exposure, irrespective of the timing of the default (a lifetime ECL).
At each reporting date, the Group assesses whether the credit risk on a financial instrument has increased
significantly since initial recognition. When making the assessment, the Group compares the risk of a default
occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial
instrument as at the date of initial recognition and considers reasonable and supportable information that is available
without undue cost or effort, including historical and forward-looking information. The Group considers that there
has been a significant increase in credit risk when contractual payments are more than 30 days past due.
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in
certain cases, the Group may also consider a financial asset to be in default when internal or external information
indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account
any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation
of recovering the contractual cash flows.
Financial assets at amortised cost are subject to impairment under the general approach and they are classified within
the following stages for measurement of ECLs except for accounts receivable which apply the simplified approach as
detailed below.
Stage 1 – Financial instruments for which credit risk has not increased significantly since initial recognition and for
which the loss allowance is measured at an amount equal to 12 month ECLs
Stage 2 – Financial instruments for which credit risk has increased significantly since initial recognition but that are
not credit-impaired financial assets and for which the loss allowance is measured at an amount equal to lifetime ECLs
Stage 3 – Financial assets that are credit-impaired at the reporting date (but that are not purchased or originated as
credit-impaired) and for which the loss allowance is measured at an amount equal to lifetime ECLs
Simplified approach
For accounts receivable that do not contain a significant financing component or when the Group applies the
practical expedient of not adjusting the effect of a significant financing component, the Group applies the simplified
approach in calculating ECLs. Under the simplified approach, the Group does not track changes in credit risk, but
instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a
provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to
the debtors and the economic environment.
Annual Report 2023
86
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as trade and other payables, and borrowings.
All financial liabilities are recognised initially at fair value and net of directly attributable transaction costs.
Subsequent measurement of financial liabilities at amortised cost (trade and other payables, and borrowings)
After initial recognition, trade and other payables, and interest-bearing borrowings are subsequently measured at
amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in
which case they are stated at cost. Gains and losses are recognised in the consolidated statement of profit or loss
when the liabilities are derecognised as well as through the effective interest rate amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are
an integral part of the effective interest rate. The effective interest rate amortisation is recognised in the consolidated
statement of profit or loss.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a
derecognition of the original liability and a recognition of a new liability, and the difference between the respective
carrying amounts is recognised in the consolidated statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of
financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an
intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.
Provisions
A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and
it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable
estimate can be made of the amount of the obligation.
When the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate
asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the
consolidated statement of profit or loss net of any reimbursement.
When the effect of discounting is material, the amount recognised for a provision is the present value at the end of
the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the
discounted present value amount arising from the passage of time is included in finance costs in the consolidated
statement of profit or loss.
Annual Report 2023
87
Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of financial position comprise cash on hand and at banks,
and short-term highly liquid deposits with a maturity of generally within three months that are readily convertible
into known amounts of cash, subject to an insignificant risk of changes in value and held for the purpose of meeting
short-term cash commitments.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and
at banks, and short-term deposits as defined above, less bank overdrafts which are repayable on demand and form
an integral part of the Group
’
s cash management.
Income tax
Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is
recognised outside profit or loss, either in other comprehensive income or directly in net assets.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the
reporting period, taking into consideration interpretations and practices prevailing in the countries/jurisdictions in
which the Group operates.
Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period
between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss and does not give rise to equal taxable and deductible temporary
differences; and
in respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the
reversal of the temporary differences can be controlled and it is probable that the temporary differences will
not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, and the carryforward of unused tax
credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable future taxable
profits will be available against which the deductible temporary differences, and the carryforward of unused tax
credits and unused tax losses can be utilised, except:
when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition
of an asset or liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss and does not give rise to equal taxable and
deductible temporary differences; and
in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax
assets are only recognised to the extent that it is probable that the temporary differences will reverse in the
foreseeable future and future taxable profits will be available against which the temporary differences can be
utilised.
Annual Report 2023
88
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent
it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to
be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised
to the extent it has become probable that sufficient taxable profits will be available to allow all or part of the
deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted
by the end of the reporting period.
Deferred tax assets and deferred tax liabilities are offset if and only if the Group has a legally enforceable right to
set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities related to
income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities
which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the
liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are
expected to be settled or recovered.
Government grants
Government grants are recognised at their fair value where there is reasonable assurance that the grant will
be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is
recognised as income on a systematic basis over the periods that the costs, for which it is intended to compensate,
are expensed.
Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and
leases of low value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.
Annual Report 2023
89
(a) Lease liabilities
Lease liabilities are recognised at the commencement date of the lease at the present value of lease payments
to be made over the lease term. The lease payments include fixed payments (including in-substance fixed
payments).
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease
commencement date because the interest rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced
for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in lease payments (e.g., a change to future lease payments
resulting from a change in an index or rate) or a change in assessment of an option to purchase the underlying
asset.
(b) Short-term leases
The Group applies the short-term lease recognition exemption to its short-term leases of premises (that is
those leases that have a lease term of 12 months or less from the commencement date and do not contain a
purchase option).
Lease payments on short-term leases are recognised as an expense on a straight-line basis over the lease term.
Group as a lessor
When the Group acts as a lessor, it classifies at lease inception (or when there is a lease modification) each of its
leases as either an operating lease or a finance lease.
Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an
asset are classified as operating leases. Rental income is accounted for on a straight-line basis over the lease terms
and is included in revenue in the consolidated statement of profit or loss due to its operating nature. Initial direct
costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset
and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue
in the period in which they are earned.
Leases that transfer substantially all the risks and rewards incidental to ownership of an underlying asset to the
lessee are accounted for as finance leases. At the commencement date, the cost of the leased asset is capitalised at
the present value of the lease payments, and related payments (including the initial direct costs), and presented as a
receivable at an amount equal to the net investment in the lease. The finance income on the net investment in the
lease is recognised in the statement of profit or loss so as to provide a constant periodic rate of return over the lease
terms.
When the Group is an intermediate lessor, a sublease is classified as a finance lease or operating lease with reference
to the right-of-use asset arising from the head lease. If the head lease is a short-term lease to which the Group
applies the on-balance sheet recognition exemption, the Group classifies the sublease as an operating lease.
Annual Report 2023
90
Revenue recognition
Revenue from leases
Rental income is recognised on the following bases:
(a) Base Rent from operating leases, on the straight-line basis over the terms of the relevant leases;
(b) Variable Rent, in the accounting period in accordance with the terms of the respective agreements; and
(c) other rental income, on a time proportion basis over the lease terms.
Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of goods or services is transferred to the
customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange for
those goods or services.
When the consideration in a contract includes a variable amount, the amount of consideration is estimated to
which the Group will be entitled in exchange for transferring the goods or services to the customer. The variable
consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue
reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the
variable consideration is subsequently resolved.
Revenue from hotel operations comprises of the provision of room and ancillary services and is recognised over time
in the accounting period in which the services are rendered.
Other income
Interest income is recognised on an accrual basis using the effective interest method by applying the rate that exactly
discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period,
when appropriate, to the net carrying amount of the financial asset.
Contract liabilities
A contract liability is recognised when a payment is received or a payment is due (whichever is earlier) from a
customer before the Group transfers the related goods or services. Contract liabilities are recognised as revenue
when the Group performs under the contract (i.e., transfers control of the related goods or services to the customer).
Foreign currency transactions
These consolidated financial statements are presented in Hong Kong dollars, which is Regal REIT
’
s functional
currency. Foreign currency transactions recorded by the entities in the Group are initially recorded using their
respective functional currency rates prevailing at the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies are translated at the functional currency rates of exchange ruling at the end
of the reporting period. Differences arising on settlement or translation of monetary items are recognised in the
consolidated statement of profit or loss.
Annual Report 2023
91
3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Group
’
s financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their accompanying
disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could
result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities
affected in the future.
Judgements
In the process of applying the Group
’
s accounting policies, management has made the following judgements,
apart from those involving estimations, which have the most significant effect on the amounts recognised in the
consolidated financial statements:
Property lease classification – Group as lessor
The Group has entered into commercial property leases on its investment property portfolio. The Group has
determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not
constituting a major part of the economic life of the commercial property and the present value of the minimum
lease payments not amounting to substantially all the fair value of the commercial property, that it retains
substantially all the significant risks and rewards incidential to ownership of these properties which are leased out
and accounts for the contracts as operating leases.
Classification between investment properties and owner-occupied properties
The Group determines whether a property qualifies as an investment property, and has developed criteria in making
that judgement. Investment property is a property held to earn rentals or for capital appreciation or both. Therefore,
the Group considers whether a property generates cash flows largely independently of the other assets held by
the Group. Some properties comprise a portion that is held to earn rentals or for capital appreciation and another
portion that is held for use in the production or supply of goods or services or for administrative purposes. If these
portions could be sold separately or leased out separately under a finance lease, the Group accounts for the portions
separately. If the portions could not be sold separately, the property is an investment property only if an insignificant
portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is
made on an individual property basis to determine whether ancillary services are so significant that a property does
not qualify as an investment property.
Annual Report 2023
92
Estimation uncertainties
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are described below.
Estimations of fair values of investment properties and property, plant and equipment
The fair value of each investment property and item of property, plant and equipment is individually determined at
the end of each reporting period by an independent valuer based on a market value assessment. The valuer has relied
on the income approach – discounted cash flow analysis as its primary method supported by the direct comparison
approach. These methodologies are based upon estimates of future results and a set of assumptions specific to each
property to reflect its tenancy or occupancy, and cash flow profile. The discounted cash flow projections of each
investment property and item of property, plant and equipment are based on reliable estimates of expected future
cash flows, supported by the terms of any existing leases, other contracts, projection of hotel operating income
and (when possible) by external evidence, and using discount rates that reflect current market assessments of the
uncertainty in the amounts and timing of the cash flows. In respect of the leases of each investment property and
item of property, plant and equipment, due consideration has also been given to the expectation of the renewal of
the leases with the Government of the Hong Kong Special Administrative Region upon expiry without paying any
land premiums, which is a widely accepted practice used in the property market, and is widely accepted by other real
estate investment trusts in Hong Kong.
Deferred tax assets
Deferred tax assets are recognised for unused tax losses carried forward to the extent that it is probable that future
taxable profit will be available against which the carryforward of unused tax losses can be utilised. Recognition of
deferred tax primarily involves judgements and estimations regarding the future performance of the Group. A variety
of other factors are also evaluated in considering whether there is convincing evidence that it is probable that some
portions or all of the deferred tax assets will ultimately be realised, such as tax planning strategies and the periods
in which estimated tax losses can be utilised. The carrying amounts of deferred tax assets and related taxable profit
projections are reviewed at the end of each reporting period.
Provision for expected credit losses on accounts receivable
The Group uses a provision matrix to calculate ECLs for accounts receivable. The provision rates are based on days
past due for groupings of various customer segments with similar loss patterns.
The provision matrix is initially based on the Group
’
s historical observed default rates. The Group will calibrate
the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast
economic conditions (i.e., gross domestic products) are expected to deteriorate over the next year which can lead to
an increased number of defaults in the sector, the historical default rates are adjusted. At each reporting date, the
historical observed default rates are updated and changes in the forward-looking estimates are analysed.
The assessment of the correlation among historical observed default rates, forecast economic conditions and ECLs is
a significant estimate. The amount of ECLs is sensitive to changes in circumstances and forecast economic conditions.
The Group
’
s historical credit loss experience and forecast of economic conditions may also not be representative of
a customer
’
s actual default in the future. The financial impact of ECLs for accounts receivable under HKFRS 9 was
insignificant for the year ended 31st December, 2023. The information about the Group
’
s accounts receivable is
disclosed in note 14 to the consolidated financial statements.
Annual Report 2023
93
Leases Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in a lease and, therefore, it uses an incremental
borrowing rate (
“
IBR
”
) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay
to borrow over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to
the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group
“
would have to
pay
”
, which requires estimation when no observable rates are available or when it needs to be adjusted to reflect the
terms and conditions of the lease. The Group estimates the IBR using observable input when available and is required
to make certain entity-specific estimates.
4. OPERATING SEGMENT INFORMATION
Operating segments of the Group are identified on the basis of internal reports covering the components of the
Group which are regularly reviewed by the Group
’
s chief operating decision-maker to make decisions about resources
to be allocated to segments and assess their performance. Information reported to the Group
’
s chief operating
decision-maker, for the above-mentioned purposes, is mainly focused on the segment results related to the nature of
properties, namely, the hotel properties and the mixed use property. For management purposes, the two reportable
operating segments are (i) the hotel properties segment which invested in the Initial Hotels, iclub Sheung Wan Hotel,
iclub Fortress Hill Hotel and iclub To Kwa Wan Hotel; and (ii) the mixed use property segment which invested in the
iclub Wan Chai Hotel and is made up of the hotel portion and non-hotel portions.
The operating segments of the Group for the year ended 31st December, 2023 are as follows:
Hotel Mixed Use
Properties Property Total
HK$
’
000 HK$
’
000 HK$
’
000
Segment revenue
Gross rental revenue 580,644 5,795 586,439
Gross hotel revenue
—
31,323 31,323
Total 580,644 37,118 617,762
Segment results 577,469 21,569 599,038
Fair value changes on investment properties 365,920 1,000 366,920
Depreciation
—
(7,726) (7,726)
Interest income 875
REIT Manager fees (91,053)
Trust, professional and other expenses (10,547)
Finance costs – excluding distributions to Unitholders (611,183)
Profit before tax and distributions to Unitholders 246,324
Annual Report 2023
94
The operating segments of the Group for the year ended 31st December, 2022 were as follows:
Hotel Mixed Use
Properties Property Total
HK$
’
000 HK$
’
000 HK$
’
000
Segment revenue
Gross rental revenue 592,102 5,464 597,566
Gross hotel revenue
—
18,875 18,875
Total 592,102 24,339 616,441
Segment results 589,220 11,379 600,599
Fair value changes on investment properties 750,688 4,000 754,688
Depreciation
—
(7,935) (7,935)
Interest income 438
REIT Manager fees (89,595)
Trust, professional and other expenses (10,249)
Finance costs – excluding distributions to Unitholders (281,849)
Profit before tax and distributions to Unitholders 966,097
Segment assets and liabilities
As part of the Group
’
s performance assessment, the fair values of investment properties and property, plant and
equipment are reviewed by the Group
’
s chief operating decision-maker.
As at 31st December, 2023, the Group
’
s segment assets, comprised of the aggregate fair values of the investment
properties and property, plant and equipment in the hotel properties segment and the mixed use property segment,
amounted to HK$23,155,000,000 (2022: HK$22,753,000,000) and HK$833,000,000 (2022: HK$800,000,000),
respectively.
Save as set out above, no other assets and liabilities are included in the assessment of the Group
’
s segment
performance.
Annual Report 2023
95
Other segment information
Year ended 31st December, 2023
Hotel Mixed Use
Properties Property Total
HK$
’
000 HK$
’
000 HK$
’
000
Capital expenditures 36,080 388 36,468
Year ended 31st December, 2022
Hotel Mixed Use
Properties Property Total
HK$
’
000 HK$
’
000 HK$
’
000
Capital expenditures 44,999 120 45,119
Capital expenditures consist of additions to investment properties and property, plant and equipment.
Information about a major customer
For the year ended 31st December, 2023, revenue of HK$580,644,000 (2022: HK$592,102,000) was derived from
the lease of hotel properties to a single lessee which is a related company.
Geographical information
The Group
’
s investment properties and property, plant and equipment are all located in Hong Kong.
Annual Report 2023
96
5. NET RENTAL AND HOTEL INCOME
Revenue represents the gross rental revenue received and receivable from its investment properties, and gross hotel
revenue during the year.
The net rental and hotel income represents the aggregate of:
(a) Net rental income, being the gross rental revenue less property operating expenses; and
(b) Net hotel income, being the gross hotel revenue less hotel operating expenses.
An analysis of the gross and net rental and hotel income is as follows:
Notes 2023 2022
HK$
’
000 HK$
’
000
Gross rental revenue
Rental income
Initial Hotels (a) 480,000 475,000
iclub Wan Chai Hotel – Non-hotel portions 5,795 5,464
iclub Sheung Wan Hotel (b) 35,628 27,000
iclub Fortress Hill Hotel (c) 32,358 37,757
iclub To Kwa Wan Hotel (d) 30,000 50,000
Other income 2,658 2,345
586,439 597,566
Property operating expenses (3,831) (3,521)
Net rental income 582,608 594,045
Gross hotel revenue 31,323 18,875
Hotel operating expenses (f) (14,893) (12,321)
Net hotel income 16,430 6,554
Net rental and hotel income 599,038 600,599
Revenue from contracts with customers
Gross hotel revenue (e) 31,323 18,875
Revenue from other sources
Gross rental income 586,439 597,566
Annual Report 2023
97
Notes:
(a) An analysis of the Initial Hotels rental income is as follows:
2023 2022
HK$
’
000 HK$
’
000
Base Rent 480,000 475,000
Variable Rent
— —
480,000 475,000
(b) An analysis of the iclub Sheung Wan Hotel rental income is as follows:
2023 2022
HK$
’
000 HK$
’
000
Base Rent 32,000 27,000
Variable Rent 3,628
—
35,628 27,000
(c) An analysis of the iclub Fortress Hill Hotel rental income is as follows:
2023 2022
HK$
’
000 HK$
’
000
Base Rent 30,000 27,000
Variable Rent 2,358 10,757
32,358 37,757
(d) An analysis of the iclub To Kwa Wan Hotel rental income is as follows:
2023 2022
HK$
’
000 HK$
’
000
Contractual cash rental income
—
45,900
Difference in accounting rental income and contractual cash rental income
—
(4,675)
Base Rent 30,000 8,775
Variable Rent
— —
30,000 50,000
(e) Gross hotel revenue is recognised over time.
(f) Included subsidies of HK$668,000 granted by the Government of the Hong Kong Special Administrative Region under
the Anti-epidemic Fund during the year ended 31st December, 2022. There were no unfulfilled conditions related to
these grants.
Annual Report 2023
98
6. REIT MANAGER FEES
2023 2022
HK$
’
000 HK$
’
000
Base Fees 73,155 71,504
Variable Fees 17,898 18,091
91,053 89,595
Under the Trust Deed, the REIT Manager is entitled to receive the following:
a base fee (the
“
Base Fee
”
) of currently 0.3% (subject to a maximum of 0.5%) per annum of the value of the
deposited property of Regal REIT which is payable monthly (in the form of Units and/or cash) and subject to
adjustments (in the form of cash) based on the value of the deposited property of Regal REIT as at the end of
the reporting period for the relevant financial year; and
a variable fee (the
“
Variable Fee
”
) of currently 3% (subject to a maximum of 5%) per annum of the net
property income for the relevant financial year as defined in the Trust Deed in respect of each Initial Hotel,
iclub Wan Chai Hotel, iclub Sheung Wan Hotel, iclub Fortress Hill Hotel and iclub To Kwa Wan Hotel, which is
payable annually.
For the financial year 2023, the REIT Manager elected to receive its Base Fees and Variable Fees in the form of cash.
Details of which can be referred to an announcement of Regal REIT published on 6th December, 2022.
7. TRUST, PROFESSIONAL AND OTHER EXPENSES
2023 2022
HK$
’
000 HK$
’
000
Auditor
’
s remuneration:
Audit fees 1,350 1,900
Non-audit fees 534 713
Legal and other professional fees 2,610 1,349
Trustee fees 3,780 3,694
Valuation fees 400 400
Other expenses 1,873 2,193
10,547 10,249
Regal REIT did not appoint any directors and the Group did not engage any employees during the year (2022: Nil)
and, accordingly, no director and employee benefit expenses were incurred during the year (2022: Nil).
Annual Report 2023
99
8. FINANCE COSTS - EXCLUDING DISTRIBUTIONS TO UNITHOLDERS
2023 2022
HK$
’
000 HK$
’
000
Interest expense on interest-bearing bank borrowings 586,134 260,064
Amortisation of debt establishment costs 26,395 24,713
Interest income from restricted cash (4,172)
—
Others, net of compensation income 2,622 (3,250)
Interest expense on lease liabilities 204 322
611,183 281,849
9. INCOME TAX
Hong Kong profits tax has been provided at the rate of 16.5% (2022: 16.5%) on the estimated assessable profits
arising in Hong Kong during the year.
2023 2022
HK$
’
000 HK$
’
000
Charge for the year 13,045 19,939
Overprovision in prior years (28) (70)
Deferred (note 22) (32,429) 16,332
Total tax charge/(credit) for the year (19,412) 36,201
A reconciliation of the tax charge applicable to profit before tax and distributions to Unitholders at the Hong Kong
statutory tax rate of 16.5% (2022: 16.5%) to the tax charge at the Group
’
s effective tax rate is as follows:
2023 2022
HK$
’
000 HK$
’
000
Profit before tax and distributions to Unitholders 246,324 966,097
Tax charge at the statutory tax rate 40,643 159,406
Adjustments in respect of current tax of previous periods (28) (70)
Income not subject to tax (60,770) (124,537)
Expenses not deductible for tax 928 933
Others (185) 469
Tax charge/(credit) at the Group
’
s effective rate (19,412) 36,201
Annual Report 2023
100
10. EARNINGS PER UNIT ATTRIBUTABLE TO UNITHOLDERS
The calculation of the basic earnings per Unit attributable to Unitholders is based on the profit for the year before
distributions to Unitholders of HK$265,736,000 (2022: HK$929,896,000) and 3,257,431,189 Units in issue (2022:
3,257,431,189 Units). The basic earnings per Unit attributable to Unitholders for the year amounted to HK$0.082
(2022: HK$0.285).
The diluted earning per Unit attributable to Unitholders is the same as the basic earnings per Unit attributable to
Unitholders as there were no dilutive instruments in issue during the year (2022: Nil).
11. PROPERTY, PLANT AND EQUIPMENT
Authorised
investments
Hotel
properties
HK$
’
000
At 1st January, 2022 575,000
Additions 120
Surplus on revaluation 36,815
Depreciation provided during the year (7,935)
At 31st December, 2022 and 1st January, 2023 604,000
Additions 388
Surplus on revaluation 39,338
Depreciation provided during the year (7,726)
At 31st December, 2023 636,000
The Group
’
s property, plant and equipment represents the value of land and building together with furniture, fixtures
and equipment of iclub Wan Chai Hotel for the hotel portion. The REIT Manager has determined that the property,
plant and equipment constitute a single class of asset (i.e. hotel property) based on the nature, characteristics and
risks of the property. The property, plant and equipment was valued by Colliers International (Hong Kong) Limited
(
“
Colliers
”
), an independent property valuer and the principal valuer of Regal REIT, at HK$636,000,000 as at 31st
December, 2023 (2022: HK$604,000,000). A revaluation surplus of HK$39,338,000 (2022: HK$36,815,000) resulting
from the valuation as at 31st December, 2023 has been credited to other comprehensive income.
The property, plant and equipment is categorised as Level 3 in the fair value hierarchy (note 29).
The iclub Wan Chai Hotel has been pledged to secure banking facilities granted to the Group (note 21).
The carrying amount of the Group
’
s property, plant and equipment would have been HK$371,990,000 (2022:
HK$377,083,000) had such assets been stated in the consolidated financial statements at cost less accumulated
depreciation.
Further particulars of the Group
’
s hotel properties are included on page 187.
Annual Report 2023
101
12. INVESTMENT PROPERTIES
Authorised investments
Hotel
properties
Commercial
properties Total
HK$
’
000 HK$
’
000 HK$
’
000
At 1st January, 2022 21,957,000 192,000 22,149,000
Fair value changes 750,688 4,000 754,688
Capital expenditures for the year 44,999
—
44,999
Others 313
—
313
At 31st December, 2022 and
1st January, 2023 22,753,000 196,000 22,949,000
Fair value changes 365,920 1,000 366,920
Capital expenditures for the year 36,080
—
36,080
At 31st December, 2023 23,155,000 197,000 23,352,000
The REIT Manager has determined that the investment properties constitute two classes of asset (i.e. hotel and
commercial properties) based on the nature, characteristics and risks of each property.
The Group
’
s investment properties were valued by Colliers at HK$23,352,000,000 as at 31st December, 2023 (2022:
HK$22,949,000,000). The investment properties are leased to a related company and other commercial tenants
under operating leases. Further details of which are included in note 20 to the consolidated financial statements.
The investment properties are categorised as Level 3 in the fair value hierarchy (note 29).
Initial Hotels, together with iclub Sheung Wan Hotel, iclub Fortress Hill Hotel and iclub To Kwa Wan Hotel, have been
pledged to secure banking facilities granted to the Group (note 21).
Further particulars of the Group
’
s investment properties are included on pages 186 to 187.
Annual Report 2023
102
13. FINANCE LEASE RECEIVABLES
Minimum
lease payments
Present value of
minimum lease payments
2023 2022 2023 2022
HK$
’
000 HK$
’
000 HK$
’
000 HK$
’
000
Amounts receivable:
Not later than one year 6,555 6,555 6,470 6,351
Later than one year and not
later than five years 999 7,554 998 7,468
7,554 14,109 7,468 13,819
Less: Unearned finance income (86) (290)
7,468 13,819
Portion classified as current assets (6,470) (6,351)
Non-current portion 998 7,468
The effective interest rate of the finance lease of the premises as at 31st December, 2023 is 1.86% (2022: 1.86%)
per annum.
No finance lease receivable is past due at the end of the reporting period.
14. ACCOUNTS RECEIVABLE
2023 2022
HK$
’
000 HK$
’
000
Variable Rent receivable 5,986
—
Other accounts receivable 525 884
6,511 884
The Group
’
s accounts receivable as at the end of the reporting period, based on invoice dates, are aged as being
within 3 months. No accounts receivable are past due at the end of the reporting period.
The Variable Rent receivable represents amounts due from a related company which are unsecured, interest-free and
repayable within one year in accordance with the terms of the respective agreements.
The general credit terms for other accounts receivable are 30 days. The Group seeks to maintain control over the
outstanding receivables and to minimise any credit risk associated thereon.
Annual Report 2023
103
15. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
2023 2022
HK$
’
000 HK$
’
000
Prepayments 1,882 1,009
Deposits and other receivables 7,487 5,491
9,369 6,500
Deposits in the amount of HK$1,212,000 (2022: HK$1,212,000) were placed with a related company with respect to
services provided to iclub Wan Chai Hotel. The amounts are unsecured, interest-free and repayable on demand.
16. RESTRICTED CASH
The restricted cash of the Group is kept in designated bank accounts in accordance with the relevant facility
agreements and is restricted mainly for servicing finance costs on certain interest-bearing bank borrowings, funding
and utilisation of furniture, fixtures and equipment expenditures for the Initial Hotels, iclub Wan Chai Hotel - Hotel
portion, iclub Sheung Wan Hotel, iclub Fortress Hill Hotel and iclub To Kwa Wan Hotel, and holding rental deposits
from certain tenants.
17. CASH AND CASH EQUIVALENTS
Cash at banks earns interest at floating rates based on daily bank deposit rates. The bank balances are deposited
with creditworthy banks with no recent history of default.
18. ACCOUNTS PAYABLE
2023 2022
HK$
’
000 HK$
’
000
Amounts due to related companies 39,524 69,780
Other accounts payable 718 248
40,242 70,028
The amounts due to related companies are unsecured, interest-free and repayable on demand. Other accounts
payable are unsecured, non interest-bearing and are normally settled within 90 days.
The Group
’
s accounts payable as at the end of the reporting period, based on invoice dates, are all aged within 3
months.
Annual Report 2023
104
19. CONTRACT LIABILITIES
The Group has recognised the following revenue-related contract liabilities:
2023 2022
HK$'000 HK$
’
000
Advances from customers 461 1,096
Contract liabilities included the advance receipts from customers under hotel operations.
20. LEASES
The Group as a lessee
The Group has lease contracts for various premises used in its operations. Leases of premises generally have lease
terms between 1 and 12 years.
(a) Lease liabilities
The carrying amount of lease liabilities and the movements during the year were as follows:
2023 2022
HK$
’
000 HK$
’
000
Carrying amount at 1st January 13,819 20,640
Accretion of interest recognised during the year 204 322
Payments (6,555) (7,143)
Carrying amount at 31st December 7,468 13,819
Analysed into:
Current portion 6,470 6,351
Non-current portion 998 7,468
7,468 13,819
(b) The amounts recognised in profit or loss in relation to leases were as follows:
2023 2022
HK$
’
000 HK$
’
000
Interest on lease liabilities 204 322
Expense relating to short-term leases (included in property
and hotel operating expenses) 360 310
Total amount recognised in profit or loss 564 632
(c) The total cash outflow for leases was HK$6,915,000 (2022: HK$7,453,000).
Annual Report 2023
105
The Group as a lessor
The Group leases its investment properties (note 12) consisting of hotel properties, commercial properties and
premises in Hong Kong under operating lease arrangements. The terms of the leases generally require the tenants to
pay security deposits and provide for periodic rent adjustments according to the then prevailing market conditions.
At the end of the reporting period, the undiscounted lease payments receivable by the Group in future periods under
non-cancellable operating leases with its tenants are as follows:
2023 2022
HK$
’
000 HK$
’
000
Within one year 674,106 580,392
After one year but within two years 6,217 6,555
After two years but within three years 2,577 954
682,900 587,901
21. INTEREST-BEARING BANK BORROWINGS
Note 2023 2022
HK$
’
000 HK$
’
000
Interest-bearing bank borrowings 10,424,900 10,271,000
Debt establishment costs (84,468) (89,780)
10,340,432 10,181,220
Portion classified as current liabilities (919,360) (5,727,031)
Non-current portion 9,421,072 4,454,189
Principal amounts repayable based on original maturity terms:
Within one year 920,400 2,466,000
In the second year (a) 700,000 455,000
In the third to fifth years, inclusive (a) 8,804,500 7,350,000
10,424,900 10,271,000
Note:
(a) For the year ended 31st December 2022, included in the amount were two long term loans with an aggregate principal
amount of HK$3,305.0 million (the
“
Relevant Loans
”
) which have maturity dates beyond 2022 but were classified as current
liabilities at the end of the reporting period. The Relevant Loans were deemed to have been in breach or in breach of a
loan covenant related to interest coverage ratio (the
“
ICR
”
) as at 31st December, 2022. Subsequent to the year ended 31st
December, 2022, waivers and confirmations have been secured from the relevant bank lenders on the ICR breach and that
the Relevant Loans remain repayable on their original maturity dates in 2027 and 2024, respectively. Despite the waivers
and confirmations obtained from the bank lenders, the Relevant Loans were still classified as current liabilities as at 31st
December, 2022, in order to comply with the applicable accounting standards. Having obtained the waivers from the bank
lenders, there were no longer any deemed breach or breach of the ICR related loan covenants under the Relevant Loans as
at 31st December, 2022.
Annual Report 2023
106
On 10th August, 2021, Regal REIT, through wholly-owned subsidiaries, Bauhinia Hotels Limited and Rich Day
Investments Limited, entered into a facility agreement for a term loan facility of HK$4,500.0 million and a revolving
loan facility of up to HK$500.0 million (the
“
2021 IH Facilities
”
) for a term of five years. The 2021 IH Facilities are
secured by four of the five Initial Hotels, namely, the Regal Airport Hotel, the Regal Hongkong Hotel, the Regal
Oriental Hotel and the Regal Riverside Hotel. As at 31st December, 2023, the 2021 IH Facilities had an outstanding
amount of HK$4,965.4 million, representing the full amount of the term loan facility and an amount of HK$465.4
million under the revolving loan facility.
On 8th March, 2018, Regal REIT arranged, through a wholly-owned subsidiary, Ricobem Limited, a bilateral term
loan facility of HK$3,000.0 million (the
“
2018 RKH Facility
”
), secured by a mortgage over the Regal Kowloon Hotel.
This facility had a term of five years to March 2023. In late June 2022, Regal REIT concluded a 5-year term loan
facility of HK$2,950.0 million (the
“
2022 RKH Facility
”
) with a new lender, similarly secured by the Regal Kowloon
Hotel, which was used to refinance the 2018 RKH Facility. The 2022 RKH Facility carries interest based on HIBOR and
has loan maturity in June 2027. As at 31st December, 2023, the outstanding amount of the 2022 RKH Facility was
HK$2,900.0 million, after an installment repayment of HK$50.0 million in June 2023, representing the full amount of
the term loan facility.
On 19th July, 2019, Regal REIT, through a wholly-owned subsidiary, Sonnix Limited, entered into a facility agreement
for a term loan facility of HK$440.0 million (the
“
2019 WC Facility
”
), for a term of five years to July 2024. The
2019 WC Facility is secured by the iclub Wan Chai Hotel. On 22nd June, 2020, its principal amount was revised to
HK$405.0 million for compliance with an undertaking in the facility agreement. As at 31st December, 2023, the
outstanding facility amount of the 2019 WC Facility was HK$405.0 million.
Annual Report 2023
107
On 17th October, 2023, Regal REIT arranged, through a wholly-owned subsidiary, a new bilateral term loan facility
of HK$749.5 million and secured by the iclub Sheung Wan Hotel (the
“
2023 SW Facility
”
) to replace the then term
and revolving loan facilities of HK$790.0 million. The 2023 SW Facility bears HIBOR-based interest with a four-year
term to October 2027. As at 31st December, 2023, the outstanding amount of the 2023 SW Facility was HK$749.5
million, representing the full amount of the term loan.
On 27th November, 2023, Regal REIT arranged, through a wholly-owned subsidiary, another new bilateral term loan
facility of HK$755.0 million and secured by the iclub Fortress Hill Hotel (the
“
2023 FH Facility
”
) to replace the then
term and revolving loan facilities of HK$825.0 million. The 2023 FH Facility bears HIBOR-based interest and has a
term of five years to November 2028. As at 31st December, 2023, the outstanding amount of the 2023 FH Facility
was HK$755.0 million, representing the full amount of the term loan.
On 15th November, 2023, Regal REIT arranged, through a wholly-owned subsidiary, a new term loan facility of
HK$650.0 million, secured by the iclub To Kwa Wan Hotel (the
“
2023 TKW Facility
”
), with a term of two years to
November 2025 and bearing HIBOR-based interest, to replace the then term loan facility of HK$621.0 million. As at
31st December, 2023, the outstanding amount of the 2023 TKW Facility was HK$650.0 million, representing the full
amount of the term loan.
As at 31st December, 2023, the outstanding loan facilities bore interest at the Hong Kong Interbank Offered Rate
plus an interest ranging from 1.05% per annum to 1.80% per annum (2022: ranging from 1.05% per annum to
1.80% per annum).
Bank borrowings under the 2021 IH Facilities, the 2022 RKH Facility, the 2019 WC Facility, the 2023 SW Facility, the
2023 FH Facility and the 2023 TKW Facility are guaranteed by Regal REIT and/or certain individual companies of the
Group on a joint and several basis.
The Group
’
s interest-bearing bank borrowings are also secured by, amongst others:
(i) legal charges and debentures over the corresponding properties;
(ii) an assignment of rental income and all other proceeds arising from and including all rights, titles and interests
under all hotel management agreements and lease agreements, where appropriate, relating to the relevant
properties;
(iii) charges over each relevant rental account, sales proceeds account and other control accounts of the Group, if
any;
(iv) a floating charge over all of the undertakings, properties, assets and rights of each of the relevant companies
of the Group; and
(v) an equitable charge over the shares in the relevant companies of the Group.
Annual Report 2023
108
22. DEFERRED TAX
The movements in deferred tax assets and liabilities during the year were as follows:
Fair value
adjustments Depreciation Losses
arising from allowances in available for
revaluation of excess of offsetting
property, plant related against future
and equipment depreciation taxable profits Total
HK$
’
000 HK$
’
000 HK$
’
000 HK$
’
000
Gross deferred tax assets/(liabilities)
at 1st January, 2022 (31,686) (650,228) 8,009 (673,905)
Deferred tax charged to other
comprehensive income during the year (6,074)
— —
(6,074)
Deferred tax credited/(charged) to the
consolidated statement of profit or loss
during the year (note 9) 319 (20,134) 3,483 (16,332)
Gross deferred tax assets/(liabilities)
at 31st December, 2022 (37,441) (670,362) 11,492 (696,311)
Gross deferred tax assets/(liabilities)
at 1st January, 2023 (37,441) (670,362) 11,492 (696,311)
Deferred tax charged to other
comprehensive income during the year (6,491)
— —
(6,491)
Deferred tax credited/(charged) to the
consolidated statement of profit or loss
during the year (note 9) 370 (16,252) 48,311 32,429
Gross deferred tax assets/(liabilities)
at 31st December, 2023 (43,562) (686,614) 59,803 (670,373)
For presentation purposes, certain deferred tax assets and liabilities have been offset in the consolidated statement of
financial position.
Annual Report 2023
109
23. NUMBER OF UNITS IN ISSUE
Number of Units
2023 2022
At beginning and end of the year 3,257,431,189 3,257,431,189
24. NET ASSET VALUE PER UNIT ATTRIBUTABLE TO UNITHOLDERS
The net asset value per Unit attributable to Unitholders is calculated by dividing the net assets attributable to
Unitholders as at 31st December, 2023 of HK$13,073,873,000 (2022: HK$12,807,864,000) by the number of Units
in issue of 3,257,431,189 (2022: 3,257,431,189) as at that date.
25. NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
Changes in liabilities arising from financing activities
Lease
liabilities
Interest-
bearing bank
borrowings
HK$
’
000 HK$
’
000
At 1st January, 2022 20,640 9,992,044
Changes from financing cash flows (6,821) 164,463
Non-cash change:
Amortisation of debt establishment costs
—
24,713
At 31st December, 2022 and at 1st January, 2023 13,819 10,181,220
Changes from financing cash flows (6,351) 132,817
Non-cash change:
Amortisation of debt establishment costs
—
26,395
At 31st December, 2023 7,468 10,340,432
Annual Report 2023
110
26. COMMITMENTS
The Group had the following capital commitments in respect of its properties at the end of the reporting period:
2023 2022
HK$
’
000 HK$
’
000
Authorised, but not contracted for 29,394 31,384
27. CONNECTED AND RELATED PARTY TRANSACTIONS
In addition to the transactions and balances detailed elsewhere in these consolidated financial statements, the Group
had the following material transactions with connected and/or related parties during the year:
Connected/related parties Relationship with the Group
DB Trustees (Hong Kong) Limited The Trustee of Regal REIT
Deutsche Bank AG and its associates
(the
“
Deutsche Bank Group
”
)
Connected persons of the Trustee
Regal Hotels International Holdings Limited and
other members of its group
(collectively the
“
RHIHL Group
”
)
Substantial Unitholder of Regal REIT
Regal Portfolio Management Limited The REIT Manager of Regal REIT and a member of
the RHIHL Group
Paliburg Holdings Limited and other members of its group
(collectively the
“
PHL Group
”
)
Controlling shareholders of the RHIHL Group
(a) Transactions with connected/related parties:
Notes 2023 2022
HK$
’
000 HK$
’
000
Contractual rental income received/receivable from
the RHIHL Group (i) 587,198 603,903
Rental income received/receivable from the RHIHL Group (ii) 1,083 1,732
Hotel management fees charged by the RHIHL Group (iii) (1,491) (722)
Marketing fees charged by the RHIHL Group (iv) (313) (189)
Building management fees charged by the PHL Group (v) (632) (632)
REIT Manager fees (vi) (91,053) (89,595)
Trustee fees (vii) (3,780) (3,694)
Meeting fees charged by the RHIHL Group (viii)
—
(171)
Annual Report 2023
111
Notes:
(i) The rental income earned by the Group was in accordance with the relevant lease agreements with respect to the
Initial Hotels, iclub Sheung Wan Hotel, iclub Fortress Hill Hotel and iclub To Kwa Wan Hotel.
(ii) The rental income earned by the Group was in accordance with the relevant tenancy agreement with respect to Shop
Nos. A & B, which is part of the iclub Wan Chai Hotel.
(iii) The hotel management fees in respect of iclub Wan Chai Hotel – Hotel portion were comprised of (a) a base fee,
for an amount based on 2% of the gross hotel revenue, and (b) an incentive fee based on 5% of the excess of the
gross operating profit over the base fee and fixed charges in accordance with the corresponding hotel management
agreement.
(iv) The marketing fees in respect of iclub Wan Chai Hotel – Hotel portion were charged at 1% of the gross hotel revenue
of iclub Wan Chai Hotel – Hotel portion in accordance with the corresponding hotel management agreement.
(v) The building management fees were charged at a mutually agreed amount payable on a monthly basis in respect of
iclub Wan Chai Hotel – Non-hotel portions.
(vi) The REIT Manager is entitled to receive Base Fees and Variable Fees, details of which, including the terms, are set out
in note 6 to the consolidated financial statements.
(vii) The Trustee is entitled to receive trustee fees (calculated and payable quarterly) at rates ranging from 0.015% per
annum to 0.025% per annum based on the value of the deposited property of Regal REIT as at the end of the
reporting period subject to a minimum of HK$66,000 per month.
(viii) The meeting fees were charged at mutually agreed amounts.
The above transactions have been entered into in the ordinary course of business and on normal commercial terms.
(b) Balances at 31st December with connected/related parties were as follows:
Notes 2023 2022
HK$
’
000 HK$
’
000
Net amounts due from/(to) the RHIHL Group:
Accounts payable to related companies (i) (39,524) (69,780)
Deposit received (iii)
—
(7,433)
Amounts due from related companies (i) 2,228 2,747
Amounts due to related companies (i) (183,722) (521)
Net amounts due from the PHL Group:
Deposits paid (i) 1,212 1,212
Net amounts due to:
The Trustee (ii) (1,019) (1,042)
Restricted and non-restricted bank balances with
the Deutsche Bank Group (iv) 154 154
Annual Report 2023
112
Notes:
(i) The amounts are unsecured, interest-free and repayable on demand/within one year.
(ii) The amount is unsecured and repayable in accordance with the terms of the Trust Deed.
(iii) The amount is repayable in accordance with the terms of the relevant agreement.
(iv) The bank balances earn interest at prevailing market rates.
(c) The RHIHL Group has guaranteed to pay all amounts from time to time owing or payable by the lessee of the
Initial Hotels to the Group under the respective lease agreements, when the same become due, together with
other charges and outgoings, interest, default interest, fees and costs. In this connection, the RHIHL Group
undertook to maintain a minimum consolidated tangible net worth (as defined in the relevant agreements) of
HK$4 billion. Under the Market Rental Package for 2023, the RHIHL Group provided a third party guarantee as
security deposit for an amount of HK$120.00 million (2022: HK$118.75 million), which is equivalent to three-
month Base Rent for the year 2023, issued by a licensed bank in Hong Kong.
(d) Under a deed of trade mark licence, the RHIHL Group granted the REIT Manager and companies holding the
Initial Hotels within the Group a non-exclusive and non-transferable licence at nil consideration to use its
registered trade marks or service marks for the purpose of describing the ownership of the Initial Hotels and/or
use in connection with the business of the Initial Hotels.
(e) On 10th February, 2014, the Group entered into a hotel management agreement with a member of the RHIHL
Group in respect of the management of iclub Sheung Wan Hotel for a 10-year term commencing on 10th
February, 2014.
(f) On 28th July, 2014, the Group entered into a hotel management agreement with a member of the RHIHL
Group in respect of the management of iclub Fortress Hill Hotel for a 10-year term commencing on 28th July,
2014.
(g) On 4th September, 2017, the Group entered into a hotel management agreement with a member of the
RHIHL Group in respect of the management of iclub To Kwa Wan Hotel for a 10-year term commencing on 4th
September, 2017.
(h) On 20th December, 2019, the Group entered into a hotel management agreement with a member of the RHIHL
Group in respect of the management of iclub Wan Chai Hotel for a 10-year term commencing on 1st January,
2021.
Annual Report 2023
113
28. FINANCIAL INSTRUMENTS BY CATEGORY
The carrying amounts of each of the categories of financial instruments as at the end of the reporting period are as
follows:
Financial assets
Financial assets
at amortised cost
2023 2022
HK$
’
000 HK$
’
000
Accounts receivable 6,511 884
Financial assets included in prepayments, deposits and other receivables 7,487 5,491
Due from related companies 2,228 2,747
Finance lease receivables 7,468 13,819
Restricted cash 330,360 124,354
Cash and cash equivalents 45,877 141,336
399,931 288,631
Financial liabilities
Financial liabilities
at amortised cost
2023 2022
HK$
’
000 HK$
’
000
Accounts payable 40,242 70,028
Deposits received 3,049 10,151
Due to related companies 183,722 521
Other payables and accruals 72,125 60,775
Contract liabilities 461 1,096
Interest-bearing bank borrowings 10,340,432 10,181,220
Lease liabilities 7,468 13,819
10,647,499 10,337,610
Annual Report 2023
114
29. FAIR VALUE AND FAIR VALUE HIERARCHY
The fair values of the financial assets and liabilities represent the amounts for which the instruments that could be
exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The REIT Manager considers the carrying amounts of the financial assets and financial liabilities recorded in the
consolidated financial statements approximated their fair values at the end of the reporting period.
Fair value hierarchy
The following tables illustrate the fair value measurement hierarchy of the Group
’
s non-financial assets:
Assets measured at fair value:
As at 31st December, 2023
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
HK$
’
000 HK$
’
000 HK$
’
000 HK$
’
000
Property, plant and equipment
— —
636,000 636,000
Investment properties
— —
23,352,000 23,352,000
— —
23,988,000 23,988,000
As at 31st December, 2022
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
HK$
’
000 HK$
’
000 HK$
’
000 HK$
’
000
Property, plant and equipment
— —
604,000 604,000
Investment properties
— —
22,949,000 22,949,000
— —
23,553,000 23,553,000
During the year, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers
into or out of Level 3 (2022: Nil).
Annual Report 2023
115
The income approach - discounted cash flow analysis was used for the valuation of property, plant and equipment
and investment properties, with the following key inputs:
(a) Property, plant and equipment
Range Range
Significant unobservable inputs 2023 2022
Capitalisation rate 3.00% 3.00%
Discount rate 6.00% 6.00%
Growth rate p.a. (Approximately) 2.7% to 13.7% 3.0% to 35.0%
Occupancy rate 94% 89% to 92%
Room rate per day (Approximately) HK$900 to HK$1,500 HK$800 to HK$1,600
Gross operating profit (as a % of revenue) (Approximately) 56% to 57% 34% to 55%
(b) Investment properties
Range Range
Significant unobservable inputs Asset Class 2023 2022
Capitalisation rate Hotel and commercial 2.5% to 3.25% 2.5% to 3.25%
Discount rate Hotel and commercial 5.5% to 7.00% 5.5% to 7.00%
Growth rate p.a. (Approximately) Hotel 2.7% to 50.8% 3.0% to 119.4%
Occupancy rate Hotel 65% to 95% 60% to 92%
Room rate per day (Approximately) Hotel HK$700 to HK$2,100 HK$500 to HK$1,900
Gross operating profit (as a %
of revenue) (Approximately)
Hotel 22% to 57% 11% to 58%
Estimated rental p.a.
(Approximately)
Commercial HK$7,100,000 to
HK$9,300,000
HK$7,000,000 to
HK$9,000,000
Under the income approach - discounted cash flow analysis, fair value is estimated using assumptions regarding the
benefits and liabilities of ownership over the asset
’
s life including an exit or terminal value. This method involves the
projection of a series of cash flows on a property interest. A market-derived discount rate is applied to the projected
cash flow in order to establish the present value of the income stream associated with the asset. The exit yield is
normally separately determined and differs from the discount rate.
The duration of the cash flows and the specific timing of inflows and outflows are determined by events such as rent
reviews, lease renewals and related relettings, redevelopment or refurbishment. The appropriate duration is driven
by market behaviour that is a characteristic of the class of property. The periodic cash flow is estimated as gross
income less operating expenses, the FF&E Reserve, building insurance, government rates and rent, base management
fees and incentive fees. The series of periodic net operating income, along with an estimate of the terminal value
anticipated at the end of the projection period, is then discounted.
A significant increase/(decrease) in the estimated rent, the room rate per day, the occupancy rate and the growth
rate per annum in isolation would result in a significant increase/(decrease) in the fair value of the hotel properties. A
significant increase/(decrease) in the capitalisation rate and the discount rate in isolation would result in a significant
(decrease)/increase in the fair value of the hotel properties. Generally, a change in the assumption made for the room
rate per day is accompanied by a directionally similar change in the growth rate per annum and the discount rate.
Annual Report 2023
116
30. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The main risks arising from the Group
’
s financial instruments are interest rate risk, credit risk and liquidity risk. The
REIT Manager reviews and agrees policies for managing each of these risks and they are summarised below.
Interest rate risk
The Group
’
s exposure to the risk of changes in market interest rates relates primarily to the Group
’
s bank borrowings
with floating interest rates. Interest rate risk is managed by the REIT Manager on an ongoing basis with the primary
objective of limiting the extent to which net interest expense could be affected by adverse movements in interest
rates.
For Hong Kong dollar borrowings, assuming the amount of bank borrowings outstanding at the end of the reporting
period was outstanding for the whole year, a 100 basis point increase in interest rates would have hypothetically
decreased the Group
’
s profit before tax and distributions to Unitholders for the current year by HK$104.2 million
(2022: HK$102.7 million). A 10 basis point decrease in interest rates would have hypothetically increased the Group
’
s
profit before tax and distributions to Unitholders for the current year by HK$10.4 million (2022: HK$10.3 million).
The sensitivity to the interest rates used above is considered reasonable with the other variables held constant.
Credit risk
Credit risk is the potential financial loss which could result from the failure of a tenant or counterparty to settle
its financial and contractual obligations to the Group as and when they fall due. The REIT Manager monitors the
balances of its lessees on an ongoing basis. Currently, all the investment properties held by the Group are leased to
lessees. Cash and fixed deposits are placed with authorised institutions which are regulated. Transactions involving
financial instruments are carried out only with authorised institutions with sound credit ratings.
The Group applies the simplified approach for ECLs on accounts receivable. For financial assets included in
prepayments, deposits and other receivables, amounts due from related companies, restricted cash, and cash and
cash equivalents, they are classified within stage 1 for measurement of ECLs.
The maximum exposure to credit risk is the carrying amounts of such financial assets on the consolidated statement
of financial position.
Annual Report 2023
117
Liquidity risk
The REIT Manager monitors and maintains a level of cash and cash equivalents deemed adequate to finance the
Group
’
s operations. In addition, the REIT Manager observes the REIT Code issued by the SFC concerning limits on
total borrowings and monitors the level of borrowings of Regal REIT so that it is within the permitted limits.
The maturity profile of the Group
’
s financial liabilities as at the end of the reporting period, based on the contractual
undiscounted payments, was as follows:
2023
Less than 1 to 5
On demand 12 months years Total
HK$
’
000 HK$
’
000 HK$
’
000 HK$
’
000
Accounts payable 39,524 718
—
40,242
Deposits received
—
182 2,867 3,049
Due to related companies
—
183,722
—
183,722
Other payables and accruals
—
72,125
—
72,125
Contract liabilities
—
461
—
461
Interest-bearing bank borrowings
—
1,596,383 10,858,827 12,455,210
Lease liabilities
—
6,555 999 7,554
39,524 1,860,146 10,862,693 12,762,363
2022
Less than 1 to 5
On demand 12 months years Total
HK$
’
000 HK$
’
000 HK$
’
000 HK$
’
000
Accounts payable 69,780 248
—
70,028
Deposits received
—
10,151
—
10,151
Due to related companies
—
521
—
521
Other payables and accruals
—
60,775
—
60,775
Contract liabilities
—
1,096
—
1,096
Interest-bearing bank borrowings
—
3,024,503 9,126,816 12,151,319
Lease liabilities
—
6,555 7,554 14,109
69,780 3,103,849 9,134,370 12,307,999
Annual Report 2023
118
Capital management
The objective of the Group is to employ a growth-oriented capital structure to maximise cash flows while maintaining
flexibility in funding any future acquisitions. The Group
’
s excess borrowing capacity will be utilised to meet funding
requirements relating to acquisitions of properties, as well as capital expenditures for the enhancement of the
properties held by the Group.
The Group also adopts a prudent capital management policy to ensure that the leverage ratio will not exceed the
threshold percentage under the REIT Code and relevant provisions in the banking facility agreements.
The Group monitors the capital management position using the loan-to-value ratio and the gearing ratio. At the end
of the reporting period, the loan-to-value ratios in connection with certain utilised banking facilities ranged from
39.4% to 48.7% (2022: ranged from 39.5% to 53.7%), which were below the thresholds as allowed under the
respective banking facility agreements.
At the end of the reporting period, the gearing ratio of Regal REIT was 42.7% (2022: 43.1%), being the gross
amount of the outstanding loans aggregating HK$10,424.9 million (2022: HK$10,271.0 million), as compared to the
total gross assets of Regal REIT of HK$24,392.3 million (2022: HK$23,848.5 million). For details of the gross amount
of the outstanding loans, refer to note 21 to the financial statements. The gearing ratio is below the maximum 50%
permitted under the amended REIT Code which became effective on 4th December, 2020.
31. SUBSIDIARIES
Particulars of the principal subsidiaries are as follows:
Percentage
Place of Issued of equity
incorporation ordinary attributable Principal
Name and business share capital to the Group activities
Bauhinia Hotels Limited Hong Kong HK$2 100 Hotel ownership
Cityability Limited Hong Kong HK$10,000 100 Hotel ownership
Gala Hotels Limited Hong Kong HK$2 100 Hotel ownership
Regal Asset Holdings Limited Bermuda/Hong Kong US$12,000 100 Investment holding
Regal Riverside Hotel Limited Hong Kong HK$2 100 Hotel ownership
Rich Day Investments Limited Hong Kong HK$1 100 Financing
Ricobem Limited Hong Kong HK$100,000 100 Hotel ownership
Sonnix Limited Hong Kong HK$2 100 Property ownership
R-REIT International Finance Limited British Virgin Islands US$1 100 Financing
Tristan Limited Hong Kong HK$20 100 Hotel ownership
Wise Decade Investments Limited Hong Kong HK$1 100 Hotel ownership
Land Crown International Limited Hong Kong HK$1 100 Hotel ownership
The above table lists the subsidiaries of Regal REIT which, in the opinion of the REIT Manager, principally affected
the results for the year or formed a substantial portion of the net assets of the Group. To give details of other
subsidiaries would, in the opinion of the REIT Manager, result in particulars of excessive length.
Annual Report 2023
119
INDEPENDENT AUDITOR
’
S REPORT
To the Unitholders of Regal Real Estate Investment Trust
(A Hong Kong collective investment scheme authorised under section 104 of the Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong))
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
OPINION
We have audited the consolidated financial statements of Regal Real Estate Investment Trust (
“
Regal REIT
”
) and its
subsidiaries (the
“
Group
”
) set out on pages 68 to 118, which comprise the consolidated statement of financial position as
at 31st December, 2023, and the consolidated statement of profit or loss, the consolidated statement of comprehensive
income, the consolidated statement of changes in net assets attributable to unitholders, the consolidated statement of cash
flows and the distribution statement for the year then ended, and notes to the consolidated financial statements, including
material accounting policy information.
In our opinion, the consolidated financial statements give a true and fair view of the financial disposition of the Group
as at 31st December, 2023, and of its financial transactions and cash flows for the year then ended in accordance with
Hong Kong Financial Reporting Standards (
“
HKFRSs
”
) issued by the Hong Kong Institute of Certified Public Accountants
(
“
HKICPA
”
).
BASIS FOR OPINION
We conducted our audit in accordance with Hong Kong Standards on Auditing (
“
HKSAs
”
) issued by the HKICPA. Our
responsibilities under those standards are further described in the
Auditor
’
s responsibilities for the audit of the consolidated
financial statements
section of our report. We are independent of the Group in accordance with the HKICPA
’
s
Code of
Ethics for Professional Accountants
(the
“
Code
”
), and we have fulfilled our other ethical responsibilities in accordance with
the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Annual Report 2023
120
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in
that context.
We have fulfilled the responsibilities described in the
Auditor
’
s responsibilities for the audit of the consolidated financial
statements
section of our report, including in relation to these matters. Accordingly, our audit included the performance
of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial
statements. The results of our audit procedures, including the procedures performed to address the matter below, provide
the basis for our audit opinion on the accompanying consolidated financial statements.
Key audit matter How our audit addressed the key audit matter
Valuations of investment properties and property, plant and equipment
As at 31st December, 2023, the Group
’
s investment
properties and property, plant and equipment were
valued at approximately HK$23.4 billion and HK$0.6
billion, respectively, which made up, in aggregate, 98.3%
of the Group
’
s total assets. The Group engages an
external valuer to perform the property valuations for the
investment properties and property, plant and equipment
on a half-yearly basis. The valuation process is inherently
subjective and dependent on a number of assumptions
and estimates.
The Group
’
s accounting policies and disclosures for the
valuations of investment properties and property, plant
and equipment are set out in notes 2.4, 3, 11, 12 and 29
to the consolidated financial statements.
With the assistance from our internal valuation specialists,
we evaluated the valuation methodology used and the
underlying assumptions in connection with the valuations
of investment properties and property, plant and
equipment of the Group as at 31st December, 2023. The
valuations were based on, among others, assumptions on
capitalisation rates, discount rates, terminal growth rates,
occupancy rates, daily room rates, gross operating profits
and estimated annual rentals.
We evaluated the competence, capabilities and
independence of the external valuer commissioned by the
Group. We also assessed the adequacy of disclosures of
the valuations of investment properties and property, plant
and equipment in the consolidated financial statements.
Annual Report 2023
121
OTHER INFORMATION INCLUDED IN THE ANNUAL REPORT
The manager of Regal REIT (the
“
REIT Manager
”
) is responsible for the other information. The other information comprises
the information included in the Annual Report, other than the consolidated financial statements and our auditor
’
s report
thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF THE REIT MANAGER AND THE AUDIT COMMITTEE OF THE REIT MANAGER FOR
THE CONSOLIDATED FINANCIAL STATEMENTS
The REIT Manager is responsible for the preparation of the consolidated financial statements that give a true and fair
view in accordance with HKFRSs issued by the HKICPA, and for such internal control as the REIT Manager determines is
necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the consolidated financial statements, the REIT Manager is responsible for assessing the Group
’
s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the REIT Manager either intends to liquidate the Group or to cease operations or has no realistic
alternative but to do so.
In addition, the REIT Manager is required to ensure that the consolidated financial statements have been properly prepared
in accordance with the relevant provisions of the trust deed dated 11th December, 2006 (as amended and restated by
the first amending and restating deed dated 23rd March, 2021 and the second amending and restating deed dated 31st
January, 2024) constituting Regal REIT (the
“
Trust Deed
”
) and the relevant disclosure provisions of Appendix C of the Code
on Real Estate Investment Trusts (the
“
REIT Code
”
) issued by the Hong Kong Securities and Futures Commission.
The Audit Committee of the REIT Manager is responsible for overseeing the Group
’
s financial reporting process.
AUDITOR
’
S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor
’
s report that includes our opinion.
Our report is made solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept
liability to any other person for the contents of this report.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
Annual Report 2023
122
In addition, we are required to assess whether the consolidated financial statements of the Group have been properly
prepared, in all material respects, in accordance with the relevant provisions of the Trust Deed and the relevant disclosure
provisions of Appendix C of the REIT Code.
As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism
throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group
’
s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the REIT Manager.
Conclude on the appropriateness of the REIT Manager
’
s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group
’
s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor
’
s report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor
’
s report. However, future events or conditions may cause the
Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the consolidated financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the Audit Committee of the REIT Manager regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the Audit Committee of the REIT Manager with a statement that we have complied with relevant
ethical requirements regarding independence and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or
safeguards applied.
Annual Report 2023
123
From the matters communicated with the Audit Committee of the REIT Manager, we determine those matters that were of
most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor
’
s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
REPORT ON MATTERS UNDER THE RELEVANT PROVISIONS OF THE TRUST DEED AND THE RELEVANT
DISCLOSURE PROVISIONS OF APPENDIX C OF THE REIT CODE
In our opinion, the consolidated financial statements have been properly prepared, in all material respects, in accordance
with the relevant provisions of the Trust Deed and the relevant disclosure provisions of Appendix C of the REIT Code.
The engagement partner on the audit resulting in this independent auditor
’
s report is Leung Chi Ying.
Ernst & Young
Certified Public Accountants
27/F, One Taikoo Place
979 King
’
s Road
Quarry Bay, Hong Kong
27th March, 2024
Annual Report 2023
124
PERFORMANCE TABLE
As at 31st December, 2023
Year ended Year ended Year ended Year ended Year ended
Notes 31st December, 31st December, 31st December, 31st December, 31st December,
2023 2022 2021 2020 2019
Net assets attributable to Unitholders
(HK$
’
million) 13,073.9 12,807.9 12,146.9 11,930.9 14,671.1
Net asset value per Unit attributable to
Unitholders (HK$) 4.014 3.932 3.729 3.663 4.504
The highest traded price during the
year (HK$) 1 1.42 1.52 1.78 2.01 2.52
The lowest traded price during the
year (HK$) 0.54 0.86 1.28 1.11 1.72
The highest discount of the traded price to
net asset value per Unit attributable
to Unitholders 86.55% 78.13% 65.67% 69.70% 61.81%
Distribution yield per Unit 2 N/A 4.36% 6.01% 9.93% 6.14%
Notes:
1. The highest traded price during all the relevant periods was lower than the net asset value per Unit attributable to Unitholders
reported at the end of those periods. Accordingly, no premium on the traded price to net asset value per Unit attributable to
Unitholders is presented.
2. (a) This is not applicable as there is no distribution declared by the Board of Directors of the REIT Manager for the year ended
31st December, 2023.
(b) Distribution yield per Unit for the year ended 31st December, 2022 is calculated by dividing the total distributions per Unit
of HK$0.061 over the Unit closing price of HK$1.40 on the last trading day of 2022. Details of the total distributions per
Unit is set out in the section
“
Distribution Statement
”
on page 73.
Annual Report 2023
125
TRUSTEE
’
S REPORT
TO THE UNITHOLDERS OF REGAL REAL ESTATE INVESTMENT TRUST
(a Hong Kong collective investment scheme authorised under section 104 of the Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong))
We hereby confirm that, in our opinion, the Manager of Regal Real Estate Investment Trust (
“
Regal REIT
”
) has, in all
material respects, managed Regal REIT in accordance with the provisions of the Trust Deed dated 11 December 2006 (as
amended from time to time) for the period from 1 January 2023 to 31 December 2023.
DB Trustees (Hong Kong) Limited
(in its capacity as trustee of Regal REIT)
Hong Kong, 12 March 2024
Annual Report 2023
126
VALUATION REPORT
18
5701
(852) 2828 9888
(852) 2828 9899
colliers.com
Regal Portfolio Management Limited
(as the Manager of Regal Real Estate Investment Trust (
“
Regal REIT
”
))
Unit No.2001, 20/F,
68 Yee Wo Street,
Causeway Bay, Hong Kong
and
Colliers International (Hong Kong) Limited
Suite 5701
Central Plaza
18 Harbour Road
Wanchai
Hong Kong
DB Trustees (Hong Kong) Limited
(as the Trustee of Regal REIT)
Level 60,
International Commerce Centre,
1 Austin Road West,
Kowloon, Hong Kong
T: (852) 2822 0525
F: (852) 2107 6017
EA LICENCE: C-006052
28 February 2024
Dear Sir/Madam,
Re: Valuation of Regal Airport Hotel, Regal Hongkong Hotel, Regal Kowloon Hotel, Regal Oriental Hotel, Regal
Riverside Hotel, iclub Wan Chai Hotel, iclub Sheung Wan Hotel, iclub Fortress Hill Hotel and iclub To Kwa
Wan Hotel in Hong Kong (collectively the
“
Properties
”
)
Terms of Engagement
We refer to our terms of engagement requiring us to conduct a valuation of the Properties in which Regal REIT have
interests in Hong Kong, for annual reporting purpose. We confirm that we have carried out inspections, made relevant
enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you
with our opinion of the Market Values of the Properties, as at 31 December 2023.
Valuation Standards
The valuations have been carried out in accordance with
The HKIS Valuation Standards (2020 Edition)
published by The
Hong Kong Institute of Surveyors; and in compliance with the requirements contained in Chapter 5 of the
Rules Governing
the Listing of Securities
issued by The Stock Exchange of Hong Kong Limited; and Chapter 6.8 of the Code on Real Estate
Investment Trusts issued by The Securities and Futures Commission in August 2022.
Annual Report 2023
127
Valuer
’
s Interest
We hereby confirm that:
We have no present or prospective interest in the Properties and are not a related corporation of nor have a
relationship with the Manager and the Trustee.
We are authorised to practice as valuer and have the necessary expertise and experience in valuing similar types of
properties.
The valuations have been prepared on a fair and unbiased basis.
Valuation Date
The valuation date is 31 December 2023. Due to possible changes in market forces and circumstances in relation to the
Properties, the report can only be regarded as representing our opinion of the Properties
’
values as at the valuation date.
We assume that the Properties are in the same conditions on the valuation date as the inspection date.
Valuation Basis
Our valuation is based on Market Value which is defined as the estimated amount for which an asset or liability should
exchange on the valuation date between a willing buyer and a willing seller in an arm
’
s length transaction, after proper
marketing and where the parties had each acted knowledgeably, prudently and without compulsion.
Valuers
The valuation has been prepared by Stella Ho, assisted by Candy Tsang. Stella is a Member of the Royal Institution of
Chartered Surveyors (Membership No. 1178305), a Member of the Hong Kong Institute of Surveyors (Membership No.
3626) and a Registered Professional Surveyor under the Surveyors Registration Ordinance (Cap. 417) in the Hong Kong
Special Administrative Region. She is suitably qualified to carry out the valuation and has more than 20 years of experience
in the real estate field and in valuing properties of this magnitude and nature.
Candy is a Member of the Royal Institution of Chartered Surveyors (Membership no. 5605293) and an RICS Registered
Valuer. She is suitably qualified to carry out the valuation and has more than ten years
’
experience in the real estate field
and valuation of properties of this magnitude and nature.
Neither the valuers nor Colliers International (Hong Kong) Limited are aware of any pecuniary or other conflicts of interest
that would affect their ability to give an unbiased and objective opinion of the value of the Properties.
Valuation Assumptions
Our valuations have been made on the assumption that the Properties can be sold on the open market without the
benefit of deferred terms contracts, leasebacks, joint ventures, or any similar arrangements which would affect their values
although they are subject to the existing management agreements and lease agreements.
No allowances have been made in our valuations for any charges, mortgages or amounts owing neither on the Properties
nor for any expenses or taxes which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the
Properties are free from and clear of any charges, liens and encumbrances of an onerous nature likely to affect value.
Annual Report 2023
128
We have made the following assumptions:
All information on the Properties provided by the Manager is correct.
Proper ownership titles of and relevant planning approvals for the Properties have been obtained, all payable land
premiums, land-use rights fees and other relevant fees have been fully settled and the Properties can be freely
transferred, sub-let, mortgaged or otherwise disposed of.
We have been provided with the tenancy schedules, a standard Tenancy Agreement and a Licence Agreement by the
Manager. We have not examined the lease documents for each specific tenancy and our assessment is based on the
assumption that all leases are executed and are in accordance with the provisions stated in the tenancy schedules
provided to us. Moreover, we assume that the tenancies are valid, binding and enforceable.
Unless otherwise stated, we have not carried out any valuation on a redevelopment basis, nor the study of possible
alternative options.
No acquisition costs or disposal costs have been taken into account in the valuations.
The Government Leases will be renewed upon expiry on normal terms.
Valuation Approaches and Methods
We have adopted the Income Approach – Discounted Cash Flow (
“
DCF
”
) Analysis in our valuations. This approach is
defined in the International Valuation Standards as a financial modelling technique based on explicit assumptions regarding
the prospective cash flows from income-generating properties. This analysis involves projecting a series of periodic cash
flows for an income-generating property. To this projected cash flow series, an appropriate discount rate is applied to
indicate the present value of the rental income stream associated with the property.
As the Properties are held for long-term investment, we have undertaken the DCF Analysis on an annual basis over a ten-
year investment horizon which is a common market practice and a reasonable investment holding period for the Properties
based on the prevailing property market in Hong Kong. This ten-year analysis allows the stabilisation of income over such a
period and an investor or owner to assess the long-term return of the Properties taking into account capital growth.
In the case of our valuations of the Properties, the annual cash flows of the Properties are typically estimated as their gross
income less operating expenses and other outgoings. The annual gross income over the ten-year period mainly included
revenues generated from hotel rooms taking into account the projected annual occupancy rate and annual growth in daily
room rate.
The series of periodic net cash flow, along with an estimate of the reversionary or terminal value anticipated at the end of
the projection period, is then discounted by a discount rate, being a cost of capital or a rate of return used to convert a
monetary sum, payable or receivable in the future, into present value.
We have assumed that the Properties are sold at the commencement of the eleventh year of the cash flow. This is a
common market practice to derive the capital value at the end of the investment period, and the net cash flow in the
eleventh year has been capitalised by a terminal capitalisation rate to derive the capital value, which is discounted by the
discount rate into present value, at the end of the tenth year.
This analysis has then been cross-checked by the Market Approach assuming sale of the Properties in their existing state
and referring to comparable sale transactions as available in the relevant market. By analysing sale transactions that qualify
as
‘
arms-length
’
transactions, between willing buyers and sellers, relevant adjustments are made when comparing such sale
transactions against the Properties.
Annual Report 2023
129
Inspections, Investigations and Sources of Information
An external and internal inspection of the Properties, befitting this valuation, was undertaken by Stella Ho and Candy
Tsang on 24 and 25 January 2024. We have made enquiries and obtained such information we consider necessary to
undertake the valuation.
Information has been obtained from various sources including the Manager, public domain and our own databases and has
been verified as far as is reasonable. We have assumed all such information to be true and accurate for the purposes of
this valuation.
No on-site measurements have been taken to verify the correctness of site areas. We have assumed that the site areas
shown on the documents provided to us are correct.
No structural or environmental surveys have been carried out. Services and facilities have not been tested.
We have made enquiries and relevant searches at the Land Registry. However, we have not sighted the original documents
and are therefore not aware of any possible amendments that are not shown on the documents available to us.
Currency
Unless otherwise stated, all monetary figures stated in this report are in Hong Kong dollars (HKD).
Confidentiality and Non-Disclosure
This report and our valuations are for the use of the REIT Manager and the Trustee of Regal REIT and the report is for the
use only of the parties to whom it is addressed and for no other purpose. No responsibility is accepted to any third party
who may use or rely on the whole or any part of the content of these valuations.
Colliers International (Hong Kong) Limited similarly undertakes to keep all information relating to this valuation report
confidential and will not publish or refer to it without the prior written consent of the Manager.
Valuation Summary and Valuation Particulars are attached hereto and together with this covering letter form our valuation
report.
Yours sincerely,
For and on behalf of
Colliers International (Hong Kong) Limited
Stella Ho
BSSc (Hons) MSc MRICS MHKIS RPS (GP) MCIREA
Registered Real Estate Appraiser PRC
Executive Director
Valuation and Advisory Services
Annual Report 2023
130
VALUATION SUMMARY
Market Value
in existing state as at
31 December 2023
No. Property (HKD)
1 Regal Airport Hotel
9 Cheong Tat Road
Hong Kong International Airport
Chek Lap Kok
New Territories
Hong Kong
1,429,000,000
2 Regal Hongkong Hotel
88 Yee Wo Street
Causeway Bay
Hong Kong
4,322,000,000
3 Regal Kowloon Hotel
71 Mody Road
Tsim Sha Tsui
Kowloon
Hong Kong
5,953,000,000
4 Regal Oriental Hotel
30-38 Sa Po Road and
Shops 3-11 on Ground Floor including
Cockloft of Shops 5-7 and the whole of 1/F
Po Shing Court
21-25 Shek Ku Lung Road
40-42 Sa Po Road and
15-29 Carpenter Road
Kowloon City
Kowloon
Hong Kong
1,805,000,000
5 Regal Riverside Hotel
34-36 Tai Chung Kiu Road
Shatin
New Territories
Hong Kong
5,146,000,000
Annual Report 2023
131
Market Value
in existing state as at
31 December 2023
No. Property (HKD)
6 iclub Wan Chai Hotel
Shops A, B and C on G/F, Flat Roof on 3/F
Whole of 5-12/F, 15-23/F and 25-29/F
Eastern and Western Elevations of External Walls
Architectural Feature at Roof Top and Upper Roof
211 Johnston Road
Wan Chai
Hong Kong
833,000,000
7 iclub Sheung Wan Hotel
138 Bonham Strand
Sheung Wan
Hong Kong
1,579,000,000
8 iclub Fortress Hill Hotel
18 Merlin Street
North Point
Hong Kong
1,560,000,000
9 iclub To Kwa Wan Hotel
8 Ha Heung Road
Kowloon
Hong Kong
1,361,000,000
Total: 23,988,000,000
Annual Report 2023
132
Property 1
REGAL AIRPORT HOTEL
9 Cheong Tat Road
Hong Kong International Airport
Chek Lap Kok
New Territories, Hong Kong
Portion of the Remaining Portion of Chek Lap Kok Lot No. 1 and the Extension thereto
1. Property Description
Regal Airport Hotel (
“
RAH
”
) is a 14-storey (including a basement floor) High Tariff A hotel completed in 1999. There
are currently 1,171 rooms and suites after the completion of an Asset Enhancement Programme in October 2007.
RAH is connected to the passenger terminal of the Hong Kong International Airport (
“
HKIA
”
) by an air-conditioned
footbridge on the 2nd Floor near AsiaWorld Expo, a few minutes
’
walk away. The immediate locality of RAH
comprises mainly the airport
’
s support facilities, carpark, and passenger terminals.
Site Area : 10,886 sq. m.
Gross Floor Area : 71,988 sq. m.
Covered Floor Area : Approx. 83,400 sq. m.
Town Planning Zoning :
“
Commercial
”
zone under Approved Chek Lap Kok Outline Zoning
Plan No. S/I-CLK/16 dated 20 January 2023.
Hotel Guestroom Configuration
Room Type No. of Rooms Room Type No. of Rooms
Standard Room 173 Spa Deluxe Room 14
Superior Room 324 Spa Cabana Room 5
Deluxe Room 45 Spa Suite 2
Prime Deluxe Room 99 Honeymoon Suite 1
Premier Room 66 Royal Suite 11
Theme Room 6 Spa Duplex Suite 2
Cabana Room 17 Deluxe Suite 15
Family Triple Room 23 Apartment Suite 8
Family Quadruple Room 199 Theme Suite 1
Executive Club Floor Superior Room 68 Presidential Suite 1
Executive Club Floor Deluxe Room 91
Total 1,171
Notes: The room sizes range from 21 sq. m. to 318 sq. m.
Annual Report 2023
133
Food and Beverage Outlets
Seating Capacity (approx.)
Floor Name of Outlet Type of Facility
Area
(sq. m.)
No. of normal
dining seating
G/F Café Aficionado International Buffet and Asian Specialities 869 384
G/F The China Coast Bar + Grill American Steakhouse 630 230
G/F Dragon Inn Shanghainese Cuisine 359 182
G/F Airport Izakaya Japanese Cuisine 310 100
1/F Rouge Cantonese Cuisine 480 260
2/F Regala Café & Dessert Bar Desserts and Drinks 326 94
Meeting and Banquet Facilities
Seating Capacity (approx.)
No. of seating in
Floor Name of Function Room Type of Facility
No. of
Rooms
Area
(sq. m.)
Theatre/
Boardroom
Style
Banquet
Style
B/F Pre-function Area and Meeting Rooms Conference and Exhibition 13 815 783 512
1/F Ballroom Banquet/Convention 1 1,050 1,500 960
1/F Multi-purpose Function Rooms Meeting and Conference 7 572 403 252
2/F Meeting Rooms Meeting and Conference 3 100 38 N/A
9/F Meeting Room Meeting and Conference 4 234 136 N/A
Other Facilities
Other facilities include an outdoor and an indoor swimming pool, a health club with a gymnasium, massage and spa
facilities, a business centre and some retail spaces.
2. Ownership and Tenure
Lot Numbers : The Remaining Portion of Chek Lap Kok Lot No. 1 and the Extension thereto
Lease Terms : Held under New Grant No. IS7996 for a term commencing on 1 December
1995 and expiring on 30 June 2047, and has been extended for a term
commencing on 1 July 2047 and expiring on 30 August 2071
Registered Owner : Airport Authority
1
Major Encumbrances : Sub-Lease of Hotel in favour of Bauhinia Hotels Limited dated 12
August 2004, registered vide Memorial No. IS342341. The term of
the Sub-Lease commenced from 31 December 2003 until the date
occurring 25 years thereafter.
1
The Hotel is sub-leased in favour of Bauhinia Hotels Limited for a term commencing from 31 December 2003 until the date
occurring 25 years thereafter.
Annual Report 2023
134
Supplemental Lease (To Sub-Lease of Hotel Memorial No. IS342341) in
favour of Bauhinia Hotels Limited dated 8 November 2006, registered
vide Memorial No. 06112400700018.
Lease Agreement (No. 1 for Regal Airport Hotel) in favour of Favour
Link International Limited dated 16 March 2007, registered vide
Memorial No. 07041300910065. (Remarks: By Bauhinia Hotels Limited
from 30th Day of March 2007 to 31st Day of December 2015).
First Supplemental Agreement amending Lease Agreement No.
1 for Regal Airport Hotel in favour of Favour Link International
Limited dated 12 February 2010, registered vide Memorial No.
10052602510099. (Remarks: By Bauhinia Hotels Limited).
G.N. 2762 dated 26.4.2012 under Roads (works, use and
compensation) Ordinance (Chapter 370) dated 26 April 2012,
registered vide Memorial No. 12051002590012. (Remarks: with plans
No. ISM1731A-1 (re portion), re: PWP Item No. 834th Hong Kong-
Zhuhai-Macao Bridge Hong Kong boundary crossing facilities).
G.N. 2764 dated 26.4.2012 under Roads (works, use and
compensation) Ordinance (Chapter 370) dated 26 April 2012,
registered vide Memorial No. 12051002590024. (Remarks: with
plan Nos. ISM1734B-I and ISM1732B-I (re portion) for creation of
easements and other permanent rights and rights of temporary
occupation of land. Re: PWP item No. 834th Hong Kong-Zhuhai-
Macao Bridge Hong Kong boundary crossing facilities).
G.N. 2761 dated 26.4.2012 under Roads (works, use and
compensation) Ordinance (Chapter 370) dated 26 April 2012,
registered vide Memorial No. 12051002590037. (Remarks: with plans
No. ISM1741A (re portion), re: PWP item No. 844th Hong Kong-
Zhuhai-Macao Bridge Hong Kong Link Road).
G.N. 2763 dated 26.4.2012 under Roads (works, use and
compensation) Ordinance (Chapter 370) dated 26 April 2012,
registered vide Memorial No. 12051002590049. (Remarks: with plans
nos. ISM1742A and ISM1757A for creation of easements and other
permanent rights and rights of temporary occupation of land. Re: PWP
item No. 844th Hong Kong-Zhuhai-Macao Bridge Hong Kong Link
Road).
Annual Report 2023
135
G.N. 6022 dated 10.10.2013 under Roads (works, use and
compensation) Ordinance (Chapter 370) with plan dated 10 October
2013, registered vide Memorial No. 13102500820010. (Remarks:
re portion, re: PWP Item No. 834th Hong Kong-Zhuhai-Macao
Bridge Hong Kong Boundary Crossing Facilities Creation of Rights of
Temporary Occupation of Land).
Consent Letter dated 19 November 2013, registered vide Memorial
No. 13120201030063. (Remarks: from District Lands Officer, Islands).
Second Supplemental Deed amending Lease Agreement No. 1
for Regal Airport Hotel in favour of Favour Link International
Limited dated 12 March 2015, registered vide Memorial No.
15042302380228. (Remarks: By Bauhinia Hotels Limited).
Consent Letter with plan date 6 November 2015, registered vide
Memorial No. 15112001200210. (Remarks: from District Lands
Officer, Islands).
Consent Letter with Plan dated 23 February 2017, registered vide
Memorial No. 17022300740027. (Remarks: from District Lands
Officer, Islands).
Third Supplemental Deed amending Lease Agreement No.1 for Regal
Airport Hotel in favour of Favour Link International Limited dated 20
December 2019, registered vide Memorial No. 20041601820093.
Particulars and Conditions of Extension of Lease Term dated 31
August 2021, registered vide Memorial No. 21092102780018
(Remarks: For a term of years commencing on the 1st day of July
2047 and Expiring on the 30th day of August 2071).
Mortgage and Assignment of Rights in favour of Hang Seng Bank
Limited dated 10 September 2021, registered vide Memorial No.
21092902710345. (Remarks: by Bauhinia Hotels Limited).
Annual Report 2023
136
3. Hotel Operation
Hotel Performance in 2023
Occupancy Rate : 49%
Average Room Rate : HKD1,191
Lease Agreement
Lessor : Bauhinia Hotels Limited
Lessee : Favour Link International Limited
Term of Lease Agreement : Commencing from 30 March 2007 (the
“
Listing Date
”
) and expiring on 27
December 2028 (both days inclusive).
Rental
From 2011 to 2028, the Market Rent
2
to be determined (the
“
Market Rental Package Determination
”
) in accordance
with the Lease Agreement, subject to a Floor Rent of HKD175,000,000 per annum out of a total Floor Rent of
HKD400,000,000 for all five Initial Hotels
3
.
According to the 2023 and 2024 Market Rental Package Determinations, Base Rent for RAH for the fiscal years of
2023 and 2024 are both HKD175,000,000; and the Variable Rent is 50% of the excess of the aggregate NPI of the
five Initial Hotels over the aggregate Base Rent of the Initial Hotels for the respective years, which portion shall be
the proportion by which the excess NPI of this hotel bears to the aggregate excess NPI of all the Initial Hotels.
Hotel Management Agreement (
“
HMA
”
)
Hotel Manager : Regal Hotels International Limited
Term of HMA : Twenty (20) years from the Listing Date
Base Fee : One percent (1%) of Gross Revenue
4
(for so long as the Lease Agreement is
in subsistence); or
Two percent (2%) of Gross Revenue (for other cases during the Operating
Term)
Incentive Fee : One percent (1%) of the excess of the Adjusted GOP
5
over the Base Fee and
the Fixed Charges (for so long as the Lease Agreement is in subsistence); or
Five percent (5%) of the excess of the Adjusted GOP over the Base Fee and
the Fixed Charges (for other cases during the Operating Term)
2
According to the Lease Agreement, the Market Rent to be determined includes the Base Rent, Variable Rent and the Lessee
’
s
contribution to the FF&E Reserve.
3
Namely Regal Airport Hotel, Regal Hongkong Hotel, Regal Kowloon Hotel, Regal Oriental Hotel and Regal Riverside Hotel.
4
According to the Hotel Management Agreement,
“
Gross Revenue
”
means all revenue derived from the Hotel.
5
According to the Hotel Management Agreement,
“
Adjusted GOP
”
means the aggregate of Gross Operating Profit and Net Rental
Income.
Annual Report 2023
137
4. Retail Tenancy/Licence Schedules
Retail
6
Retail Area (Lettable) : Approx. 38,030 sq. ft. (3,533 sq. m.)
Occupied Area (Lettable) : Approx. 19,878 sq. ft. (1,847 sq. m.)
Vacant Area (Lettable) : Approx. 18,152 sq. ft. (1,686 sq. m.)
Occupancy Rate : 52.3%
Monthly Base Rent : HKD1,234,148 (All tenancies except two are exclusive of rates, management
fees and air-conditioning charges; the remaining tenancies are inclusive of
management fees and air-conditioning charges, but exclusive of rates.)
Tenancy Expiry Profile
Year
Lettable
Area
(sq. ft.) % of Total
Monthly
Rent
(HKD) % of Total
No. of
Tenancy % of Total
Year Ending 2023 4,662 23.5% 186,480 15.1% 1 10%
Year Ending 2024 14,035 70.6% 1,009,582 81.8% 8 80%
Year Ending 2026 1,181 6.0% 38,086 3.1% 1 10%
Total 19,878 100%
(rounded)
1,234,148 100%
(rounded)
10 100%
(rounded)
Tenancy Duration Profile
Tenancy Duration
Lettable
Area
(sq. ft.) % of Total
Monthly
Rent
(HKD) % of Total
No. of
Tenancy % of Total
Up to 1 year 5,699 28.7% 549,600 44.5% 4 40%
More than 1 year and
up to 2 years
4,662 23.5% 186,480 15.1% 1 10%
More than 2 years and
up to 3 years
9,517 47.9% 498,068 40.4% 5 50%
Total 19,878 100%
(rounded)
1,234,148 100%
(rounded)
10 100%
(rounded)
6
The areas quoted exclude spaces which are used by RAH.
Annual Report 2023
138
Latest Expiry Date : 10 March 2026
Range of Rent-free Period : 0 to 10.5 months
Option to Renew : One of the tenancies have an option to renew for a further term of three
years.
Summary of Terms : The Landlord
7
is responsible for payment of Government Rent and the
structural and external repairs while the Tenant is responsible for the
internal repairs of the occupied area.
Licences for Mobile Phone Base Stations, Antennae, Signage Spaces and Poster Stand(s)
Number of Licences : 4
Monthly Licence Fee : HKD212,520 per month
Latest Expiry Date : 14 February 2025
5. Estimated Net Property Yield
8
12.2%
6. Market Value in existing state as at 31 December 2023
HKD1,429,000,000 (Hong Kong Dollars One Billion Four Hundred and Twenty-Nine Million)
7
All tenancy agreements/licences are entered into by Favour Link International Ltd as Landlord.
8
The Estimated Net Property Yield of RAH is derived from the rent receivable in 2023 divided by the Market Value.
Annual Report 2023
139
Property 2
REGAL HONGKONG HOTEL
88 Yee Wo Street
Causeway Bay, Hong Kong
Sections C, D, E, F, G, H, I, J, L, M and the Remaining Portion of Inland Lot No. 1408
1. Property Description
Regal Hongkong Hotel (
“
RHK
”
) is a 38-storey (including 4 basement floors) High Tariff A hotel completed in 1993,
providing 481 rooms and suites. Most rooms command views of Victoria Park. RHK also comprises ancillary hotel
spaces on the portions of Ground Floor to 3rd Floor of 68 Yee Wo Street
9
.
RHK is located in Causeway Bay, one of the major shopping areas in Hong Kong, where the immediate developments
are predominately for retail and office uses.
Site Area : 1,176 sq. m.
Gross Floor Area : 25,090 sq. m.
10
Covered Floor Area : Approx. 32,000 sq. m.
11
Town Planning Zoning :
“
Commercial
”
zone under Approved Causeway Bay Outline Zoning Plan No.
S/H6/17 dated 18 January 2019.
Hotel Guestroom Configuration
Room Type No. of Rooms Room Type No. of Rooms
Standard Room 34 Executive Club Floor Deluxe Room 36
Superior Room 114 Executive Suite 20
Deluxe Room 101 Deluxe Suite 8
Prime Deluxe Room 18 Presidential Suite 1
Premier Room 6 Imperial Suite 1
Family Triple Room 115 Chairman Suite 1
Family Quadruple Room 12 Regal Royale Suite 2
Executive Club Floor Superior Room 12
Total 481
Notes: The room sizes range from 22 sq. m.to 154 sq. m.
9
The owner of RHK has also rented some spaces on G/F to 3/F of 68 Yee Wo Street. The first tenancy is related to hotel ancillary use
of 10,510 sq. ft. (976 sq. m.) lettable area. The current monthly rent is HKD453,871 with expiration on 1 March 2025. The second
tenancy is related to Shops No. 301 to 304 on the Third Floor with a lettable area of 3,437 sq. ft. (319 sq. m.). The term is three
years commencing from 16 January 2022 with a monthly rent of HKD92,346.
10
Area excludes the rented space
11
Area excludes the rented space
Annual Report 2023
140
Food and Beverage Outlets
Seating Capacity (approx.)
Floor Name of Outlet Type of Facility
Area
(sq. m.)
No. of normal
dining seating
G/F Tiffany Lounge Snacks and Drinks 137 50
1/F Café Rivoli International Cuisine & Buffet 376 200
3/F Regal Palace Cantonese Cuisine 752 500
31/F Alto 88 Italian Cuisine 214 120
Meeting and Banquet Facilities
Seating Capacity (approx.)
No. of seating in
Floor Name of Function Room Type of Facility
No. of
Rooms
Area
(sq. m.)
Theatre/
Boardroom
Style
Banquet
Style
2/B Multi-purpose Function Rooms Banquet/Convention 5 343 260 216
1/B Ballroom Banquet/Convention 1 239 239 228
1/B Multi-purpose Function Rooms Banquet/Convention 3 194 180 132
3/F Meeting Rooms Banquet/Convention 6 336 273 228
Other Facilities
Other facilities include a gymnasium and an outdoor swimming pool.
2. Ownership and Tenure
Lease Terms : The Inland Lot No. 1408 is held under a Government Lease for a term of
999 years commencing from 25 December 1884.
Registered Owner : Cityability Limited
Major Encumbrances : Deed of Restrictive Covenant dated 13 May 1992, registered vide
Memorial No. UB5287070.
Deed of Covenant and Grant of Right of Way and Easements and
Management Agreement dated 13 May 1992, registered vide
Memorial No. UB5287071.
Statutory Declaration as to Loss of Title Deeds dated 21 March 2000,
registered vide Memorial No. UB8033163.
Lease Agreement (No. 2 for Regal Hongkong Hotel) in favour of
Favour Link International Limited dated 16 March 2007, registered
vide Memorial No. 07041300910073.
Annual Report 2023
141
First Supplemental Agreement amending Lease Agreement No. 2
for Regal Hongkong Hotel in favour of Favour Link International
Limited dated 12 February 2010, registered vide Memorial No.
10052602510109.
Second Supplemental Deed amending Lease Agreement No. 2
for Regal Hongkong Hotel in favour of Favour Link International
Limited dated 12 March 2015, registered vide Memorial No.
15042302380234.
Third Supplemental Deed amending Lease Agreement No.2 for Regal
Hongkong Hotel in favour of Favour Link International Limited dated
20 December 2019, registered vide Memorial No. 20041601820103.
Cityability Debenture in favour of Hang Seng Bank Limited dated 10
September 2021, registered vide Memorial No. 21092902710364.
3. Hotel Operation
Hotel Performance in 2023
Occupancy Rate : 76%
Average Room Rate : HKD1,067
Lease Agreement
Lessor : Cityability Limited
Lessee : Favour Link International Limited
Term of Lease Agreement : Commencing from the Listing Date and expiring on 31 December 2030
(both days inclusive)
Rental
From 2011 to 2030, the Market Rent
12
to be determined (the
“
Market Rental Package Determination
”
) in accordance
with the Lease Agreement, subject to a Floor Rent of HKD60,000,000 per annum out of a total Floor Rent of
HKD400,000,000 for all five Initial Hotels
13
.
According to the 2023 and 2024 Market Rental Package Determinations, Base Rent for RHK for the fiscal years of
2023 and 2024 are HKD66,000,000 and HKD90,000,000 respectively; and the Variable Rent is 50% of the excess of
the aggregate NPI of the five Initial Hotels over the aggregate Base Rent of the Initial Hotels for the respective years,
which portion shall be the proportion by which the excess NPI of this hotel bears to the aggregate excess NPI of all
the Initial Hotels.
12
According to the Lease Agreement, the Market Rent to be determined includes the Base Rent, Variable Rent and the Lessee
’
s
contribution to the FF&E Reserve.
13
Namely Regal Airport Hotel, Regal Hongkong Hotel, Regal Kowloon Hotel, Regal Oriental Hotel and Regal Riverside Hotel.
Annual Report 2023
142
Hotel Management Agreement (
“
HMA
”
)
Hotel Manager : Regal Hotels International Limited
Term of HMA : Twenty (20) years from the Listing Date
Base Fee : One percent (1%) of Gross Revenue
14
(for so long as the Lease Agreement
is in subsistence); or
Two percent (2%) of Gross Revenue (for other cases during the Operating
Term)
Incentive Fee : One percent (1%) of the excess of the Adjusted GOP
15
over the Base
Fee and the Fixed Charges (for so long as the Lease Agreement is in
subsistence); or
Five percent (5%) of the excess of the Adjusted GOP over the Base Fee and
the Fixed Charges (for other cases during the Operating Term)
4. Licence Schedules
Licences for Installation of Mobile Radio Equipment and Integrated Radio System (
“
IRS
”
)
Number of Licences : 2
Monthly Licence Fee : HKD150,300 per month
Latest Expiry Date : 30 April 2026
5. Estimated Net Property Yield
16
1.5%
6. Market Value in existing state as at 31 December 2023
HKD4,322,000,000 (Hong Kong Dollars Four Billion Three Hundred and Twenty-Two Million)
14
According to the Hotel Management Agreement,
“
Gross Revenue
”
means all revenue derived from the Hotel.
15
According to the Hotel Management Agreement,
“
Adjusted GOP
”
means the aggregate of Gross Operating Profit and Net Rental
Income.
16
The Estimated Net Property Yield of RHK is derived from the rent receivable in 2023 divided by the Market Value.
Annual Report 2023
143
Property 3
REGAL KOWLOON HOTEL
71 Mody Road
Tsim Sha Tsui, Kowloon, Hong Kong
Kowloon Inland Lot No. 10474
1. Property Description
Regal Kowloon Hotel (
“
RKH
”
) is a 20-storey (including 4 basement floors) High Tariff A hotel completed in 1982.
Most of the rooms command an open view of Centenary Garden. There are retail shops and restaurants from the
Ground Floor to the 2nd Floor and 1st Basement to 3rd Basement.
RKH is located at Tsim Sha Tsui, a renowned commercial and tourist area. The immediate locality is predominately
occupied by hotel, retail and office developments.
Site Area : 2,560 sq. m.
Gross Floor Area : 31,746 sq. m.
Covered Floor Area : Approx. 43,500 sq. m.
Town Planning Zoning :
“
Commercial
”
zone under Approved Tsim Sha Tsui Outline Zoning Plan No.
S/K1/28 dated 13 December 2013.
Hotel Guestroom Configuration
Room Type No. of Rooms Room Type No. of Rooms
Standard Room 41 Executive Club Floor Deluxe Room 147
Superior Room 39 Executive Club Floor Premier Room 29
Deluxe Room 27 Executive Suite 12
Prime Deluxe Room 36 Royal Suite 10
Premier Room 144 Deluxe Suite 16
Executive Club Floor Superior Room 98 Presidential Suite 1
Total 600
Notes: The room sizes range from 19 sq. m. to 140 sq. m.
Annual Report 2023
144
Food and Beverage Outlets
Seating Capacity (approx.)
Floor Name of Outlet Type of Facility
Area
(sq. m.)
No. of normal
dining seating
1/B Café Allegro International Seafood Buffets 350 186
G/F V Bar & Lounge
17
Snacks and Cocktails 89 56
1/F Mezzo American Italian Cuisine 199 90
2/F Regal Court Chinese Cuisine 673 266
Meeting and Banquet Facilities
Seating Capacity (approx.)
No. of seating in
Floor Name of Function Room Type of Facility
No. of
Rooms
Area
(sq. m.)
Theatre/
Boardroom
Style
Banquet
Style
2/F Multi-purpose Function Rooms Banquet/Convention 6 331 260 240
3/F Ballroom Banquet/Convention 1 353 353 360
3/F Multi-purpose Function Rooms Banquet/Convention 6 665 360 336
Other Facilities
Other facilities include a fitness room and a shopping arcade.
2. Ownership and Tenure
Lease Terms : The Kowloon Inland Lot No. 10474 is held by the Government under
Conditions of Sale No. 10983 for a term of 75 years commencing from 28
December 1976 and renewable for a further term of 75 years.
Registered Owner : Ricobem Limited
17
Additional outdoor seating areas are provided on the G/F.
Annual Report 2023
145
Major Encumbrances : Letter of Compliance from District Lands Office Kowloon West Kowloon
Government Offices to Paliburg Project Management Limited dated 6
July 1982, registered vide Memorial No. UB3990407.
Statutory Declaration as to Loss of Title Deeds dated 21 March 2000,
registered vide Memorial No. UB8033162.
Lease Agreement (No. 3 for Regal Kowloon Hotel) in favour of
Favour Link International Limited dated 16 March 2007, registered
vide Memorial No. 07041300910082. (Remarks: For the period
commencing from 30 March 2007 to 31 December 2015).
First Supplemental Agreement amending Lease Agreement No.
3 for Regal Kowloon Hotel in favour of Favour Link International
Limited dated 12 February 2010, registered vide Memorial No.
10052602510128.
Second Supplemental Deed amending Lease Agreement No. 3
for Regal Kowloon Hotel in favour of Favour Link International
Limited dated 12 March 2015, registered vide Memorial No.
15042302380241.
Third Supplemental Deed amending Lease Agreement No.3 for Regal
Kowloon Hotel in favour of Favour Link International Limited dated 20
December 2019, registered vide Memorial No. 20041601820111.
Debenture and Mortgage in favour of Industrial and Commercial Bank
of China (Asia) Limited dated 30 June 2022, registered vide Memorial
No. 22070702330270.
Assignment of Rentals and Receivables in favour of Industrial and
Commercial Bank of China (Asia) Limited dated 30 June 2022,
registered vide Memorial No. 22070702330282.
Annual Report 2023
146
3. Hotel Operation
Hotel Performance in 2023
Occupancy Rate : 82%
Average Room Rate : HKD946
Lease Agreement
Lessor : Ricobem Limited
Lessee : Favour Link International Limited
Term of Lease Agreement : Commencing from the Listing Date and expiring on 31 December 2030
(both days inclusive).
Rental
From 2011 to 2030, the Market Rent
18
to be determined (the
“
Market Rental Package Determination
”
) in accordance
with the Lease Agreement, subject to a Floor Rent of HKD65,000,000 per annum out of a total Floor Rent of
HKD400,000,000 for all five Initial Hotels
19
.
According to the 2023 and 2024 Market Rental Package Determinations, Base Rent for RKH for the fiscal years of
2023 and 2024 are HKD99,000,000 and HKD116,000,000 respectively; and the Variable Rent is 50% of the excess of
the aggregate NPI of the five Initial Hotels over the aggregate Base Rent of the Initial Hotels for the respective years,
which portion shall be the proportion by which the excess NPI of this hotel bears to the aggregate excess NPI of all
the Initial Hotels.
Hotel Management Agreement (
“
HMA
”
)
Hotel Manager : Regal Hotels International Limited
Term of HMA : Twenty (20) years from the Listing Date
Base Fee : One percent (1%) of Gross Revenue
20
(for so long as the Lease Agreement is in
subsistence); or
Two percent (2%) of Gross Revenue (for other cases during the Operating Term)
Incentive Fee : One percent (1%) of the excess of the Adjusted GOP
21
over the Base Fee and the Fixed
Charges (for so long as the Lease Agreement is in subsistence); or
Five percent (5%) of the excess of the Adjusted GOP over the Base Fee and the Fixed
Charges (for other cases during the Operating Term)
18
According to the Lease Agreement, the Market Rent to be determined includes the Base Rent, Variable Rent and the Lessee
’
s
contribution to the FF&E Reserve.
19
Namely Regal Airport Hotel, Regal Hongkong Hotel, Regal Kowloon Hotel, Regal Oriental Hotel and Regal Riverside Hotel.
20
According to the Hotel Management Agreement,
“
Gross Revenue
”
means all revenue derived from the Hotel.
21
According to the Hotel Management Agreement,
“
Adjusted GOP
”
means the aggregate of Gross Operating Profit and Net Rental
Income.
Annual Report 2023
147
4. Retail Tenancy/Licence Schedules
Retail
22
Retail Area (Lettable) : Approx. 42,383 sq. ft. (3,938 sq. m.)
Occupied Area (Lettable) : Approx. 27,187 sq. ft. (2,526 sq. m.)
Vacant Area (Lettable) : Approx. 15,196 sq. ft. (1,412 sq. m.)
Occupancy Rate : 64.1%
Monthly Base Rent : HKD1,243,972 (Three of the tenancies are exclusive of rates but inclusive of
management fees and air-conditioning charges; the remaining tenancies are
exclusive of management fees, air-conditioning charges and rates.)
Tenancy Expiry Profile
Year
Lettable
Area
(sq. ft.) % of Total
Monthly
Rent
(HKD) % of Total
No. of
Tenancy % of Total
Year Ending 2024 3,104 11.4% 226,589 18.2% 4 33.3%
Year Ending 2025 4,548 16.7% 239,540 19.3% 2 16.7%
Year Ending 2026 19,535 71.9% 777,843 62.5% 6 50.0%
Total 27,187 100%
(rounded)
1,243,972 100%
(rounded)
12 100%
(rounded)
Tenancy Duration Profile
Tenancy Duration
Lettable
Area
(sq. ft.) % of Total
Monthly
Rent
(HKD) % of Total
No. of
Tenancy % of Total
Up to 1 year 3,104 11.4% 226,589 18.2% 4 33.3%
More than 1 year
and up to 2 years
4,548 16.7% 239,540 19.3% 2 16.7%
More than 2 years
and up to 3 years
19,363 71.2% 774,343 62.2% 5 41.7%
More than 3 years
and up to 4 years
172 0.6% 3,500 0.3% 1 8.3%
Total 27,187 100%
(rounded)
1,243,972 100%
(rounded)
12 100%
(rounded)
22
The areas quoted exclude spaces which are used by RKH.
Annual Report 2023
148
Latest Expiry Date : 16 August 2026
Range of Rent-free Period : 0 to 5 months
Summary of Terms : The Landlord
23
is responsible for payment of Government Rent and the structural and
external repairs while the Tenant is responsible for the internal repairs of
the occupied area.
Licences for Mobile Phone Base Stations, Antennae, Signage Spaces and Poster Stand(s)
Number of Licences : 6
Monthly Licence Fee : HKD146,642 per month
Latest Expiry Date : 30 November 2026
5. Estimated Net Property Yield
24
1.7%
6. Market Value in existing state as at 31 December 2023
HKD5,953,000,000 (Hong Kong Dollars Five Billion Nine Hundred and Fifty-Three Million)
23
All tenancy agreements/licences are entered into by Favour Link International Ltd as Landlord.
24
The Estimated Net Property Yield of RKH is derived from the rent receivable in 2023 divided by the Market Value.
Annual Report 2023
149
Property 4
REGAL ORIENTAL HOTEL
30-38 Sa Po Road and
Shops 3-11 on G/F including Cockloft of Shops 5-7 and the Whole of 1/F Floor
Po Sing Court, 21-25 Shek Ku Lung Road, 40-42 Sa Po Road and 15-29 Carpenter Road
Kowloon City, Kowloon, Hong Kong
New Kowloon Inland Lot No. 5754 and 41/180th undivided shares of and in New Kowloon
Inland Lot No. 4917
1. Property Description
Regal Oriental Hotel (
“
ROH
”
) is a 17-storey (including two basement floors) High Tariff B hotel completed in 1982.
The hotel currently comprises 494 guestrooms and suites after the completion of the asset enhancement programme
in 2007 and the conversion projects in 2013.
ROH also comprises nine shop units on the Ground Floor (with three units that have cocklofts), and the 1st Floor in
an adjacent 14-storey building (
“
Po Sing Court
”
) which was completed in 1967. The 1st Floor of Po Sing Court is for
back-of-house uses.
ROH is located in Kowloon City and faces the former Hong Kong International Airport at Kai Tak Area, where a
complex development project with a mix of community, housing, business and tourism uses is under construction.
Site Area : New Kowloon Inland Lot No. 5754 (Regal Oriental Hotel) – 1,797 sq. m.
New Kowloon Inland Lot No. 4917 (Po Sing Court) – 741 sq. m.
Gross Floor Area : 22,601 sq. m.
Covered Floor Area : Approx. 27,300 sq. m.
Town Planning Zoning : ROH falls within
“
Commercial
”
zone and Po Sing Court falls within
“
Residential (Group A) 2
”
zone under Approved Ma Tau Kok Outline Zoning
Plan No. S/K10/30 dated 8 September 2023.
Hotel Guestroom Configuration
Room Type No. of Rooms Room Type No. of Rooms
Standard Room 55 Family Quadruple Room 32
Superior Room 114 Executive Club Floor Superior Room 55
Deluxe Room 22 Executive Club Floor Deluxe Room 45
Prime Deluxe Room 71 Executive Suite 14
Premier Room 23 Deluxe Suite 10
Family Triple Room 52 Presidential Suite 1
Total 494
Notes: The room sizes range from 12 sq. m. to 105 sq. m.
Annual Report 2023
150
Food and Beverage Outlets
Seating Capacity (approx.)
Floor Name of Outlet Type of Facility
Area
(sq. m.)
No. of normal
dining seating
1/B Café Neo International Cuisine & Buffet 536 298
G/F The China Coast
Pub + Restaurant
25
Pub & Restaurant 155 72
G/F Avanti Pizzeria Italian Cuisine 185 90
G/F Regal Patisserie Cake & Dessert 29 20
2/F Regal Terrace Cantonese Cuisine 427 300
Meeting and Banquet Facilities
Seating Capacity (approx.)
No. of seating in
Floor Name of Function Room Type of Facility
No. of
Rooms
Area
(sq. m.)
Theatre/
Boardroom
Style
Banquet
Style
1/F Ballroom Banquet/Convention 1 345 250 300
1/F Multi-purpose Function Rooms Banquet/Convention 7 302 294 204
Other Facilities
Other facilities include a fitness room and retail spaces.
2. Ownership and Tenure
Lease Terms : New Kowloon Inland Lot No. 5754 is held by the Government under
Conditions of Sale No. 11240 for a term of 99 years less the last three days
commencing from 1 July 1898 and has been statutorily extended to 30 June
2047.
New Kowloon Inland Lot No. 4917 is held by the Government under
Conditions of Sale No. 8785 for a term of 99 years less the last three days
commencing from 1 July 1898 and has been statutorily extended to 30 June
2047.
Registered Owner : Gala Hotels Limited
25
Additional outdoor seating areas are provided on the G/F.
Annual Report 2023
151
Major Encumbrances : New Kowloon Inland Lot No. 5754 (Regal Oriental Hotel)
Deed of Grant of Easement with Plan dated 23 June 1981, registered
vide Memorial No. UB2111189.
Modification Letter dated 26 August 1981, registered vide Memorial
No. UB2144106.
Letter of Compliance from District Lands Office Kowloon West to
Paliburg Project Management Limited dated 27 July 1982, registered
vide Memorial No. UB3990406.
Statutory Declaration as to Loss of Title Deeds dated 21 March 2000,
registered vide Memorial No. UB8033164.
Lease Agreement (No. 4 for Regal Oriental Hotel) in favour of
Favour Link International Limited dated 16 March 2007, registered
vide Memorial No. 07041300910095. (Remarks: For the period
commencing from 30 March 2007 to 31 December 2015)
First Supplemental Agreement amending Lease Agreement No.
4 for Regal Oriental Hotel in favour of Favour Link International
Limited dated 12 February 2010, registered vide Memorial No.
10052602510111.
Second Supplemental Deed amending Lease Agreement No. 4
for Regal Oriental Hotel in favour of Favour Link International
Limited dated 12 March 2015, registered vide Memorial No.
15042302380254.
Third Supplemental Deed amending Lease Agreement No. 4 for Regal
Oriental Hotel in favour of Favour Link International Limited dated 20
December 2019, registered vide Memorial No. 20041601820121.
Gala Debenture in favour of Hang Seng Bank Limited dated 10
September 2021, registered vide Memorial No. 21092902710383.
New Kowloon Inland Lot No. 4917 (Shops 3-11 including Cocklofts of Shops
5, 6, 7 on Ground Floor and Whole of the First Floor of Po Sing Court)
Management Agreement in favour of The Hong Kong Building and
Loan Agency Limited (Agency) and National Investment Company
Limited (Manager) dated 28 November 1967, registered vide Memorial
No. UB604982.
Deed of Mutual Covenant dated 12 December 1967, registered vide
Memorial No. UB607737.
Annual Report 2023
152
Lease Agreement (No. 4 for Regal Oriental Hotel) in favour of
Favour Link International Limited dated 16 March 2007, registered
vide Memorial No. 07041300910095. (Remarks: For the period
commencing from 30 March 2007 to 31 December 2015)
First Supplemental Agreement amending Lease Agreement No.
4 for Regal Oriental Hotel in favour of Favour Link International
Limited dated 12 February 2010, registered vide Memorial No.
10052602510111.
Second Supplemental Deed amending Lease Agreement No. 4
for Regal Oriental Hotel in favour of Favour Link International
Limited dated 12 March 2015, registered vide Memorial No.
15042302380254.
Order No.
“
UBCSN/05-29/0001/12
”
under S.24(1) of the Buildings
Ordinance with plans dated 14 December 2016, registered vide
Memorial No. 17041302060283. (Remarks: By the Building Authority
Re: Common Part(s) only)
Third Supplemental Deed amending Lease Agreement No. 4 for Regal
Oriental Hotel in favour of Favour Link International Limited dated 20
December 2019, registered vide Memorial No. 20041601820121.
Order No.
“
D00133/K/20/TE
”
by the Building Authority under Section
26 of the Buildings Ordinance dated 3 September 2020, registered
vide Memorial No. 20100702240477. (Remarks: for common areas
(including common staircase) of the building)
Gala Debenture in favour of Hang Seng Bank Limited dated 10
September 2021, registered vide Memorial No. 21092902710383.
Order No.
“
DR00792/K/22
”
by the Building Authority under S.28(3)
of the Buildings Ordinance dated 7 October 2022, registered vide
Memorial No. 22121401110015. (Remarks: for common part(s) only)
Order No.
“
CCSN/TC/017984/12/K
”
under S.24(1) of the Buildings
Ordinance with Plans dated 24 October 2023, registered vide
Memorial No. 23122900650075. (Remarks: by the Building Authority
for common part(s) only)
Annual Report 2023
153
3. Hotel Operation
Hotel Performance in 2023
Occupancy Rate : 66%
Average Room Rate : HKD595
Lease Agreement
Lessor : Gala Hotels Limited
Lessee : Favour Link International Limited
Term of Lease Agreement : Commencing from the Listing Date and expiring on 31 December 2030
(both days inclusive).
Rental
From 2011 to 2030, the Market Rent
26
to be determined (the
“
Market Rental Package Determination
”
) in accordance
with the Lease Agreement, subject to a Floor Rent of HKD30,000,000 per annum out of a total Floor Rent of
HKD400,000,000 for all five Initial Hotels
27
.
According to the 2023 and 2024 Market Rental Package Determinations, Base Rent for ROH for the fiscal years of
2023 and 2024 are both HKD37,000,000; and the Variable Rent is 50% of the excess of the aggregate NPI of the
five Initial Hotels over the aggregate Base Rent of the Initial Hotels for the respective years, which portion shall be
the proportion by which the excess NPI of this hotel bears to the aggregate excess NPI of all the Initial Hotels.
Hotel Management Agreement (
“
HMA
”
)
Hotel Manager : Regal Hotels International Limited
Term of HMA : Twenty (20) years from the Listing Date
Base Fee : One percent (1%) of Gross Revenue
28
(for so long as the Lease Agreement
is in subsistence); or
Two percent (2%) of Gross Revenue (for other cases during the Operating
Term)
Incentive Fee : One percent (1%) of the excess of the Adjusted GOP
29
over the Base
Fee and the Fixed Charges (for so long as the Lease Agreement is in
subsistence); or
Five percent (5%) of the excess of the Adjusted GOP over the Base Fee and
the Fixed Charges (for other cases during the Operating Term)
26
According to the Lease Agreement, the Market Rent to be determined includes the Base Rent, Variable Rent and the Lessee
’
s
contribution to the FF&E Reserve.
27
Namely Regal Airport Hotel, Regal Hongkong Hotel, Regal Kowloon Hotel, Regal Oriental Hotel and Regal Riverside Hotel.
28
According to the Hotel Management Agreement,
“
Gross Revenue
”
means all revenue derived from the Hotel.
29
According to the Hotel Management Agreement,
“
Adjusted GOP
”
means the aggregate of Gross Operating Profit and Net Rental
Income.
Annual Report 2023
154
30
The areas quoted exclude spaces which are used by ROH.
4. Retail Tenancy/Licence Schedules
Retail
30
Retail Area (Lettable) : ROH - Approx. 12,263 sq. ft. (1,139 sq. m.)
Po Sing Court – Approx. 9,337 sq. ft. (867 sq. m.)
Occupied Area (Lettable) : ROH – Approx. 0 sq. ft. (0 sq. m.)
Po Sing Court – Approx. 2,927 sq. ft. (272 sq. m.)
Vacant Area (Lettable) : ROH - Approx. 12,263 sq. ft. (1,139 sq. m.)
Po Sing Court – Approx. 6,410 sq. ft. (596 sq. m.)
Occupancy Rate : ROH – 0%
Po Sing Court – 31.3%
Monthly Base Rent : ROH - HKD0
Po Sing Court - HKD88,000 (All tenancies are exclusive of rates,
management fees and air-conditioning charges)
ROH
Latest Expiry Date : N/A
Range of Rent-free Period : N/A
Option to Renew : N/A
Summary of Terms : N/A
Po Sing Court
Tenancy Expiry Profile
Year
Lettable Area
(sq. ft.) % of Total
Monthly Rent
(HKD) % of Total
No. of
Tenancy % of Total
Year Ending 2024 2,927 100% 88,000 100% 2 100%
Total 2,927 100%
(rounded)
88,000 100%
(rounded)
2 100%
(rounded)
Annual Report 2023
155
Tenancy Duration Profile
Tenancy Duration
Lettable Area
(sq. ft.) % of Total
Monthly Rent
(HKD) % of Total
No. of
Tenancy % of Total
Up to 1 year 1,407 48.1% 18,000 20.5% 1 50%
More than 2 years and
up to 3 years
1,520 51.9% 70,000 79.5% 1 50%
Total 2,927 100%
(rounded)
88,000 100%
(rounded)
2 100%
(rounded)
Latest Expiry Date : 4 July 2024
Range of Rent-free Period : 0 to 2 months
Option to Renew : One of the tenancies have an option to renew for a further term of two
years.
Summary of Terms : The Landlord
31
is responsible for payment of Government Rent and the
structural and external repairs while the Tenant is responsible for the
internal repairs of the occupied area.
Licences for Mobile Phone Base Stations, Antennae, Signage Spaces and Poster Stand(s)
Number of Licences : 3
Monthly Licence Fee : HKD69,365 per month
Latest Expiry Date : 30 April 2026
5. Estimated Net Property Yield
32
2.0%
6. Market Value in existing state as at 31 December 2023
HKD1,805,000,000 (Hong Kong Dollars One Billion Eight Hundred and Five Million)
31
All tenancy agreements/licences are entered into by Favour Link International Ltd as Landlord.
32
The Estimated Net Property Yield of ROH is derived from the rent receivable in 2023 divided by the Market Value.
Annual Report 2023
156
Property 5
REGAL RIVERSIDE HOTEL
34-36 Tai Chung Kiu Road
Shatin, New Territories, Hong Kong
Sha Tin Town Lot No. 160
1. Property Description
Regal Riverside Hotel (
“
RRH
”
) is a 20-storey (including two basement floors) High Tariff B hotel completed in 1986. It
has currently 1,147 guestrooms after the recent renovation works in 2020.
RRH is located at Shatin, a well-established urban area in the New Territories with an immediate locality of mainly
residential buildings and some shopping facilities. RRH overlooks the Shing Mun River.
Site Area : 4,956 sq. m.
Gross Floor Area : 59,668 sq. m.
Covered Floor Area : Approx. 69,100 sq. m.
Town Planning Zoning :
“
Commercial
”
zone under Draft Sha Tin Outline Zoning Plan No. S/ST/37
dated 17 November 2023.
Hotel Guestroom Configuration
Room Type No. of Rooms Room Type No. of Rooms
Standard Room 131 Executive Club Floor Deluxe Room 72
Superior Room 274 Executive Club Floor River View Room 63
Deluxe Room 28 Spa Superior Room 4
Prime Deluxe Room 140 Spa Deluxe Room 3
Premier Room 98 Executive Suite 11
Premier Riverview Room 60 Royal Suite 1
Family Triple Room 26 Deluxe Suite 6
Family Quadruple Room 69 Presidential Suite 1
Executive Club Floor Superior Room 160
Total 1,147
Notes: The room sizes range from 10 sq. m. to 121 sq. m.
Annual Report 2023
157
Food and Beverage Outlets
Seating Capacity (approx.)
Floor Name of Outlet Type of Facility
Area
(sq. m.)
No. of normal
dining seating
G/F Vi
33
Vietnamese-Thai Cuisine 145 92
G/F Moon River Local Eatery 97 72
G/F Avanti Pizzeria
34
American-Italian Cuisine 154 98
G/F Scene Bar
35
Lounge and Bar 210 88
G/F Taiwan Delight Taiwanese Cuisine 31 42
1/F Carnival Bar American Bar 286 120
1/F Dragon Inn Shanghainese and Provincial
Cuisines
318 156
2/F Regal Terrace Cantonese with seafood
specialities
726 260
2/F Regal Court Cantonese with Sichuan flavours 205 80
3/F L
’
Eau Restaurant International Buffet with
Poolside BBQ
409 220
Meeting and Banquet Facilities
Seating Capacity (approx.)
No. of seating in
Floor Name of Function Room Type of Facility
No. of
Rooms
Area
(sq. m.)
Theatre/
Boardroom
Style
Banquet
Style
1/F Ballroom Banquet/Convention 1 549 450 456
1/F Multi-purpose Function Rooms Banquet/Convention 2 115 70 72
1/F Forum Meeting and Convention 1 518 500 432
2/F Multi-purpose Function Rooms Banquet/Convention 5 390 180 264
3/F Multi-purpose Function Rooms Banquet/Convention 1 416 200 300
Other Facilities
Other facilities include an outdoor swimming pool, a health club with a gymnasium and spa/massage facilities and
retail spaces.
33
Additional outdoor seating areas are provided on the G/F.
34
Additional outdoor seating areas are provided on the G/F.
35
Additional outdoor seating areas are provided on the G/F.
Annual Report 2023
158
2. Ownership and Tenure
Lease Terms : Sha Tin Town Lot No. 160 is held by the Government under New Grant No.
11571 for a term of 99 years less the last three days commencing from 1
July 1898 and has been statutorily extended to 30 June 2047.
Registered Owner : Regal Riverside Hotel Limited
Major Encumbrances : Modification Letter dated 1 June 1982, registered vide Memorial No.
ST211142.
Modification Letter dated 28 August 1986, registered vide Memorial
No. ST353344.
Letter of Compliance dated 18 July 1986, registered vide Memorial
No. ST430228.
Statutory Declaration as to Loss of Title Deeds dated 21 March 2000,
registered vide Memorial No. ST1145794
Lease Agreement (No. 5 for Regal Riverside Hotel) in favour of Favour
Link International Limited dated 16 March 2007, registered vide
Memorial No. 07041300910108 (Remarks: For the period commencing
from 30 March 2007 to 31 December 2015).
Modification Letter dated 14 November 2007, registered vide
Memorial No. 07111601000553.
First Supplemental Agreement amending Lease Agreement No.
5 for Regal Riverside Hotel in favour of Favour Link International
Limited dated 12 February 2010, registered vide Memorial No.
10052602510131.
Second Supplemental Deed amending Lease Agreement No. 5
for Regal Riverside Hotel in favour of Favour Link International
Limited dated 12 March 2015, registered vide Memorial No.
15042302380265.
Third Supplemental Deed amending Lease Agreement No.5 for Regal
Riverside Hotel dated 20 December 2019, registered vide Memorial
No. 20041601820134.
Regal Riverside Debenture in favour of Hang Seng Bank Limited dated
10 September 2021, registered vide Memorial No. 21092902710405.
Annual Report 2023
159
3. Hotel Operation
Hotel Performance in 2023
Occupancy Rate : 82%
Average Room Rate : HKD663
Lease Agreement
Lessor : Regal Riverside Hotel Limited
Lessee : Favour Link International Limited
Term of Lease Agreement : Commencing from the Listing Date and expiring on 31 December 2030
(both days inclusive).
Rental
From 2011 to 2030, the Market Rent
36
to be determined (the
“
Market Rental Package Determination
”
) in accordance
with the Lease Agreement, subject to a Floor Rent of HKD70,000,000 per annum out of a total Floor Rent of
HKD400,000,000 for all five Initial Hotels
37
.
According to the 2023 and 2024 Market Rental Package Determinations, Base Rent for RRH for the fiscal years of
2023 and 2024 are HKD103,000,000 and HKD126,000,000 respectively; and the Variable Rent is 50% of the excess
of the aggregate NPI of the five Initial Hotels over the aggregate Base Rent of the Initial Hotels for the respective
years, which portion shall be the proportion by which the excess NPI of this hotel bears to the aggregate excess NPI
of all the Initial Hotels.
Hotel Management Agreement (
“
HMA
”
)
Hotel Manager : Regal Hotels International Limited
Term of HMA : Twenty (20) years from the Listing Date
Base Fee : One percent (1%) of Gross Revenue
38
(for so long as the Lease Agreement
is in subsistence); or
Two percent (2%) of Gross Revenue (for other cases during the Operating
Term)
Incentive Fee : One percent (1%) of the excess of the Adjusted GOP
39
over the Base
Fee and the Fixed Charges (for so long as the Lease Agreement is in
subsistence); or
Five percent (5%) of the excess of the Adjusted GOP over the Base Fee and
the Fixed Charges (for other cases during the Operating Term)
36
According to the Lease Agreement, the Market Rent to be determined includes the Base Rent, Variable Rent and the Lessee
’
s
contribution to the FF&E Reserve.
37
Namely Regal Airport Hotel, Regal Hongkong Hotel, Regal Kowloon Hotel, Regal Oriental Hotel and Regal Riverside Hotel.
38
According to the Hotel Management Agreement,
“
Gross Revenue
”
means all revenue derived from the Hotel.
39
According to the Hotel Management Agreement,
“
Adjusted GOP
”
means the aggregate of Gross Operating Profit and Net Rental
Income.
Annual Report 2023
160
4. Retail Tenancy/Licence Schedules
Retail
40
Retail Area (Lettable) : Approx. 4,719 sq. ft. (438 sq. m.)
Occupied Area (Lettable) : Approx. 4,719 sq. ft. (438 sq. m.)
Vacant Area (Lettable) : Approx. 0 sq. ft. (0 sq. m.)
Occupancy Rate : 100%
Monthly Base Rent : HKD221,737 (All tenancies are exclusive of rates, management fees and air-
conditioning charges)
Tenancy Expiry Profile
Year
Lettable Area
(sq. ft.) % of Total
Monthly Rent
(HKD) % of Total
No. of
Tenancy % of Total
Year Ending 2024 4,719 100% 221,737 100% 2 100%
Total 4,719 100%
(rounded)
221,737 100%
(rounded)
2 100%
(rounded)
Tenancy Duration Profile
Tenancy Duration
Lettable Area
(sq. ft.) % of Total
Monthly Rent
(HKD) % of Total
No. of
Tenancy % of Total
More than 2 years and
up to 3 years
4,719 100% 221,737 100% 2 100%
Total 4,719 100%
(rounded)
221,737 100%
(rounded)
2 100%
(rounded)
Latest Expiry Date : 14 November 2024
Range of Rent-free Period : 2.5 to 9.5 months
Option to Renew : N/A
Summary of Terms : The Landlord
41
is responsible for payment of Government Rent and the
structural and external repairs while the Tenant is responsible for the
internal repairs of the occupied area.
40
The areas quoted exclude spaces which are used by RRH.
41
All tenancy agreements/licences are entered into by Favour Link International Ltd as Landlord.
Annual Report 2023
161
Licences for Mobile Phone Base Stations, Antennae, Signage Spaces and Poster Stand(s)
Number of Licences : 5
Monthly Licence Fee : HKD184,800 per month
Latest Expiry Date : 31 March 2026
5. Estimated Net Property Yield
42
2.0%
6. Market Value in existing state as at 31 December 2023
HKD5,146,000,000 (Hong Kong Dollars Five Billion One Hundred and Forty-Six Million)
42
The Estimated Net Property Yield of RRH is derived from the rent receivable in 2023 divided by the Market Value.
Annual Report 2023
162
Property 6
ICLUB WAN CHAI HOTEL
Shops A, B and C on G/F, Flat Roof on 3/F, whole of 5-12/F, 15-23/F and 25-29/F
Eastern and Western Elevations of External Walls
Architectural Feature at Roof Top and Upper Roof
211 Johnston Road, Wan Chai, Hong Kong
3,062/3,637th undivided shares of and
in the Sub-section 1 and The Remaining Portion of Section F
and the Sub-section 1 and The Remaining Portion of Section G, of Inland Lot No. 2769
1. Property Description
iclub Wan Chai Hotel (
“
ICWC
”
) comprises a significant portion of the Ground Floor including Shops A, B and C,
22 entire floors (from the 5th to 29th Floors, of which the 13th, 14th and 24th Floors are omitted), a flat roof on
the 3rd Floor, together with the eastern and western elevations of external walls and architectural feature at the
roof top and the upper roof of a 26-storey composite building completed in 1997. The remaining portion of the
building including a portion of the Ground Floor, all of the 1st and 2nd Floors, is owned by The Financial Secretary
Incorporated (the HKSAR Government
’
s property agent) and does not form part of ICWC. The immediate locality is
predominantly office buildings.
After the completion of the Asset Enhancement Programme and the conversion project in 2009 and 2010
respectively, the hotel comprises 99 guestrooms and suites. ICWC is a High Tariff B hotel.
The 99-room hotel portion includes a portion of the Ground Floor and the whole of the 5th to 26th Floors. The
portion of the Ground Floor comprises the hotel lobby and a shop which is leased. The mechanical floor is the 3rd
Floor. The 27th to 29th Floors have been leased and are occupied for retail/restaurant/bar/karaoke uses.
Site Area : 413 sq. m.
Gross Floor Area : 5,326 sq. m.
Covered Floor Area : Approx. 5,530 sq. m.
Town Planning Zoning :
“
Commercial
”
zone under Approved Wan Chai Outline Zoning Plan
No. S/H5/31 dated 12 May 2023.
Annual Report 2023
163
Hotel Guestroom Configuration
Room Type No. of Rooms Room Type No. of Rooms
iSelect 18 iBusiness Executive 10
iSelect Premier 12 iSuite Premier 4
iPlus Premier 29 iResidence Premier 7
iBusiness Deluxe 19
Total 99
Notes: The room sizes range from 15 sq. m. to 47 sq. m.
Other Facilities
Other facilities include a club lounge and a gymnasium.
2. Ownership and Tenure
Lease Terms : The Inland Lot No. 2769 is held under a Government Lease for a term of 99
years commencing from 25 May 1929 and renewable for a further term of
99 years.
Registered Owner : Sonnix Limited
Major Encumbrances : Licence in favour of Sonnix Limited by the District Lands Officer/Hong
Kong West for and on behalf of the Governor of Hong Kong dated 22
November 1994, registered vide Memorial No. UB6186840;
Statutory Declaration of Liu Yee Man John dated 17 April 1997,
registered vide Memorial No. UB7020522.
Occupation Permit No. H73/97 dated 20 November 1997, registered
vide Memorial No. UB7355437.
Deed of Mutual Covenant and Management Agreement in favour
of Paliburg Estate Management Limited dated 28 November 1997,
registered vide Memorial No. UB7376631.
Supplemental Deed of Mutual Covenant and Management Agreement
in favour of Paliburg Estate Management Limited dated 19 October
2009, registered vide Memorial No. 09103001380118.
Debenture and Mortgage in favour of Hang Seng Bank Limited, dated
24 July 2019, registered vide Memorial No. 19080702600227.
Annual Report 2023
164
3. Hotel Operation
Hotel Performance in 2023
Occupancy Rate : 94%
Average Room Rate : HKD903
Hotel Management Agreement (
“
HMA
”
)
Hotel Manager : Regal Hotels International Limited
Term of HMA : From the Effective Date
43
, and unless sooner terminated as herein provided,
shall continue thereafter through and inclusive of 31 December 2030.
Base Fee : Two percent (2%) of the Gross Revenue
44
Incentive Fee : Five percent (5%) of the excess of the GOP
45
over the Base Fee and the
Fixed Charges.
4. Retail Tenancy/Licence Schedules
Retail
46
Total Retail Area : 1,800 sq. ft. (167 sq. m.)
(gross area)
Occupied Area : 1,800 sq. ft. (167 sq. m.)
(gross area)
Vacant Area (gross area) 0 sq. ft. (0 sq. m.)
Occupancy Rate : 100%
Monthly Base Rent : HKD130,000 (The base rent is exclusive of rates, government rent,
management fees and air-conditioning charges and outgoings)
43
According to the Hotel Management Agreement,
“
Effective Date
”
means 1 January 2021.
44
According to the Hotel Management Agreement,
“
Gross Revenue
”
means all revenue derived from the Hotel.
45
According to the Hotel Management Agreement,
“
Gross Operating Profit
”
means Total Hotel Revenue less Hotel Operating
Expenses during the same period.
46
The areas quoted exclude spaces which are used by ICWC.
Annual Report 2023
165
Tenancy Expiry Profile
Year
Gross Area
(sq. ft.) % of Total
Monthly Rent
(HKD) % of Total
No. of
Tenancy % of Total
Year Ending 2026 1,800 100% 130,000 100% 1 100%
Total 1,800 100% 130,000 100% 1 100%
Tenancy Duration Profile
Tenancy Duration
Gross Area
(sq. ft.) % of Total
Monthly Rent
(HKD) % of Total
No. of
Tenancy % of Total
More than 2 years and
up to 3 years
1,800 100% 130,000 100% 1 100%
Total 1,800 100% 130,000 100% 1 100%
Latest Expiry Date : 14 August 2026
Range of Rent-free Period : 6 months
Option to Renew : N/A
Summary of Terms : The Landlord
47
and/or another responsible party is/are to be responsible for
the structural and external repairs while the Tenant is to be responsible for
the internal repairs of the occupied area. The rates, government rent, taxes
are payable by the Tenant.
Office
Total Area : 8,304 sq. ft. (771 sq. m.)
(gross area)
Occupied Area : 8,304 sq. ft. (771 sq. m.)
(gross area)
Vacant Area (gross area) : 0 sq. ft. (0 sq. m.)
Occupancy Rate : 100%
Monthly Base Rent : HKD446,921 (All tenancies are inclusive of air-conditioning charges,
management fees and rates, except one of the tenancies is exclusive of
rates)
47
All tenancy agreements are entered into by Sonnix Limited as Landlord.
Annual Report 2023
166
Tenancy Expiry Profile
Year
Gross Area
(sq. ft.) % of Total
Monthly Rent
(HKD) % of Total
No. of
Tenancy % of Total
Year Ending 2026 8,304 100% 446,921 100% 3 100%
Total 8,304 100% 446,921 100% 3 100%
Tenancy Duration Profile
Tenancy Duration
Gross Area
(sq. ft.) % of Total
Monthly Rent
(HKD) % of Total
No. of
Tenancy % of Total
More than 2 years and
up to 3 years 8,304 100% 446,921 100% 3 100%
Total 8,304 100% 446,921 100% 3 100%
Latest Expiry Date : 21 July 2026
Range of Rent-free Period : 6 months
Option to Renew : N/A
Summary of Terms : The Landlord
48
and/or another responsible party is/are to be responsible for
the structural and external repairs while the Tenant is to be responsible for
the internal repairs of the occupied area.
5. Estimated Net Property Yield
49
2.6%
6. Market Value in existing state as at 31 December 2023
HKD833,000,000 (Hong Kong Dollars Eight Hundred and Thirty-Three Million)
48
All tenancy agreements are entered into by Sonnix Limited as Landlord.
49
The Estimated Net Property Yield of ICWC is derived from the net income receivable in 2023 divided by the Market Value.
Annual Report 2023
167
Property 7
ICLUB SHEUNG WAN HOTEL
138 Bonham Strand
Sheung Wan
Hong Kong
Section C of Marine Lot No. 67A
Section A of Sub-section 1 of Section A of Marine Lot No. 67
The Remaining Portion of Sub-section 1 of Section A of Marine Lot No. 67
Section A of Sub-section 1 of Section B of Marine Lot No. 67
The Remaining Portion of Sub-section 1 of Section B of Marine Lot No. 67
Sub-section 2 of Section B of Marine Lot No. 67
The Remaining Portion of Section B of Marine Lot No. 67
Sub-section 1 of Section C of Marine Lot No. 67
The Remaining Portion of Section C of Marine Lot No. 67
Section G of Inland Lot No. 66 and
The Remaining Portion of Inland Lot No. 66
1. Property Description
The iclub Sheung Wan Hotel (
“
ICSW
”
) is a 34-storey hotel completed in 2014 with 248 rooms and suites. ICSW is
located in Sheung Wan, a mature commercial/residential area close to Central, Hong Kong
’
s primary CBD. The hotel
is easily accessible by MTR, taxi and various bus lines.
Site Area
50
: 472 sq. m.
Gross Floor Area : 7,197 sq. m.
Covered Floor Area : Approx. 9,600 sq. m.
Town Planning Zoning :
“
Commercial
”
zone under Approved Sai Ying Pun & Sheung Wan Outline
Zoning Plan No. S/H3/34 dated 13 November 2020.
Hotel Guestroom Configuration
Room Type No. of Rooms Room Type No. of Rooms
iSelect 66 iBusiness Deluxe 8
iPlus 60 iBusiness Premier 14
iBusiness 34 iSuite 18
iSelect Premier 13 iResidence 7
iPlus Premier 28
Total 248
Notes: The room sizes range from 13 sq. m. to 54 sq. m.
50
The site area excludes an area of 32.803 sq. m. to be reserved for lane pattern but includes an area of 24.398 sq. m. to be
surrendered for road widening.
Annual Report 2023
168
Other Facilities
Other facilities include a club lounge and a gymnasium.
2. Ownership and Tenure
Lease Terms : Marine Lot No. 67 and Marine Lot No. 67A are held under respective
Government Leases for a common term of 999 years commencing from 7
February 1852; Inland Lot No. 66 is held under a Government Lease for a
term of 999 years commencing from 26 March 1868.
Registered Owner : Tristan Limited
Major Encumbrances : Government Notice No. 2710 of 21 July 1995 pursuant to Section
22(1) the Crown Rent and Premium (Apportionment) Ordinance (Cap.
125) dated 21 July 1995, registered vide Memorial No. UB6352712
(For The Remaining Portion of Inland Lot No. 66 only).
Government Notice No. 1100 of 18 February 2011 pursuant to
Section 22(1) of the Government Rent and Premium (Apportionment)
Ordinance (Cap. 125) dated 18 February 2011, registered vide
Memorial No. 11030101830019 (For The Remaining Portion of Sub-
section 1 of Section A of Marine Lot No. 67, The Remaining Portion
of Sub-section 1 of Section B of Marine Lot No. 67, The Remaining
Portion of Section B of Marine Lot No. 67 and The Remaining Portion
of Section C of Marine Lot No. 67 only).
Deed Poll dated 15 August 2011, registered vide Memorial No.
11082501800017 (The Remaining Portion of Sub-section 1 of Section
A of Marine Lot No. 67, Section A of Sub-section 1 of Section B of
Marine Lot No. 67, The Remaining Portion of Sub-section 1 of Section
B of Marine Lot No. 67, The Remaining Portion of Section B of Marine
Lot No. 67, The Remaining Portion of Section C of Marine Lot No. 67
and The Remaining Portion of Inland Lot No. 66 only).
Government Notice No. 7420 of 11 November 2011 pursuant to
Section 22(1) of the Government Rent and Premium (Apportionment)
Ordinance (Cap. 125) dated 11 November 2011, registered vide
Memorial No. 11111702560010 (For Section C of Marine Lot No. 67A
only).
Offensive Trade Licence by District Lands Officer, Hong Kong
West & South dated 12 December 2011, registered vide Memorial
No. 12022300500014 (For Section C of Marine Lot No. 67A, The
Remaining Portion of Sub-section 1 of Section A of Marine Lot No.
67, The Remaining Portion of Sub-section 1 of Section B of Marine
Lot No. 67, The Remaining Portion of Section B of Marine Lot No. 67,
The Remaining Portion of Section C of Marine Lot No. 67 and The
Remaining Portion of Inland Lot No. 66 only).
Annual Report 2023
169
Occupation Permit (No. HK1/2014(OP)) dated 6 January 2014,
registered vide Memorial No. 18112102410465.
Lease Agreement in favour of Favour Link International Limited dated
18 November 2019, registered vide Memorial No. 19121001910020
(Note: For the period commencing from 1 January 2020 to 31
December 2024).
Debenture and Mortgage in favour of United Overseas Bank
Limited dated 19 October 2023, registered vide Memorial No.
23102702090129.
3. Hotel Operation
Hotel Performance in 2023
Occupancy Rate : 91%
Average Room Rate : HKD823
Lease Agreement
Lessor : Tristan Limited
Lessee : Favour Link International Limited
Term of Lease Agreement : Commencing from the Effective Date
51
and expiring on 31 December 2024,
and will be further extended to 31 December 2034
52
.
Rental : The annual rent receivable in respect of the first, second and third years
of the lease term are 5.00%, 5.25% and 5.50% respectively of HKD1,580
million.
The rent receivable in respect of the remaining lease term shall be
determined based on annual market rental reviews performed by
independent professional property valuer who will be jointly appointed by
the Lessor and the Lessee.
According to the 2023 and 2024 Market Rental Package Determinations,
Base Rent for ICSW for the lease year of 2023 and 2024 are HKD32,000,000
and HKD42,000,000 respectively; and the Variable Rent is 50% of the
excess of the NPI.
51
According to the Lease Agreement,
“
Effective Date
”
means 10 February 2014.
52
According to the Extended Lease Agreement, the extended lease period will commence from 1 January 2025 to 31 December
2034.
Annual Report 2023
170
Hotel Management Agreement (
“
HMA
”
)
Hotel Manager : Regal Hotels International Limited
Term of HMA : From the Effective Date
53
, and unless sooner terminated as herein provided,
shall continue thereafter through and inclusive of the tenth anniversary of
the Effective Date, and will be further extended to 31 December 2034
54
.
Base Fee : One percent (1%) of Gross Revenue
55
(for so long as the Lease Agreement
is in subsistence); or
Two percent (2%) of Gross Revenue (for other cases during the Operating
Term)
Incentive Fee : One percent (1%) of the excess of the Adjusted GOP
56
over the Base
Fee and the Fixed Charges (for so long as the Lease Agreement is in
subsistence); or
Five percent (5%) of the excess of the Adjusted GOP over the Base Fee and
the Fixed Charges (for other cases during the Operating Term)
4. Licence Schedules
Licences for Mobile Radio Equipment, Integrated Radio Systems and Others
Number of Licences : 1
Monthly Licence Fee : HKD60,000
Latest Expiry Date : 31 December 2023
5. Estimated Net Property Yield
57
2.3%
6. Market Value in existing state as at 31 December 2023
HKD1,579,000,000 (Hong Kong Dollars One Billion Five Hundred and Seventy-Nine Million)
53
According to the Hotel Management Agreement,
“
Effective Date
”
means 10 February 2014.
54
According to the Extended Hotel Management Agreement, the extended HMA period is from the expiry of the current term to 31
December 2034.
55
According to the Hotel Management Agreement,
“
Gross Revenue
”
means all revenue derived from the Hotel.
56
According to the Hotel Management Agreement,
“
Adjusted GOP
”
means the aggregate of Gross Operating Profit and Net Rental
Income.
57
The Estimated Net Property Yield of ICSW is derived from the rent receivable in 2023 divided by the Market Value.
Annual Report 2023
171
Property 8
ICLUB FORTRESS HILL HOTEL
18 Merlin Street
North Point
Hong Kong
The Remaining Portion of Section P of Inland Lot No. 2273,
The Remaining Portion of Sub-section 1 of Section P of Inland Lot No. 2273,
The Remaining Portion of Sub-section 1 of Section H of Inland Lot No. 2273 and
The Remaining Portion of Section H of Inland Lot No. 2273
1. Property Description
The iclub Fortress Hill Hotel (
“
ICFH
”
) is a 32-storey hotel completed in 2014 with 338 guestrooms. ICFH is located in
North Point, where most of developments are residential buildings. Office buildings and hotel developments can also
be found in the vicinity. The hotel is easily accessible by MTR, taxi and various bus lines.
Site Area : 457 sq. m.
Gross Floor Area : 6,849 sq. m.
Covered Floor Area : Approx. 9,400 sq. m.
Town Planning Zoning :
“
Commercial/Residential
”
zone under Draft North Point Outline Zoning Plan
No. S/H8/27 dated 24 March 2023.
Hotel Guestroom Configuration
Room Type No. of Rooms Room Type No. of Rooms
iRoom 17 iRoom Premier 11
iSelect 116 iPlus Premier 30
iPlus 108 iBusiness Premier 56
Total 338
Notes: The room sizes range from 10 sq. m. to 16 sq. m.
Other Facilities
Other facilities include a club lounge and a gymnasium.
Annual Report 2023
172
58
According to the Lease Agreement,
“
Effective Date
”
means 28 July 2014.
59
According to the Extended Lease Agreement, the extended lease period will commence from 1 January 2025 to 31 December
2034.
2. Ownership and Tenure
Lease Terms : Inland Lot No. 2273 is held under a Government Lease for a term of 75
years commencing from 25 August 1919 and renewable for a further term
of 75 years.
Registered Owner : Wise Decade Investments Limited
Major Encumbrances : Offensive Trade Licence from District Lands Office, Hong Kong East
dated 20 July 2012, registered vide Memorial No. 12082101060027.
Occupation Permit (No. HK20/2014(OP)) dated 5 May 2014, registered
vide Memorial No. 19010702210517.
Lease Agreement in favour of Favour Link International Limited dated
18 November 2019, registered vide Memorial No. 19121001910030
(Note: For the period commencing from 1 January 2020 to 31
December 2024).
Debenture and Mortgage in favour of Cathay United Bank Company,
Limited, Hong Kong Branch, dated 29 November 2023, registered vide
Memorial No. 23121401720099.
3. Hotel Operation
Hotel Performance in 2023
Occupancy Rate : 85%
Average Room Rate : HKD610
Lease Agreement
Lessor : Wise Decade Investments Limited
Lessee : Favour Link International Limited
Term of Lease Agreement : Commencing from the Effective Date
58
and expiring on 31 December 2024,
and will be further extended to 31 December 2034
59
.
Rental : The annual rent receivable in respect of the first, second and third years
of the lease term are 5.00%, 5.25% and 5.50% respectively of HKD1,650
million.
The rent receivable in respect of the remaining lease term shall be
determined based on annual market rental reviews performed by
independent professional property valuer who will be jointly appointed by
the Lessor and the Lessee.
Annual Report 2023
173
According to the 2023 and 2024 Market Rental Package Determinations,
Base Rent for ICFH for the lease years of 2023 and 2024 are HKD30,000,000
and HKD40,000,000 respectively; and the Variable Rent is 50% of the excess
of the NPI.
Hotel Management Agreement (
“
HMA
”
)
Hotel Manager : Regal Hotels International Limited
Term of HMA : From the Effective Date
60
, and unless sooner terminated as herein provided,
shall continue thereafter through and inclusive of the tenth anniversary of
the Effective Date, and will be further extended to 31 December 2034
61
.
Base Fee : One percent (1%) of Gross Revenue
62
(for so long as the Lease Agreement
is in subsistence); or
Two percent (2%) of Gross Revenue (for other cases during the Operating
Term)
Incentive Fee : One percent (1%) of the excess of the Adjusted GOP
63
over the Base
Fee and the Fixed Charges (for so long as the Lease Agreement is in
subsistence); or
Five percent (5%) of the excess of the Adjusted GOP over the Base Fee and
the Fixed Charges (for other cases during the Operating Term)
4. Licence Schedules
Licences for Mobile Radio Equipment, Integrated Radio Systems and Others
Number of Licences : 1
Monthly Licence Fee : HKD60,000
Latest Expiry Date : 31 December 2023
5. Estimated Net Property Yield
64
2.1%
6. Market Value in existing state as at 31 December 2023
HKD1,560,000,000 (Hong Kong Dollars One Billion Five Hundred and Sixty Million)
60
According to the Hotel Management Agreement,
“
Effective Date
”
means 28 July 2014.
61
According to the Extended Hotel Management Agreement, the extended HMA period is from the expiry of the current term to 31
December 2034.
62
According to the Hotel Management Agreement,
“
Gross Revenue
”
means all revenue derived from the Hotel.
63
According to the Hotel Management Agreement,
“
Adjusted GOP
”
means the aggregate of Gross Operating Profit and Net Rental
Income.
64
The Estimated Net Property Yield of ICFH is derived from the rent receivable in 2023 divided by the Market Value.
Annual Report 2023
174
Property 9
ICLUB TO KWA WAN HOTEL
8 Ha Heung Road
(formerly known as 8, 8A, 10, 10A, 12 and 12A Ha Heung Road)
Kowloon
Hong Kong
Section C of Kowloon Inland Lot No. 4148
1. Property Description
iclub To Kwa Wan Hotel (
“
ICTKW
”
)(formerly iclub Ma Tau Wai Hotel) is a 22-storey building including 1 basement
floor completed in 2017. It provides 340 guestrooms accommodated from the 5th to 23rd Floors of the building.
Carparking spaces are available on the basement and ground floor.
ICTKW is located at To Kwa Wan, a traditional residential area near Kowloon City and the new Kai Tak development.
The immediate locality is predominantly residential buildings.
Site Area : 700 sq. m.
Gross Floor Area
65
: 6,298 sq. m.
Covered Floor Area : Approx. 9,490 sq. m.
Town Planning Zoning :
“
Residential (Group A)
”
zone under Approved Ma Tau Kok Outline Zoning
Plan No. S/K10/30 dated 8 September 2023.
Hotel Guestroom Configuration
Room Type No. of Rooms Room Type No. of Rooms
iSelect 57 iPlus Family 24
iPlus 71 iPlus Premier Family 18
iSelect Premier 57 iBusiness Premier Family 20
iBusiness Premier 64 iBusiness Deluxe Family 9
iSelect Premier Family 12 iSmart 8
Total 340
Notes: The room sizes range from 11 sq. m. to 16 sq. m.
Other Facilities
Other facilities include a lounge, computer area and fitness area.
65
The Gross Floor Area excludes 158.11 sq. m. lift exempted area.
Annual Report 2023
175
2. Ownership and Tenure
Lease Terms : Section C of Kowloon Inland Lot No. 4148 is held under a Conditions of
Sale No. 3945 for a term of 75 years commencing from 26 June 1939 and
renewable for a further term of 75 years.
Registered Owner : Land Crown International Limited
Government Rent : 3% of the rateable value of the Property
Major Encumbrances : Occupation Permit No. KN52/2016 (OP), dated 23 November 2016,
registered vide Memorial No. 17091300940028.
Lease Agreement for iclub Ma Tau Wai Hotel in favour of Favour
Link International Limited, dated 4 September 2017, registered vide
Memorial No. 17091300940063.
Supplemental Deed amending Lease Agreement for iclub Ma Tau Wai
Hotel in favour of Favour Link International Limited, dated 8 June
2022, registered vide Memorial No. 22061400820022 (Remarks: A
Term From 4.9.2022 to 31.12.2027).
Debenture and Mortgage Constituting Fixed and Floating Charges in
favour of United Overseas Bank Limited, dated 20 November 2023,
registered vide Memorial No. 23120802120071.
3. Hotel Operation
Hotel Performance in 2023
Occupancy Rate : 81%
Average Room Rate : HKD579
Lease Agreement
Lessor : Land Crown International Limited
Lessee : Favour Link International Limited
Term of Lease Agreement : Commencing from the Effective Date
66
and expiring on 31 December 2027.
Rental : The annual rent receivable in respect of the first, second, third, fourth and
fifth years of the lease term are 4.00%, 4.25%, 4.50%, 4.75% and 5.00%
respectively of HKD1,360 million.
66
According to the Lease Agreement,
“
Effective Date
”
means 4 September 2017.
Annual Report 2023
176
The rent receivable in respect of the remaining lease term shall be determined
based on annual market rental reviews performed by independent
professional property valuer who will be jointly appointed by the Lessor and
the Lessee.
According to the 2023 and 2024 Market Rental Package Determinations,
Base Rent for ICTKW for the 2023 and 2024 are HKD30,000,000 and
HKD36,000,000 respectively; and the Variable Rent is 50% of the excess of
the NPI.
Hotel Management Agreement (
“
HMA
”
)
Hotel Manager : Regal Hotels International Limited
Term of HMA : From the Effective Date
67
, and unless sooner terminated as herein provided,
shall continue thereafter through and inclusive of the tenth anniversary of
the Effective Date.
Base Fee : One percent (1%) of Gross Revenue
68
(for so long as the Lease Agreement
is in subsistence); or
Two percent (2%) of Gross Revenue (for other cases during the Operating
Term)
Incentive Fee : One percent (1%) of the excess of the Adjusted GOP
69
over the Base
Fee and the Fixed Charges (for so long as the Lease Agreement is in
subsistence); or
Five percent (5%) of the excess of the Adjusted GOP over the Base Fee and
the Fixed Charges (for other cases during the Operating Term)
4. Estimated Net Property Yield
70
2.2%
5. Market Value in existing state as at 31 December 2023
HKD1,361,000,000 (Hong Kong Dollars One Billion Three Hundred and Sixty-One Million)
67
According to the Hotel Management Agreement,
“
Effective Date
”
means 4 September 2017.
68
According to the Hotel Management Agreement,
“
Gross Revenue
”
means all revenue derived from the Hotel.
69
According to the Hotel Management Agreement,
“
Adjusted GOP
”
means the aggregate of Gross Operating Profit and Net Rental
Income.
70
The Estimated Net Property Yield of ICTKW is derived from the rent receivable in 2023 divided by the Market Value.
Annual Report 2023
177
HOTEL MARKET OVERVIEW
The HK-mainland China border was fully reopened on 6 February 2023
71
. On 1 March, the mandatory order to wear facial
masks was rescinded. Daily life returned to normal, and tourism began recovering. Based on December 2023 figures,
almost 34 million visitors had arrived in Hong Kong, about 60% of the monthly average visitor arrivals (or 4.65 million)
in 2019
72
. The rise in visitors was bound to boost the hospitality sector and its business environment, with December
’
s
average hotel occupancy at 87% from the end of 2022
’
s 72%
73
.
Hong Kong
’
s hospitality sector was under pressure before the pandemic. As a result of 2019
’
s social unrest and the US-
Sino trade tensions, there was a significant decline of 18.8% in the number of overnight visitor arrivals compared to the
previous year. The decline accelerated in 2020 and 2021 due to the pandemic, with overnight arrivals shrinking by 94.3%
and 93.4% year on year (YoY), respectively
74
. The slide can be attributed to the continued travel restrictions and other
social distancing measures.
In May 2022, as the Fifth Wave of the pandemic subsided, overnight arrivals reached 17,973, up 307.0% month on month
from April
’
s 4,416. As the pandemic subsided in the second half of 2022, the government lifted the compulsory quarantine
requirements for arrivals on 26 September 2022
75
. Overnight arrivals continued to increase, reaching 145,879 by the end
of December 2022– the highest since February 2020
’
s 90,362
76
.
In December 2023, Hong Kong
’
s visitor arrivals reached about 34 million. The Airport Authority recorded 35.2 million
passengers using Hong Kong International Airport in the first eleven months of 2023, up from the same period last year
when only 4.1 million were recorded. Flights increased by around 100% YoY from 122,952 to 246,155, handled 3.8
million passengers in November
77
. Meanwhile, airlines are increasing capacity to cope with increased demand.
On 2 February 2023, the government launched a promotional activity – Hello Hong Kong – to rebuild the city
’
s global
image as a financial centre and to reboot the tourism and meetings, incentives, conferences and exhibitions (MICE)
sectors
78
. Some HKD550 million has been set aside to improve Hong Kong
’
s MICE market share, hold even more mega-
events, and attract value-added visitors. The Airport Authority is distributing 500,000 free air tickets to attract visitors,
while the HK Tourism Board will hand out a million gift packs offering inbound travellers dining and shopping privileges.
The government
’
s promotion of international events and activities continues in the second half of the year, such as the
Night Vibes Hong Kong campaign, attracted more visitors, benefiting the hospitality sector.
71
Source: The Government of the Hong Kong Special Administrative Region, Press Releases, https://www.info.gov.hk/gia/
general/202302/03/P2023020300649.htm
72
Source:
“
Visitor Arrivals To Hong Kong In December 2023
”
, HKTB, partnernet.hktb.com/
73
Source:
“
HKTB - Hotel Room Occupancy Report – Dec 2023
”
, HKTB, partnernet.hktb.com/
74
Source:
“
Tourist Statistics Database Nov 2019 – Dec 2023
”
, HKTB, partnernet.hktb.com/
75
Source: The Government of the Hong Kong Special Administrative Region, Press Releases, www.info.gov.hk/gia/general/202209/24/
P2022092400048.htm
76
Source:
“
Tourist Statistics Database Nov 2019 – Dec 2022
”
, HKTB, partnernet.hktb.com/
77
Source: Air Traffic Statistics, HKIA, https://www.hongkongairport.com/
78
Source: The Government of the Hong Kong Special Administrative Region, Press Releases, https://www.info.gov.hk/gia/
general/202302/02/P2023020200675.htm
Annual Report 2023
178
Historically, High Tariff A hotels
’
average occupancy remained above 80% from 2010 to 2018, except for 2019 and 2020,
when the market was disrupted. Starting from the first half of 2021, the High Tariff A hotel market showed signs of
recovery, where the Occupancy Rate and Average Achieved Hotel Room Rate increased steadily from 31% and HKD1,467
in Q1 2021 to 56% and HKD1,732 in Q4 2022 respectively, it further increased to about 80% and HKD2,597 in Q4 2023
respectively
79
. The rebound in occupancy rate had been faster in this sector than that of lower-priced hotels.
As of December 2023, Hong Kong had 321 hotels with an inventory of 90,109 keys. Since 2017, licensed hotels have
increased by a 2.5% CAGR from 277 to 321 (as of December 2023), with keys growing by 2.2%. During that period, High
Tariff A hotel rooms increased by 15.3%, the highest among hotels of other price ranges, reaching 21,475 keys. Notably,
two new hotels – Regala Skycity Hotel and Fullerton Ocean Park Hotel Hong Kong – added 1,632 keys in this category
since Aug 2022. The High Tariff B segment put on 18.7% and has 35,939 keys. Medium Tariff hotels meanwhile had the
slowest growth of 4.6% with 25,589 keys.
80
Around 1,293 keys should enter the market in or before 2026, representing an 0.5% CAGR to reach 91,402 keys by the
end of 2026. Future supply will be distributed across districts, particularly in Kowloon City and Kwun Tong. The most
significant opening will be the Metropark Hotel Hunghom Hong Kong (536 keys) in Kowloon City in February 2024
81
.
79
Source:
“
Hotel Room Occupancy Report – Dec 2021, Dec 2022 and Dec 2023
”
, HKTB, partnernet.hktb.com/
80
Source: HKTB - Hotel Room Occupancy Report – Dec 2017 and Dec 2023
81
Source: HKTB - Hotel Supply Situation Report as at September 2023
Annual Report 2023
179
82
Source: Press Release, New World Development, https://www.nwd.com.hk/content/new-world-development-unveils-
%E2%80%9C11-skies%E2%80%9D-%E2%80%93-first-destination-combine-wellness-and-wealth-0
1. REGAL AIRPORT HOTEL
The Regal Airport Hotel (RAH) is located at 9 Cheong Tat Road, adjacent to Hong Kong International Airport
(HKIA). It is Hong Kong
’
s only airport hotel with direct access to the passenger terminals through an air-conditioned
footbridge.
RAH is close to the AsiaWorld Expo, one of Hong Kong
’
s two main MICE venues, and important tourist destinations,
including Hong Kong Disneyland. The HKIA passenger terminals and the adjoining Citygate Outlets Shopping Centre
have shopping and dining options. RAH benefits from easy accessibility thanks to the airport
’
s comprehensive
transport infrastructure. It can be reached via the Airport Express Line – which connects to the Mass Transit Railway
(MTR) system – taxis, and buses across the city.
In 2022, a new hotel under Regal Hotels International – Regala Skycity Hotel – opened near the airport, adding 1,208
keys. The top competitors are the two existing nearby hotels, the Novotel Citygate Hong Kong in Tung Chung and
the Hong Kong SkyCity Marriott Hotel adjacent to the AsiaWorld Expo. Nonetheless, due to its strategic location and
accessibility to passenger ports, RAH is thought to have a competitive advantage. Furthermore, because those hotels
have different market positioning and pricing strategies, competition is predicted to be modest.
According to the projections made in the HKIA Master Plan 2030, once the two HKIA projects – HKIA Terminal 2 and
the three-runway system (3RS) extension projects – are finished by 2024, the HKIA will be able to extend its capacity
to handle 30 million additional passengers per year. The massive commercial complex known as SkyCity opens in
phases from 2022 to 2025. Three grade A office towers under K11 ATELIER were completed in 2022. The first phrase
of the commercial section known as 11 Skies began operating in the middle of 2023, and the more entertainment
section is scheduled to launch in mid-2024. Upon completion, the whole development will contain over 800 shops
including more than 120 dining concepts
82
. The development of new commercial and entertainment facilities in the
vicinity, along with the operational SkyCity Transport Terminal since November 2023, has improved the connection of
the HKIA neighborhood, including RAH.
Travel restrictions and precautionary measures were fully lifted in H1 2023 and the government
’
s promotion of
international events and activities continues in 2024, which attracts more visitors and benefits the hospitality sector.
We expect the tourism market to gain momentum from increasing international and mainland overnight visitors in
2024, and the occupancy and average room rate will increase. We expect a slight recovery in the short and medium
run and a full recovery in the long run.
Annual Report 2023
180
2. REGAL HONGKONG HOTEL
The Regal Hongkong Hotel (RHK) is located at 88 Yee Wo Street in Causeway Bay, a popular retail district in Hong
Kong. The hotel has good accessibility thanks to various transportation options, including the MTR, taxis, buses,
trams, and road networks. RHK is a few minutes walk from the Causeway Bay MTR Station.
RHK is close to a range of retail and entertainment options, including Sogo Department Store, Times Square, Hysan
Place, Fashion Walk and Lee Gardens. The Hong Kong Stadium, Victoria Park, and Happy Valley Racecourse are
famous sports and recreational facilities in the area that help RHK attract guests attending various events.
There was no record of any new hotel supply in Causeway Bay in 2023.
RHK, located in Hong Kong Island
’
s famous shopping district, is in high demand from locals and visitors. Travel
restrictions and precautionary measures were fully lifted in H1 2023 and the government
’
s promotion of international
events and activities continues in 2024, which attracts more visitors and benefits the hospitality sector. We expect
the tourism market to gain momentum from increasing international and mainland overnight visitors in 2024, and
the occupancy and average room rate will increase. We expect a slight recovery in the short and medium run and a
full recovery in the long run.
3. REGAL KOWLOON HOTEL
The Regal Kowloon Hotel (RKH) is located at 71 Mody Road in Tsim Sha Tsui East, a traditional tourist and
commercial district in Kowloon. Harbour City (which contains four areas: Ocean Terminal, Ocean Centre, Gateway
Arcade, and The Marco Polo Hongkong Hotel Arcade), iSquare, K11 Musea, the One, the Hong Kong Cultural Centre,
1881 Heritage, and the Hong Kong Science Museum are all within walking distance. RKH is well-served by public
transport, including the MTR, taxis, and buses connecting to other districts in Hong Kong.
The Hong Kong Cultural Centre, Hong Kong Museum of Art, and Hong Kong Space Museum are famous museums
and performance venues in Tsim Sha Tsui. Moreover, two well-known museums: the Hong Kong Museum of History
and the Hong Kong Science Museum, are in Tsim Sha Tsui East. The Avenue of Stars, a major tourist attraction, has
increased foot traffic in the Tsim Sha Tsui harbourfront region, and the RKH is only a 10-minute walk away.
In 2023, Mondrian launch of the first Mondrian hotel in Greater China – Mondrian Hong Kong – situated in Tsim Sha
Tsui. In addition, Regent Hong Kong (formerly InterContinental Hong Kong), is reopened in November 2023 after
refurbishment. In 2024, a new hotel Kimpton Hong Kong will be completed at former Mariner
’
s Club site, further
adding 492 keys
83
. These luxury hotels resemble the Rosewood Hotel, K11 Artus, and Page 148. Due to differences
in scale of operation, location, and target markets, these hotels are unlikely to substantially influence or compete
directly with RKH. In addition, the high demand for hotel rooms in Tsim Sha Tsui will likely digest any additional
room supply quickly.
RKH, located in the heart of Kowloon, is in high demand from locals and visitors. Travel restrictions and precautionary
measures were fully lifted in H1 2023 and the government
’
s promotion of international events and activities
continues in 2024, which attracts more visitors and benefits the hospitality sector. We expect the tourism market
to gain momentum from increasing international and mainland overnight visitors in 2024, and the occupancy and
average room rate will increase. We expect a slight recovery in the short and medium run and a full recovery in the
long run.
83
Source: Projects, Empire Group Holdings, https://egh.com.hk/projects.html
Annual Report 2023
181
84
Source: Mass Transit Railway Corporation, Press Release, www.mtr.com.hk/archive/corporate/en/press_release/PR-22-039-E.pdf
85
Source: Information Services Department (ISD), 2017 Policy Address.
86
Source: Announcement, Nan Fung Group, https://www.nanfung.com/en/about-us/announcement/nan-fung-groups-flagship-mixed-
use-complex-airside/
87
Source:
“
The Twins
”
, Lifestyle International Holdings Ltd., https://www.lifestylehk.com.hk/en/our-business
88
Source: Kai Tak Sports Park, MEHK, https://www.mehongkong.com/eng/home/mice-ideas/detail/kai-tak-sports-park.html
4. REGAL ORIENTAL HOTEL
The Regal Oriental Hotel (ROH) is situated at 30-38 Sa Po Road in Kowloon City, directly across the Kai Tak
Development Area (KTDA). ROH is a few minutes walk from the Sung Wong Toi MTR Station. It is also closely
connected to the surrounding industrial and economic districts of Kwun Tong, Kowloon Bay, Tsim Sha Tsui,
and Mongkok in Kowloon by an arterial road, Prince Edward Road East. There are numerous tourist attractions
nearby such as the Chi Lin Nunnery, Wong Tai Sin Temple, and Hau Wong Temple. As for shopping, dining, and
entertainment options, a large retail and leisure facility - Festival Walk, can be accessed from Kowloon Tong MTR
Station.
The section from Kai Tak to Hung Hom of the MTR Shatin-Central Link (SCL) Phase 1 was completed in June 2021,
and the expansion and extension of the SCL Phase 2, which extends the East Rail Line from Hung Hom to Admiralty,
completed in May 2022.
84
It reduces the travel time to about 15 minutes from Kowloon City to Admiralty, further
enhancing ROH
’
s accessibility.
The Kai Tak Development includes 320 hectares of land, including the former airport site and the hinterland districts
of Wong Tai Sin, Kwun Tong, and Kowloon City. It is designed to revitalise the surrounding areas with a community,
housing, business, tourism, and infrastructure development mix. The government has undertaken a review to raise
the KTDA
’
s development intensity and improve site planning. In two phases, 16,000 additional residential flats and
about 400,000 sq. m. of commercial floor area will be built.
85
In 2023, Kai Tak
’
s new mall, AIRSIDE opened in September 2023, providing over 700,000 sq. ft. of commercial
spaces and 40 restaurants in the area
86
.
“
The Twins
”
under SOGO
’
s operator is also set to open in mid to late 2024
in phase. It will offer 1.1 million sq. ft. of retail space and host over 700 shops, including a SOGO department
store
87
. Furthermore, Kai Tak Sports Park is expected to be completed in phases by the end of 2024. Kai Tak Sports
Park, spanning 28 hectares, is capable of hosting various international sports events and entertainment activities
88
.
Kai Tak is set to become a prominent destination for sports experiences, shopping, and entertainment, serving as
a new landmark in Hong Kong, expected to attract more visitors, ultimately benefiting the Kai Tak neighborhood,
including ROH.
There was no record of new hotel supply in nearby districts during 2023.
Travel restrictions and precautionary measures were fully lifted in H1 2023 and the government
’
s promotion of
international events and activities continues in 2024, which attracts more visitors and benefits the hospitality sector.
We expect the tourism market to gain momentum from increasing international and mainland overnight visitors in
2024, and the occupancy and average room rate will increase. We expect a slight recovery in the short and medium
run and a full recovery in the long run.
Annual Report 2023
182
5. REGAL RIVERSIDE HOTEL
The Regal Riverside Hotel (RRH) is situated at 34-36 Tai Chung Kiu Road in Sha Tin, with a view of the Shing Mun
River. The hotel is close to the Sha Tin MTR Station, making it convenient for guests to travel between Kowloon and
mainland China. The construction of the Sha Tin to Central Link Phase 2, extending the railway from Hung Hom to
Admiralty, has improved RRH
’
s accessibility to other districts in Hong Kong.
Nearby, the New Town Plaza, Shatin Centre and Shatin Plaza Shopping Arcade offer extensive shopping and dining
options. Shatin Racecourse and the Shing Mun River nearby provide sports and recreation activities.
After the completion of Alva Hotel in 2019, there has been no new hotel supply in Sha Tin or the surrounding
regions. Since Alva Hotel
’
s business scale and market positioning differ from RRH, it has a limited impact on RRH.
Travel restrictions and precautionary measures were fully lifted in H1 2023 and the government
’
s promotion of
international events and activities continues in 2024, which attracts more visitors and benefits the hospitality sector.
We expect the tourism market to gain momentum from increasing international and mainland overnight visitors in
2024, and the occupancy and average room rate will increase. We expect a slight recovery in the short and medium
run and a full recovery in the long run.
6. ICLUB WAN CHAI HOTEL
iclub Wan Chai Hotel (ICWC) is located at Johnston Road, Wan Chai, one of Hong Kong
’
s most significant
commercial areas, infused with the city
’
s traditional culture. The Hong Kong Convention and Exhibition Centre
(HKCEC) in Wan Chai North, which is close to the hotel, organises various conferences and events. ICWC is always
an ideal choice for businessman as it is a convenient 15-minute walk from the Convention Centre. The hotel is also
close to a cluster of prime office buildings, including the Sun Hung Kai Centre and the Great Eagle Centre, which
house a diverse of firms.
The ICWC is also well-positioned to serve leisure travellers, bordered by Hennessy and Johnston Roads, which are
lined with restaurants and specialised shops. Wan Chai is popular with leisure travellers due to its rich culture and
ease of access via Wan Chai MTR Station, buses, taxis and trams; ferry service between Tsim Sha Tsui and Wan Chai
is also available.
Moreover, the SCL Phase 2 has completed in May 2022, which extends the East Rail Line from Hung Hom to
Admiralty. The extended East Rail Line now passes a new MTR station in Wan Chai – Exhibition Centre, reducing
the travelling time to about 48 minutes from Lok Ma Chau to Wan Chai, which enhances ICWC
’
s accessibility from
mainland China
89
.
Langham Hospitality Group launched a new hospitality brand, Ying
’
nFlo, and 2 new hotels – Ying
’
nFlo, Hong Kong
and Ying
’
nFlo, Wesley Admiralty, Hong Kong – were opened in Wan Chai in 2022 and 2023 respectively, and the
two hotels offers 321 keys in total
90
. In Addition, Hopewell Holdings
’
development project of a conference hotel –
Hopewell Centre II – is expected to be completed in 2024, which will provide approximately 1,000 guest rooms
91
.
These hotels target affluent travellers, which is different to the targeting group of ICWC.
89
Source: Mass Transit Railway Corporation, Trip Planner (Route Suggestion), www.mtr.com.hk/en/customer/jp/index.php
90
Source: Press Release, Langham Hospitality Group, https://www.langhamhospitalitygroup.com/en/media/latest-news/langham-
hospitality-group-launches-ying-n-flo/
91
Source: Hopewell Centre II, https://www.hopewellholdings.com/eng/hhl_hopewell_centre_ll.htm
Annual Report 2023
183
Located in a business area with good-quality office developments, ICWC commands strong demand from business
travellers. Travel restrictions and precautionary measures were fully lifted in H1 2023 and the government
’
s
promotion of international events and activities continues in 2024, which attracts more visitors and benefits the
hospitality sector. We expect the tourism market to gain momentum from increasing international and mainland
overnight visitors in 2024, and the occupancy and average room rate will increase. We expect a slight recovery in the
short and medium run and a full recovery in the long run.
7. ICLUB SHEUNG WAN HOTEL
The iclub Sheung Wan Hotel (ICSW) is located in Bonham Strand, Sheung Wan, a secondary business area close to
Central with numerous Grade A office buildings, such as Shun Tak Centre, Cosco Tower, and 9 Des Voeux Road
West. The hotel can be accessed via the MTR, trams, taxis, and buses. Tsim Sha Tsui and Kowloon Station are both
within a 20-minute drive of the hotel through the Western Harbour Crossing. In addition, the Hong Kong-Macau
Ferry terminal nearby which provides ferry and helicopter services, acts as a conduit for business travellers from
Macau and mainland China. Situated in a prime location with good accessibility, ICSW catches a good quantity of
business travellers.
Besides business travellers, the hotel is also able to attract leisure travellers. Cluster of stores along Wing Lok Street
and Des Voeux Road West is a well-known area selling quality dried foods and Chinese medicines. Together with
historical architecture, Sheung Wan attracts various leisure travellers.
There was no record of new hotel supply in nearby district during 2023.
Located near Central business area with good-quality office developments, ICSW commands strong demand from
business travellers. Travel restrictions and precautionary measures were fully lifted in H1 2023 and the government
’
s
promotion of international events and activities continues in 2024, which attracts more visitors and benefits the
hospitality sector. We expect the tourism market to gain momentum from increasing international and mainland
overnight visitors in 2024, and the occupancy and average room rate will increase. We expect a slight recovery in the
short and medium run and a full recovery in the long run.
8. ICLUB FORTRESS HILL HOTEL
iclub Fortress Hill Hotel (ICFH) is located in Merlin Street in North Point. North Point is a mature residential area and
one of the primary decentralised commercial districts on Hong Kong Island. North Point is served by various modes of
transportation, including the Mass Transit Railway, taxis, trams, and buses.
Fortress Hill is near to Quarry Bay - a decentralised commercial district with high-quality office projects, and Causeway
Bay - a retail district with well-known shopping centres such as Times Square, Lee Gardens, Sogo Department Store,
and Hysan Place. Commercial developments such as Lee & Man Commercial Centre, AIA Tower, and 148 Electric
Road are office buildings in Fortress Hill. The East Coast Park Precinct, which opened in September 2021 and is only
10 minutes away from ICFH, provides a venue for families and pet owners to enjoy their leisure time. In addition,
Victoria Park, the Hong Kong Stadium, and the Happy Valley Racecourse are in close proximity and can be reached
by public transport and taxi.
Annual Report 2023
184
In 2023, Vanke Hong Kong has officially opened its new hotel – the Stellar – in North Point, adding 164 keys in the
area
92
. Due to the differences in business scale and market positioning between Stellar and ICFH, the influence of
Stellar on ICFH is limited.
Located near to the MTR Fortress Hill Station with good accessibility to Kowloon and New Territories, ICFH will
continue to be the prime choice of millennial travellers who are more prone to choose accommodation characterised
by modern technology. Travel restrictions and precautionary measures were fully lifted in H1 2023 and the
government
’
s promotion of international events and activities continues in 2024, which attracts more visitors and
benefits the hospitality sector. We expect the tourism market to gain momentum from increasing international and
mainland overnight visitors in 2024, and the occupancy and average room rate will increase. We expect a slight
recovery in the short and medium run and a full recovery in the long run.
9. ICLUB TO KWA WAN HOTEL
iclub To Kwa Wan Hotel (ICTKW) (formerly iclub Ma Tau Wai Hotel) is located in Ha Heung Road in To Kwa Wan, an
urban area characterised by old residential and industrial buildings as well as newly redeveloped residential buildings.
The Kai Tak Development, part of the government
’
s Energising Kowloon East plan, is a major development in the
region.
The section from Kai Tak to Hung Hom of the MTR Shatin-Central Link (SCL) Phase 1 was completed in June 2021,
and the expansion and extension of the SCL Phase 2, which extends the East Rail Line from Hung Hom to Admiralty,
completed in May 2022.
93
It reduces the travel time to about 15 minutes from Kowloon City to Admiralty, further
enhancing ICTKW
’
s accessibility.
The Kai Tak Development includes 320 hectares of land, including the former airport site and the hinterland districts
of Wong Tai Sin, Kwun Tong, and Kowloon City. It is designed to revitalise the surrounding areas with a community,
housing, business, tourism, and infrastructure development mix. The government has undertaken a review to raise
the KTDA
’
s development intensity and improve site planning. In two phases, 16,000 additional residential flats and
about 400,000 sq. m. of commercial floor area will be built.
94
In 2023, Kai Tak
’
s new mall, AIRSIDE opened in September 2023, providing over 700,000 sq. ft. of commercial
spaces and 40 restaurants in the area
95
.
“
The Twins
”
under SOGO
’
s operator is also set to open in mid to late 2024
in phase. It will offer 1.1 million sq. ft. of retail space and host over 700 shops, including a SOGO department
store
96
. Furthermore, Kai Tak Sports Park is expected to be completed in phases by the end of 2024. Kai Tak Sports
Park, spanning 28 hectares, is capable of hosting various international sports events and entertainment activities
97
.
Kai Tak is set to become a prominent destination for sports experiences, shopping, and entertainment, serving as
a new landmark in Hong Kong, expected to attract more visitors, ultimately benefiting the Kai Tak neighborhood,
including ICTKW.
92
Sources: Press Releases, Vanke, https://www.vankehk.com/en/press-release/vanke-hong-kong-officially-named-its-hotel-and-
serviced-apartments-as-the-stellar
93
Source: Mass Transit Railway Corporation, Press Release, www.mtr.com.hk/archive/corporate/en/press_release/PR-22-039-E.pdf
94
Source: Information Services Department (ISD), 2017 Policy Address.
95
Source: Announcement, Nan Fung Group, https://www.nanfung.com/en/about-us/announcement/nan-fung-groups-flagship-mixed-
use-complex-airside/
96
Source:
“
The Twins
”
, Lifestyle International Holdings Ltd., https://www.lifestylehk.com.hk/en/our-business
97
Source: Kai Tak Sports Park, MEHK, https://www.mehongkong.com/eng/home/mice-ideas/detail/kai-tak-sports-park.html
Annual Report 2023
185
There was no record of new hotel supply in nearby districts during 2023.
Located near to the MTR To Kwa Wan Station with enhanced accessibility to Yau Tsim Mong District and Hong
Kong Island, ICTKW will continue to be the prime choice of millennial travellers who are more prone to choose
accommodation characterised by modern technology. Travel restrictions and precautionary measures were fully lifted
in H1 2023 and the government
’
s promotion of international events and activities continues in 2024, which attracts
more visitors and benefits the hospitality sector. We expect the tourism market to gain momentum from increasing
international and mainland overnight visitors in 2024, and the occupancy and average room rate will increase. We
expect a slight recovery in the short and medium run and a full recovery in the long run.
Annual Report 2023
186
SUMMARY OF PROPERTY PORTFOLIO
As at 31st December, 2023
Percentage
Approx. interest
Covered attributable
Gross Floor Floor to Regal
Description Use Lease Area Area REIT
(sq. m.) (sq. m.)
(1) Regal Airport Hotel Hotel Medium term 71,988 83,400 100
9 Cheong Tat Road
Hong Kong International Airport
Chek Lap Kok
New Territories
Hong Kong
(2) Regal Hongkong Hotel Hotel Long term 25,090 32,000 100
88 Yee Wo Street
Causeway Bay
Hong Kong
(3) Regal Kowloon Hotel Hotel Long term 31,746 43,500 100
71 Mody Road
Tsimshatsui
Kowloon
Hong Kong
(4) Regal Oriental Hotel Hotel Medium term 22,601 27,300 100
30-38 Sa Po Road
and Shops 3-11 on G/F
including Cockloft of Shops 5-7
and the whole of 1/F
Po Sing Court
21-25 Shek Ku Lung Road
40-42 Sa Po Road and
15-29 Carpenter Road
Kowloon City
Kowloon
Hong Kong
Annual Report 2023
187
Percentage
Approx. interest
Covered attributable
Gross Floor Floor to Regal
Description Use Lease Area Area REIT
(sq. m.) (sq. m.)
(5) Regal Riverside Hotel Hotel Medium term 59,668 69,100 100
34-36 Tai Chung Kiu Road
Shatin, New Territories
Hong Kong
(6) iclub Wan Chai Hotel Hotel/ Long term 5,326 5,530 100
Shops A, B and C on commercial
G/F, Flat Roof on 3/F,
Whole of 5-12/F,
15-23/F and 25-29/F
Eastern and Western
Elevations of External Walls
Architectural Feature at
Roof Top and Upper Roof
211 Johnston Road
Wan Chai
Hong Kong
(7) iclub Sheung Wan Hotel Hotel Long term 7,197 9,600 100
138 Bonham Strand
Sheung Wan
Hong Kong
(8) iclub Fortress Hill Hotel Hotel Long term 6,849 9,400 100
18 Merlin Street
North Point
Hong Kong
(9) iclub To Kwa Wan Hotel Hotel Long term 6,298 9,490 100
8 Ha Heung Road
Kowloon
Hong Kong
Annual Report 2023
188
SUMMARY FINANCIAL INFORMATION
The summary of the results, the distributions and the assets and liabilities of the Group, as extracted from the published
audited consolidated financial statements, is set out below.
Summary of the results and distributions
Year ended Year ended Year ended Year ended Year ended
31st December, 31st December, 31st December, 31st December, 31st December,
2023 2022 2021 2020 2019
HK$
’
000 HK$
’
000 HK$
’
000 HK$
’
000 HK$
’
000
Gross rental and hotel revenue 617,762 616,441 593,544 871,398 975,632
Net rental and hotel income 599,038 600,599 578,916 858,099 956,023
Profit/(Loss) before tax and distributions
to Unitholders 246,324 966,097 631,731 (2,222,407) (2,017,851)
Profit/(Loss) for the year, before distributions
to Unitholders 265,736 929,896 577,087 (2,309,806) (2,102,262)
Distribution income/(adjusted loss) for
the year attributable to Unitholders (127,612) 204,759 310,848 491,355 445,220
Total distributions per Unit
—
HK$0.061 HK$0.086 HK$0.136 HK$0.124
Summary of the assets and liabilities
2023 2022 2021 2020 2019
HK$
’
000 HK$
’
000 HK$
’
000 HK$
’
000 HK$
’
000
Non-current assets:
Property, plant and equipment 636,000 604,000 575,000 543,000 614,000
Investment properties 23,352,000 22,949,000 22,149,000 21,829,000 24,517,000
Investment properties - right-of-use assets
— — — —
21,787
Finance lease receivables 998 7,468 13,819 1,584
—
Current assets 403,347 288,043 174,656 361,518 217,463
Total assets 24,392,345 23,848,511 22,912,475 22,735,102 25,370,250
Current liabilities 1,223,162 5,882,679 331,129 4,864,557 883,905
Non-current liabilities 10,095,310 5,157,968 10,434,435 5,939,685 9,815,252
Total liabilities 11,318,472 11,040,647 10,765,564 10,804,242 10,699,157
Net assets attributable to Unitholders 13,073,873 12,807,864 12,146,911 11,930,860 14,671,093
Net asset value per Unit attributable
to Unitholders HK$4.014 HK$3.932 HK$3.729 HK$3.663 HK$4.504
