Yuexiu Real Estate Investment Trust (“Yuexiu REIT”, together with Yuexiu REIT Asset Management Limited, collectively known as the “REIT”; stock code: 0405) has announced its interim results for the six months ended 30 June 2024.
Yuexiu REIT Management Team: Chairman, Chief Executive Officer and
Executive Director Mr. LIN Deliang (second from the left), Deputy Chief
Executive Office and Executive Director Ms. OU Haijing (third from the
left), Chief Financial Officer Mr. KWAN Chi Fai (first from the left),
and Investor Relations Director Mr. JIANG Yongjin (fourth from the left)
2024 Interim Results Highlights:
– Overall operation was stable, with total revenue of RMB 1,034 million (corresponding period of 2023: RMB1,061 million).
– Distribution of approximately RMB0.0371 per unit, equivalent to approximately HK$0.0405 for the period. This represents an annualized distribution yield of 8.52%.
– As at 30 June 2024, the overall occupancy rate of the properties was 84.0%, unchanged from the previous corresponding period.
Guangzhou International Finance Center (GZIFC):
– Operating revenue of the GZIFC complex was RMB504 million, accounting for 48.8% of the REIT’s total revenue.
– Its office building successfully renewed leases with a number of key tenants, with a renewal rate of 88.2%.
– GZIFC Shopping Mall recorded a year-on-year increase of 5% in customer flow.
– Four Seasons Hotel saw a significant increase in the proportion of international customers, and Ascott Serviced Apartments’ overall operating revenue reached a record high.
Yuexiu Financial Tower:
– Yuexiu Financial Tower recorded operating revenue of approximately RMB182 million, representing 17.6% of the REIT’s total revenue. The occupancy rate was 82.9%.
– In the first half of the year, it successfully secured the lease renewals of key quality tenants. The renovated vacant units recorded a high sell-through rate of 86%. The tenant structure continued to improve.
Active management of financing risks and effective reduction of financing costs
– With regard to the loans maturing within the year, the Manager planned in advance and introduced an offshore revolving loan of RMB530 million with a fixed interest rate of 3.70% in February and then an offshore loan of HK$1.12 billion from domestic banks in May to refinance the maturing financing during the year so as to ensure effective control of liquidity risk.
– Taking advantage of the spread window of the RMB financing cost, the Manager has replaced the existing offshore foreign currency financing with RMB loans. As of the end of June 2024, a total of RMB7.38 billion of financing has been introduced and used to replace Hong Kong dollar financing. The average financing cost was 4.55%, representing a year-on-year decrease of 35 basis points.
– The Manager continued to further reduce the exchange rate exposure by adjusting the financing structure and increasing the proportion of low-cost RMB financing where appropriate. As at the end of June 2024, Yuexiu REIT had RMB financing of approximately RMB8,404 million, accounting for 41% of total financing.
Mr. LIN Deliang, Chairman, Chief Executive Officer and Executive Director of Yuexiu REIT, said, “In the first half of this year, domestic economic growth was mainly driven by the supply side, while overall effective demand was insufficient and social expectations remained weak. Nevertheless, with a focus on three core business sectors, namely, office buildings, retail, and hotels and serviced apartments, the Manager tapped into demands to find opportunities in light of market trends, conducted analyses in relevant challenges and difficulties encountered in different business sectors to work out resolutions and seek breakthroughs, and implemented effective leasing strategies and operational measures to navigate through the competitive market conditions, gearing up all efforts to achieve satisfactory results for Unitholders.”
Guangzhou International Finance Center (GZIFC)
In the first half of the year, GZIFC withstood the downward pressure in the office market and successfully renewed leases with a number of key tenants such as the British Consulate, Zurich General Insurance, Youngy Group and the CBD Administrative Committee, achieving a renewal rate of 88.2% and effectively securing high-quality customer resources. It continued to optimize the tenant structure by introducing a number of renowned enterprises, including Celue Law Firm, Shengang Securities and CPEP, and also further expanded the lease of an existing tenant, Guan Ling Law Firm, with an additional area of 1,071 sq.m. In order to attract quality customers requiring large spaces, GZIFC has proactively promoted the integration of units and improved the leasing efficiency of high-rise floors. Currently, there is a full-floor unit with a total area of approximately 10,000 sq.m. for which business negotiations with potential clients are underway.
GZIFC Shopping Mall actively adjusted its business categories, took the initiative to remove tenants with low effectiveness in generating the anticipated market rent, and optimized its specialty catering mix. In the first half of the year, it introduced the first novelty bakery brand “INCUBATOR” in Zhujiang New Town, the first directly operated “Subway” flagship store in Guangzhou, the high-end coffee brand chain “M Stand”, and the trendy snack retailer “CURIOUS SNACKS”, continuously enhancing the variety and popularity of brands in the shopping mall. In terms of promotion, GZIFC Shopping Mall organized a marketing campaign of “Cantonese Music Festival & Liquor Bazaar & Dancing Party to celebrate its eighth anniversary, while expanding its promotional influence and coverage. The shopping mall recorded a year-on-year increase of 5% in customer flow in the first half of the year.
Four Seasons Hotel maintained its leading position in the local luxury market, and was awarded the “Forbes Travel Guide Five-star Hotel” for the ninth consecutive year. In the first half of the year, the average occupancy rate was 79.0%, and the proportion of international customers increased significantly, effectively filling the gap of the decline in domestic market demand. The average room rate was RMB2,214, an increase of 0.5% year-on-year. Ascott Serviced Apartments leveraged the competitive advantage of the differentiated product of its large-sized apartments in the short-term rental market and achieved a significant breakthrough with a record high overall operating revenue. The average occupancy rate in the first half of the year was 90.5%, an increase of 0.2 percentage point year-on-year; the average room rate was RMB1,134, an increase of 3.0% year-on-year. With a high competitive RevPAR index of 146.3, the apartments maintained a leading position in the competitive market and remained a top player among its peers.
Yuexiu Financial Tower
In the first half of the year, Yuexiu Financial Tower concluded lease renewal contracts for a total of 7,454 sq.m. and successfully secured the lease renewals of key quality tenants such as Everbright Securities, Guoyuan Securities, SHZQ Futures and Minmetals Land. Additionally, it successfully retained three customers who did not renew their leases upon expiration by offering alternative solutions such as relocation to another floor and reduction of the leased area. The renovated vacant units recorded a high sell-through rate of 86%, with the successful introduction of a major law firm brand “Digtech Law Firm” and two renowned premium financial institutions, marking a continuous improvement in the tenant structure.
White Horse Building
White Horse Building, benchmarked against high-quality brands in the competitive market, stepped up its efforts in customer engagement and retention, with a focus on solving the operation and optimization issues of floors and units at risk of vacancy. Driven by the dual driver of tenant acquisition and stabilization, the average occupancy rate maintained at a high level of 95.7% in the first half of the year. In the first half of the year, White Horse Building innovated its marketing strategy, continued to collaborate with government and industry resources, and implemented a series of projects to expand its brand influence. By participating in CHIC Shanghai and organizing the Infinite Form 2024 Autumn/Winter Order Fair, the White Horse brand has expanded its coverage at home and abroad.
Fortune Plaza and City Development Plaza
Fortune Plaza further optimized its tenant structure by successfully introducing C&S Paper, an industry-leading company, and “Ke Jun”, a Hong Kong-style restaurant, to seamlessly occupy a street-facing shop on the first floor. City Development Plaza successfully introduced a government-owned sports service agency and leased approximately 2,500 sq.m. of vacant space, which led to a year-on-year increase of 5.8 percentage points in occupancy rate. In addition, leases with key customers such as Konica Minolta and WUYIGE Certified Public Accountants were successfully renewed, contributing to a relatively high renewal rate of 87.9% in the first half of the year.
Victory Plaza
Victory Plaza made a breakthrough in signing a lease for a specific unit that required greater efforts in attracting business, successfully introduced a financially sound beauty brand, and recorded 1,033 sq.m. of new leases in the first half of the year. The management team actively sought external resources for Victoria Plaza to facilitate new product launches and promotional arrangements of its major tenants, which helped boost the business performance of Uniqlo. Based on holiday consumption patterns in the first half of the year, the team was able to stimulate in-store consumption, resulting in a year-on-year increase of 14% in customer flow in the first half of the year.
Shanghai Yue Xiu Tower
In the first half of the year, it recorded 3,400 sq.m. of newly contracted space, successfully introduced well-known companies including Chang’an Ford and Taiping Insurance, and renewed leases with high-quality customers including Access World and Sulzer. In view of the insufficient effective leasing demand and low number of visitors in the Zhuyuan area, Shanghai Yue Xiu Tower proactively expanded its tenant acquisition channels and optimized and improved its products by selecting key units for premium furnishing and refurbishing undecorated units, thereby increasing the number of visitors and improving the signing rate.
Wuhan Properties
In the first half of the year, the project recorded 17,000 sq.m. of newly contracted space and successfully renewed leases with high-quality customers including Luzhou Laojiao, AVIVA-COFCO and Guangdong Guangxin. Faced with various difficult conditions in the Wuhan market with a low net absorption rate and high vacancy rate, Yuexiu Fortune Centre reviewed its leasing policies and pricing strategies in a timely manner, adjusted the commission policy and actively expanded business acquisition channels, focusing on identifying high-quality customers in the same area and attracting more visitors through the channels of the five major banks, while also strengthening risk control.
Starry Victoria Shopping Centre continued to optimize various business formats for its portfolios. In the first half of the year, it successfully signed contracts with brands including Xiaomi, Yinxingkong (隱星空) and New Oriental, resulting in a higher proportion of training/education and retail space. By continuously optimizing different business formats for its portfolios, it has revitalized the overall retail atmosphere. The shopping mall recorded a year-on-year increase of 37.6% in customer flow and a year-on-year increase of 16.2% in sales in the first half of the year.
Hangzhou Victory
Hangzhou Victory effectively resolved the risk related to the termination of large-area leases, as it succeeded in attracting tenants to sign new contracts covering two entire floors in the first half of the year, with effective rents 20% and 12% higher than the previous contracts, respectively. In terms of lease renewal management, it successfully renewed leases with existing high-quality customers including Shanxi Road & Bridge, Bank of China and Yiqiwan, ensuring the stable operation of the existing high-quality customers.
Prospects
In the second half of 2024, the Manager is expected to invest more than RMB38 million to actively promote asset appreciation projects in order to achieve value preservation and appreciation of properties. Regarding financing, the Manager will take a series of liquidity management measures to manage the annual interest rate at a reasonable level and monitor the foreign exchange risk. In light of the interest rate continuing to remain high, the refinancing strategy will continue to focus on replacing foreign currency financing with low-cost domestic RMB financing. The Manager will also maintain a prudent financial policy to ensure that it can meet the operational needs and the distributions of Yuexiu REIT.
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About Yuexiu Real Estate Investment Trust
Yuexiu Real Estate Investment Trust (“Yuexiu REIT”) was listed on the Hong Kong Stock Exchange of Hong Kong Limited on 21 December 2005 and is the first listed real estate investment trust only investing in properties in the People’s Republic of China (the “PRC”) in the world. The current property portfolio comprises ten high quality properties, namely Guangzhou International Finance Center, White Horse Building, Fortune Plaza, City Development Plaza, Victory Plaza, Yuexiu Financial Tower in Guangzhou, Yuexiu Tower in Shanghai, Wuhan Properties in Wuhan (including Wuhan Yuexiu Fortune Centre and Starry Victoria Shopping Centre), Victory Business Centre in Hangzhou and Yuexiu Building in Hong Kong, with a total area of ownership of approximately 1.184 million sq.m. All properties are located in the central business district of Guangzhou, Shanghai, Wuhan, Hangzhou and Hong Kong respectively. The categories of the properties include Grade-A offices, commercial complexes, retail business, hotel, serviced apartments and professional clothing market etc.
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Topic: Press release summary