- Proactive and Prudent Leasing Strategies Bring in More High-Quality Customers and Better Performance
Yuexiu Real Estate Investment Trust (Yuexiu REIT, together with Yuexiu REIT Asset Management Limited, collectively known as the REIT; HKG: 405) announced its annual results for the year ended 31 December 2023.
2023 Annual Results Highlights:
- Overall operation grew steadily, with total revenue of RMB2,087 million, representing an 11.4% year-on-year increase.
- Final distribution per Unit will be approximately RMB0.0303, equivalent to HK$0.0334. Distribution per Unit for the full year will be approximately RMB0.0844, equivalent to HK$0.0924. Distribution yield is 7.33% per Unit for the year.
- For 18 years since 2005, the REIT has distributed 100% of its distributable income to Unitholders.
- As at 31 December 2023, overall occupancy rate of the properties was 85.0%.
Guangzhou International Finance Center (GZIFC)
- Operating revenue of the GZIFC complex was RMB1,031 million, accounting for 49.4% of the REIT’s total revenue.
- The office building of GZIFC successfully renewed leases with a number of key tenants, with a renewed leasing area of 26,000 sq.m. for the year.
- GZIFC shopping mall continued to optimise the tenant structure and recorded a property occupacy rate of 98.2% and a 21% increase in sales year-on-year.
- Overall performance of the hotel and serviced apartments saw a strong rebound, remaining its market benchmark position. The average occupancy rate and room rate of Four Seasons Hotel and Ascott Serviced Apartments climbed year-on-year.
- Yuexiu Financial Tower
- Yuexiu Financial Tower posted an operating revenue of approximately RMB399 million, representing 19.1% of the REIT’s total revenue. Occupancy rate stood at 88.5%.
- Certain industry leaders were successfully introduced, thereby further reinforcing the premium tenant base of the building.
Active management of financing risks and effective control of financing cost
- With regard to the 5-year syndicated loan of HK$2.8 billion and the 3-year syndicated loan of HK$2.0 billion due in 2023, the Manager obtained in 2023 the 3-year loan of RMB4.0 billion, the 3-year loan of RMB1.0 billion and the 3-year loan of RMB350 million for the purpose of refinancing the maturing loans so as to ensure effective monitor on the liquidity risk.
- Taking advantage of the bottom window of the RMB interest rate market, the RMB1.5 billion Shanghai Free Trade Zone Bonds were issued in March 2023 for early repayment of offshore floating rate loan, thereby reducing the financing cost. At the end of 2023, the overall interest rate of Yuexiu REIT’s financing was 4.74% per annum, representing a decrease of 9 basis points from 4.83% at the beginning of the year.
- The Manager actively adjusted the financing structure and used foreign exchange hedging tool at reasonable cost to monitor foreign exchange exposure. In addition, a loan of HK$2.8 billion and a loan of HK$2.0 billion for which foreign exchange hedging have been arranged were settled in advance, resulting in a cash inflow of approximately RMB202 million.
- Debt structure continued to be optimised, with the proportion of RMB financing rising from 6% at the beginning of 2023 to 39% at the end of the year.
Mr. LIN Deliang, Chairman, Chief Executive Officer and Executive Director of Yuexiu REIT, said: “In 2023, the first year following the optimisation of pandemic prevention policies, the domestic macro economy experienced a wave-like recovery. The Manager implemented targeted measures for projects in various business formats, and thereby leading to a steady increase in operating revenue from assets. Looking ahead at 2024, operation environment of the REIT remains complex and challenging. Committed to holding fast to its original aspiration of maximising asset value, the Manager will, through the implementation of proactive and prudent leasing strategies, and agile response to the potential investment opportunities, expand financing opportunities in the capital market to effectively reduce financing cost, continuously creating value to the Unitholders.
Guangzhou International Finance Center (GZIFC)
By implementing the strategy of “one distinctive policy for each key customer”, it successfully introduced certain top 100 state-owned key enterprises, industry bellwethers and leading enterprises in high-end service industry such as BOCOM Schroders and China Life as well as two law firms renting a whole floor, with a newly contracted area of approximately 25,000 sq.m. for the year, of which high-quality customers accounted for 50%. GZIFC also renewed leases with a number of key tenants such as CCB Fintech and Société Générale, with a renewed leasing area of 26,000 sq.m. for the year and the renewal rate of key tenants reached 87%.
The GZIFC shopping mall engaged in the positioning and adjustment in brands. By resources integration and multi-channel business solicitation, it concluded new contracts with 9 brands during the year, with a rental increase of 14.3%.
Four Seasons Hotel’s room revenue exceeded the pre-pandemic level in 2019, on the back of average room rate of RMB2,238, representing a year-on-year increase of 32.6%. The average occupancy rate of Four Seasons Hotel was 79.9%, representing a year-on-year increase of 23.5 percentage points. The average occupancy rate of Ascott Serviced Apartments reached 90.2%, representing a year-on-year increase of 3.1%. The average room rate was RMB1,117, representing a year-on-year increase of 11.3%.
Yuexiu Financial Tower
Yuexiu Financial Tower successfully contracted with industry bellwethers such as Yinghe Law Firm and Huajin Securities, and facilitated the expansion of existing lease areas for internal key tenants including Chong Hing Bank, with a newly contracted area of approximately 20,000 sq.m. for the year. It also renewed leases with key tenants such as Wanglaoji and ZTE, with the renewal rate reaching 78% and the rent increasing by 3.2% for the year.
White Horse Building
White Horse Building implemented precise business solicitation, and tapped deep into the business arena for target customers, thereby effectively expediting business solicitation and sales. By the end of the year, the occupancy rate of White Horse Building climbed to 95.8%, representing a year-on-year increase of 14.6 percentage points. Continuing to innovate business models, it successfully introduced 15 up-and-coming fashion designer brands into the “China Original Design Brand Base”, consolidating the new positioning and promoting the transformation and upgrading of White Horse Building.
Fortune Plaza and City Development Plaza
With robust management of lease renewal, Fortune Plaza recorded a relatively high renewal rate of 82% for the year. Development Plaza introduced a high-quality customer, Pufanglimin Technology, contributing to the continuous increase in the proportion of tenants engaging in the information technology industry. Taking advantage of the lease expiry of a large area, it also successfully introduced well-known companies such as China Merchants Life Insurance and Dongxing Securities .
Victory Plaza
Victory Plaza successfully renewed leases with its anchor tenant Uniqlo and key customer China Merchants Bank. For units at risk of vacancy, Victory Plaza introduced well-known brands such as Wuu’s Hong Kong Cuisine to enrich its brand portfolio. In terms of operation and promotion, it actively mobilised the resources of major stores and organised joint activities with well-known brands in the shopping mall, which effectively drove the annual sales of the shopping mall to grow by 28% year-on-year,
Shanghai Yue Xiu Tower
Shanghai Yue Xiu Tower actively retained customers by splitting units to suit tenants’ needs, and relocating floors and other methods. As a result, the occupancy rate of Shanghai Yue Xiu Tower rebounded to 89.2% at the end of the year from a low of 81.2% during the year. It also provided tailored lease renewal plans for existing specific high-quality customers, and renewed leases with six key customers including Hongta Securities.
Wuhan Properties
Yuexiu Fortune Centre successfully introduced high-quality customers such as FAW Hongqi and Dongguan Securities, recording a newly contracted area of 23,000 sq.m. for the year. It actively promoted cooperations between the government and enterprises. It worked with the Qiaokou District Government to organise activities involving different sectors. It also communicated with enterprises to identify customer needs as well. It pushed forward the precise renovation and modification of vacant units to effectively match market demands, and the renovated units recorded a high sell-through rate of 90%, significantly shortening the business solicitation cycle.
Starry Victoria Shopping Centre introduced 20 merchants including CHAGEE and Watsons, which effectively improved the operating image and quality of the first floor of Hall A and met the consumer needs of customers from the office building. The newly contracted area for the year reached 11,000 sq.m., and the occupancy rate rose to 90.2% against the prevailing downtrend at the end of the period. The annual sales of the shopping mall increased by 18% year-on-year, and there were 23 tenants who were subject to the category of a higher fixed rent and percentage of turnover.
Hangzhou Victory
Hangzhou Victory achieved a renewal rate of 80% for the year, realising the seamless transition for the vacated space of 2,500 sq.m. By successfully exploring the leasing demands of customers in the building, it facilitated the expansion of the leasing of the entire seventh floor by a financially-sound customer, Caitong Securities,
SUSTAINABILITY
The Manager carried out several energy conservation and carbon reduction capital transformation and asset appreciation projects for GZIFC, Fortune Plaza and Victory Plaza during the year. GZIFC and Yuexiu Financial Tower completed the renewal of Platinum Certification, and Wuhan Yuexiu Fortune Centre obtained the Net Zero Carbon Building Excellence Certification.
Yuexiu REIT signed a green loan with a total value of RMB4 billion during the year for the purpose of financing. By the end of 2023, the proportion of green and sustainability related loan was about 50.3%.
A number of mainstream ESG ratings or scores for Yuexiu REIT were elevated during the year, demonstrating the recognition level by the capital market. In particular, under the Global Real Estate Sustainability Benchmark (“GRESB”) Yuexiu REIT received Green “Four Star” rating for the second consecutive year (with a 5% increase in the overall score) and the highest grade of “A” in public disclosure for the third consecutive year.
Prospects
In 2024, the Manager will effectively synergise a diversified portfolio of business formats, to enhance the product adaptability, and captial transformation and enhancement for GZIFC, Yuexiu Financial Tower, White Horse Building, Four Seasons Hotel Guangzhou, Shanghai Yue Xiu Tower, Wuhan Fortune Centre and Hangzhou Victory is expected to achieve value preservation and appreciation of the properties and to improve the level of leasing operation.
While the market expects a slowdown in inflation, signalling a peak in the interest rates of US dollar and Hong Kong dollar, it is still expected that interest rates will remain at a relatively high level for some time. RMB interest rate has entered a downward trend to stimulate economic recovery after the pandemic. In light of the rising foreign interest rates and the relatively low cost of RMB, the Manager will continue to review and make reasonable adjustments to its financing structure depending on expectations of market developments, such as introducing low-cost RMB financing through free trade zone bonds, RMB loans and other means, in order to seek more favourable financing cost to reduce interest rate risk.
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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