Yuexiu Real Estate Investment Trust (“Yuexiu REIT”, together with Yuexiu REIT Asset Management Limited, collectively known as the “REIT”; stock code: 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.
Yuexiu Real Estate Investment Trust (“Yuexiu REIT” or the “REIT”; stock code: 00405) announced today its 2022 annual results for the year ended 31 December 2022.
Mr. LIN Deliang, Chairman, Chief Executive Officer & Executive Director
2022 Annual Results Highlights: Overall operation remained stable, with 100% distribution rate for the 17th consecutive year: — Revenue for 2022 was RMB1,873 million, representing a 4.2% growth over last year. — Declared final distribution of approximately RMB0.0399 per unit, equals to approximately HK$0.0453. Distribution per Unit for the Reporting Year is approximately RMB0.1133, equal to approximately HK$0.1306. Distribution yield was approximately 6.63%. — For 17 years since it was listed in 2005, the REIT has distributed 100% of its distributable income to Unitholders.
Guangzhou International Finance Center (GZIFC) office rental business was developing steadily. Average occupancy rate and room rate of The Ascott Serviced Apartments increased steadily: — Operating revenue of GZIFC was RMB880.2million, accounting for 47.0% of the total revenue of the REIT. — Overall performance of the Hotel and serviced apartment remained as market benchmarks. The Ascott Serviced Apartments recorded increase in both average occupancy rate and average room rate. Long-term leasing business was stable, short-term rental business recorded a 10.7% increase in revenue year-on-year.
Actively managed due borrowings, effectively lowering financing cost: — The Manager secured 3-year term syndicated loan of HK$3.8 billion in 2022 to refinance mature loans, thereby ensure effective monitoring and control of liquidity risk. — Seized the favorable window in the RMB interest rate market, the Manager completed the onshore financing of approximately RMB1,284 million in July 2022, effectively reducing the financing cost.
Wuhan Yuexiu Fortune Center obtained LEED O+M platinum certification for the first time whereas Yuexiu REIT continues to build up ESG capability: — Wuhan Yuexiu Fortune Center obtained LEED O+M platinum certification for the first time, which is the third property under the REIT to be LEED O+M platinum certified. Currently, the REIT has three LEED Platinum certified properties, constituting up to 68% of the property area it owns. — The REIT also sealed its first sustainability-linked loan of total amount HK$3.8 billion, effectively raising the proportion of green buildings under it, as well as that of green and sustainable financing.
Its revenue for 2022 full year amounted to RMB1,872.86 million, representing a 4.2% increase when compared with the same period last year. Net Property Income amounted to RMB1,355.87 million, representing a 4.4% increase compared with the same period last year.
Yuexiu REIT Asset Management Limited (the “Manager”) has declared a final distribution of approximately RMB0.0399 per unit, equivalent to approximately HK$0.0453. Distribution per Unit (“DPU”) for the Reporting Year is approximately RMB0.1133, equivalent to approximately HK$0.1306, based on the closing price of HK$1.97 per Unit as at 31 December 2022, representing a yield of approximately 6.63%. The REIT has been distributing no less than 100% of its Total Distributable Income for 17 consecutive years since listing in 2005.
Mr. Lin Deliang, Chairman, Chief Executive Officer and Executive Director of Yuexiu REIT, said, “In 2022, Yuexiu REIT adopted a prudent approach in operation and realized steady increase in revenue. Its aim is to provide Unitholders with stable returns. Since 2005, for 17 years in a row, we have distributed all of our distributable income. The REIT has also started to extend its reach to cover overseas properties. It acquired its first overseas properties, which are the 17th and 23rd floor of Yue Xiu Building in Hong Kong, to create additional growth potential. The international environment will still be complex in 2023 with the risk of global economic stagflation rising. However, with the Chinese government having optimized and adjusted her anti-epidemic policies, the mainland economy has picked up steadily, and the financing environment has been improved. Yuexiu REIT will seize favorable opportunities, make progress in firm strides and present satisfactory returns to Unitholders. “
Guangzhou International Finance Center (GZIFC) GZIFC is committed to optimizing its customer structure and enhancing service quality. It grasped the opportunity to rent out sizeable high-quality units, as well as optimize its long-term customer structure through bringing in quality customers and expanding its customer base, and eventually, reshaped its image as a landmark project. Insisting on adopting high international operation and management standards, GZIFC passed relevant revaluations at the end of 2022 and obtained BOMA CHINA COE renewal certifications, with 15 items well above international standards.
GZIFC Mall took the initiative to adjust and renovate, completed the re-positioning of B1 floor as “Landmark Parlor”, resulting in optimized asset positioning. Moreover, via resource integration and multi-channel tenant recruitment, it was able to sign leases with new tenants taking up spaces of more than 3,000 sq.m. during the year, further enhancing the awareness of brands and enriching its brand portfolio. Combined with the scenario-based marketing supported by its brands, it was able to enhance overall customer experience and increased support to tenants’ operations.
Four Seasons Hotel actively participated in live events and major promotions on leading media platforms to boost its exposure and seize high net worth leisure travelers, and thus increase the overall revenue of its hotels. For the eighth consecutive year, the hotel has earned the “Forbes Travel Guide 2022 Five-Star Award” for its consistently excellent services. As for Ascott Serviced Apartments, its long-term rental business remained stable, while short-term rental business recorded a year-on-year increase of 10.7%, giving an effective pull to the overall operational performance of the project. In 2022, its average occupancy rate rose by 1.3 percentage points year-on-year. The average room rate increased by 1.5% year-on-year. RevPAR was RMB874, representing an increase of 3.1% year-on-year. Thanks to the stabilizing effect of the long-term rental business, the annual RevPAR competitive index of Ascott Serviced Apartments reached 156.3, a historical high. The project has for seven years from 2016 topped all Ascott China projects in terms of operating revenue and GOP.
Yuexiu Financial Tower Yuexiu Financial Tower negotiated with key tenants in advance for lease renewal, while fortifying relationship with customers via multiple channels and proactively exploring customers’ potential need to lease bigger spaces. For the year, it renewed leases with key tenants, such as isuwang.com and Easylink Payment Co. Ltd., with total area leased out reaching 15,000 sq.m., laying a solid foundation for the stable operation of Yuexiu Financial Tower. Key customers such as Kaiyue Hotel Consulting Service (Guangzhou) Co., Ltd. and CR Assets, leased bigger spaces during the year, with the new contracted area reaching 18,000 sq.m.
White Horse Building White House Building had to close three times amid the pandemic. Its operation team, while working hard to stabilize and retain merchants, also pushed to innovate and change in the face of market competition. The team actively explored high-quality external customers, comprehensively engaged leading brand customers in major competitive markets in Guangzhou. As such, it signed leases with two top fast fashion brands, has engaged a total of 702 potential customers and introduced in 104 high-quality customers. It also actively facilitated breakthrough in tenant portfolio and drove innovation of business model. For example, it introduced a number of well-known catering brands to the atrium on the first floor, which boosted market traffic significantly. On the second floor, in the standalone area of passage 25, it adopted an innovative joint operation leasing model, allowing it to introduce a good number of high-quality designer brand customers from Guangzhou and Shenzhen. Furthermore, it continued to carry out marketing activities to attract customers for tenants and facilitate transactions.
Fortune Plaza and City Development Plaza Fortune Plaza adjusted the business positioning of its podium building. By letting parts of the area with lease expired to introduce a number of stable customers and having the Fortune 500 company COSCO Logistics to expand its lease area to the entire floor, the proportion of high-quality customers of the project has kept increasing. As for City Development Plaza, it actively eliminated the risk of lease termination by swiftly introducing high-quality customers such as WUYIGE Certified Public Accountants LLP, and at the same time vigorously promoted product upgrade to optimize the layout of rental units and user experience.
Victory Plaza With at the impact of the resurging epidemic, Victory Plaza continued to experience early lease termination by struggling tenants. In response, the operation team took the initiative to adjust the project’s positioning and brand and terminated timely leases with high-risk customers, and seamlessly introduced the popular Cantonese cuisine brand Xiao Li Yuan and the well-known hair care brand Hairology as tenants. Furthermore, through pooling internal and external resources, a number of impressive large-scale events were organized, empowering well-rounded tenants and project operations. In 2022, Victory Plaza earned the titles “Top 10 Fashion Shops in Flower City” and “Caring Charity Unit”, reflective of it being fully recognized by the industry.
Shanghai Yue Xiu Tower Shanghai Yuexiu Tower has unique lease renewal plans drawn up for its high-quality customers, with the primary goal of retaining customers with all efforts. By enriching its range of office ancillary products and offering flexible leasing terms and conditions, plus various value-added services, it achieved an annual renewal rate exceeding 78% for the year, hitting a new high in the last three years. It kept its eye on the quality of new tenant companies, introduced five target customers during the year, resulting in a more reasonable tenant structure and improved risk resistance. Taking into account market demand, some long vacant units were renovated and reconstructed, and most of them with refined d?cor were leased out quickly. The sell-through rate of renovated units reached 91%.
Wuhan Properties The operation team of Wuhan Yuexiu Fortune Center stepped up efforts to recruit tenants, mounting activities targeting different industry circles to attract customers and restructuring products according to market demand, as such, achieving new contracted lease area of approximately 16,000 sq.m. At the same time, it carried out lease renewal negotiations in advance to build up reserve of potential customers. In 2022, Yuexiu Fortune Center won the “Model Property of Wuhan” title. With the Manager taking building ESG capability as a strategic priority, Fortune Center received its first LEED O+M Platinum certification and became the third property under the Trust to obtain the accreditation.
Starry Victoria Shopping Centre saw a decline in sales and many tenants terminating their lease. In response, the operation team strived to expand various channels in building up tenant reserve and raising contract conversion rate. During the year, it signed contracts with brand customers including “Chow Tai Fook”, “Luckin Coffee” and “Pizza Hut” which helped foster overall retail sentiment and attracted more family customers. In 2022, Starry Victoria Shopping Centre offered two rounds of rental concessions to tenants affected by the pandemic and, with a “specific tactic for specific shop” support mechanism established, it effectively stabilized tenants’ operation.
Hangzhou Victory Hangzhou Victory proactively exited high-risk customers and engaged potential customers in advance to shorten the vacancy period. It secured a number of quality enterprises including the Fortune 500 company China Railway 15th Bureau, and powerful state-owned enterprises with strong renting ability, such as Shanxi Road & Bridge and Yuexiu Financial Leasing expanding their lease areas, as such vacant units were quickly leased out. As at the end of 2022, Hangzhou Victory boasted a 100% occupancy rate.
Sustainable Development The Manager sees building up ESG capability as a strategic priority, regarding it as an important leverage to enhance the REIT’s core competitiveness. Thus, with guidance from the Board, it has devoted full effort to helping the REIT achieve its sustainable development goals. On top of having its annual MSCI ESG rating raised to “BB”, the REIT’s Global Real Estate Sustainability Benchmark (GRESB) rating was raised to the green “Four Star”, and it also scored the highest “A” rating for public disclosure for the second consecutive year. Its sustainalytics ESG risk rating improved to “low risk”, and S&P Global ESG score also increased, by 13.3%, against last year.
Prospects Regarding the economic trend in 2023, the global environment remains complex and challenging, and the risk of global stagflation is rising. However, the Chinese economy has been steadily recovering since the country optimized and adjusted her anti-pandemic policies. Against this backdrop, the Manager, staying true to its original aspiration of maximizing asset value, will implement leasing strategies actively yet with prudence, grasp potential investment opportunities quickly and carefully and expand financing opportunities in the capital market to effectively reduce financing costs, thereby continuously generate stable returns to Unitholders.
Taking into account situations such as interest rate hikes overseas, RMB exchange rate fluctuation and market development expectations, the Manager will continue to review and make reasonable adjustments to the REIT’s financing structure, looking into such as introducing low-cost RMB capital through onshore bond issuance or cross-border financing, so as to enjoy more favorable financing costs and mitigate interest rate and exchange risks.
The Manager will take to greater depth the REIT’s energy saving and carbon reduction plan. It will push to deepen development in the areas of green building, green and sustainable finance, and ESG rating. At the same time, the Manager will seize opportunities brought by the country’s high-quality development, consolidate its sustainable development mechanism and enhance ESG management capabilities, and collaborate with all stakeholders to generate greater economic and social benefits.
About Yuexiu REIT Yuexiu Real Estate Investment Trust (“Yuexiu REIT”, HKEX stock code: 00405) was listed on The Stock Exchange of Hong Kong Limited on 21 December 2005. It is the first listed real estate investment trust in the world that invests in properties on the mainland of the People’s Republic of China. Its property portfolio consists of ten high-quality properties namely Guangzhou International Finance Center, White Horse Building, Fortune Plaza, City Development Plaza, Victory Plaza, Yuexiu Financial Tower, Shanghai Yue Xiu Tower, Wuhan Properties (including Yuexiu Fortune Centre and Starry Victoria Shopping Centre) and Hangzhou Victory, with total area owned spanning approximately 1,184,000 square meters.
Yuexiu Real Estate Investment Trust (HKEX stock code: 00405) announced that the proposal to acquire Yuexiu Financial Tower from Yuexiu Property Company Limited (HKEX stock code: 00123) was approved by unitholders at the extraordinary general meeting held today, with a majority vote of 96.24%. Yuexiu Financial Tower, the acquisition of which was approved by unitholders at the extraordinary general meeting, is a scarce top-tier international Grade A office building in the core district of Guangzhou Zhu Jiang New Town CBD. The 309-metre tall building is among the 10 tallest skyscrapers in Guangzhou. It has a total gross floor area of 210,282.94 square metres, a 4-storey shopping arcade, 64-storey office spaces, and a 4-storey basement carpark offering 827 parking spaces. In a strategic transportation hub, Yuexiu Financial Tower boasts convenient transportation access, with several major subway lines in its neighbourhood. Among these subway lines, Metro Line 18 was opened in September this year and Phase 2 of Line 13 is expected to open in 2022. It is also the only office building in Guangzhou that has a helipad for helicopter routes connecting Guangzhou, Shenzhen and Zhuhai. Its unique advantages have attracted many high-quality tenants from different industries including finance, business services, information technology, some being Fortune Global 500 enterprises.
Mr. Lin Deliang, Chairman, Executive Director and CEO of Yuexiu REIT, said, “The voting result has significant meaning as it fully reflects that the majority of unitholders are very supportive of Yuexiu REIT’s acquisition of Guangzhou Yuexiu Financial Tower. After the acquisition is completed, Yuexiu REIT will own the largest PRC portfolio by valuation among Hong Kong and Singapore listed REITs. At the same time, with Guangzhou properties making up a larger portion of its portfolio, the Fund will be able to capture more effectively development opportunities in Guangzhou and the Guangdong-Hong Kong-Macao Bay Area. As manager of the Fund, we will continue to optimize the assets of Yuexiu REIT, maximise the value of its properties, thereby generate the highest returns for unitholders.”
When the acquisition, rights issue and reverse merger are completed, Yuexiu REIT’s pro forma distribution per unit (DPU) is expected to increase by approximately 3.4% and pro forma DPU Yield to increase from 6.68% to 7.16%.
In addition, unitholders whose names appear on the register of unitholders as at 9 December 2021 will receive a special distribution of RMB0.0255 per unit, or approximately RMB85 million in total. The special distribution will be paid within 30 business days after the acquisition is completed.
Yuexiu Real Estate Investment Trust (Yuexiu REIT, together with Yuexiu REIT Asset Management Limited, is referred to as the Fund, HKEX stock code: 405) is pleased to announce that, through its Special Purpose Vehicle, it has entered into the acquisition deed with a direct wholly-owned subsidiary of Yuexiu Property Company Limited (as Vendor) (Yuexiu Property, HKEX stock code: 123), and Yuexiu Property (as the Guarantor). Yuexiu REIT proposes to acquire, from the Vendor, Yuexiu Financial Tower, a top-tier international Grade A office building as such structures become increasingly scarce in the Core Business District of Guangzhou Zhu Jiang New Town (ZJNT). Mr. Lin Deliang, Chairman, Executive Director and CEO of Yuexiu REIT said, “We believe this acquisition presents a precious opportunity. Upon completion of the acquisition, Yuexiu REIT will own three super-high-rise landmark buildings taller than 300 meters and it is expected that Yuexiu REIT’s enlarged portfolio valuation to be the largest among the PRC portfolio owned by Hong Kong and Singapore listed REITs after the acquisition. Yuexiu REIT has long been committed to investing in high-quality income-producing commercial real estate in top-tier People’s Republic of China (PRC) cities with long-term growth potential. This acquisition marks a major advance in Yuexiu REIT’s investment and growth strategy. Furthermore, we can also capture robust development opportunities in the Greater Bay Area (GBA) and Guangzhou, and Guangzhou’s growing commercial property market; enlarge Yuexiu REIT’s property portfolio; generate a long-term and stable source of income; and, ultimately, enhance the growth potential of Yuexiu REIT.”
Guangzhou’s growth has been driven by an innovation-based economic system and development model, and it will be developed as a world-class headquarters for enterprises engaged in emerging, advanced manufacturing and modern services industries and ultimately an international-standard city cluster and world-class Bay Area will be fully established in the future. As one of the core cities in the development of the GBA together with Hong Kong, Macau and Shenzhen, Guangzhou is positioned as a national central and gateway city; and is also an advanced international trade center, a comprehensive transportation hub and an important focal point for science, technology, education and culture development, as it continues to build an international metropolis. Among the 9+2 cities in the GBA, Guangzhou is the capital city of Guangdong province in Southern China and a key strategic location in the GBA situated at a prime location that has developed rapidly. In the first half of 2021, Guangzhou’s GDP growth exceeded the average national and Guangdong levels, and the expected accelerated development of the GBA should also stimulate stronger market demand for international Grade A office in ZJNT in Guangzhou. Therefore, the acquisition can seize the opportunities arising from rapid economic expansion of the GBA and Guangzhou[, and also capture the development of the Guangzhou commercial property market.
The proposed acquisition of Yuexiu Financial Tower is for an International Grade A office building, which is one of the ten tallest skyscrapers in Guangzhou and a landmark building strategically located in the Core District of ZJNT, at No. 28, Zhujiang East Avenue, Tianhe District in Guangzhou. Yuexiu Financial Tower has a total gross floor area of 210,282.94 square meters and comprises a 68-storey above-ground commercial office building (comprising a 4-storey retail component and a 64-storey office component) and a 4-storey basement of 827 underground carpark spaces. Located in a strategic transportation hub with convenient transportation and adjacent to major subway lines within about 5-10 minutes walking distances. It is accessible to the Metro Lines 3, 5 and the Automated People Mover (a driverless electric train) line. It is just 200 metres away from the Xiancun Station, the interchange station of the Metro Line 18 and Phase 2 of Line 13 which was opened in September 2021 and expected to open in 2022 respectively. The opening of the new Xiancun Station and Huacheng Square North Stations would further improve the regional public transportation network.and hence could further push up the rentals of office buildings near the station. Moreover, Yuexiu Financial Tower has a helipad, a unique transport infrastructure compared to the other Grade A office buildings in Guangzhou which supports flying routes between Guangzhou, Shenzhen and Zhuhai.
Yuexiu Financial Tower is a highly competitive facility in the region, with the largest leasable office space and advanced facilities, including a super-high-speed elevator with a maximum speed of eight metres per second, an intelligent elevator despatch system and an energy-saving air conditioning system that can effectively block PM 2.5 with a virus sterilisation rate of 99.9%. Currently, it has attracted many high-quality tenants across various industries including finance, business services, information technology, manufacturing, and property, as well as Fortune Global 500 enterprises. Moreover, it achieved an average occupancy rate of 92.5% for the nine months ended 30 September 2021.
In addition, Yuexiu Financial Tower has won multiple awards including the US Green Building Council LEED EBOM V4 Platinum Certification, the US Green Building Council WELL V2 Platinum Pre-certification and the China Construction Engineering Luban Award (National Prime-quality Project), with the last mentioned being the highest award for construction quality in the PRC. The property’s outstanding, design, quality and infrastructure are widely recognized.
The core area of ZJNT is in the heart of Guangzhou Tianhe central business district with the most Grade A office buildings, and it is considered a hub for the financial and high-end services sectors in Southern China. Tianhe District’s economic strength continued growing, from the GDP level of RMB343.3 billion in 2015 to reach RMB531.3 billion in 2020 and the district’s GDP has ranked first in Guangzhou for 14 consecutive years. Led by a “headquarters economy”, Tianhe District is expected to do well in four leading industries including financial services, new generation of information technology, modern commerce and business services. Compared with other districts in Guangzhou, ZJNT has the highest rent level for Grade A office space. As at 30 September 2021, the current passing rent for the office component of Yuexiu Financial Tower was approximately RMB199.3 per square meter per month. The average rent of International Grade A office buildings in the core area of ZJNT was RMB 218 per square meter per month in the second quarter of 2021. Based on the superior conditions of Yuexiu Financial Tower, there appears to be further room for rent to rise. Moreover, according to the market consultant report, the rental rate of international Grade A office space in the core area of ZJNT is expected to steadily grow at 3.2% to 4.4% between 2022 to 2025, mainly due to the scarcity of office space in the area in the next four years. In that time, ZJNT will be the first choice for financial services companies and high-end services companies in the leasing market, and ZJNT is expected to enjoy the best lease performance.
Upon the completion of acquisition, the revenue generated by Yuexiu Financial Tower for the six months ended 30 June 2021 would have represented approximately 19% of the revenue of the enlarged portfolio for the same period. This acquisition not only provides an additional source of distributable income from the additional property, it also diversifies the concentration risk of the distributable income of Yuexiu REIT’s current portfolio.
Yuexiu Financial Tower and Yuexiu REIT’s Guangzhou International Finance Center (“GZIFC”) are in close proximity to each other, which enables Yuexiu REIT Asset Management Limited, the Manager to leverage its experience and existing resources to realize synergies. The competencies of the Manager is demonstrated through its success in acquiring and managing high-quality office properties including GZIFC and Wuhan Yuexiu Fortune Centre. Upon completion of the acquisition, the greater portfolio size will create a stronger platform to further increase the number of well-established domestic and multinational corporations in Yuexiu REIT’s tenant base, spread operating costs over a larger portfolio, and achieve greater operating synergies resulting from the economies of scale. It is expected that Yuexiu REIT’s enlarged portfolio valuation to be the largest among the PRC portfolio owned by Hong Kong and Singapore listed REITs after the acquisition. The proportion of office space of Yuexiu REIT will increase from 68% to 73% in terms of gross rentable area and the average age of the properties in the portfolio will decline from 14.2 years to 13.4 years.
The agreed acquisition amount is approximately RMB7,800 million. The Manager intends to fund the acquisition consideration in the following manner: (i) approximately HKD992 million (equivalent to approximately RMB826 million) shall be paid from internal resources of Yuexiu REIT; (ii) approximately HKD3,919 million (equivalent to approximately RMB3,261 million) shall be paid from the net proceeds of the rights issue; (iii) up to HKD4,600 million (equivalent to approximately RMB3,828 million) shall be paid from amounts drawn down under the New Bank Facility.
For the rights Issue plan, Yuexiu REIT proposes to raise approximately HKD3,950 million (before expenses) on the basis of 37 rights issue units for every 100 existing units by issuing up to 1,234,403,038 rights issue units at the price of HKD3.20 per rights issue unit. Upon the completion of the acquisition, the increase in the total number of units in issue and publicly traded is expected to improve the trading liquidity of the units and broaden the unitholder base of Yuexiu REIT.
On 24 October 2021, the Manager and the Placing Agents (including DBS Asia Capital Limited, BOCI Asia Limited, China International Capital Corporation Hong Kong Securities Limited, Haitong International Securities Company Limited, and Yue Xiu Securities Company Limited) entered into the Placing Agreement with a maximum of 730,822,457 placing units, which the placing price shall be not less than the rights issue subscription price.
Upon completion of the acquisition, the Manager intends to declare a special distribution to unitholders whose names appear on the register of unitholders as at the Special Distribution Record Date (being 6 December 2021), the amount of the special distribution being approximately RMB85 million, or RMB0.0255 per Unit.
This acquisition requires approval having been passed by the unitholders at the extraordinary general meeting, and the Yuexiu Property independent shareholders at the Yuexiu Property General Meeting, as well as the remaining terms of the acquisition deed being fulfilled.
About Yuexiu REIT Yuexiu Real Estate Investment Trust (Yuexiu REIT, HKEX stock code: 405) was listed on the Stock Exchange of Hong Kong Limited on 21 December 2005. It is the first listed real estate investment trust in the world investing in properties on the mainland of the People’s Republic of China. Yuexiu REIT’s property portfolio consists of eight high-quality properties including Guangzhou International Finance Center, White Horse Building, Fortune Plaza, City Development Plaza, Victory Plaza, Shanghai Yue Xiu Tower, and Wuhan Properties (including “Wuhan Yuexiu Fortune Centre”, “Starry Victoria Shopping Centre” and certain Carpark Spaces) and Hangzhou Victory, with a total area of ownership of approximately 973,000 square meters.
