Yuexiu defends bid to shift Guangzhou centre into reit
Guangzhou-based developer Yuexiu Property yesterday defended its plan to inject Guangzhou International Finance Centre into its real estate investment trust Yuexiu reit, after criticism of the deal.
The developer's announcement on May 28 of the planned 13.44 billion yuan (HK$16.46 billion) asset injection into Yuexiu reit led to a fall in the share prices of both companies when they resumed trading the next day. Yuexiu reit slumped 7.1 per cent to HK$3.68, and Yuexiu Property dropped 2.15 per cent to HK$1.82.
The fall reflected market concerns about leasing space in the world's 10th-tallest building.
Shareholders will hold an extraordinary general meeting to vote on the proposal on July 23.
'[Leasing of] office space at Guangzhou International Finance Centre has improved from 52 per cent at the end of March to 60 per cent on June 15. We're confident that the occupancy rate will increase to 70 per cent at the end of this year,' Alan Ha, investor relations director of Yuexiu's capital department, said yesterday.
The company said the building had a special significance in the city, and commanded a rental premium.
'As it's a landmark building in the city, its office rent is 30 per cent higher than that of Swire Properties' Taikoo Hui in Guangzhou,' said Liang Ningguang, chairman of Yuexiu reit.
Although the supply of office space will remain high this year, according to Jones Lang LaSalle, Ha said about half of the new offices would be earmarked for the use of the developers.
He also quoted Jones Lang LaSalle as saying the vacancy rate for high-end grade-A offices in Zhujiang New Town would stay at 10 per cent for the next few years.
As hotel and serviced apartments at Guangzhou International Finance Centre had yet to come onstream, the developer would also subsidise them to the tune of 610 million yuan to ensure it met its targeted operating profit each year. Shares in Yuexiu Property closed 2.12 per cent higher at HK$1.93 yesterday. Yuexiu reit rose 1.04 per cent to HK$3.89.