China’s Yuexiu Reit expects rental income to recover in 2017

PUBLISHED : Tuesday, 14 February, 2017, 10:29pm
UPDATED : Tuesday, 14 February, 2017, 10:29pm

Hong Kong-based Yuexiu Real Estate Investment Trust (Reit) reported a 3.9 per cent decrease in net profit last year due to exchange losses caused by the yuan’s depreciation.

The trust, which focuses on investment in office buildings and shopping malls in China’s fourth-largest city Guangzhou, said it expects rental income to stabilise this year and that it will increase yuan denominated loans to reduce foreign exchange risks.

Net profit was down to 712 million yuan, while net property income jumped 16.5 per cent year on year to 1.27 billion yuan.

Total dividend rose 17.1 per cent to 824.7 million, or 32.69 HK cents per unit, representing an annual dividend yield of about 8 per cent based on Yue Xiu Reit’s closing price of HK$4.09 at the end of 2016.

Last year, the trust’s parent Yuexiu Group was reportedly bidding for one of Hong Kong’s tallest buildings, The Center.

Lin Deliang, chief executive of Yuexiu Reit, said at a press conference in Hong Kong on Tuesday that the company isn’t looking at The Center but “will not give up opportunities” to invest in Hong Kong and Macau.

The fund currently holds seven properties, namely White Horse Building, Fortune Plaza, City Development Plaza, Victory Plaza , Neo Metropolis, The Guangzhou International Finance Center (GZIFC) and Yuexiu Tower in Shanghai, with a total valuation about 28.7 billion yuan.

“Last year the average rent was under pressure because of the launch of The Guangzhou Chow Tai Fook Finance Centre,” said Lin Zhaoyuan, chairman of Yuexiu Reit.

The 530-metre-high Guangzhou CTF Finance Centre, sitting in the city’s central business district of Zhujiang New Town, became the latest tallest building in Guangzhou, surpassing its neighbour GZIFC, which is owned by Yuexiu Reit.

Lin said the trust expected rents to remain flat this year and would likely rise in 2018 as new supply has already been absorbed and there will be less office supply in 2017, and next year there will be no new supply in Zhujiang New Town.

“The service sector has already accounted for 68 per cent of Guangzhou’s GDP. The demand for office space is huge,” he said.