Yuexiu Real Estate Investment Trust

Important accounting notes

Units as liabilities: Units are classified as financial liabilities under HKAS 32. "Profit/loss after tax before transactions with unitholders" is the economically relevant earnings line. "Net assets attributable to unitholders" (NAV) is the equity-equivalent.

No gross profit line: REITs report net property income (NPI) instead of gross profit.

EBITDA proxy: profit before finance income, finance expenses and tax + depreciation and amortisation. This is an analyst construct, not company-reported.

Income statement

Sources and derivations

• FY2021: 21st Century Business Herald / CS.com.cn (8 Mar 2022), and FY2022 Final Results for EPU and DPU.

• FY2022: FY2022 Final Results and press release. The loss is from the FY2023 results summary.

• FY2023–FY2024: FY2024 Final Results.

• FY2025: press release (11 Mar 2026) and Final DPU announcement (9 Apr 2026).

• FY2025 total distribution is derived as the interim RMB171.1m plus the final RMB0.0186 × 5,338.8m units (about RMB99.3m).

• FY2025 HK$ DPU is as declared. After Manager-fee unit dilution, actual payments were HK$0.0361 interim plus HK$0.0211 final, i.e. HK$0.0572.

• FY2024 profit before tax includes a RMB26.7m derivative gain, a RMB50.6m construction-payable gain and a RMB20.9m goodwill impairment outside the line shown.

Revenue CAGR FY2021–FY2025: about 0.8% per year (1,797 to 1,856). This flatters reality: FY2025 includes only about 9.5 months of Yuexiu Financial Tower.

DPU CAGR FY2021–FY2025 (HK$): about -30% per year.

Half-year income statement

Sources: 2025 and 2026 Interim Results Announcements: ### Balance sheet

Notes

• FY2025 values come from the comparative column of the 2026 Interim Results.

• The FY2025 portfolio valuation of RMB33,645m excludes Yuexiu Financial Tower, which is now held as an associate.

• FY2025 total liabilities/total assets is computed as 26,799/42,047.

• The FY2022 NAV is the opening 1 Jan 2023 balance from the FY2024 statement of changes.

Cash flow

Interest is classified within operating cash flow, which depresses reported OCF. FY2024 OCF of RMB219m did not cover distributions of RMB335m. Distributions are funded through the "additional items" mechanism: CAS depreciation add-backs, Manager fees paid in units and FX losses. Capital-in-nature distributions were RMB153.6m in FY2024 and RMB60.9m in 1H2026.

The RMB4.9bn net cash decrease in 1H2026 reflects deployment of the Yuexiu Financial Tower proceeds to repay about RMB5.3bn of debt.

Ratios

Notes

• ROIC is not meaningful: interest-bearing debt and unit capital are blended, and tax deferrals are large.

• Cash conversion cycle is not meaningful for a REIT.

• The 1H2026 interest-coverage figure excludes the RMB22.0m associate income and the RMB37.3m finance income. Including finance income, coverage was about 1.14x.

• FY2025 current ratio was 0.49x and debt/NAV 1.45x.

Commentary on trends, inflections and drivers

Revenue plateau then step-down. Revenue rose from RMB1.80bn (FY2021) to a peak of RMB2.09bn (FY2023). The Yuexiu Financial Tower acquisition added about RMB399m a year from late 2021, and the hotel rebounded post-COVID: GZIFC complex revenue reached RMB1,031m in FY2023. From FY2024 revenue declined for three reasons:

• office rental reversion (unit rent fell 3.9% in FY2024);

• falling occupancy: 85.0% (end-2023), 84.5% (end-2024), 82.1% (end-2025), 79.4% (30 Jun 2026, excluding Yuexiu Financial Tower);

• the Yuexiu Financial Tower disposal from Q4 2025.

The like-for-like 1H2026 decline of 4.3% shows the underlying erosion: Shanghai -20.8%, City Development Plaza -11.4%, Wuhan -11.2%, GZIFC office -8.5%. The hotel (+5.2%) and GZIFC mall (+6.8%) offset part of this.

NPI margin compression. The NPI margin was about 71% through FY2024 but fell to 66.2% in 1H2026. The cause is mix: high-margin office income left with Yuexiu Financial Tower (83% NPI margin), while the low-margin hotel (about 33%) is now 34% of revenue.

The distribution problem is a financing problem. NPI was broadly stable at RMB1.36–1.48bn from FY2022 to FY2024. DPU nevertheless collapsed from HK$0.2451 to HK$0.0680. The drivers were:

Interest costs: HIBOR-linked borrowing pushed finance costs excluding FX to about RMB925m in FY2023–FY2024, absorbing roughly 64% of NPI.

FX losses: RMB depreciation produced FX losses on USD/HKD debt of RMB622m (FY2022), RMB144m (FY2023) and RMB74m (FY2024).

Dilution: Units rose from about 4.9bn to 5.34bn through the January 2022 rights issue, Manager-fee units and Deferred Units.

Currency translation: RMB weakness reduced the HK$ value of RMB distributions.

Inflection in funding costs. The average financing cost fell from 4.74% (end-2023) to 4.16% (end-2024) and 3.61% (end-2025). It ticked up to 3.85% at 30 Jun 2026, mainly because the new USD green notes carry 6.5% against 2.65% on the bonds they refinanced. The average interest payment rate fell from 4.60% (FY2023) to 4.53% (FY2024), 3.77% (FY2025) and 3.79% (1H2026). Finance costs excluding FX fell 14% YoY in 1H2026 to RMB345m. This is the main lever for stabilising distributions.

Valuation drift. The portfolio valuation was flat-to-down in each period: -0.6% in FY2024, -0.2% in 1H2026. Cumulative fair-value losses drove NAV per unit from RMB4.31 (FY2021) to RMB2.63 (1H2026), a 39% decline. Part of this was dilution from the rights issue at HK$3.20, well below NAV.

Balance-sheet repair. The Yuexiu Financial Tower sale cut total borrowings from RMB20.4bn to RMB15.5bn and gearing from 48.5% to 41.9%, with headroom against the 50% REIT Code cap rising to about RMB3.0bn. The short-term debt wall of RMB13.1bn at end-2025 was resolved through RMB11.7bn of refinancing in 1H2026. Interest coverage of about 1.0–1.2x remains thin by any standard.

Management guidance

There is no numeric guidance. For 2H2026 management commits to:

• flexible leasing to defend occupancy;

• innovation in office products and retail scenarios;

• continued low-cost RMB refinancing;

• an orderly Four Seasons renovation.

It expects RMB rates to stay low and the economy to remain stable.

Consensus: not publicly available in sources reviewed.

Bull case

1. Distribution floor forming on lower interest costs.

   • Finance costs excluding FX fell 14% YoY to RMB345m in 1H2026.

   • About RMB5.3bn of debt has been repaid.

   • New RMB facilities at 2.75–2.85% replace 4–6% offshore debt.

   • The full-year benefit of 2026 refinancing should partly offset NPI attrition.

2. Extreme valuation dislocation. At about 0.21x P/NAV and about an 8% trailing yield, the units price in severe further impairment. A stabilisation in occupancy, or another asset sale near book value, would crystallise value. The Yuexiu Financial Tower sale was executed close to appraisal.

3. Hospitality and retail tailwinds.

   • Record Four Seasons RevPAR (RMB1,881).

   • GZIFC mall sales +9% and Victory Plaza sales +18%.

   • Visa-free inbound growth above 30%.

   • Together these give real growth in about 42% of revenue (hotel, apartments and malls).

Bear case

1. Structural office decline.

   • Like-for-like office revenue keeps falling: GZIFC office -8.5%, Shanghai -20.8%, Wuhan -11.2% in 1H2026.

   • Overall occupancy is below 80% for the first time in the data reviewed.

   • About half of leases rolled over in FY2025–FY2026 at lower rents.

2. Disposal dilution and financing-cost creep.

   • Selling Yuexiu Financial Tower removed about RMB300m a year of NPI (FY2024 basis) in exchange for about RMB5.3bn of debt reduction. At about a 3.8% cost of debt this saves only about RMB200m of interest, so the trade dilutes distributable income.

   • The average financing cost rose to 3.85% at 30 Jun 2026, partly because the USD notes now cost 6.5%.

   • DPU fell 14.5% in 1H2026.

3. Governance and dilution overhang.

   • Manager-fee units are paid at depressed prices.

   • 167.8m Deferred Units remain to be issued.

   • Coverage is about 1.0x.

   • The sponsor is under earnings pressure: Yuexiu Property's 1H2026 profit was about RMB90m.

   • Together these raise the risk of further sponsor-driven transactions that may not favour minority unitholders.

Catalysts and monitorables (next 12 months)

Analyst verdict

Yuexiu REIT has stopped deteriorating on the balance sheet, but it has not stopped deteriorating in its operations.

The decisive event of the past 18 months was the partial disposal of Yuexiu Financial Tower. Together with a disciplined refinancing programme, it removed the near-term debt wall: short-term borrowings fell from RMB13.1bn to RMB3.2bn. Gearing fell to 41.9%, and RMB and fixed-rate funding now dominate.

Management deserves credit for capital-markets execution: a Panda bond, green dual-currency notes and 15-year onshore money at 2.85%. The investment-grade ratings, with outlooks moved to stable, confirm that liquidity risk has receded materially.

The income engine is still shrinking, however.

• Like-for-like revenue fell 4.3% in 1H2026.

• Occupancy slipped below 80%.

• The NPI margin compressed to 66% as the hotel's share rose.

• Interest coverage of about 1.0x leaves almost no room for error.

The disposal shrank the portfolio and its future earnings power as much as it de-risked it. Distribution per unit has fallen in every period since 2021. HK$ DPU is down about 77% in four years, compounded by dilution from fee and deferred units, whose issue mechanics favour the sponsor.

At about 0.21x NAV and an 8% trailing yield, the market is pricing in sustained office impairment in all four Mainland cities and scepticism about related-party governance. Three developments would change that judgement:

1. office occupancy holding near 80% through the 2026–2027 expiry wave;

2. annualised finance costs falling below about RMB650m;

3. evidence that further asset recycling occurs at or near appraised values.

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Source documents: - Yuexiu REIT Final Results Announcements FY2022, FY2023, FY2024 (HKEXnews)

• 2025 and 2026 Interim Results Announcements and Interim Reports (HKEXnews, 14 Aug 2025; 12 Aug 2026; 27 Aug 2026)

• FY2025 annual results press release (ACN Newswire, 11 Mar 2026)

• Final DPU announcement (9 Apr 2026)

• Board-meeting notices (27 Feb 2026; 31 Jul 2026)

• HKEX circulars PMI2026040 and SMD2026134

• Monthly return for Dec 2025

• Yuexiu Financial Tower disposal release (8 Sep 2025)

• 21st Century Business Herald (8 Mar 2022; 14 Aug 2026)

• Beijing News (11 Mar 2026); Winshang (2024–2026); Gelonghui (17 Mar 2025)

• Macau Business (MOX bond); etnet (distribution records); Lixinger (market data)

• Yuexiu Property 2026 interim results announcement (28 Aug 2026)