Yuexiu Real Estate Fund Lin Deliang-Low Earnings, Scale Causes Slow Development of Mainland REITs

Yuexiu Real Estate Fund Lin Deliang: Low Profits and Slow Performance of Mainland Real Estate Investment Trusts
Original title: Yuexiu Real Estate Fund Lin Deliang: Concerned about Zhou Yanyan, a city with a GDP of over one trillion. Recently, the economic growth rate of transformation has declined.Withdraw from the heart of Shanghai. “  In some cases, as the only standard overseas real estate investment trust fund used to operate domestic assets, Yuexiu Real Estate Investment Trust (referred to as: Yuexiu Real Estate Fund 00405).(HK) Chairman Lin Deliang expressed his logic of property ups and downs in major cities in China in an interview with 21st Century Business Herald.  Yuexiu Real Estate Fund was listed on the Hong Kong Stock Exchange in 2005 and entered the Hang Seng Index.The current property portfolio includes Baima Building, Fortune Plaza, Urban Construction Building, Victoria Plaza, Guangzhou International Finance Center, Shanghai Yuexiu Building, etc., with a total asset 北京桑拿体验网 value of over 35 billion yuan, and is one of the top ten listed real estate funds in Asia.  Focusing on 16 cities 4 years ago, the Yuexiu Real Estate Fund “goed out of the sheep and entered Shanghai” for the first time, and made asset acquisitions in areas outside Guangzhou, which led to the Shanghai Yuexiu Building (formerly Shanghai Hongjia Building).  The data shows that the revenue of Shanghai Yuexiu Building in 2018 reached 1.43 billion, an estimated 31.4.9 billion, an increase of 10 in the earlier acquisitions.7% and 11.3%, the occupancy rate continued to stabilize above 95%.According to the financial report data, as of 2018, the monthly unit price of the project is nearly 9.5 yuan / square meter, an increase of more than 15% compared with 2015; project property evaluation 31.4.9 billion yuan, 26 more than the purchase price.2.7 billion premium at 20%.  According to how to deal with “evacuating Lujiazui”, Lin Deliang said that he is adjusting the lease and improving services to make up for the impact of rising office vacancy in the next 2-3 years.  Lin Deliang told the 21st Century Business Herald that the vacancy rate of some office buildings in Pudong is indeed “rising up” and the Shanghai office market is under pressure.At the beginning, the overall economic pressure was too high. I believe that the entire Shanghai office market will be under some pressure. For the first time, the vacancy rate near Yuexiu Building reached 10%.”But the occupancy rate of Yuexiu Building is fairly stable.Lin Deliang revealed that the lease rate is 95% at the end of June and 46% of the leases have expired this year.Lease renewal.In addition, the lease has been extended. Previously, the lease was mainly 2 years, and now it is mainly 3 years. This can counteract the risk of rising vacancy rates in the next 2-3 years.  When judging whether to enter the commercial real estate of an inland city, Lin Deliang said that he mainly looked at the GDP volume of each city and the proportion of the tertiary industry.  For example, Yuexiu will focus on 16 inland cities with GDP growth of over one trillion, including Beijing, Shanghai, Guangzhou, Shenzhen, Tianjin, Chongqing, Wuhan, Chengdu, Suzhou, Qingdao, Nanjing, Hangzhou, Wuxi, and Changsha.Development of the mall.In the first half of the year, the contribution of Beijing’s tertiary industry to economic growth has exceeded 80%, and office buildings and shopping malls in Beijing will not be too bad.  Guangzhou and Shanghai initially accounted for over 70%, and other cities were between 50% and 60%.One accident was that Shenzhen was not among the top three.Because Shenzhen’s industrial structure is dominated by manufacturing, this is why some Shenzhen office vacancy rates exceed 20%.  Lin Deliang revealed that the Yuexiu Property Fund was recently in Shenzhen’s Qianhai and Houhai inspection projects. “Qianhai is in its infancy and Houhai is in its second growth stage. Rents are still rising.”Unlike some private placements that entered early in the project development, with high risks and high returns, the strategy choices adopted by mature funds that require stable distribution are not the case.”As for the evaluation of individual projects, Lin Deliang said that the requirement of Yuexiu Property Trust is that the project return rate is above 4%.”Long-term debt lock-in interest rate” The financing cost in the first half of this year was only 3.7%, financing costs are expected to further reduce in the second half of the year.”Developing and developing enterprises. As a company operating the leasing market, Lin Deliang said that Yuexiu Real Estate Fund has better cash flow and banks are willing to borrow money. In addition to the investment grades of Moody’s and S & P, Yuexiu Real Estate Fund has a lower cost of debt.In the first half of this year, the 5-year bond issue rate was only 3.6%, the actual average interest payment cost rate in the first half of the year 3.7%, domestic cash flow is good.  The background of this interest rate is that the one-month Hong Kong Interbank Offered Rate reached a high of 10 in the first half of this year. One of the reasons was that 74 companies passed the IPO, the raised funds increased by more than 30%, and some funds were withdrawn.Second, the first half of the year was the peak of debt due, so the market had limited liquidity.  ”Interbank lending rates were indeed relatively high in the first half of the year, almost 3%, but our financing cost was less than 4%, which means that our early management is effective. We try to fix long-term debts and lock in interest rates in advance. Other debt periods have also been extended, From the previous three years to five years.This is also our current financing strategy.”Lin Deliang said.  With the recent US interest rate cuts, Hong Kong’s interbank interest rates may hopefully fall back.Corporate financing costs are expected to decrease.  Compared with the slow progress of mainland real estate investment trust funds, Lin Deliang believes that the first reason is that the level of profit has decreased, which is not enough to cover financing costs (assuming the profit level is about 4%, but the five-year interest rate is at least 4).9%); Second, restructuring tax, operation tax and distribution tax are exempted in Hong Kong, but there is no similar policy in the domestic market.