China's Yuexiu REIT sees higher 2020 office rental income even as coronavirus hits retail

Yuexiu Real Estate Investment Trust

05/03/2020 12:50

HONG KONG, March 5 (Reuters) - China's Yuexiu Real Estate
Investment Trust  0405.HK  said on Thursday its retail and hotel
businesses will be under pressure in the first half of the year
due to the coronavirus outbreak, but it still expected office
rental income to grow in 2020 and to see a stable occupancy rate
on strong tenant demand.     
    Its single commercial building in the epidemic center,
Wuhan, signed two new leases this year - to an online training
company and a state-owned company - amid the novel coronovirus
outbreak, the Guangzhou-based REIT said at a conference to
announce its earnings. 
    It said the fact that most of its tenants were not
small-to-medium enterprises would help mitigate the impact of
the coronavirus outbreak on its earnings, suggesting larger
companies may be more resilient to a potential economic
slowdown.    
    A supermarket located in the building recorded daily
turnover of over 300,000 yuan in February, 19% higher than a
year ago, and more than before the city's lockdown. 
    Still, most of the retail tenants remained closed during the
month, which would affect its rental income.
    The company said rental concessions to its retail tenants in
Wuhan and other cities would reduce its total income by 90
million yuan this year, an amount that represents 4.4% of total
gross revenue in 2019. That drop would be reflected over the
coming three financial years due to a three-year lease period. 
    But Chairman and Chief Executive Lin Deliang said he was
optimistic over the long run and expects to see a surge in
consumer spending after the epidemic is over. He said the
company was talking to its hotel operator, Four Seasons, as well
as to retail tenants, to prepare for it. 
    "China's economy now is different from during (a previous
viral outbreak) SARS; it is mainly driven by consumption. So
what we're doing now is to discuss with tenants how to boost
consumption after the epidemic is over so that we can catch up
on the businesses," Lin said.    
    Yuexiu REIT said its distribution income in 2019 dropped
10.4% to 761.2 million yuan.
    The stock closed up 1.4% before the earnings announcement.
Hang Seng Index  .HSI  was up 2.1%.
    

 (Reporting by Clare Jim; Editing by Bernadette Baum)
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