CMC REIT’s Total Revenue Reached RMB432.8 Million with a payout ratio of 100%
Overall Occupancy Rate of Property Portfolio Remains High at 87.7%
HONG KONG, China Merchants Commercial Real Estate Investment Trust (“CMC REIT” or “the Trust”, HKEX stock code:1503), announced its annual results for the year ended 31 December 2021.
In 2021, CMC REIT was impacted by the ongoing COVID-19 pandemic. Total revenue for the year was RMB432.8 million, RMB62.7 million more than the revenue for 2020. This significant increase was mainly a reflection of stable recovery from last year’s epidemic outbreak and the proper operational strategies and efforts made by China Merchants Land Asset Management Co., Limited, the manager of CMC REIT (“the Manager”). In general, leasing on both the office and retail fronts are picking up in Greater Bay Area of China, albeit gradually.
Together with the interim distribution per unit of HK$10.39 cents, the total distribution per unit for the year amounted to HK$25.41 cents, equivalent to a distribution yield of 9.7%, based on the closing price of CMC REIT on 31 December 2021 (being HK$2.61), and a payout ratio of 100% was maintained.
The market value of our portfolio increased from RMB6,644 million as of 31 December 2020 to RMB6,746 million as of 31 December 2021, an increase of RMB102 million. Net assets attributable to unitholders increased by 2.5% year-on-year to RMB4,007 million, or RMB3.55 per unit, equivalent to HKD4.34 per Unit (based on the central parity rate as announced by the People’s Bank of China on 31 December 2021), representing a 66.3% premium to the closing unit price of HKD2.61 on 31 December 2021.
Business Performance
CMC REIT has a property portfolio of five high-quality commercial properties located in the Shekou Industrial Zone of Shenzhen, in the Greater Bay Area of China. Over the Reporting Year, the occupancy rate of the overall properties portfolio increased from 84.3% as at 31 December 2020 to 87.7% as at 31 December 2021, representing an increase of 3.4 percentage points.
Over the Reporting Year, the passing rent of all our properties saw an increase, ranging from 2.7% to 14.9%. In particular, passing rent of Technology Building saw a significant increase of 14.9% and of the Garden City Shopping Centre, there was an increase of 6.1%.
New Times Plaza
New Times Plaza performed well in 2021 with an average occupancy rate of over 90% for the year. The occupancy rate at the end of the year increased to 91.9%. Due to more flexible leasing strategies adopted by the Manager during the year and additional value-added services, the passing rent increased gradually from RMB174.6/sq.m. to RMB179.4/sq.m. over the Reporting Year, an increase of approximately 3%.
Cyberport Building, Technology Building and Technology Building 2
The occupancy rate of Cyberport Building decreased slightly from 72.9% to 71.3% in 2021 as some tenants moved out upon the expiration of their leases to avoid the inconvenience caused by renovation and enhancement works. The Manager is currently conducting leasing promotions through various channels and one of the priorities of the operations manager in 2022 is to fill most of the vacant space.
Shenzhen Qianhai Shekou Free Trade Zone Hospital, the major tenant of Technology Building has commenced operations and the occupancy rate remains at 100% as this tenant continues to expand its leased area by taking up all the spaces vacated by other tenants. Some of the tenants have been moving to Technology Building 2, and as a result, the occupancy rate of Technology Building 2 increased from 74.4% to 81.2% over the Reporting Year. The passing rents of the Net Valley Properties experienced increases ranging from 2.9% to 14.9% during 2021.
Garden City Shopping Centre
Throughout 2021 Shenzhen’s commercial complexes were affected by the recurring impact of the ongoing COVID-19 epidemic, but Garden City Shopping Centre managed to sustain commercial activity at a stable level over the year. On top of maintaining an occupancy rate of over 88% during the Reporting Year, passing rents were lifted 6.1% by RMB10.2/sq.m. through the introduction of select emerging commercial brands more in line with current consumer habits during tenant turnover.
Outlook
In the beginning of 2022, the recovery of the economics remains challenging amid the lingering uncertainty arising from the resurgence of COVID-19, inflation, dynamic international relations and the ongoing deleveraging campaign. In the “2022 REPORT ON THE WORK OF THE GOVERNMENT”, China has set the growth of GDP to around 5.5%. This stablisation is becoming a key strategy for the coming year.
By 2025, the competition in Shenzhen office market will further intensify as the amount of new supply will be close to the stock of the last decades. Although most of the office buildings coming on stream are located in emerging peripheral districts, they could have an impact on the established business districts. Over the same timeframe the trend of stronger consumer spending is expected to continue, and the overall retail commercial market should remain resilient looking forward however the competition for quality tenants will become increasingly fierce.
The Manager will adopt proactive asset management measures to continuously enhance the market competitiveness and operating performance of its assets to generate stable returns for the investors. Fortunately, several stations of Shenzhen Metro Line 12 connecting the Shekou and Baoan launching in 2022 are located around our properties, and their accessibility will be significantly enhanced. The Manager intends to maximize asset value by taking advantage of the situation and actively accelerating the progress of asset enhancement and renovation.
Mr. HUANG Junong, Chairman and Non-executive Director of CMC REIT, said, “The Manager will actively arrange refinancing to lock in the current low interest rate and take the opportunity to stagger the expiry of debt and optimize the overall capital structure. This will make CMC REIT more resilient against financial risk. At the same time, the Manager will also actively look for suitable properties in first and second tier cities across the market to be injected into CMC REIT, so as to increase the AUM and diversify the portfolio under management. Currently, the Manager is actively in negotiations with the China Merchants Group as well as external parties, with a view to executing the asset injection that increases returns for unitholders as soon as possible.”
About CMC REIT
China Merchants Commercial REIT is a Hong Kong collective investment scheme constituted as a unit trust and authorised under section 104 of the SFO. China Merchants Commercial REIT is a REIT formed to primarily own and invest in high quality income-generating commercial properties in the PRC (including Hong Kong and Macao but excluding the CML Cities). It will initially focus on: (i) the Greater Bay Area (other than Foshan and Guangzhou, being two of the CML Cities), which is where the initial five Properties are situated; and (ii) Beijing and Shanghai. China Merchants Commercial REIT is managed by the REIT Manager whose key investment objectives are to provide Unitholders with stable distributions, sustainable and long-term distribution growth, and enhancement in the value of China Merchants Commercial REIT’s properties.
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