# Loss Doubled, Distribution Shrinks! Yuexiu REIT Financing Cost Declining Supports Cash Flow

Hong Kong-listed Real Estate Investment Trust—Yuexiu Property Trust (00405.HK, hereafter “Yuexiu REIT”)—the world’s first REIT investing in Mainland China property, announced its 2025 annual results on March 11.

Looking at the full-year data, Yuexiu REIT’s income declined, losses widened, and distribution amounts decreased year-over-year, indicating significant operational pressure. However, the fund has also strengthened its long-term foundation through financial structure and asset portfolio optimization, maintaining overall stability.

Losses Double, Office Business Shows Significant Divergence

Public information shows that Yuexiu REIT was listed on the Hong Kong Stock Exchange in 2005. Its properties are located in key areas of Guangzhou, Shanghai, Wuhan, Hangzhou, and Hong Kong, covering office buildings, retail malls, specialized markets, hotels, and serviced apartments.

In 2025, Yuexiu REIT faced considerable operational pressure, with losses doubling. The total revenue reached HKD 1.856 billion, down 8.6% year-over-year; net property income was HKD 1.284 billion, down 11.2%; after-tax losses amounted to HKD 694 million, an increase of 106.3% compared to the previous year.

Revenue and profit declined mainly due to pressure on core business operations. Office buildings are the REIT’s largest income pillar, contributing over 50% of total revenue, with their performance directly impacting overall results.

Affected by increased market supply and weak demand, office operations in 2025 faced greater challenges.

During the period, overall office leasing rate was 78.1%, down 3.6 percentage points year-over-year; rental prices averaged HKD 164.8 per square meter per month, down 7.5%. Total income also declined, with operating revenue for the year at HKD 986 million, down 14.26%.

Operational performance varied significantly across regions. Yuexiu Tower in Hong Kong achieved 100% occupancy; high-quality projects in Guangzhou, Shanghai, and Hangzhou maintained occupancy rates above 80%.

In contrast, Grade-A office buildings in Wuhan had a leasing rate of only 62.1%, with a rent of HKD 72.1 per square meter per month, notably lower than the company’s overall and other core city levels, becoming a major weakness dragging down the overall office segment.

In terms of asset valuation, the company’s property portfolio remained stable. As of the end of 2025, Yuexiu REIT owned nine core properties including Baima Building and Fortune Plaza, with a revalued asset market value of approximately HKD 33.645 billion, maintaining a solid core asset base.

Distributions Shrink, Lower Financing Costs Support Cash Flow

Despite operational pressures, Yuexiu REIT has optimized its financial costs to maintain stable investor distributions and continuously improve its financial health.

Regarding dividends, the total payout for 2025 was HKD 271 million, down 14% year-over-year. Although the payout size shrank with operational performance, the distribution ratio remained high at 96%, providing investors with relatively stable returns.

Yuexiu REIT stated that the high distribution level was supported by continued declines in financing costs, effectively reducing financial burdens and freeing up distributable cash flow.

Financial reports show that Yuexiu REIT’s average interest rate in 2025 fell to 3.77%, a decrease of 76 basis points from the previous year; the financing cost rate at year-end further dropped to 3.61%, the lowest in nearly three years, saving approximately HKD 150 million in financing costs for the year—funds that can be used for asset maintenance, operational upgrades, and investor distributions.

In addition to lowering financing costs, Yuexiu REIT also raised funds through asset disposals and optimized its asset structure. In Q4 2025, it sold a 50% stake in Yuexiu Financial Tower, reducing its office asset proportion and raising about HKD 5.3 billion in cash.

Overall, 2025 was still a period of industry adjustment and operational pressure for Yuexiu REIT, with income, profits, and distributions declining in tandem, and regional operational divergence becoming more pronounced. The company relied on falling financing costs and asset disposals to improve its financial position, supporting short-term liquidity and distribution capacity. However, recovery in commercial property leasing and profitability remains uncertain.

Text by Huang Ning