GZI paid out 100% in distributable income last year.
GZI Real Estate Investment Trust managed to buck the trend in Guangzhou last year, a city that along with Shenzhen has shown some of the most dramatic y-o-y recent declines in property prices, mostly confined to residential real estate.
Perhaps the fact that GZI REIT’s (HK 405) five assets are immune from any residential exposure is the reason the Hong Kong-listed firm has managed to keep its head above water so as better to see the safety of the shore.
In 2008, GZI REIT had a y-o-y revenue increase of 23 pct to 496 mln hkd. And despite its net profit sliding by 36%, in large part due to its securing a 2.1 bln hkd three-year loan facility, the company declared distributions per unit of 0.246 hkd, up 9% from FY2007, rendering its distributable income to reach 100%, the highest among Hong Kong-listed REITs.
Distributable income over the period rose 16% y-o-y to 262 mln hkd.
Its end-year share price was 1.79 hkd, down considerably from the year-earlier level of 3.08 hkd. Since then, it has crawled back to around 2.01 hkd, with Taifook Research giving it a 12-month target price of 2.45 hkd, representing a 22% upside.
Due to its outperforming its Hong Kong-listed REIT competitors, it is little wonder that it was the top-pick choice among peers at the recent Taifook Institutional Investor Conference 2009 – co-sponsored by Aries Consulting -- and one of 14 firms considered likely “winners” following a turnaround in the current economic slump.
White Horse Building ‘mane’ breadwinner
The company owes much of its success – over three-fifths to be precise – to a single commercial property.
Management is confident that a high occupancy rate can be maintained in the White Horse Building, a mature wholesale and retail center which accounts for more than 60% of the company’s rental income, given the long waiting list for lessees and the renewal intentions of the existing tenants.
And a cursory glance at statistics reveals the hard-to-overstate importance of the property to GZI REIT.
Although WHB only comprises 23.8% of GZI REIT’s total rentable area (all located in Guangzhou), the White Horse Building contributed 298 mln hkd in gross income last year, or 60.1% of the group’s total.
All told, GZI REIT’s five holdings had a combined occupancy rate of 98.1%, up 0.7 percentage point y-o-y, an impressive performance in a so-called buyers’ market!
Perhaps this prompted GZI REIT to make to property pickups of its own of late, acquiring Yue Xiu Metropolis in June last year for 677 mln hkd, and Fortune Plaza Unit 1701 in July for 15.5 mln hkd.
The company is the world’s first REIT focusing on real estate in mainland China, currently having five properties including the White Horse Building, and four Grade A office buildings with one located in a traditional commercial district and three in Guangzhou’s Tianhe Central Business District (CBD).
GZI REIT’s lease expiry ratio in FY2009 and FY2010 is 23.8% and 37.6% in terms of lease areas, respectively, or 31.6% and 46.0% in terms of rentals.
Spun off from Guangzhou Investment and listed on the HKEX in Dec 2005, GZI REIT (HK 405) is a real estate investment trust constituted by a trust deed between HSBC Institutional Trust Services (Asia) as the trustee and GZI REIT Asset Management as the manager.
