Yuexiu REIT Issuer Summary

Report date: 2026-05-21

Issuer: Yuexiu Real Estate Investment Trust（越秀房地産投資信託基金、Yuexiu REIT、HKEx: 00405）

Relevant bond reference: Yuexiu REIT MTN Company Limited / Moon King Limited notes under the US$1.5bn Guaranteed Medium Term Note Programme, guaranteed by HSBC Institutional Trust Services (Asia) Limited solely in its capacity as trustee of Yuexiu REIT, with recourse limited to the assets of Yuexiu REIT. This is not an HSBC group parent-bank guarantee.

1. Business Snapshot and Recent Developments

Yuexiu Real Estate Investment Trust（hereafter Yuexiu REIT or the REIT）is an SFC-authorised REIT listed on the Hong Kong Stock Exchange. It owns and operates mainly commercial real estate in mainland China, including offices, retail properties, wholesale markets, hotels and serviced apartments. It was listed on the Hong Kong Stock Exchange on 21 December 2005. As of end-2025, it owned or held interests in White Horse Building, Fortune Plaza, City Development Plaza, Victory Plaza, Guangzhou International Finance Centre（GZIFC）, a 49.495% interest in Yuexiu Financial Tower, all in Guangzhou, Yue Xiu Tower in Shanghai, Wuhan Yuexiu Fortune Centre and Starry Victoria Shopping Centre in Wuhan, Victory Business Centre in Hangzhou, and certain floors of Yue Xiu Building in Hong Kong. For credit analysis purposes, the issuer should be treated not as a mainland Chinese residential developer, but as a REIT credit dependent on rental and operating income from investment properties, NPI, asset valuations, borrowing limits, and access to bank and bond markets.

The credit story of the REIT is neither simply that of a “Chinese REIT with a strong parent” nor that of a “high-yield REIT”. Its core is a mainland Chinese commercial property portfolio centred on Guangzhou, with particularly significant contributions from offices and GZIFC-related assets. At the same time, the office market is exposed to oversupply, rental competition and corporate cost-reduction demand. Therefore, in assessing repayment capacity, occupancy, unit rent, NPI, valuations, borrowing ratio, short-term borrowings, bank loan covenants, and rating-agency LTV and interest coverage should take priority over headline DPU yield.

For the full year 2025, the REIT experienced a year in which “financial flexibility improved, but operating and structural weaknesses were also visible”. Gross income for the year ended December 2025 was RMB1,855.9m, down 8.6% from RMB2,031.5m in the previous year, and NPI was RMB1,283.6m, down 11.2%. DPU was HK$0.0580, down 14.7% from HK$0.0680 in the previous year, and total distribution was RMB270.7m, down 14.0%. The accounting loss widened to RMB694.3m, but the main driver was an RMB640.1m fair-value loss on investment properties, rather than an operating deficit involving cash outflow. That said, it would also be wrong to dismiss valuation losses. A REIT’s debt capacity depends on the value of its investment properties, so valuation declines feed through to LTV, bank covenants, asset coverage for unsecured bonds, and unit-market valuation.

The largest event was the disposal of a 50% interest in Yuexiu Financial Tower, completed in October 2025. Through this transaction, the asset was removed from consolidation, and Yuexiu REIT continued to invest in it as a Qualified Minority-owned Property with a 49.495% beneficial interest. Fitch stated that the transaction would generate around RMB5.3bn of cash proceeds for the REIT and cited improvement in leverage and interest coverage as the reason for stabilising the rating outlook. In contrast, the company’s 2025 results notes present the accounting cash consideration as RMB1.718bn, retained investments as RMB1.842bn, and net inflow of cash and cash equivalents as RMB1.627bn. Fitch’s approximately RMB5.3bn and the cash-inflow amount in the company’s results notes may differ in definition because of differences in transaction scope, borrowings, JV interests and accounting presentation. This report uses the company-disclosed net inflow and cash and bank deposits at end-2025 for direct liquidity analysis, and treats Fitch’s figure as the rating agency’s view of the deleveraging effect. In any case, the transaction modestly reduced office concentration, increased cash and created refinancing room, while also reducing consolidated NPI and the investment-property balance and increasing the complexity of related-party transactions and the JV structure.

On ratings, Fitch affirmed Yuexiu REIT’s Long-Term Foreign-Currency IDR at BBB- in November 2025 and revised the Outlook from Negative to Stable. Fitch expects EBITDA interest coverage to exceed its negative sensitivity after the 50% disposal of Yuexiu Financial Tower and incorporates a one-notch uplift for support expectations from the parent, Guangzhou Yue Xiu Holdings Limited（hereafter GYX）. S&P also assigned a BBB- issue rating in February 2026 to Moon King Limited’s RMB-denominated senior unsecured green notes and referred to Yuexiu REIT’s issuer credit rating as BBB-/Stable. The REIT is therefore positioned at the bottom of investment grade, but the strength of the rating reflects not only standalone rental cash flow but also expected parent support, funding access and post-disposal deleveraging.

At the same time, the end-2025 balance sheet contains warning signs that investors cannot ignore. Cash and bank deposits increased sharply to RMB6.64bn, but borrowings due within 12 months were RMB13.08bn, and net current liabilities widened to RMB7.08bn. In addition, as of end-2025, the REIT had breached restrictions on asset disposals and security margin ratio limits under certain bank borrowings, affecting RMB12.979bn of bank borrowings. Of this amount, RMB3.784bn was classified as current liabilities because, as of the reporting date, the lenders had not provided waivers in relation to their rights to demand immediate repayment. The company states that, taking into account cash on hand, the MTN programme, and available debt and note facilities, it has sufficient resources on a going-concern basis. Therefore, it should not be immediately characterised as a liquidity crisis, but covenant management and short-term refinancing have become the most important monitoring items in the REIT’s credit assessment.

In February 2026, Yuexiu REIT MTN Company Limited issued USD300m of 6.50% green notes due 2029, and Moon King Limited issued CNY690m of 3.50% green notes due 2029. This is important in assessing the short-term debt classification at end-2025 and 2026 maturities. If the new notes are in fact used to refinance or repay existing debt and ease the bank covenant issue, liquidity metrics at end-2025 may improve relative to the year-end snapshot. However, as of the date of this report, bank waivers, amendments to terms, and repayment or reclassification by individual facility have not been confirmed. It is therefore necessary to verify, in the 2026 interim results or the next funding disclosure, how short-term debt, cash, covenants and the borrowing ratio have moved.

2. Industry Position and Franchise Strength

Yuexiu REIT’s business base lies in holding mainland Chinese commercial real estate in the form of a listed REIT and operating it through a combination of Hong Kong capital markets and the mainland Chinese parent and bank relationships. As a Hong Kong-listed REIT, its nature differs from the defensive characteristics of Link REIT’s Hong Kong daily-needs retail and car-park assets. Yuexiu REIT derives income from Guangzhou CBD assets, GZIFC, hotels, serviced apartments, wholesale markets, and office and retail properties across multiple cities. Therefore, its credit strength is derived not from the strong defensiveness of daily-needs retail, but from location, parent network, scope for asset sales and restructuring, RMB funding capacity, and the extent to which it can absorb the commercial-property cycle.

The first element supporting the REIT’s franchise is its asset base in Guangzhou. GZIFC is a large mixed-use complex including offices, retail properties, Four Seasons Hotel Guangzhou and Ascott Serviced Apartments GZIFC, and is central to the REIT’s earnings and asset value. Fitch states that GZIFC and the 49.5%-owned Yuexiu Financial Tower account for a large part of the portfolio, and notes the very high weighting to the Guangzhou region. Concentration in prime commercial properties in Guangzhou is positive for asset quality, tenant attraction, bank valuation and parent support. At the same time, it is a constraint in terms of geographic diversification and creates high sensitivity to Guangzhou office rents, Guangzhou consumption and Guangzhou property valuations.

The second element is the relationship with the parent and sponsor. Through the Yuexiu Group brand, bank relationships, asset pipeline and related-party transactions, Yuexiu REIT is more likely to have funding and asset-rotation options than a standalone REIT. Fitch incorporates a one-notch uplift in YXR’s IDR based on parent support, and views the recent Yuexiu Financial Tower transaction as an example of support. The most important point, however, is not to confuse support expectations with an explicit guarantee. The fact that the parent agreed to asset restructuring through a related-party transaction provides credit support, but does not mean there is a legal obligation to unconditionally assume all debt. Bondholders need to distinguish among the REIT itself, the trustee, the issuer, the guarantee, and the recourse-limited-to-assets structure.

The third element is the breadth of funding channels. Yuexiu REIT uses bank borrowings, USD MTNs, RMB/CNY bonds and Panda-bond-type onshore debt instruments. In 2025, it issued RMB1.0bn of offshore RMB bonds and RMB600m of onshore bonds, and in February 2026 it issued USD300m and CNY690m of green notes. It is clear that this is not an issuer whose funding markets are completely shut. In addition, the company stated that its 2025 average funding cost was 3.61%, a three-year low, suggesting that lower HKD rates, RMB funding and parent/bank relationships may have contained funding costs.

That said, the REIT’s business position has clear weaknesses. As of end-2025, the occupancy rate of the office segment was 78.1% and unit rent was RMB164.8/sq.m./month, both lower than in the previous year. GZIFC office occupancy was only 80.9%, and Wuhan office occupancy was low at 62.1%. Hangzhou Victory occupancy was 84.5%, but fell 13.2 percentage points year on year due to an early tenant termination. This shows that, within commercial real estate, offices are exposed to structural oversupply, corporate cost reductions and competition for tenant relocations. Even with prime locations and parent support, when market rent itself is weak, REIT NPI and valuations come under pressure.

Retail, wholesale and hotels are not as straightforwardly weak as offices. White Horse Building maintained an occupancy rate of 96.0% and had the REIT’s highest unit rent at RMB439.8/sq.m./month. GZIFC retail mall was 95.5% occupied, Victory Plaza 94.0%, and Wuhan retail mall 87.4%, with retail properties showing higher occupancy than offices. Four Seasons Hotel Guangzhou saw its average occupancy decline to 77.7% due to renovation, but its average room rate rose to RMB2,260. Ascott Serviced Apartments GZIFC had an average occupancy rate of 91.5%, more stable than the hotel. For credit purposes, the key issue is how far wholesale, retail and hotels can mitigate the weakness in offices.

Relative to peers, Yuexiu REIT’s credit level differs from Hong Kong-centred REITs such as Link REIT, which are A-rated and have low gearing. Yuexiu REIT is rated BBB-, the bottom of investment grade. Fitch, in comparisons with Wharf and Starhill Global REIT, gives some credit to Yuexiu REIT’s portfolio quality but sees constraints in scale, leverage, interest coverage and income stability. Therefore, it is reasonable to view Yuexiu REIT as “a REIT with strong sponsor support within Chinese property”, but it would be an overstatement to view it as having the same defensiveness as a large Hong Kong REIT.

3. Portfolio and Segment Assessment

3.1 Portfolio Mix

The end-2025 portfolio is nominally made up of ten properties, but the credit centre of gravity is clearly in Guangzhou and offices. The 2025 results highlights state the end-2025 property portfolio valuation as RMB33.645bn, and, due to the effect of the 50% disposal of Yuexiu Financial Tower, also present the 2024 comparative figure as RMB34.024bn. At the time of the 2024 results, the pre-disposal property portfolio valuation was RMB42.308bn. Therefore, a simple year-on-year comparison of valuations does not make it easy to read the change in asset value. The displayed 2025 portfolio valuation appears to have declined by 1.1%, but this is affected by the post-disposal presentation basis. Investors need to separate the deleveraging effect from the disposal from valuation losses and rental declines in the remaining portfolio.

By property, White Horse Building, Fortune Plaza, City Development Plaza, Victory Plaza and GZIFC are all located in Guangzhou. Yuexiu Financial Tower, in which the REIT retains a 49.495% interest after the disposal, is added to this. There are also assets in Shanghai, Wuhan, Hangzhou and Hong Kong, but Guangzhou remains highly important. The portfolio is not fully diversified enough to claim broad geographic dispersion; the Guangzhou commercial-property cycle and the relationship with Yuexiu Group are at the core of the credit.

What this table shows is that Yuexiu REIT is not “a REIT made up only of bad assets”, but it is also difficult to describe it as a “defensive REIT with high occupancy and long leases”. Wholesale, retail, hotels and serviced apartments have resilient elements, but the office segment, which accounts for the largest share of NPI, is weak. In particular, the 62.1% occupancy rate of Wuhan office may indicate structural oversupply in the regional office market rather than merely temporary vacancy.

3.2 Segment Revenue and NPI

Looking at 2025 gross income and NPI by segment, it is clear that offices are the largest source of income. Office gross income in 2025 was RMB986.2m, representing 53.1% of total gross income. Office NPI was RMB817.1m, representing 63.7% of total NPI. In other words, weakness in office rents is not merely an issue for some assets, but is directly linked to the REIT’s overall repayment capacity and rating.

The deterioration in office income includes the accounting effect of the shorter income-recognition period following the sale of Yuexiu Financial Tower, so it should not be read entirely as a rental decline at existing assets. However, the MD&A in the 2025 results states that, in the mainland China office market, companies pursued “low cost and high efficiency”, while cross-regional relocations and rental pressure continued. Given the occupancy declines at GZIFC office, Shanghai Yue Xiu Tower and Hangzhou Victory, weak office demand has substance. Even if the disposal reduces the office weighting, the main remaining portfolio is still office-heavy.

White Horse Building, the wholesale market asset, maintained 96.0% occupancy in 2025, and gross income and NPI increased slightly. It has different demand drivers from ordinary offices because it is supported by apparel wholesale, external trade and industrial-cluster networks. For credit purposes, it is an asset that adds income diversity to the portfolio and offsets low office occupancy to some extent. However, wholesale markets are affected by e-commerce, distribution structures, consumer demand and the export environment. High occupancy alone should not be assumed to mean permanent stability.

Retail properties had high occupancy but lower income. The occupancy rates of GZIFC retail mall, Victory Plaza and Wuhan Starry Victoria Shopping Centre were 95.5%, 94.0% and 87.4%, respectively, and vacancy is not severe. However, retail segment gross income was RMB147.4m, down 11.8% year on year, and NPI also fell 12.7% to RMB122.1m. This indicates that even when a retail property is nearly full, rental terms, promotion costs, tenant mix and weak consumption can affect earnings. In credit analysis, occupancy alone is insufficient; unit rents, turnover rent, tenant turnover and consumption trends also need to be considered.

Hotels and serviced apartments have a somewhat different nature within Yuexiu REIT. They are closer to accommodation demand and operating income than to rental-type income. Gross income in 2025 was RMB513.5m, slightly above the previous year, and NPI was broadly flat at RMB168.5m. Four Seasons Hotel Guangzhou saw average occupancy fall to 77.7% due to renovation, but average room rate rose to RMB2,260. Ascott Serviced Apartments GZIFC maintained an average occupancy rate of 91.5%. Fitch’s inclusion of hotel EBITDA in its interest coverage metric indicates that it regards this segment’s performance as stable to some degree. However, hotel income is more sensitive to economic conditions and travel demand than leased offices, and should not be overvalued as stable credit income.

4. Financial Profile and Analysis

When analysing Yuexiu REIT’s financial profile, three REIT-specific differences must be kept in mind. First, accounting profit or loss is heavily affected by fair-value gains or losses on investment properties, so net profit or loss alone cannot be used to assess repayment capacity. Second, DPU and distribution yield are important for unitholders, but for bondholders they need to be assessed in relation to retained cash flow, distribution policy, capital-market access and leverage. Third, borrowing ratios and covenants depend on asset values, so a fall in valuations can reduce credit headroom even if NPI remains.

Key metrics from 2023 to 2025 are as follows. The 2025 results highlights present 2024 property portfolio valuation as RMB34.024bn, aligned with the post-disposal presentation of Yuexiu Financial Tower, but at the time of the 2024 results it was RMB42.308bn. This table mainly uses the presentation in the 2025 results highlights for comparability, with the difference noted.

On earnings, the decline in revenue and NPI in 2025 is credit negative. Against NPI of RMB1.284bn, finance expenses were RMB834.3m, leaving a heavy burden from interest, foreign exchange and finance costs. The company states that finance expenses excluding exchange losses declined to RMB773.2m, but if NPI contracts, the cushion in interest coverage can quickly erode.

The accounting net loss was substantially affected by investment-property valuation losses. The fair-value loss on investment properties in 2025 was RMB640.1m, up from RMB321.9m in 2024. This does not involve cash outflow, but it is fundamental information for REIT credit. Investment-property valuation is the denominator for borrowing limits, collateral headroom, bank covenants, rating-agency LTV and unit-market valuation. If valuation losses continue, debt capacity will shrink even if some NPI remains, and the room for deleveraging through asset sales will also decline.

On distributions, Yuexiu REIT is required under its Trust Deed to distribute at least 90% of Total Distributable Income, and the full-year 2025 payout ratio was approximately 96%. Maintaining DPU is desirable for unitholders, but in a credit stress scenario it constrains retained cash flow and deleveraging. The decline in DPU in 2025 is negative for the unit market, but from the perspective of bond investors, adjusting distributions towards 90% and retaining funds for debt repayment or capex is more prudent than excessive maintenance of distributions.

However, of the 2025 total distribution of RMB270.7m, RMB198.3m was capital in nature. REIT distributions do not simply correspond to accounting profit, so DPU yield alone should not be used to evaluate earnings capacity. For bond investors, what matters is liquidity and borrowing ratio after distributions.

On the balance sheet, total assets declined from RMB43.285bn at end-2024 to RMB42.047bn at end-2025, and investment properties fell significantly to RMB28.831bn. At the same time, cash and cash equivalents increased to RMB6.580bn, and including bank deposits, cash and bank deposits totalled RMB6.640bn. Direct coverage of short-term borrowings is not sufficient, but compared with end-2024, the liquidity buffer has improved substantially.

Leverage is quite high for a REIT. Borrowings/gross assets at end-2025 was 48.5%, very close to the general 50% limit under the REIT Code. Gross liabilities/gross assets was 63.7%. Fitch expected net debt / investment-property value to improve to around 41% after the disposal from 45% in 1H25, but the company-disclosed borrowings/gross assets remains near the limit. The definitions differ and therefore cannot be compared directly, but in any case Yuexiu REIT’s financial headroom is entirely different from that of a low-gearing REIT such as Link REIT.

5. Structural Considerations for Bondholders

When analysing Yuexiu REIT’s bonds, it is necessary to distinguish among listed units, the REIT, the trustee, MTN issuers, guarantees, collateral and bank borrowings. Yuexiu REIT itself is a Hong Kong collective investment scheme, with HSBC Institutional Trust Services (Asia) Limited involved as trustee. MTNs are issued through subsidiary issuers such as Yuexiu REIT MTN Company Limited and Moon King Limited, and the pricing supplements state that HSBC Institutional Trust Services (Asia) Limited guarantees the notes in its capacity as trustee of Yuexiu REIT, with recourse limited to the assets of Yuexiu REIT. This is not a credit guarantee by the HSBC group itself, but a limited-recourse guarantee in trustee capacity.

This structure is important to avoid investor confusion with debt of Yuexiu Group itself or Yuexiu Property. Yuexiu REIT’s bonds are not bonds with an explicit guarantee from Yuexiu Group. Fitch and S&P may incorporate parent support expectations and group relationships into their assessments, but legally recoveries are determined by the issuer, guarantor, trust deed, MTN programme and pricing supplement. Therefore, parent support is a credit-enhancing factor, but it should not be equated with a guarantee under the bond terms.

For bondholders, positives include the borrowing restrictions under the REIT Code and the asset backing from investment properties. Income is rental and operating income from existing assets and does not depend on contracted sales of residential development properties. Even after the disposal, the end-2025 portfolio valuation was around RMB33.6bn, and the asset value provides indirect coverage for borrowings and bonds.

At the same time, the structure has constraints. Distribution obligations leave limited scope for deleveraging through retained cash flow, and when investment-property valuations decline, borrowing-limit headroom and bank covenant headroom shrink simultaneously. There are also secured bank borrowings, and at end-2025 RMB4.226bn of bank borrowings were secured by a portion of GZIFC. S&P placed the priority debt ratio at 23.8% as of end-June 2025, but the future collateral and borrowing mix needs to be monitored continuously.

The structure after the 50% disposal of Yuexiu Financial Tower is also important for bondholders. The property is no longer a consolidated subsidiary and is positioned closer to an associate / qualified minority-owned property. This may improve the presentation of consolidated borrowings and assets, but the property’s cash flow no longer comes directly into consolidated NPI. Without confirming the JV, shareholder loan and priority of dividends and repayments, the value of this asset cannot be treated as equivalent to liquidity.

For individual bond investment, the MTN offering circular and each pricing supplement must be checked. This report has reviewed the pricing supplements for the USD300m 6.50% green notes due 2029 and the CNY690m 3.50% green notes due 2029 issued in February 2026, but has not reviewed all terms of the full MTN offering circular.

6. Capital Structure, Liquidity and Funding

The end-2025 capital structure is the part of Yuexiu REIT’s credit analysis that requires the closest reading. Higher cash, lower average funding cost and the new bond issuance in February 2026 indicate an improvement in liquidity. At the same time, short-term debt classification, net current liabilities, bank covenant breaches, and borrowings/gross assets close to the REIT Code limit all exist at the same time.

Cash and bank deposits of RMB6.640bn at year-end improved significantly from RMB1.446bn at end-2024. In its going-concern note, the company also states that, taking into account cash, remaining capacity under the MTN programme, and available debt and note facilities, it can meet its liabilities and working-capital needs. However, current borrowings of RMB13.078bn are heavy, representing around 64% of total borrowings. The new USD/CNY green note issuance in February 2026 is important for refinancing maturities, but the existence of liquidity pressure at year-end remains a fact.

The more important issue is bank loan covenants. As of end-2025, the REIT had breached restrictions on asset disposals and security margin ratio requirements, with an aggregate carrying amount of RMB12.979bn of affected bank borrowings. Of this, RMB3.784bn was classified as current liabilities because, as of the reporting date, the lenders had not provided waivers in relation to the right to demand immediate repayment. This is not merely an accounting classification; it indicates that negotiating leverage with banks, collateral value, post-disposal restrictions and LTV headroom have in fact become tight.

The company states that, for certain bank borrowings of RMB3.151bn, it assessed the likelihood of compliance with covenants within 12 months and considered the risk of acceleration before maturity not to be material. This is the company’s judgement supporting going concern, but the next disclosure should confirm the existence of waivers, amendments to terms, executed repayments, new borrowing terms, reclassification of short-term debt, and a decline in borrowings/gross assets.

On funding costs, there has been improvement. The disclosed effective interest rates at end-2025 were 3.64% for RMB borrowings, 4.58% for HKD borrowings and 2.72% for USD borrowings. The company states that its 2025 average funding cost was 3.61%, with lower HIBOR and RMB funding reducing finance expenses. Indeed, finance expenses excluding exchange losses declined to RMB773.2m. However, the coupon on the USD300m notes issued in February 2026 was 6.50%, so the cost of long-term foreign-currency funding is not low. The 3.50% coupon on the CNY690m notes is relatively low, but currency, investor base, use of proceeds, maturity and hedging need to be considered together.

In the debt currency mix, RMB borrowings increased to RMB15.467bn, while HKD borrowings declined to RMB2.108bn. Increasing RMB funding against mainland Chinese assets and RMB income is natural, but offshore bond investors need to check RMB assets, RMB income, HKD/USD/CNY debt, FX hedging, distribution currency and fund transfers as a Hong Kong REIT. The RMB61.1m exchange loss on USD-denominated borrowings and MTNs in 2025 shows that foreign-currency debt continues to affect earnings.

7. Rating Agency View

The rating agencies’ views are important in understanding Yuexiu REIT’s credit assessment, but ratings should not be used as a substitute for one’s own credit judgement. In November 2025, Fitch affirmed Yuexiu REIT’s Long-Term Foreign-Currency IDR at BBB- and revised the Outlook to Stable. Fitch expected the financial profile to improve after the 50% disposal of Yuexiu Financial Tower, with recurring EBITDA interest coverage exceeding its negative sensitivity. Fitch expects the REIT’s EBITDA interest coverage to improve from 1.6x in 2024 to above 1.8x, and net debt / investment-property value to improve from 45% in 1H25 to around 41%.

The important point in Fitch’s rating is that the standalone credit profile does not fully explain the BBB- rating. Fitch incorporates a one-notch uplift based on support expectations from GYX. The basis for support includes the shared brand, bank relationships, reputational incentives and the recent Yuexiu Financial Tower disposal. On the other hand, legal and strategic incentives are assessed as Low. This should be read as meaning that there are support expectations, but the credit is not supported solely by strong legal obligations or strategic integration. Bond investors should not mistake this one-notch support uplift for a parent guarantee.

Fitch’s business outlook is, if anything, cautious. Fitch expects the office segment to account for around 55% of Yuexiu REIT’s revenue and office rental income to decline in 2025 and 2026. This is due to abundant new supply and aggressive discounts by landlords. On the other hand, Fitch sees good locations and flight to quality as providing support, and views non-office segments such as wholesale, retail, hotels and serviced apartments as relatively resilient. This view is broadly consistent with the segment analysis in this report. In other words, the rating outlook was revised to Stable not because the operating environment suddenly improved, but because Fitch considered that the improvement in financial headroom from the asset disposal and funding would outweigh operating weakness.

In February 2026, S&P assigned a BBB- issue rating to Moon King Limited’s RMB-denominated senior unsecured green notes. S&P stated that Yuexiu REIT’s issuer credit rating was BBB-/Stable and placed the notes rating at the same level as the REIT’s issuer credit rating. The rationale was that S&P did not see material subordination risk in the capital structure, and it stated that, as of end-June 2025, secured debt was RMB4.9bn, unsecured debt RMB15.7bn, and the priority debt ratio 23.8%. It also expected debt-to-EBITDA to move towards around 11x in 2026-2027 from 13.4x in 2024 after the completion of the 50% disposal of Yuexiu Financial Tower in December 2025.

The meaning of the rating level is that the REIT is a bottom-of-investment-grade real estate credit with funding access, but without thick headroom against shocks. Fitch’s negative sensitivities are EBITDA interest coverage sustainably below 1.7x, net debt / investment-property value sustainably above 50%, operating deterioration beyond assumptions, and a decline in the parent’s ability or willingness to provide support. Positive sensitivities include EBITDA interest coverage sustainably above 2.0x and net debt / investment-property value below 45%. In other words, the current rating position has only just stabilised after factoring in deleveraging and support expectations, and downward pressure could re-emerge easily if any of operations, valuation or funding deteriorates.

This report has not confirmed the latest Moody’s rating. A Moody’s rating may exist for Yuexiu REIT, but this report focuses on confirmed Fitch and S&P information. In the next update, it will be necessary to recheck the existence of a Moody’s rating, the full S&P report, the full Fitch report, issue ratings for the latest bonds, and downgrade triggers.

8. Credit Positioning

Within Asian REIT credits, Yuexiu REIT is appropriately positioned as “a high-quality but highly leveraged issuer at the bottom of investment grade, with heavy exposure to the mainland Chinese commercial-property cycle”. It belongs to a different credit tier from A-rated, low-gearing, Hong Kong daily-needs retail-focused REITs such as Link REIT. At the same time, it also differs from Chinese private residential developers and property issuers with constrained liquidity. Repayment resources come from rental and operating income from existing investment properties, and sponsor relationships, bank relationships and bond-market access remain available.

Comparable credits include Hong Kong-listed REITs, Wharf-related Chinese commercial-property names, Asian commercial REITs such as Starhill Global REIT, and Chinese state-owned property-related issuers. Fitch assesses Wharf’s standalone credit profile as three notches higher than Yuexiu REIT’s, citing lower leverage and higher interest coverage. Starhill Global REIT is also positioned above Yuexiu REIT’s standalone profile due to higher interest coverage, lower leverage and stable cash flow from long-term master leases. This shows that Yuexiu REIT’s rating is constrained not only by asset quality, but also by thin financial headroom.

Within the Chinese property sector, Yuexiu REIT is more defensive than developers because it does not have residential sales risk. However, commercial-property rents and valuations are affected by the Chinese economy, corporate demand, consumption, interest rates and cap rates. In addition, as a REIT, it has distribution obligations, so it is difficult to retain large amounts of profit and deleverage in the way an ordinary property company might. Therefore, it is a “relatively transparent, investment-grade income-property credit” for taking Chinese property exposure, but it is not a “safe asset detached from Chinese property risk”.

This report does not assess relative value for individual bonds. Live prices, yields, OAS, and spread comparisons with Link REIT, Wharf, Yuexiu Property and other Hong Kong/China property IG credits of similar tenor have not been checked. As Yuexiu REIT is a bottom-of-BBB- investment-grade issuer, investment decisions need to consider not only issuer credit but also currency, maturity, issuer, guarantee, liquidity, benchmark-index inclusion, investor base and rating-maintenance headroom.

9. Key Credit Strengths

The first strength is recurring NPI from existing investment properties. Although 2025 NPI declined, it remained RMB1.284bn, and the REIT has multiple income sources across offices, wholesale, retail, hotels and serviced apartments. Unlike a residential sales company, repayment resources do not depend directly on annual new home sales and deliveries.

The second strength is the core Guangzhou assets and sponsor relationship. The Guangzhou portfolio, including GZIFC, is central to asset value and income, and can more readily use Yuexiu Group’s regional network, bank relationships and brand. The ability to create financial flexibility through related-party transactions, such as the 50% disposal of Yuexiu Financial Tower, is also a support that a fully independent REIT would not have.

The third strength is funding access. From 2025 to 2026, the REIT issued offshore RMB bonds, onshore bonds, USD green notes and CNY green notes, and its 2025 average funding cost declined to 3.61%. The fact that funding markets are not closed is essential in managing short-term borrowings and covenant issues.

The fourth strength is the thicker liquidity after the disposal. Cash and bank deposits increased to RMB6.64bn at end-2025, a substantial improvement from RMB1.45bn at end-2024. This does not fully cover short-term borrowings, but together with the February 2026 new bond issuance, there is room to manage near-term liquidity.

The fifth strength is a degree of support from non-office assets. White Horse Building maintained high occupancy and high unit rent, and hotels and serviced apartments maintained NPI in 2025. The portfolio is not composed only of offices, so operating deterioration is diversified to some extent.

10. Key Credit Constraints

The first constraint is rental and occupancy pressure in the office-centred portfolio. In 2025, office gross income fell 14.3% year on year and office NPI fell 15.1%. As offices account for around 64% of NPI, this weakness directly affects the REIT’s overall repayment capacity.

The second constraint is thin leverage headroom. Borrowings/gross assets was 48.5%, close to the 50% limit under the REIT Code. If asset valuations decline further, headroom against borrowing limits, bank covenants and rating-agency metrics will shrink rapidly.

The third constraint is bank covenant breaches. As of end-2025, RMB12.979bn of bank borrowings were affected by breaches of restrictions on asset disposals and security margin ratio requirements, and RMB3.784bn was classified as current liabilities because no waiver had been obtained. This indicates that asset disposals and valuation changes are actually affecting bank borrowing conditions.

The fourth constraint is the distribution obligation. Under the Trust Deed, at least 90% of distributable income must be distributed, and the full-year 2025 payout ratio was also around 96%. Because the scope for retained cash flow is limited, deleveraging takes time when NPI declines, asset valuations fall and maturities need to be refinanced at the same time.

The fifth constraint is that parent support is not a legal guarantee. Fitch incorporates parent support, but Yuexiu Group or GYX does not provide explicit guarantees for all debt. The parent’s financial profile, policy, asset-restructuring capacity and approval of related-party transactions need to be monitored.

The sixth constraint is partial limitations on information. Individual bond terms, bank waivers, unused committed lines, top tenants, lease expiries, asset-level valuation sensitivity and restricted cash by entity have not been confirmed in this report. These omissions do not prevent distribution of an issuer report, but they are mandatory checks before investment in individual bonds.

11. Downside Scenarios and Monitoring Triggers

The most realistic downside for Yuexiu REIT is not sudden default, but a multi-period chain of lower office rents, shrinking NPI, lower valuations and a higher borrowing ratio. When NPI falls, interest coverage deteriorates; when valuations fall, headroom in borrowings/gross assets and bank covenants narrows. Because the REIT maintains a high payout ratio, rapid repair through retained cash flow is also difficult.

The second downside is simultaneous covenant and refinancing stress. As of end-2025, some bank borrowings were classified as current liabilities because waivers had not been obtained. If, during 2026, waivers, amendments, refinancing and repayments do not progress as assumed, and banks demand additional collateral or repayment, cash on hand and new bond issuance alone would leave thin headroom.

The third downside is a decline in parent support expectations. Fitch’s BBB- rating includes one notch of parent support. If Yuexiu Group’s or GYX’s financial strength, willingness to support, policy constraints, or the approval environment for related-party transactions deteriorates, Yuexiu REIT’s rating and funding access would be affected. Because the REIT is partly maintaining its bottom-of-investment-grade rating precisely because of parent support expectations, this assumption is a monitoring item.

The fourth downside is reduced financial flexibility from maintaining distributions. A lower DPU is negative for the unit price, and a lower unit price weakens equity-funding capacity. On the other hand, if DPU is maintained excessively, internal funds available for debt repayment and capex decline. The adjustment of the final-period payout ratio to 90% in 2025 shows some conservatism, but if NPI remains weak, the trade-off among distributions, debt repayment, capex and rating maintenance will intensify.

Monitoring items are cash and bank deposits, current borrowings, net current liabilities, borrowings/gross assets and gross liabilities/gross assets in the 2026 interim results. In addition, bank-borrowing waivers, amendments, repayments and reclassifications, office occupancy and unit rents, investment-property valuations, Fitch/S&P rating actions, the use of proceeds from the February 2026 bond issuance and terms for future MTN issuance need to be tracked.

Quantitatively, if borrowings/gross assets remains near 50%, NPI declines further by high-single digits to double digits, low office occupancy broadens, and the inability to obtain bank waivers persists, the headroom to maintain the BBB- rating would become quite narrow. Conversely, if short-term borrowings decline materially during 2026, the covenant issue is resolved, the decline in office NPI moderates, and Fitch-defined interest coverage stabilises above 1.8x, the basis for the Stable outlook would be confirmed.

12. Credit View and Monitoring Focus

The base case of this report is to view Yuexiu REIT as an issuer at around the BBB- bottom-of-investment-grade level, broadly stable but awaiting confirmation of modest improvement. The 50% disposal of Yuexiu Financial Tower in October 2025 and the new bond issuance in February 2026 work in the direction of liquidity improvement and deleveraging, but to fully reflect this improvement in the credit view, confirmation is needed in the 2026 interim results on short-term borrowings, bank covenants, asset valuations and office NPI. Rapid credit deterioration is not the base case, but if covenants, short-term borrowings and asset valuations deteriorate simultaneously, ratings and spreads could react relatively quickly.

The basic view of this report is to position Yuexiu REIT as a “mainland Chinese commercial-property REIT with sponsor support”, treating it more defensively than an ordinary Chinese residential developer, while viewing it as much riskier than a large Hong Kong REIT. NPI has declined but remains in place, and White Horse Building, retail properties, hotels and serviced apartments provide support outside offices. Fitch and S&P’s BBB-/Stable ratings, the February 2026 new bond issuance and RMB6.64bn of liquidity on hand support near-term refinancing capacity.

However, the end-2025 financial statements should not be read too optimistically. Borrowings/gross assets was 48.5%, close to the REIT Code limit. Current borrowings increased to RMB13.08bn and net current liabilities were RMB7.08bn. The breach of some bank-borrowing covenants and the absence of waivers are constraints that sit at the centre of the credit view for a bottom-of-BBB- investment-grade issuer.

On issuer credit alone, it is difficult to say that Yuexiu REIT must immediately be avoided, but as a lower-end IG credit, it requires high-frequency monitoring. Decisions to buy, hold or sell individual bonds require separate confirmation of spreads versus Asian REITs, property companies, Hong Kong/China quasi-sovereigns and Yuexiu Group-related bonds in the same BBB rating bucket, as well as liquidity, terms and minimum denominations. At the issuer level, until improvement in short-term borrowings and covenant issues is confirmed in the 2026 interim results, the risk should not be taken lightly merely because the outlook is Stable.

Conditions for an improving credit profile are resolution of short-term borrowings and bank covenant issues, stabilisation of office occupancy and unit rents, a reduction in asset valuation losses, a lower borrowings/gross assets ratio, and the maintenance of parent support expectations and access to RMB/CNY/USD funding markets. Conversely, if NPI declines, valuation losses, covenant concerns and weaker parent support expectations overlap, the current BBB-/Stable rating could again come under downward pressure.

13. Short Summary & Conclusion

Yuexiu REIT is a Hong Kong-listed REIT that owns a mainland Chinese commercial-property portfolio centred on Guangzhou, and is a bottom-of-investment-grade issuer supported by GZIFC, wholesale markets, retail, hotels and serviced apartments, and its relationship with Yuexiu Group. In 2025, the 50% disposal of Yuexiu Financial Tower and new bond issuance improved financial flexibility, while lower NPI, lower office occupancy, investment-property valuation losses, borrowings/gross assets of 48.5%, and bank-borrowing covenant breaches constrained credit quality. The focus for issuer credit is not near-term sharp deterioration risk, but monitoring of asset valuations, covenants, refinancing and office rents, and confirmation of improvement in short-term borrowings and covenant issues is needed in the 2026 interim results.

14. Unverified Items and Pending Checks

As of the date of this report, a full page-by-page review of the 2025 Annual Report PDF has not been conducted. This report primarily used the final results announcement dated 11 March 2026, the 2024 final results announcement, the 2025 interim report, major transaction and bond issuance disclosures on HKEX, and rating-agency releases.

Regarding bank-borrowing covenant breaches, post-end-2025 completion of waivers, amendments, repayments and reclassifications has not been confirmed. The February 2026 issuance of USD300m / CNY690m green notes has been confirmed, but actual repayment of existing short-term debt, amendments to individual bank-facility terms, and the interim current-borrowing balance need to be confirmed in the next disclosure.

The latest Moody’s rating, S&P full issuer report and Fitch full report have not been obtained. For Fitch, this report used the rating release republished by Reuters/TradingView, and for S&P, it used the public proposed green notes rating release. Full confirmation of detailed adjusted metrics, downgrade and upgrade triggers, and parent support assessment by rating agency remains a next-step task.

Individual bond pricing, OAS, yields, trading volume, same-tenor comparisons and minimum denominations have not been confirmed. This report is an issuer-credit summary, and decisions to buy, sell or hold individual bonds require live market data and review of the terms in each pricing supplement / offering circular.

Top tenant concentration, lease expiry schedule, asset-level NOI, asset-level cap rates, restricted cash by entity, unused committed lines, full debt maturity schedule, and dividend / loan repayment terms from the JV holding Yuexiu Financial Tower have not been confirmed. These are items to check in the next review in order to refine the credit view.

15. Sources

• HKEX, Yuexiu REIT, FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2025, released 2026-03-11: https://www1.hkexnews.hk/listedco/listconews/sehk/2026/0311/2026031100582.pdf
• IRAsia / Yuexiu REIT, FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2024, released 2025-03-17: https://doc.irasia.com/listco/hk/yuexiureit/annual/2024/res.pdf
• HKEX, Yuexiu REIT, Interim Report 2025, released 2025-08-21: https://www1.hkexnews.hk/listedco/listconews/sehk/2025/0821/2025082100448.pdf
• HKEX, Yuexiu REIT, ANNOUNCEMENT - (1) MAJOR AND CONNECTED PARTY TRANSACTIONS RELATING TO (A) DISPOSAL OF 50% INTEREST IN YUEXIU FINANCIAL TOWER TO A CONNECTED PERSON; AND (B) INTERNAL REORGANISATION; ..., released 2025-09-08: https://www1.hkexnews.hk/listedco/listconews/sehk/2025/0908/2025090800063.pdf
• HKEX, Yuexiu REIT, CIRCULAR TO UNITHOLDERS for Yuexiu Financial Tower disposal and internal reorganisation, released 2025-09-09: https://www1.hkexnews.hk/listedco/listconews/sehk/2025/0909/2025090900921.pdf
• HKEX, Moon King Limited, CNY690,000,000 3.50% Green Notes due 2029 pricing supplement publication, released 2026-02-13: https://www1.hkexnews.hk/listedco/listconews/sehk/2026/0213/2026021300319.pdf
• HKEX, Yuexiu REIT MTN Company Limited, US$300,000,000 6.50% Green Notes due 2029 pricing supplement publication, released 2026-02-13: https://www1.hkexnews.hk/listedco/listconews/sehk/2026/0213/2026021300307.pdf
• Fitch Ratings / Reuters via TradingView, Fitch Revises Outlook on Yuexiu REIT to Stable, Affirms at 'BBB-', 2025-11-11: https://www.tradingview.com/news/reuters.com%2C2025-11-12%3Anewsml_FIT5Ymrng%3A0-fitch-revises-outlook-on-yuexiu-reit-to-stable-affirms-at-bbb/
• S&P Global Ratings, Yuexiu REIT's Proposed Guaranteed Unsecured Green Notes Rated 'BBB-', 2026-02-05: https://www.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3513005
• Yuexiu REIT official website / Investor Relations: https://www.yuexiureit.com/en/