Fitch upgrades the outlook for YUEXIU REIT to "Stable" due to financial improvement after the sale of property interests

Fitch Ratings has revised the outlook on the long-term foreign currency issuer default rating of YUEXIU REIT (00405.HK) from "negative" to "stable," while affirming its issuer default rating at "BBB-," primarily reflecting the improvement in the financial condition of YUEXIU REIT after selling a 50% stake in YUEXIU Financial Tower.

Although the company's office-dominated property portfolio continues to face rental pressure, Fitch expects its recurring EBITDA interest coverage ratio to remain above the negative sensitivity threshold; at the same time, the company's loan-to-value ratio is expected to improve from 45% in the first half of this year to around 41%.

Additionally, Fitch forecasts that the base income (excluding asset disposals) of YUEXIU REIT will decline by 7% and 4% in the next two years, mainly due to the office sector, which accounts for about 55% of the company's revenue. It is anticipated that the company's office rental income will decrease by 8% and 6% in the next two years, as a large amount of new supply will prompt owners to adopt aggressive discount strategies.

In terms of financing costs, the company's average financing cost fell to 3.92% in the first half of this year, and Fitch expects its financing costs to remain at an average level of 3.6% to 3.7% between 2025 and 2026, benefiting from close ties with banks and maintaining smooth financing channels