2023 is a challenging year for the warehousing and logistics industry, but the two infrastructure project companies of Hongtu Innovation Yantian Port REIT are operating well and their operating performance is better than expected.
According to the 2023 expansion prospectus, Hongtu Yantian Port REIT predicts that it will be available for distribution of 98.1085 million yuan in 2023, and the amount of expanded assets for distribution will be 91.6117 million yuan after conversion of 207 days/365 days. In 2023, Hongtu Yantian Port REIT will achieve a distributable amount of 97.182 million yuan, which is 106% of the forecast in the expansion prospectus.
In terms of cash distribution ratio, the annualized cash distribution rate of Yantian Port REIT at the indicative fair value net value was 4.70%, which was higher than the annualized cash distribution rate of 4.42% (0.28 percentage points) predicted in the prospectus.
Although the completion degree is not as high as the amount available for distribution of Zhongjin Prologis REIT (113.26% of the expansion prospectus predicted by Zhongjin Prologis REIT), the overall performance is not bad.
In terms of occupancy rate and lease term, as of December 31, 2023, the occupancy rate of the Hyundai Logistics Center project was 95.11%, with a lease term ranging from 1 to 14.83 years, with the longest lease term expiring on June 30, 2037, while the occupancy rate of the Century Logistics Park project was 100%, with a lease term of 4.75 years and a lease term expiration date of May 31, 2027.
Compared with the occupancy rate of Hyundai Logistics Center in 2022 (which was 99% at the time), it has decreased by 3.89 percentage points in 2023, and the occupancy rate in the fourth quarter of 2023 has also decreased compared to the previous quarter.
At the results meeting on April 9, the management responded to this, mainly due to the impact of the Sino-US trade situation, which led to the business adjustment of individual customer contracts after the expiration of the contract, which led to the addition of 26,000 square meters of vacant area in the park.
Keep moving forward in the free trade zone
In June 2023, Hongtu Innovation Yantian Port REIT carried out its first fundraising in 2023.
The expanded asset is the Century Logistics Park project, which is located in the North District of Yantian Port Comprehensive Bonded Zone, Yantian District, Shenzhen. The previous initial asset is the modern logistics center project, which is also located in the bonded zone.
In this regard, the management said that the Yantian Comprehensive Bonded Zone, where the underlying assets are located, enjoys the superposition of the policies and functions of the three special customs supervision zones of export processing zone, bonded zone and integrated logistics park, which can meet the diversified needs of customers, and also has unique policy service advantages. Compared with other projects in the region, the operator of the project has many years of customer resource accumulation and strong investment operation capabilities, and has settled in the project Meiji Logistics, Dexun Logistics, Rixin Logistics, Global MRT Logistics and other freight and third-party enterprises, and has maintained a stable and friendly cooperative relationship for a long time.
In addition, the management also said that the Yantian Comprehensive Bonded Zone, where the project is located, has successfully passed the acceptance and has met the basic conditions for customs closure operation, and the area will usher in a certain supply of new storage facilities in the future, and the storage types will be more diversified, which will enhance the strategic position of Yantian Port as a hub port in South China and enhance its influence.
In fact, according to the construction standards, the warehousing and logistics infrastructure can be divided into high-standard warehouses and ordinary warehouses, and according to the nature of the stored goods, the warehousing and logistics facilities include bonded warehouses and non-bonded warehouses, while the underlying assets of Hongtu Yantian Port REIT are high-standard warehouses and bonded warehouses.
Viewpoint New Media understands that bonded warehouses are mainly used to store goods that have not been paid customs duties in the bonded area, and enterprises are temporarily exempted from the payment of duties and taxes when the goods are imported, reducing financial pressure, and providing flexible warehousing and logistics arrangements for enterprises. A non-bonded warehouse is a regular warehouse for the storage and distribution of goods that are subject to duties and taxes immediately upon importation.
Due to the needs of its business scenarios, bonded warehouses are also generally used for cross-border e-commerce, entrepot trade, bonded processing and other businesses, while non-bonded warehouses are mainly used for domestic sales and distribution.
From a policy perspective, bonded warehouses enjoy policy advantages that non-bonded warehouses do not have. From the perspective of business distribution and location, the underlying assets of Yantian Port REIT are all located in South China, where cross-border e-commerce is developing rapidly
For example, the People's Government of Yantian District, Shenzhen issued the "Measures for Supporting the Construction of a Modern Industrial System and Promoting High-quality Economic Development in Yantian District" in December 2023, and coordinated with the first cross-border e-commerce industry support policy "Yantian District on Accelerating the High-quality Development of Cross-border E-commerce Industry" issued in April 2023. Bonded exhibition and trading enterprises are provided with different degrees of incentives and support to promote the entry and development of such enterprises in Yantian District.
In addition, in December 2023, the General Administration of Customs (GAC) also issued the Announcement on Optimizing the Classified Supervision of Warehousing Goods in Comprehensive Bonded Zones by Status, supporting enterprises in comprehensive bonded zones to carry out direct transfer business of warehousing goods by status.
At the results meeting, the management also said that the introduction of these policies is not only conducive to the development of cross-border e-commerce, but also a good policy support for the infrastructure projects of Yantian Port REIT.
Dividends, leases and rent adjustments
The dividends of REITs are in the form of cash distributions to enable investors to receive regular returns, which can not only attract more investors to enter the REITs market, but also mean that REITs are in good operating condition.
In addition, according to the regulatory requirements of REITs, the income earned will be distributed at least once a year, and the distribution ratio of each income shall not be less than 90% of the annual amount available for distribution of the combined fund.
At the results meeting, the management said that Yantian Port REIT will achieve two fund dividends in 2023, with a total amount of 131 million yuan. According to the statistics of Guandian New Media, as of April 9, it has paid dividends 4 times, with a total distribution amount of 228 million yuan.
However, CICC Prologis REIT, which also has an expansion in June 2023, has paid dividends 7 times since its listing, with a cumulative distribution amount of about 767 million yuan, accounting for about 100% of the amount available for distribution since listing.
In terms of occupancy rate, there is a big difference between the two underlying asset projects of Yantian Port REIT, with the occupancy rate of the Hyundai Logistics Center project being 95.11% and the Century Logistics Park project being 100%, mainly because the Century Logistics Park project adopts the whole lease method and has a long lease term.
Viewpoint New Media has learned that Shenzhen Tongjieli Logistics Co., Ltd. has the largest proportion of the leasing area of the Century Logistics Park, with a leasing area of 52,400 square meters, accounting for 100% of the total leasable area of the warehousing and supporting parts, and the lease period is from September 1, 2022 to May 31, 2027.
The largest proportion of the leased area of the modern logistics center is Shenzhen Port Group Co., Ltd., with a leased area of 116,300 square meters, accounting for only 44% of the total leasable area of the warehousing and supporting parts, and the lease period is from October 2021 to October 31, 2026.
In terms of rent and its adjustment, according to the management, by the end of October 2023, it is the third lease year after the normal performance of the contract signed between Hyundai Logistics Center and Shenzhen Port Group, and the rental price of its warehouse is 39.78 yuan/square meter/day, and according to the lease contract, from the fourth lease year to the sixth lease year, the rental price will be determined according to the average rent level of the comparable property market in that year determined by a third-party appraisal agency in the market.
The management also disclosed that the fourth lease year commenced on November 1, 2023, and according to the "Shenzhen Regional Logistics Real Estate Market and Yantian Logistics Real Estate Sub-market Research Report - Q3 2023" issued by Jones Lang LaSalle, "as of the third quarter of 2023, the market rent of high-standard normal temperature bonded warehouses in Yantian Comprehensive Bonded Zone is between RMB39.5-41.5/sqm/month", and after negotiation with Shenzhen Port Group, the warehouse rent for the fourth lease year was finally determined to be RMB40.14/ m²/month, the rental price level continued to increase during the reporting period.
However, due to the slowdown in the growth of manufacturing and foreign trade exports and the recent impact of new stock entering the market, the rents of many high-standard warehouse projects in the Shenzhen market have fallen since 2023, and the high-standard warehouse leasing market in Shenzhen has begun to come under pressure.
In this regard, the management said that due to factors such as the continued weak economic recovery and the continuous entry of new supply into the market, the rental growth rate of Shenzhen's high-standard warehouse market may be under some pressure in the short term.
However, as far as Shenzhen's warehousing and logistics market is concerned, it is expected to continue to benefit from the demand for cross-border e-commerce in the future, coupled with the gradual recovery of domestic consumption levels, which will bring about the growth of new warehousing and logistics demand. In the future, the rapid expansion of online live retail will also bring more demand for leasing.