CMC REIT Steadily Advances Strategic Transformation in 2026 Interim Results

CM+U Student Apartments Officially Commences Operations;
Garden City Continues to Strengthen Operating Performance

HONG KONG, Aug. 26, 2026 /PRNewswire/ -- China Merchants Commercial Real Estate Investment Trust ("CMC REIT" or "the Trust", HKEX stock code: 1503) announced its unaudited interim results for the six months ended 30 June 2026 (the "Reporting Period").

During the Reporting Period, CMC REIT continued to advance its portfolio diversification and strategic transformation. "CM+U Student Apartments", the student accommodation project acquired and renovated in Hong Kong, has officially commenced operation. Its encouraging pre-leasing performance prior to opening marked a significant milestone in the Trust's expansion into counter-cyclical assets. Concurrently, the operating momentum of Garden City Shopping Centre, the Trust's core retail asset, continued to improve, with its occupancy rate rising to 98.8% and both foot traffic and tenant sales registering steady growth. Although the Chinese Mainland office market continued to face the dual challenges of declining rents and increasing supply, the Trust's portfolio value remained stable at RMB8.72 billion. The Manager maintained a 100% distribution payout ratio. Distribution per Unit ("DPU") for the Reporting Period was HK$0.0407 (equivalent to RMB0.0352), representing an annualised distribution yield of 8.2% based on the closing unit price on 30 June 2026.

For the first half of 2026, the Trust's rental income was RMB165.7 million, a decrease of 15.3% compared to the corresponding period in 2025. Total revenue was RMB191.7 million, representing a year-on-year decrease of 14.8%. This decline was primarily attributable to the expiry of a single major lease at Technology Building, which led to a segment revenue drop of RMB29.7 million, accounting for approximately 90% of the overall decrease in the Trust's revenue. Net property income (NPI) stood at RMB135.2 million.

As at 30 June 2026, net assets attributable to Unitholders amounted to RMB2,787 million (31 December 2025: RMB2,899 million), or RMB2.47 per Unit (31 December 2025: RMB2.57), equivalent to HK$2.84 per Unit based on the central parity rate announced by the People's Bank of China on 30 June 2026. The closing unit price of HK$0.99 on 30 June 2026 represented a 65.1% discount to the NAV per Unit.

Expanding Hong Kong Property Investment; Maintaining a Sound Debt Structure

On 29 January 2026, the Trust completed the acquisition of a property project in Kowloon, Hong Kong, and subsequently converted it into "CM+U Student Apartments". The project underwent closed-site renovation works from May to July, and its pre-leasing rate is currently close to full occupancy. The property officially commenced operation on 15 August 2026. As at 30 June 2026, the project was valued at HK$226 million. In the first half of the year, private residential rents in Hong Kong rose by 2.64%, underscoring the investment appeal of the accommodation segment. The Manager will continue to focus on the student accommodation and serviced apartment sectors in Hong Kong to identify high-quality investment targets.

Affected by the continued downward pressure on office rents in Shenzhen and Beijing, the aggregate valuation of the Trust's six Chinese Mainland properties decreased by RMB177 million from the end of 2025 to RMB8,524 million. However, inclusive of the newly added Hong Kong student accommodation project, the overall portfolio value increased by 0.2% from the end of 2025 to RMB8,720 million. On the financing front, although the Trust's total borrowings increased from RMB4,108 million at the end of 2025 to RMB4,264 million, finance costs decreased by 3.2% to RMB56.2 million. Property operating expenses remained stable at RMB56.4 million (corresponding period of 2025: RMB56.3 million). As at 30 June 2026, the gearing ratio was 43.8%, remaining well below the 50% limit permitted under the REIT Code. Furthermore, loans representing 93.8% of total borrowings will mature in January 2030, reflecting a sound debt maturity profile.

Office Leasing Market Slows; Garden City's Occupancy Rate Climbs

The operating performance of Garden City continued on an upward trajectory, with its occupancy rate rising by 2.3 percentage points from the end of 2025 to 98.8%. Both foot traffic and sales recorded steady growth, while its valuation rose by RMB4 million to RMB1,521 million. Rental income of Garden City during the period was RMB41.3 million, a decrease of 6.3% compared to the corresponding period of 2025. As the remaining vacant units in the mall were situated in secondary locations, their passing rents were generally below the mall's average level. This, coupled with the transitional impact from tenant mix optimisation, resulted in a decrease in the mall's average passing rent to RMB116.0/sq.m.

During the Reporting Period, the occupancy rate of the overall property portfolio decreased from 80.8% to 77.6%. Affected by the expiry of major leases at Technology Building and Onward Science & Trade Center, the average occupancy rate for offices decreased from 77.0% to 72.5%. In the second quarter, Technology Building was heavily impacted by the lease expiry of Shenzhen Qianhai Shekou Free Trade Zone Hospital, with the property at one point close to being fully vacant. The property subsequently secured leases with several reserve tenants, driving the occupancy rate back up to 50.7%. However, as the unit rents of these newly signed leases were lower, the property's passing rent dropped substantially to RMB71.9/sq.m. Notably, leases expiring in 2031 and thereafter account for 88.4% of the property's monthly rental income. Technology Building 2 performed well following the implementation of proactive leasing strategies, with its occupancy rate rising by 4.7 percentage points to 84.9%. The occupancy rate of Cyberport Building remained stable at 80%.

Amid supply pressure in the Beijing office market, rental income of Onward Science & Trade Center increased by 24.8% during the period to RMB40.2 million. Following the expiry of certain leases, its occupancy rate decreased by 7.3 percentage points to 86.5%, and its passing rent correspondingly decreased by 8.2% to RMB180.3/sq.m. However, based on the leases already signed, the occupancy rate of the project is expected to rebound in the coming quarter. The operational performance of New Times Plaza remained relatively stable, with its occupancy rate edging down slightly from 66.1% to 65.1%, and its passing rent holding steady at RMB141.6/sq.m.

Outlook: CMC REIT 2.0 Strategic Upgrade; Focusing on Counter-cyclical Assets

In the first half of 2026, China's gross domestic product (GDP) grew by 4.7% year-on-year, while the commercial real estate market remained in a phase of structural adjustment. Office rents in Shenzhen and Beijing declined further from the end of 2025, and vacancy rates remained elevated. The retail property market exhibited clear divergence, with prime retail rents across Shenzhen remaining relatively stable. Looking ahead to the second half of the year, the office markets in both cities are expected to continue facing supply-side pressures, with the downward trend in rents likely to persist. The retail property market is expected to maintain its divergent pattern, whereby shopping malls located in mature commercial districts with a solid customer base will continue to demonstrate resilient operating fundamentals.

Mr. YU Zhiliang, Chairman and Non-executive Director of CMC REIT, stated: "Since the beginning of this year, CMC REIT has continued to advance its 2.0 strategic upgrade, accelerating the implementation of our asset portfolio diversification strategy. The successful commencement of operations at the Hong Kong student accommodation project marks positive progress in the Trust's expansion into counter-cyclical assets, laying a solid foundation for sustainable future development. The Manager will continue to closely monitor market dynamics and flexibly adjust our leasing and operational strategies. Looking ahead, we will continue to explore more high-quality and diversified assets across Greater China, with a strategic focus on counter-cyclical asset classes such as student accommodation and serviced apartments. By enriching our asset portfolio and diversifying our income streams, we strive to achieve long-term, steady growth in DPU."

About China Merchants Commercial REIT

China Merchants Commercial REIT (1503.HK) is a Hong Kong collective investment scheme constituted as a unit trust and authorised under section 104 of the SFO. China Merchants Commercial REIT was launched by a well-known state-owned enterprise: China Merchants Shekou Industrial Zone Holdings Co., Ltd. (001979.SZ). It was listed on the Main Board of the Hong Kong Stock Exchange in December 2019, marking the first successful listing of a REIT in Hong Kong since 2014. It is also the first REIT managed by a state-owned enterprise of the People's Republic of China to be listed in Hong Kong. China Merchants Commercial REIT is a REIT formed to primarily own and invest in high quality income-generating commercial properties in the PRC. Its initial focus is: (i) the Greater Bay Area (other than Foshan and Guangzhou, being two of the CML Cities), and (ii) Beijing and Shanghai. China Merchants Commercial REIT holds seven high-quality properties, with five located in Shekou, Shenzhen, one located in Beijing, and one student hostel located in Tsim Sha Tsui, Hong Kong. It is managed by the REIT Manager whose key investment objectives are to provide Unitholders with stable distributions, sustainable and long-term distribution growth.

For more information about China Merchants Commercial REIT, please visit its corporate website: http://www.cmcreit.com/.

SOURCE CMC REITs