Yuexiu Real Estate Investment Trust : VOLUNTARY ANNOUNCEMENT - PUBLICATION OF SUMMARY ANNUAL PROPERTY VALUATION REPORTpdf Download

The Securities and Futures Commission of Hong Kong, The Stock Exchange of Hong Kong Limited and Hong Kong Exchanges and Clearing Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

(A Hong Kong collective investment scheme authorised under section 104 of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong))

(Stock Code: 00405)

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VOLUNTARY ANNOUNCEMENT

PUBLICATION OF SUMMARY ANNUAL PROPERTY

VALUATION REPORT

The Board wishes to announce that the Summary Annual Property Valuation Report has been published in the Appendix to this announcement.

Reference is made to: (i) the circular of Yuexiu Property Company Limited ("YXP") dated 18 March 2019 regarding its entry into agreements in respect of a series of transactions involving, among other things, a proposed issue of new shares of YXP to the counterparty in the subscription transaction, and the controlling shareholder of YXP's application for a waiver in respect of the mandatory general offer obligations which would otherwise arise upon completion of the issuance, such waiver being subject to, among other things, approval by the independent shareholders of YXP (the "YXP Whitewash Circular"); and (ii) the announcement of Yuexiu Real Estate Investment Trust ("Yuexiu REIT") dated 25 February 2019 regarding the final results of Yuexiu REIT for the year ended 31 December 2018 (the "YXR Final Results Announcement").

The Board notes that the YXP Whitewash Circular contains, among other things, a summary report issued by Savills Valuation and Professional Services Limited to YXP on the valuation of Yuexiu REIT's properties as at 31 December 2018 as an appendix thereto. Such summary report is consistent with the YXR Final Results Announcement and the summary valuation report issued by Savills Valuation and Professional Services Limited (in its capacity as the principal valuer of Yuexiu REIT) to the manager (the "Manager") and the trustee (the "Trustee") of Yuexiu REIT on the valuation of Yuexiu REIT's properties as at 31 December 2018, the latter of which is appended to this announcement (the "Summary Annual Property Valuation Report"). The Summary Annual Property Valuation Report is a summary of the full report issued to the Manager and the Trustee on 25 February 2019, which will be included in the annual report of Yuexiu REIT for the year ended 31 December 2018 and is available for inspection at the Manager's office in the meantime.

By order of the board of directors of

Yuexiu REIT Asset Management Limited

(as manager of Yuexiu Real Estate Investment Trust)

YU Tat Fung

Company Secretary

Hong Kong, 18 March 2019

As at the date of this announcement, the Board comprises:

Yuexiu REIT Asset Management Limited as the "Manager" of "Yuexiu Real Estate Investment Trust" 17B, Yue Xiu Building,

No. 160 Lockhart Road, Wanchai, Hong Kong

AND

Savills Valuation and Professional Services Limited

HSBC Institutional Trust Services (Asia) Limited as the "Trustee" of "Yuexiu Real Estate Investment Trust" 17th Floor, Towers 2 & 3, HSBC Centre,

1208, Cityplaza One

1111 King's Road, Taikoo Shing

Hong Kong

No. 1 Sham Mong Road,

Kowloon, Hong Kong

T : (852) 2801 6100

F : (852) 2530 0756

EA Licence: C-023750 savills.com

18 March 2019

Dear Sirs,

RE: (1) GUANGZHOU INTERNATIONAL FINANCE CENTRE, NO. 5 ZHU JIANG WEST

ROAD, TIANHE DISTRICT, GUANGZHOU, GUANGDONG PROVINCE, THE

PEOPLE'S REPUBLIC OF CHINA

• (2) VARIOUS UNITS IN WHITE HORSE BUILDING, NOS. 14, 16 AND 18 ZHAN NAN ROAD, YUEXIU DISTRICT, GUANGZHOU, GUANGDONG PROVINCE, THE PEOPLE'S REPUBLIC OF CHINA

• (3) VARIOUS UNITS IN FORTUNE PLAZA, NOS. 114, 116 AND 118 TI YU EAST ROAD, TIANHE DISTRICT, GUANGZHOU, GUANGDONG PROVINCE, THE PEOPLE'S REPUBLIC OF CHINA

• (4) VARIOUS UNITS IN CITY DEVELOPMENT PLAZA, NOS. 185, 187 AND 189 TI YU WEST ROAD, TIANHE DISTRICT, GUANGZHOU, GUANGDONG PROVINCE, THE PEOPLE'S REPUBLIC OF CHINA

• (5) VARIOUS UNITS IN VICTORY PLAZA, NO. 101 TI YU WEST ROAD, TIANHE DISTRICT, GUANGZHOU, GUANGDONG PROVINCE, THE PEOPLE'S REPUBLIC OF CHINA

• (6) TOWER 2 AND 315 CAR PARKING SPACES (INCLUDING 80 MECHANICAL CAR PARKING SPACES AND 23 PUBLIC CAR PARKING SPACES) AT BASEMENT LEVELS 1 AND 2, HANGZHOU VICTORY BUSINESS CENTER, NO. 9 JIANGXIU STREET, QIANJIANG NEW TOWN, JIANGGAN DISTRICT, HANGZHOU, ZHEJIANG PROVINCE, THE PEOPLE'S REPUBLIC OF CHINA

• (7) YUEXIU TOWER, NO. 388 FUSHAN ROAD, LOT NO. QIU 2/9 JIEFANG 302, WEIFANG XINCUN STREET, PUDONG NEW DISTRICT, SHANGHAI, THE PEOPLE'S REPUBLIC OF CHINA

• (8) WUHAN YUEXIU FORTUNE CENTRE, STARRY VICTORIA SHOPPING CENTRE AND VARIOUS CAR PARKING SPACES, NO. 1 ZHONGSHAN AVENUE, QIAOKOU DISTRICT, WUHAN, HUBEI PROVINCE, THE PEOPLE'S REPUBLIC OF CHINA

INSTRUCTIONS

We refer to the instructions from the Manager and the Trustee of "Yuexiu Real Estate Investment Trust" ("Yuexiu REIT") for us to value the captioned properties (individually referred to as the "Property" and collectively referred to as the "Properties") located in the People's Republic of China (the "PRC"), we confirm that we have inspected the Properties, made relevant enquiries and investigations as well as obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of the Properties as at 31 December 2018 ("the Valuation Date") for accounting purpose.

BASIS OF VALUATION

Our valuation of each property is our opinion of its market value on a 100% interest basis which we would define as intended to mean "the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion."

Moreover, market value is understood as the value of an asset or liability estimated without regard to costs of sale or purchase (or transaction) and without offset for associated taxes or potential taxes.

Our valuation has been undertaken in accordance with the HKIS Valuation Standards 2017 of The Hong Kong Institute of Surveyors ("HKIS"), which incorporates the International Valuation Standards ("IVS"), and (where applicable) the relevant HKIS or jurisdictional supplement. We have also complied with the requirements set out in Chapter 6.8 of the Code on Real Estate Investment Trusts (the "REIT Code").

IDENTIFICATION AND STATUS OF THE VALUER

The subject valuation exercise is handled by Mr. Charles C.K. Chan and Mr. Anthony C.K. Lau. Mr.

Charles C.K. Chan is the Managing Director of Savills Valuation and Professional Services Limited ("SVPSL") and a Fellow of the HKIS with over 34 years' experience in valuation of properties in Hong Kong and 29 years' experience in valuation of properties in the PRC; Mr. Anthony C.K. Lau is a Director of SVPSL and a corporate member of the HKIS with over 25 years' experience in valuation of properties in the PRC . Both of them have sufficient knowledge of the relevant markets, the skills and understanding to handle the subject valuation exercise competently.

Prior to your instructions for us to provide this valuation services in respect of the Properties, SVPSL, Mr. Charles C.K. Chan and Mr. Anthony C.K. Lau had been involved in valuations of the Properties in the past 12 months.

We confirm that we are independent of the scheme, the Manager, the Trustee and each of the significant holders of the scheme in accordance with the REIT Code issued by the Securities and Futures Commission in Hong Kong (the "SFC"). We are not aware of any instance which would give rise to potential conflict of interest from SVPSL or Mr. Charles C.K. Chan or Mr. Anthony C.K. Lau in the subject exercise. We confirm SVPSL, Mr. Charles C.K. Chan and Mr. Anthony C.K. Lau are in the position to provide objective and unbiased valuation for the Properties.

VALUATION APPROACHES

In arriving at our opinion of values, we have considered relevant general and economic factors and in particular have investigated recent sales and leasing transactions and/or offerings of comparable properties. In the course of our valuation, we have principally adopted both Income Capitalization Approach and Discounted Cash Flow Analysis ("DCF Analysis") and counter-checked by the Direct Comparison Approach.

INCOME CAPITALIZATION APPROACH

The Income Capitalization Approach is an approach of valuation whereby the existing rental incomes of all lettable units of each property are capitalized for the respective unexpired terms of contractual tenancies whilst vacant units are assumed to be let at their respective market rents as at the Valuation Date. Upon expiry of the existing tenancies, each unit is assumed to be let at its market rent as at the Valuation Date, which is in turn capitalized for the unexpired term of the land use rights under which the property is held. The summation of the capitalized value of the term income for the leased portion, the capitalized value of the reversion income (i.e. market rental income) as appropriately deferred for the leased portion and the capitalized value of the vacant portion provides the market value of each property.

DCF ANALYSIS

DCF Analysis is an approach of valuation where a discount rate is applied to a series of cash flows over an investment horizon including a terminal value to discount them to a present value. We have either adopted a 5-year or 10-year projection time frame in our DCF Analysis depending on the type of property. In preparing the DCF Analysis, the income and expenses over the coming 5 or 10 years from the Valuation Date are itemized and projected annually taking into account either the historical operating accounts or the contractual tenancies, and the expected growth of income and expenses. The net cash flows from the 6th or 11th year onward are capitalized at appropriate terminal capitalization rates for the Properties until the expiry of the respective land use terms. The terminal values are then discounted at our adopted rates that reflect the rates of return that adequately compensate the investors for the risks taken.

DIRECT COMPARISON APPROACH

As a supporting approach to our valuation, we have also considered the Direct Comparison Approach as a reference check for the valuations arrived from Income Capitalization Approach and DCF Analysis whereby comparable sales transactions and /or listings of comparable properties as available in the market are collected and analyzed. Appropriate adjustments are applied to the comparable properties to adjust for the discrepancies between the Properties and the comparables.

APPROACH TO VALUE

In arriving at the market values of the Properties, excluding the hotel and serviced apartment portions of Guangzhou International Finance Centre, we have applied equal weighting to the values derived from Income Capitalization Approach and Discounted Cash Flow Analysis; whilst the market values of the hotel and serviced apartment portions of Guangzhou International Finance Centre are assessed by DCF Analysis.