Champion REIT (2778 HK): Reduce: Outlook expected to stay cloudy

Research evidence excerpt

19 August 2026

Champion REIT (2778 HK)

Equities

REITs

Reduce: Outlook expected to stay cloudy

Hong Kong

◆ 1H26 results were weak with 9.7% y-o-y decline in DPU;

MAINTAIN REDUCE

we expect DPU to remain under pressure

◆ While we expect a narrowing negative rental reversion in its

office portfolio, its operations are yet to be stabilized

◆ Maintain Reduce with TP lowered to HKD1.70 from HKD1.75

DPU decline downcycle not over yet: Champion REIT reported a weak set of 1H26

results, with DPU down 9.7% y-o-y to HKD0.0633 (2H25: -8.3%). While it is

encouraging to see selected office leasing transactions at Three Garden Road (TGR)

office achieving positive rental reversions and early signs of spot rent stabilization

alongside a gradual improvement in Central office market, we think it is still too early

to call an end to the DPU downcycle. We expect negative rental reversion at TGR to

narrow, but it should continue to pressure DPU. Given limited visibility on a

meaningful turnaround, we retain Reduce.

Office portfolio – NPI pressured by TGR reset (c71% of valuation). Net property

income (NPI) for TGR fell 16.7% y-o-y in 1H26, while Langham Place Office Tower

posted a modest 0.9% y-o-y increase. The latest occupancy rate of TGR edged up to

82.2% by end-Jun 2026 (end-Dec 25: 81.6%), while the Langham Place Office Tower

was broadly stable at 86%. On a positive note, over 90% of the leases expiring in

2026 have been renewed in TGR, which should provide some near-term income

visibility. Spot rent for TGR is now in the range of 70-80s/sq ft/month. With expiry

rents trending lower, we believe this should translate into less negative rental

reversion over the next 12 months, though it remains a headwind overall.

Langham Place mall – Tenant sales recovery supports NPI resilience (c25% of

valuation). The Langham Place (LP) mall held up better, with NPI down only 0.9% y-o-y

in 1H26 (vs. -6.9% in 2H25). Tenant sales returned to growth at +1.7% y-o-y,

supported by proactive tenant mix management and improving consumer sentiment.

We expect the ongoing recovery in inbound tourism to provide additional support to

mall performance over the next 12 months.

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