Goldman Sachs lowered its target price for Wharf REIC (01997) to HK$37.6 from HK$38 and maintained its "buy" rating.
The research house said Wharf REIC has reportedly made offers to certain tenants in Harbour City that in order to enjoy some tenant relief measures for the month of May (40% rental concession), tenants would need to clear their outstanding payables up to June, and also to extend the lease term to at least end-2021.
Goldman thinks it makes sense for retail landlords to be more proactive in lease restructuring to (1) protect occupancy and lock in key tenants, and also (2) reduce cash collection uncertainties amid the process; however, this may bring more near-term downside to rental revenues as this would frontload the lease negotiation which may otherwise happen at a later point in time.
Goldman revised its FY2020-22 EPS forecasts down by 2-3% for marking-to-market the operating run rates.