Mainland reits lining up to list in Hong Kong
Several domestic and foreign companies are lining up to become the first to issue a mainland reit (real estate investment trust) in Hong Kong, but a market expert does not believe it will happen until the middle of next year.
The frontrunners include Guangzhou Investment, Beijing North Star, a joint venture between Dalian Wanda Group (DWG) and Macquarie, and a joint venture between CapitaLand and Shenzhen International Trust and Investment.
A mainland reit in Hong Kong became possible on June 16, when the Securities and Futures Commission lifted restrictions on cross-border property investment. But Stanley Chan, managing director of Shanghai-based Stanley & Partners Investment Management, said the first mainland reit would not go public until the middle of next year.
'The Link Reit [due to be launched before the end of the year] will serve as a reference point for investors. A mainland reit needs eight to nine months to prepare, so we are looking at June 2006 at the earliest.
'If they are offices, 90 per cent will be in Beijing and Shanghai. If they are city centre shops, they will be in Shanghai, Beijing or Guangzhou and if they are regional shops, they will be all over China.'
He said mainland regulatory approval would not be required because a special-purpose vehicle would be set up offshore, such as in Hong Kong or the Cayman Islands, which would purchase the required assets and then be listed, so that it would not involve the transfer of assets outside China.
State-owned Guangzhou Investment has leased properties, mostly in Guangzhou, totalling 600,000 square metres, with rental income last year of 367 million yuan.
Mainland newspapers last week said that Guangzhou Investment wanted to list a reit in November this year to raise about $2 billion.
DWG chairman Wang Jianlin said in early this month that he planned to offer shopping malls in a reit in the first quarter of next year in Singapore or Hong Kong. Wanda, a private firm set up in 1988 with registered capital of 120 million yuan, is involved in property development and car leasing.
Its partner is Macquarie, which controls property assets worth US$4 billion in Asia, including shopping centres in the mainland and industrial buildings in Hong Kong. It runs nine reits and has flagged two or three more property trusts to be listed in Asia.
Spokesmen at Guangzhou International and DWG declined to comment.
Beijing North Star said it had property investments worth about three billion yuan, including hotels, apartments and offices, and was considering how to package them as a reit.
Liew Mun Leong, chief executive of CapitaLand, which owns mainland shopping malls, a few days ago said that his company might set up Asia's first regional reit. 'Property trusts would need to offer net dividend payouts of between 6 and 7 per cent for real estate in China to compensate investors for the increased risk.'