China’s developers eagerly line up to offer commercial-property Reits amid recovery signs
Exchanges receive 19 listing applications after enthusiastic investor reception for first four such trusts
China’s first four exchange-traded real estate investment trusts (Reits) backed by commercial properties have opened the floodgates for fundraising by office developers, shopping centre builders and hotel owners amid investors’ heightened hopes for a market recovery.
According to data provider Wind Information, as of June 24 the pipelines of the Shanghai and Shenzhen stock exchanges had 19 listing applications for investment trusts backed by commercial property assets, with six having already secured regulatory approvals.
“Lucrative projects with potentially high returns will fuel the growth of Reits in China and eventually attract more investors,” said Ivy Lu, senior director of CBRE China Research. “Signs are encouraging that more developers will gain access to the financing platform.”
Reits allow asset owners to raise cash from valuable but illiquid assets without losing control of them. The investment vehicles also give investors the opportunity to collect regular dividends with income generated by the underlying properties.
The first four Reits backed by commercial properties were all heavily oversubscribed and gained in value on their first day of trading in Shanghai on June 18, after raising a combined 20.3 billion yuan (US$3 billion).
Pacific Securities predicted that they could deliver annual returns of 4.4 to 5.65 per cent, compared with one-year deposit rates of around 1 per cent offered by commercial lenders.