Moody’s expects inclusion of malls in China’s Reits programme to boost developers
- Reits allow new funding to be raised at competitive costs, which will benefit property developers with abundant commercial assets, Moody’s analyst says
- Reit applications by China Resources Land, China Jinmao Holdings and SCPG Holdings that involve more than 10.9 billion yuan (US$1.49 billion) were accepted by the Chinese authorities on Thursday
The spin-off of shopping centres that are run by Chinese developers will offer an alternative source for these builders to raise money from capital markets and manage their leverage, the international ratings agency said.
“[Reits allow] new funding to be raised at competitive costs, from which property developers with abundant commercial assets will benefit,” said Cedric Lai, an analyst at Moody’s.
Although more time is needed for the property sector and capital markets to test the programme, which is at a preliminary stage, it could help developers in controlling or reducing their debt to some extent as the programme grows, Lai said.
For instance, Moody’s expects that CR Land’s leverage will improve slightly after the spin-off of its shopping centres, with its pro forma debt-to-capitalisation ratio in 2023 falling to 43 per cent from 43.1 per cent, and its pro forma cash levels rising to 121 billion yuan from 117 billion yuan over the same period.