High-skilled asset managers need to be developed in a talent-short market ahead of the launches of Western-style real estate investment trusts (Reits) in China.
Andrew Kam, a valuation director with Savills, said that the mainland, despite making preparations for nearly a decade, could be ready for embracing an active Reits market only after it has a group of professional asset managers.
“The success of Reits largely hinges on the management capability that can yield high returns for investors,” said Kam. “Investors need professionals to add value to the underlying properties.”
Reits, a source of funding for developers, pay investors dividends from rents earned by underlying properties.
Asset managers are required to find ways to increase rents and maintain a high occupancy ratio to reward investors.
“We see the huge potential for Reits in China as investors chase lofty gains,” said Kam. “But the country still lacks experienced Reits managers.”
Beijing has been preparing to launch Reits on the mainland since 2008, but not a single Western-style Reit has been launched yet.
Still, an authentic Reit is unlikely to materialise until mainland regulators liberalise the market.
On the mainland, prototype Reits products are currently offered to institutional investors based on fixed returns earned from rent income.
According to Fred Wang, chief secretary of China Reits Alliance, an industry syndicate whose members include developers, financial institutions and research institutes, more than a dozen prototype Reits products have been launched in China since 2014.
Citic Securities, the mainland’s largest brokerage, launched a Reit-style product through a private offering that year, under which institutional investors are paid dividends from rents earned by its two office buildings.