Reits not the only option for developers
Deloitte partner says business trusts have no gearing limit, are more flexible in terms of dividend payouts and are less complex to list
Mainland developers having difficulties obtaining finance are likely to consider business trusts as funding vehicles, accountancy firm Deloitte says.
"There is no gearing limit on a business trust. But a real estate investment trust (reit) has a gearing limit of not more than 45 per cent," Gary Fung, a partner at Deloitte, said.
"A business trust also has more flexibility with its distribution policy, while the dividend payout ratio of a reit has to be at least 90 per cent."
Langham Hospitality Investments, listed in May, was the first property-related listed business trust in Hong Kong.
In Hong Kong, capital gains and distributions from a business trust are not taxed, Fung said, adding that the listing process was less complicated.
"It is suitable for mainland developers who are able to generate stable income from offices and shopping malls," he said.
"Some of the mainland developers are planning to release business trusts. If market sentiment improves, there will be more developers launching business trusts."