For the longest time, China didn’t have a structure to allow Real Estate Investment Trusts (REITs) to list in its Shanghai and Shenzhen stock exchanges (Hong Kong and Singapore were the alternatives).
It is all going to change now as 9 REITs are going public, offering the securities to retail investors starting on 31 May 2021.
9 China REITs IPO details
| No. | China REIT English Name | Chinese Name | Type | Ticker | Price (RMB) | Current Dividend Yield | Retail Investor Tranche amount |
|---|---|---|---|---|---|---|---|
| 1 | Bosera China Merchants Shekou Industrial Zone | 博时招商蛇口产业园 | Industrial | 180101 | 2.31 | 4.39% | ¥298m (S$62m) |
| 2 | HuaAn Zhangjiang Everbright Park | 华安长江光大园 | Industrial | 508000 | 2.99 | 4.66% | ¥208m (S$43m) |
| 3 | Soochow Suzhou Industrial Park | 东吴苏州工业园区产业园 | Industrial | 508027 | 3.88 | 4.31% | ¥279m (S$58m) |
| 4 | Hotland Yantian Port Warehouse Logistics | 红土创新盐田港仓储物流 | Warehouse | 180301 | 2.3 | 4.15% | ¥221m (S$46m) |
| 5 | CICC GLP Warehouse Logistics | 中金普洛斯仓储物流 | Warehouse | 508056 | 3.89 | 4.29% | ¥327m (S$68m) |
| 6 | Avic Shougang Biomass | 中行首钢生物质 | Waste management | 180801 | 13.38 | 8.52% | ¥134m (S$28m) |
| 7 | Fullgoal Capital Water | 富国首创水务 | Waste management | 508006 | 3.7 | 8.67% | ¥89m (S$18m) |
| 8 | Zheshang Securities Zhejiang Expressway | 浙商广州交投广河高速公路 | Tolls | 508001 | 8.72 | 11.71% | ¥168m (S$35m) |
| 9 | Ping An Guangzhou Comm Invest Guanghe Expressway | 平安广州交投广河高速公路 | Tolls | 180201 | 13.02 | 5.91% | ¥456m (S$95m) |
Similar REIT policy with other jurisdictions
This first batch of REITs are related to infrastructure and include industrial parks, warehousing and logistics, waste management, sewage treatment, and highway tolls. These REITs must have at least 80% of their assets in infrastructure.
Similar to Singapore-based REITs, the Chinese REITs are required to distribute at least 90% of their income as dividends.
I could not find any information on the tax treatment but I believe it would enjoy tax-free status as long as the distribution requirement is met.
Dividend yields ranged from 4.15% to 11.71%
The current dividend yields are comparable to that of Singapore REITs.
There are 3 industrial parks and 2 warehouse and logistics REITs that have a dividend yield ranging from 4.15% to 4.66%.
The higher yields come from waste management and highway toll assets. Four of these REITs are giving a dividend yield from 5.91% to 11.71%.
The yields are higher because these are concession assets entrusted by the government – the concession period is generally no more than 30 years and the assets must be returned to the government after expiry.
Therefore, the cash payout has to be higher to compensate the investors, as the assets suffer a high rate of depreciation.
Hot IPOs
Unfortunately, I don’t think the REITs public offering is available to Singapore investors. In fact, the issue has been so hot in China that it doesn’t need any foreign investments.
A fund company was reported to have sold out all its assigned REIT units by 10am on the first day of the offer.
The demand is high but the supply was low too – 9 REITs offered only about RMB 2 billion (~S$415m) to the retail investors.
“Can see, cannot touch”
I don’t think that Singapore retail investor can invest in these REITs even after they are traded on the exchanges. This is because the Shanghai-HK Connect and Shenzhen-HK Connect mainly allow us to buy A shares that start with the ticker “600…” and “000…”. The REIT tickers start with 1’s and 5’s.
Nonetheless, this is an important milestone for China’s capital market and a sign that it is maturing.
Properties are the most beloved investment option among the Chinese and REITs should be a popular avenue to own a piece of real estate in China. The initial interest in the 9 China REITs has been encouraging and I believe that the Chinese REIT market would balloon into something big in the future.
Watch this space!
Thanks for the article 🙂 May I know your take about any potential impact to Singapore Reits Industry and China-related Reits like Capitaland China Trust (CCT) or Mapletree NACT ?
I think the competition has always been there in terms of acquiring properties. Even if there were no China REITs before, there have always been private property funds in China. So competition for high quality properties has been there all the time.
That said, one possible impact is the demand for the locally listed China REITs may come down and some orders may flow to the ones listed in China. Have to see if investors’ interest shift.