REITs Market Thrives with Over-subscription and Diversification
"Sunlight-based" "over-subscription" frequently appears, and "first orders" in different fields make their debut. Since September, the public offering of REITs market continues to show a hot development momentum with strong demand and supply.
Wind data shows that since September, there have been 5 new REITs products declared in the Shanghai and Shenzhen stock exchanges, among which heating and medical REITs were reported for the first time; among the 3 REITs approved in September, the water conservancy facility REITs were approved for the first time, and the types of underlying assets continue to expand. At the same time, the progress of project declaration, approval, and expansion is rapidly advancing. This year, the public offering of REITs market has accelerated, and currently, 15 REITs have completed fundraising and listing, which is the year with the most REITs issued and listed since the emergence of public offering REITs. It is worth mentioning that listed companies are also playing an increasingly important role in the public offering REITs market.
Affordable housing REITs are sought after
On September 18, the first affordable housing REITs project expansion was officially declared. The Shanghai Stock Exchange website shows that the "expansion sale" status of Huaxia Beijing Affordable Housing REIT is declared, and the update date is September 19. Huaxia Beijing Affordable Housing REIT disclosed in May this year that it plans to subscribe to the "CITIC Securities - Beijing Affordable Housing Center Rental Housing No. 2 Asset Support Special Plan" through expansion and ultimately invest in the Langyue Jiayuan project in Fangshan District, Beijing, Guangdian project in Tongzhou District, Sheng Yue Jia Yuan project in Daxing District, and Wenquan Kai Sheng Jia Yuan project in Haidian District.
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The announcement stated that the newly purchased infrastructure projects expanded the fund's coverage of rental housing assets in various regions of Beijing, which can effectively diversify the asset portfolio risk, and is conducive to expanding the rental housing asset portfolio held by the fund, making the fund both stable in cash flow and growth. As of the date of the announcement, the overall operation of the proposed infrastructure projects is good, and the cash flow is stable.
Some people believe that among the four proposed expansion assets of Huaxia Beijing Affordable Housing REIT, except for the Sheng Yue Jia Yuan project in Daxing District, the other three projects are not as superior in location as the issued projects. However, considering that these projects are generally public rental housing in nature and are not fully market-oriented in recruitment and operation, the impact of expansion on the yield of Huaxia Beijing Affordable Housing REIT still needs to be observed.
As a hot spot in the current market, affordable housing REITs have also appeared in the primary market with a hundredfold subscription inquiry and early conclusion of the fund-raising. On September 14, China Merchants Shekou Rental Housing REIT announced that its offline inquiry stage effective subscription multiple was 103.66 times the initial offline sale share quantity, setting a new high for the 2024 public offering REITs offline full-court inquiry multiple. The product was originally scheduled to raise funds from September 19 to September 20, 2024, but due to the cumulative effective subscription scale of public investors exceeding the initial fundraising scale limit, it announced the early end of the fundraising on September 19.
It is worth mentioning that in the expansion of affordable housing REITs, in addition to the declared Huaxia Beijing Affordable Housing REIT, there are also China International Capital Corporation Xiamen Anju REIT, Red Soil Innovation Shenzhen Anju REIT, Huaxia Fund China Resources You Chao REIT, and others that have announced expansion plans.
"For the current public offering REITs market, expansion and initial issuance may be equally important, and expansion may be even more important than initial issuance. For the Chinese market, making more REITs into 'large-cap stocks' may be more important than issuing more REITs." Li Yaoguang, deputy general manager of China International Capital Corporation Fund, said that expansion can not only activate more existing assets and expand the market scale but also optimize the asset portfolio allocation, boost the performance of the secondary market, and enhance liquidity. Looking at the development of mature REITs markets abroad, expansion is the main channel for the expansion of public offering REITs and also a manifestation of market vitality.
Diversification of underlying assetsWith the addition of diversified assets such as pharmaceuticals, water conservancy, and heating networks, the investment options for public real estate investment trusts (REITs) are becoming increasingly rich.
On September 20th, the first pharmaceutical REIT, "Huaxia Jiuzhoutong Pharmaceutical Storage and Logistics Closed-end Infrastructure Securities Investment Fund," submitted its application to the Shanghai Stock Exchange. This is also the first REIT project for Huaxia. This official application signifies that Jiuzhoutong has opened the door to enter the REITs market; if the product is successfully issued, Jiuzhoutong will also become one of the few A-share listed companies with a REITs platform.
In recent years, an increasing number of listed companies, as the original rights holders providing underlying assets, have been playing an increasingly important role in the infrastructure public REITs market. Some companies have also actively carried out Pre-REITs projects, and the REITs market has become an effective way for listed companies to refinance using their own assets.
On September 14th, the Yinhua Shaoxing Yuanshui Water Conservancy REIT officially received approval from the China Securities Regulatory Commission (CSRC) to register, filling the gap in domestic public REITs for water conservancy assets. Information shows that the underlying asset of this REIT is the Tangpu Reservoir Project in Shaoxing City, Zhejiang Province. Shaoxing Yuanshui Group, one of the original rights holders of the project, stated that water conservancy infrastructure has stable cash flow returns and long-term operation characteristics, with strong resistance to market cycles; Shaoxing City plans to build the Yinhua Shaoxing Yuanshui Water Conservancy REIT into the only municipal water-related REITs platform. Looking ahead, this REIT has a solid foundation and ample space for expansion, and is expected to become a benchmark for public REITs in water conservancy infrastructure.
In addition, the Guotai Junan Jinan Energy Heating Closed-end Infrastructure Securities Investment Fund, which was accepted by the Shanghai Stock Exchange on September 12th, is the first heating network REIT, setting a precedent for heating projects in the northern region to participate in REITs, and guiding similar assets to explore the issuance of REITs and revitalize existing assets.
At present, the underlying assets of public REITs products in the entire market have covered multiple asset categories, including industrial parks, storage and logistics parks, supermarkets, affordable housing, expressways, new energy, and more.