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On August 5, the equity market was volatile, and public REITs rose across the board, with a total of 14 public REITs rising by more than 1% in a single day. Since the beginning of this year, public REITs have seen a rebound, and data shows that among the 40 REITs included in Wind statistics, 36 have achieved growth this year, accounting for 90%.

In addition, the pace of public REIT issuance has accelerated significantly. As of August 5, 11 new public REIT products were listed this year, with a total fundraising scale of 27.27 billion yuan, which has exceeded the fundraising scale of 20.142 billion yuan for the whole year of 2023. At the same time, the total market value of public REITs increased by more than 30 billion yuan, from 81.175 billion yuan at the beginning of the year to 115.95 billion yuan.

Since the first batch of nine infrastructure REITs pilot projects were listed on June 21, 2021, my country's public REITs market has grown steadily from scratch in just a few years. On July 26, the National Development and Reform Commission issued the "Notice on Comprehensively Promoting the Regular Issuance of Real Estate Investment Trust Funds (REITs) Projects in the Infrastructure Field" (hereinafter referred to as the "Notice"), marking that infrastructure REITs with Chinese characteristics have officially entered a new stage of regular issuance.

A big rise across the board

On August 5, the equity market was volatile, and public REITs rose across the board. Specifically, Harvest Wumart Consumer REIT rose 3.43%, CICC Hubei Science and Technology Investment Optics Valley REIT rose 3.21%, and Harvest China Power Construction Clean Energy REIT rose 3.09%. A total of 14 public REITs rose by more than 1% in a single day.

Since the beginning of this year, public REITs have seen a rebound. Data shows that among the 40 REITs included in Wind statistics, 36 have achieved growth this year, accounting for 90%. Among them, 22 REITs have increased by more than 10% this year, with CICC Xiamen Anju REIT and Huaxia Beijing Affordable Housing REIT leading the way, with both increasing by more than 30% this year; while four products, including Harvest JD Warehousing Infrastructure REIT, have experienced varying degrees of decline.

In terms of net inflow, according to Wind data, as of August 4, 7 REITs had net inflows exceeding one million yuan, with Gongyinhe North Expressway REIT ranking first with a net inflow of 16.3697 million yuan, followed by Harvest Jingdong Warehousing Infrastructure REIT with a net inflow of 3.6465 million yuan, and Guotai Junan Chengtou Kuanting Baozu Housing REIT with a net inflow of 2.1143 million yuan. Overall, REITs received a net inflow of more than 33 million yuan this year.

Popular in the market

Since the beginning of the year, the CSI REITs Total Return Index has risen by 10.54%, and the pace of public REITs issuance has accelerated significantly. According to Wind data, as of August 5, 11 public REITs products were newly listed this year, with a total fundraising scale of 27.27 billion yuan, which has exceeded the fundraising scale of 20.142 billion yuan for the whole year of 2023. At the same time, the total market value of public REITs increased by more than 30 billion yuan, from 81.175 billion yuan at the beginning of the year to 115.95 billion yuan.

Specifically, among the 11 new products this year, 7 fund companies participated, and 4 of them were managed by China Asset Management. It is worth mentioning that nearly half of the new products, including Huaan Bailian Consumer REIT, are consumer infrastructure products, with a total fundraising scale of more than 14.5 billion yuan. In addition, 2 have been approved for issuance and 1 is in the application and approval stage.

The above-mentioned newly issued products were popular in the market during both the public and offline issuance stages. The average subscription days for the public offering part was only 2.27 days. Many products announced the early termination of fundraising. Four of them, including E Fund Shenzhen Expressway REIT, Harvest China Power Construction Clean Energy REIT and China Special Electric Power New Energy REIT, were "sold out in one day".

In addition, many newly issued public REITs have achieved oversubscription. Taking the newly established Huaan Bailian Consumer REIT as an example, according to the subscription application confirmation ratio announcement released by the fund on July 11, the fund's public offering shares are 80.16 million, accounting for 30% of the number of shares issued after deducting the allocation to strategic investors. As of July 5, 2024, the number of valid fund shares subscribed by public investors is 86.83 million, and the full subscription funds have been paid, which exceeds the total initial public offering specified in the offering announcement, triggering the proportional allocation, and the final public investor allocation ratio is 92.32%.

The offline subscription part of this issuance also saw oversubscription, with 276.11 million fund shares subscribed effectively, which also exceeded the total initial public offering specified in the offering announcement, triggering proportional placement, and the final effective subscription application confirmation ratio was 67.75%. At the same time, the fund's initial strategic placement offering shares were 732.77 million shares, accounting for 73.28% of the total number of fund offering shares. All 22 strategic investors have subscribed to their promised fund shares and paid the full subscription amount in accordance with the strategic placement agreement and the subscription price determined by the offline inquiry, with the application confirmation ratio being 100%.

Policies promote the regular issuance of REITs

Since the first batch of nine infrastructure REITs pilot projects were listed on June 21, 2021, in just a few years, my country's public REITs market has grown from scratch and has developed steadily. The scope of asset industries has gradually expanded, and the application and recommendation procedures are becoming standardized. Infrastructure REITs have the conditions to move from pilot to normalized issuance.

On July 18, the Third Plenary Session of the 20th CPC Central Committee formally adopted the "Decision of the CPC Central Committee on Further Comprehensively Deepening Reforms and Promoting Chinese-style Modernization" (hereinafter referred to as the "Decision"). In this regard, CICC's research report stated that Article 5 of the "Decision" promotes the market-oriented reform of the infrastructure industry and Article 23 promotes the formulation of industrial and commercial land use rights extension and renewal policies after expiration, which may help promote the development of the REITs market. First, the market-oriented reform of the infrastructure industry may open up project revenue space, and the importance of REITs as a platform for the financing of physical assets is becoming increasingly important; secondly, the clarification of the land renewal policy may be conducive to the residual value and asset value confirmation of holding real estate assets, and is conducive to the stability of the asset value and market value of property REITs (industrial and commercial land projects).

In addition, on July 26, the "Notice" issued by the National Development and Reform Commission marked a key step for China in promoting innovation in investment and financing systems and mechanisms and building a multi-level capital market system. Infrastructure REITs with Chinese characteristics have officially entered a new stage of normalized issuance.

Guotai Junan Securities analyzed that the release of the "Notice" has epoch-making significance for the long-term development of the infrastructure REITs market. On the one hand, clean energy and efficient coal-fired power generation, the inseparable ground floor shops and hotels in the park infrastructure, AAAA-level scenic spots and their supporting hotels, long-term rental apartments, and elderly care infrastructure are officially included in the pilot asset category, which will undoubtedly greatly enrich the investment scope of infrastructure REITs products, enhance their market appeal and further increase the market size. On the other hand, the "Notice" cancels the unified provisions on key economic indicators such as the cash flow distribution rate or internal rate of return of infrastructure REITs, further highlights the characteristics of REITs products as equity financial instruments, and reflects the principles of market orientation and investor interest protection. In addition, the "Notice" also has clearer and more rigorous provisions on fund recovery and application recommendation processes, aiming to optimize operating procedures, improve efficiency, and further stimulate market vitality.

Editor: Tactical Heng

Proofreading: Zhao Yan