news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

21st Century Business Herald reporter Li Yuchen reports from Beijing

"Hainan, Tianjin, Sichuan, Guizhou, Hebei, Heilongjiang... the research team visited more than 20 provinces and cities, held large-scale briefings one after another, and popularized with the government what REITs products are and how to help local governments and enterprises resolve debts and form better balance sheets..." Meng Mingyi's thoughts went back to nearly 10 years ago, and the day when public REITs were launched in China is still vivid in his mind.

Today, Meng Mingyi is the executive president of Huili Investment Fund Management Co., Ltd., chairman of Guohui Green Energy Co., Ltd., vice chairman of Zhonghui Investment Management Co., Ltd., and chairman of the Infrastructure Professional Committee of the China Asset Securitization Forum. As early as when he was studying for his doctorate, Meng Mingyi took asset securitization as a research topic. Growing up in the new economic era, Meng Mingyi further took root in the capital market and became one of the leaders in my country's infrastructure REITs field.

Research on financial legal frameworks, communication and publicity to local governments, guidance and assistance in asset cultivation... On the one hand, Meng Mingyi has led the company and the project team to work at the forefront of advocating and practicing asset securitization for a long time, promoting the development and implementation of public REITs in China.

On the other hand, Meng Mingyi and Huili Fund have always keenly grasped the market trend and maintained foresight and judgment on the infrastructure investment market trend in investment. In recent years, the company has put the "industry-driven" theory into practice, relentlessly pursued the quality of industrial customers and cash flow levels in the operation process, combined the thinking mode of international real estate private equity funds and REITs with the domestic primary market investment, and still achieved good investment results under the overall situation of a sharp decline in the real estate market in recent years.

Recently, Meng Mingyi accepted an exclusive interview with a reporter from 21st Century Business Herald, sharing his own experiences and lessons learned with Huili Fund regarding China's REITs market and infrastructure investment.

Make up for the lessons of asset securitization

Since 2015, my country's economy has entered a "new normal" development stage, with the linkage between major economic indicators diverging, economic growth continuing to decline and CPI continuing to run at a low level, and the real estate that supports China's economy has also entered a downward channel. However, at the same time, with the heavy tasks of deepening the structural reform of the financial supply side, strengthening the ability of the capital market to serve the real economy, further innovating investment and financing mechanisms, and effectively revitalizing existing assets, the exploration of infrastructure public REITs has begun.

In the same year, Huili Fund team and the National Research Center jointly established a REITs research group, with Meng Mingyi as deputy secretary-general. The research group is like a lecturer, with the experience of advanced foreign markets and ardent expectations for the Chinese financial market, to guide the financial sector, local governments and enterprises.

Looking back now, Meng Mingyi told reporters that exploring a path for the localization of public REITs is like a "make-up lesson" for many players in the industry. On the legal side, this means helping to re-examine the current financial structure and find a "breakthrough" in which to legally introduce public REITs products.

In fact, due to the investment scope restrictions in laws and regulations such as the "Securities Investment Fund Law of the People's Republic of China" and the "Guiding Opinions on Regulating the Asset Management Business of Financial Institutions", "publicly offered funds shall not invest in the equity of non-listed companies", the initial view of the industry was that "publicly offered REITs cannot be issued domestically under the current securities law".

However, after fully referring to the market experience of developed countries and conducting sufficient research and communication with the Financial and Economic Committee of the National People's Congress, Meng Mingyi and his research team found that there is still a channel in the current law that is recognized by all parties to introduce public REITs. By proposing to build a "public fund + ABS" structure, with the least breakthrough in the current legal framework, public REITs products can be successfully embedded in my country's financial system and operate legally in the capital market.

For the government, it means helping to popularize professional concepts and clarify the idea of ​​asset activation. Since a large amount of national assets are held by the public sector, local governments have become the main body of the research team's voluntary publicity work. What is the government's thinking, how does it view REITs products, and ultimately promote local assets to enter the REITs market.

For enterprises, it means cultivating the willingness to issue REITs and assisting in the process of asset compliance. Since its establishment, the research team has taken the lead in participating in the front-end guidance of a series of REITs products. However, Meng Mingyi noticed that although there is no shortage of high-quality assets in the market, it is often not easy for enterprises to have a strong willingness to issue REITs while cultivating their assets to meet the issuance conditions.

"We are often asked by companies: The interest rate offered by the bank is very low, why don't I issue bonds instead of REITs?" Meng Mingyi gave an example to reporters, "Because the financing channels themselves are relatively smooth, many companies, especially state-owned enterprises, were not very willing to issue REITs at that time. In response, we would explain that the funds raised by public REITs are truly non-debt funds, and the financing is not included in the corporate debt."

In addition, Meng Mingyi said that to become the underlying high-quality assets that can be included in REITs, companies need to meet multiple conditions at the same time, such as asset compliance, controllable liabilities, and matching the issuance scale with repayment capacity. But in fact, the asset status of some companies is complicated. For example, a high proportion of repeated mortgages has led to a debt scale far exceeding the scope that new financing can cover, forming a historical debt burden. Some corporate assets also have incomplete procedures or compliance defects left over from history, spanning multiple historical periods, which are extremely difficult to repair, making it difficult for companies to meet the issuance standards of REITs. Therefore, issuing REITs is more like an opportunity for comprehensive self-examination and rectification for companies, requiring companies to solve historical problems and make up for shortcomings in order to meet compliance standards.

Today, the research team has successfully designed and submitted dozens of asset revitalization plans. Regarding the experience gained from this, Meng Mingyi pointed out that in the early stage of counseling, it is necessary to really go into the government and the company to understand their needs and difficulties. For some more systematic difficulties, it is still necessary to be patient and slowly find or wait for the appropriate response and solution over time.

"For example, we hope that in the future, government departments can further open 'green channels' to provide better and more direct coordination and approval mechanisms for asset securitization-related procedures," he pointed out.

Three years of pilot work from zero to one

In April 2020, the China Securities Regulatory Commission and the National Development and Reform Commission jointly issued a document to promote the pilot program of infrastructure REITs. In June 2021, my country's first batch of nine infrastructure REITs were successfully issued and listed on the Shanghai and Shenzhen stock markets, marking a new chapter in the pilot program of public REITs.

After overcoming the initial difficulties, public REITs have taken root in China and their scale has continued to grow. Since 2023, Meng Mingyi has led Huili Fund and its investment subsidiary team to actively participate in the REITs back-end market, strategic placement investment and secondary market transactions.

"It is very difficult to go from 0 to 1, but this step has been successfully taken." Meng Mingyi said that looking back over the past three years, the underlying assets of public REITs have been expanding, the issuance mechanism has gradually matured, and the issuance speed has significantly accelerated, showing a good trend of vigorous development. This is inseparable from the strong promotion of regulatory agencies, industry professionals and many experts and scholars.

Since 2024, public REITs have once again ushered in a wave of issuance, and as of press time, 10 new products have been listed. By the end of the first half of the year, there were 40 public REITs listed in my country, with a total issuance scale of about 130 billion yuan.

Judging from the performance of the secondary market, the public REITs market has gone through a complete market cycle, from high premium issuance and irrational rise in the early stage, to volatile decline and then stabilization and recovery within the year. According to Wind data, as of July 28, 30 of the 40 listed infrastructure public REITs have achieved positive returns within the year.

Although the market has ups and downs, and institutions have entered and exited, Meng Mingyi pointed out that after three years of market cultivation and practice, industry participants, led by mainstream investment institutions, have gone from having only limited knowledge of REITs, an innovative financial tool, to generally establishing professional REITs investment teams and building a scientific and complete project evaluation and investment decision-making system. In general, rationalization and maturity have always been the main themes of the development of the public REITs market.

The market's return to rationality has also tested the mentality of market participants and driven investors to improve their ability to examine projects. Meng Mingyi believes that nowadays, more people remain in the public REITs market, and they are truly "mid- to long-term investors". One of their major investment logics is to make investment decisions based on a deep understanding of macroeconomic policies and economic conditions, and pay attention to the economic logic behind it, cash flow stability and potential risks, rather than blindly investing based on brands or popular concepts.

"We have experienced a round of rise and a round of adjustment. In fact, for all market participants, everyone's investment mentality will become more rational now." Meng Mingyi said. At present, he believes that the enthusiasm of institutions for investing in the REITs market is still gradually increasing, and in the future, the market transaction share of each project may also show an overall upward trend.

At the same time, Meng Mingyi also suggested exploring the inclusion of more areas involving franchise models into the scope of the public REITs pilot program to drive the expansion of the REITs market, including but not limited to transportation areas such as subways, social areas such as sports, new infrastructure areas such as artificial intelligence computing power and civil space, and agriculture and forestry.

New Trends in Industrial Infrastructure Investment

In 2011, Huili Fund invested an equity investment fund with an initial scale of 40 million yuan in the Kunming affordable housing project, thus becoming the pioneer of China's affordable housing investment fund. Since then, Huili Fund has been active in the field of equity investment funds around a series of real estate projects.

Today, the development and changes of China's public REITs and real estate markets are also profoundly changing Huili Fund's investment thinking.

Meng Mingyi told reporters that all of Huili Fund's current project investments can be classified as Pre-REITs investments, that is, all investments will be anchored in industries that will be related to REITs listings in the future. In his opinion, today's real estate investment should be more regarded as part of infrastructure investment, especially its transformation trend towards "industrial infrastructure investment", which has become the mainstream direction of market development.

In other words, compared to the traditional concept of "buying, selling and leasing space" in the real estate sector, Meng Mingyi believes that close integration with the industry and vertical deepening development strategies will be the core competitive advantage and investment value of infrastructure in the new era. In this context, investors also need to pay more attention to the industrial logic behind real estate projects. For the projects they invest in, they must not only clarify their leasing objects, but also clearly grasp the characteristics of the industries they serve and the path of sustainable development.

Based on this idea, in recent years, Meng Mingyi has led Huili Fund and its platform team to work closely with operating and funding partners to achieve steady development in advantageous fields such as technology real estate and new energy, which also provides reference for the transformation of traditional real estate companies with high debt, high turnover and high leverage.

Taking technology real estate as an example, in 2021 and 2022, he led his Zhonghui Investment to establish special funds and completed two M&A investments in Beijing Zhongguancun Torch Building and Shanghai Zhangjiang Exhibition Center, with a total amount of tens of billions of yuan.

Among them, the acquisition of Torch Building is the largest commercial real estate transaction in Beijing in 2021. Torch Building is located in Tsinghua Science Park, Zhongguancun, Haidian District, with a total construction area of ​​46,000 square meters. Its main tenants are large Internet technology companies and high-tech companies in the field of artificial intelligence. It is a landmark building in Zhongguancun with extremely high scarcity and excellent display.

The Zhanxiang Center is located in the core area of ​​Zhangjiang Hi-Tech Park. It was developed by Morgan Stanley and Zhanxiang Group and has a total construction area of ​​42,000 square meters. The main tenants are leading or unicorn companies in industries that are strongly supported by the state and the government, such as chip semiconductors, software development, and biomedicine. In 2023, the incubation carrier operation was introduced, and the district-level incubator qualification was obtained and rent subsidies were provided to incubated companies. With a high occupancy rate and high-quality and stable tenants, the Zhanxiang Center has become a landmark technology carrier in the region.

New energy is also a key area of ​​Huili Fund. At present, Huili Fund is actively negotiating with a number of partners, who have expressed their willingness to open up links in the energy storage industry chain and enter the capital market through financial instruments such as REITs. Meng Mingyi firmly believes that a series of measures will greatly promote the development of the new energy and energy storage industries, inject new vitality into the market, and achieve a win-win situation for all parties.

"China's energy industry has the advantage of 'concentrating resources to accomplish major tasks', which is closely linked to our country's institutional advantages. Globally, from new energy power generation such as photovoltaics and wind power to energy storage technology, to park solutions such as smart energy management, China's production and manufacturing and innovative technological capabilities are quite advanced, which also provides a broad space for investment." Meng Mingyi said.

However, at the same time, in addition to consumer infrastructure, Meng Mingyi also looks forward to exploring REITs pilot projects with other types of high-quality commercial properties in first- and second-tier cities as underlying assets, and gradually expanding the scope of underlying assets of commercial real estate REITs to office buildings, hotels, long-term rental apartments, exhibitions, hotels and other high-quality commercial real estate fields. He believes that the "hot" issuance ecology of the market three years ago is very different from the current situation. At this time, promoting commercial real estate with excellent profitability to enter the capital market may play a "boosting" role for the development of the real estate industry.