China's real estate securitization market sees rapid growth

The real estate securitization market in China continues to expand rapidly, with public offerings of infrastructure REITs, or real estate investment trusts, to arrive in the market soon, a report by the global real estate service firm Cushman & Wakefield showed.

In 2020, 90 REIT products were issued, totaling 179.86 billion yuan ($27.7 billion), up 8.4 percent and 13.1 percent respectively over the previous year in terms of number and value.

Two infrastructure REITs were issued in 2020, providing an innovative model for the financing model in domestic infrastructure industry. And by the end of 2020, 32 products had successfully exited. The disposal of R&F Guangzhou International Airport - Integrated Logistics Park CMBS, and Beijing Huayuan Yingdu commercial REITs, attracted extensive attention from the industry.

Recently, nine publicly offered infrastructure REIT products gained official registration permission from the China Securities Regulatory Commission and have entered the sale stage. The underlying assets include logistics warehousing, industrial parks, waste disposal and power generation facilities.

"As the nine publicly offered infrastructure REIT pilot projects entered the sale stage, the long-expected REIT market in China finally drew back the curtain," said Feng Hu, senior director, head of Valuation & Advisory Services, North China, Cushman & Wakefield.

According to Sean Wang, managing director, North China, Cushman & Wakefield, the publicly offered infrastructure REIT pilot projects are of practical significance to support the implementation of major national strategies, deepen the structural reform of the financial supply side, help to revitalize infrastructure stock assets, and strengthen the capital market's attributes and objectives in serving the physical economy.

By the end of May, the first nine pilot projects in the Shanghai and Shenzhen Stock Exchanges have completed their offline price inquiry work, showing that institutions are enthusiastic in their subscription intentions, with the average effective subscription oversubscribed by a factor of seven. Private funds, commercial banks, insurance companies, securities companies and asset managers have all been involved, reflecting the high level of market interest and recognition that these products have received.

Cushman & Wakefield, together with the China Real Estate Association (CREA), also released the 2020 Asia REIT Market Report. The report presents a REIT market overview for major Asian countries and regions. For the first time, the report also includes a special study of the infrastructure REIT markets in the US, Singapore and India; and offers a detailed case analysis of Mapletree Logistics Trust – thus providing a reference for China to draw on in its ongoing development of a public offering-based REIT market.

As at the end of 2020, there were 185 REITs in the Asian market with a total market value of $281.4 billion, down around 5 percent year-on-year, according to the report. Regulators and REIT managers actively responded to the impact of the COVID-19 pandemic via a range of measures, providing multilevel supporting initiatives for REITs to maintain resilience in the wake of the pandemic.

Ma Bingying contributed to this story.