Xinhua Finance & Economics, Beijing, April 30 (Wang Jing, Zhang Siwen) At present, the mainland infrastructure public REITs market is in a stable operation stage, and as of the end of April 2024, the total market value of 35 listed public REITs reached 112.936 billion yuan. From the perspective of global experience, the main way for the continuous growth of the public REITs market is expansion, which is an important part of the healthy development of the REITs market and the embodiment of the vitality of public REITs.
According to industry opinions, public REITs can not only revitalize more existing assets, expand the market scale, but also optimize the asset portfolio allocation, as well as boost the performance of the secondary market and enhance liquidity through the expansion of public REITs. At the same time, the expansion is also a test of the operation and management ability of public REITs managers, and is an important way to attract more investors to participate.
The expansion journey is in the early stage, and there is a long way to go for localization exploration
Referring to the development of mature REITs markets abroad, expansion is the main channel for the expansion of public REITs, and it is also a reflection of the "vitality" of the market. With the initial exploration of the public REITs market in mainland China, more regulatory policies and detailed rules are gradually being implemented, and many products have already "tasted" the expansion operation.
On 31 May 2022, the Shanghai Stock Exchange and the Shenzhen Stock Exchange simultaneously issued the Guidelines for the Application of the Rules for Publicly Offered Infrastructure Securities Investment Funds (REITs) No. 3 – New Acquisition of Infrastructure Projects (Trial) (hereinafter referred to as the "Detailed Rules for the Expansion of REITs"), marking the official introduction of the Detailed Rules for the Expansion of Public Offering of REITs.
On September 29, 2022, 5 of the first batch of public REITs submitted expansion applications to the regulators, of which 4 completed the expansion in June 2023, with a total amount of more than 5 billion yuan, marking that the expansion of public REITs in mainland China has truly entered the implementation stage.
Since 2024, a number of public REITs have also been promoting their expansion. Among them, the expansion of AVIC Jingneng Photovoltaic REIT was accepted by the Shanghai Stock Exchange, and the fund plans to expand and install two hydropower projects in Sujiahekou and Songshan Hekou, which is expected to become the first representative of the expansion project to explore the mixed installation of "photovoltaic + hydropower" assets;
Liu Dongsheng, vice president of Beijing Energy International Holdings Co., Ltd., said that the infrastructure project to be purchased by AVIC Jingneng Photovoltaic REIT is located on the Binglang River in Tengchong City, Baoshan City, Yunnan Province.
It is reported that the Sujiahekou Hydropower Station Project and the Songshan Hekou Hydropower Station Project will generate 1.043 billion kWh and 569 million kWh respectively in 2022 (hydrological year). The overall appraised value of the Sujiahekou Hydropower Station Project and the Songshan Hekou Hydropower Station is 2.860 billion yuan, and the predicted amount available for distribution in 2024 and 2025 is 203 million yuan and 231 million yuan.
"With the improvement of the public REITs market system in mainland China and the sufficient reserves of various projects, in the context of continuous promotion of incremental measures such as expansion and expansion, the issuance side has moved from a pilot to a new stage of normalization, and has also achieved quantitative growth and qualitative improvement. Continuous expansion can promote the optimal allocation of asset portfolios, achieve a virtuous cycle of infrastructure investment, and help the healthy development of the public REITs market. Liu Dongsheng said.
A number of industry insiders told Xinhua Finance that the management ability of REITs managers can be directly reflected in the cash income generated by operations. Excellent REITs managers can create better returns for investors by enhancing the intrinsic value of the underlying properties, increasing operating income. Although the underlying assets of public REITs are real estate, and the operation and management have the characteristics of "passive income", this does not mean that REITs managers can "sit back and relax" in the operation and management of the project.
"REITs are financial products that link the underlying real estate and the capital market, and the rationality of the capital structure should be considered on the capital side, and adjusted in a timely manner to achieve a 'positive leverage' effect and create more value income for the share holders of REITs. A listed REITs fund manager said.
A win-win situation for the original equity holders and investors, the expansion operation has "many benefits"
Since the expansion is to load new assets into the original public REITs, in the process of preparing for the expansion, the REITs manager can optimize the asset portfolio through active selection according to the existing REITs, so as to achieve the balance and dispersion of asset allocation within the entire asset portfolio, and enhance the overall anti-risk ability of REITs while improving the investment income of the asset portfolio.
Recently, a closed-door seminar on "Expansion of Public REITs: Exploring Value Creation and Mechanism Innovation" hosted by the China REITs Forum and Rise Real Estate Finance Research Institute was held in Beijing. Fan Zhikun, head of the industry and finance business of the finance department of China Merchants Shekou, pointed out at the meeting, "The value of REITs expansion operations is reflected in helping to diversify assets, optimize portfolio performance, and reduce the debt level of original equity holders. At the same time, by expanding the 'growth' of the market volume, it can also achieve the anti-risk effect of smoothing the fluctuations of secondary trading. ”
"After opening up a virtuous cycle of heavy asset investment and financing through the expansion of REITs, the company's team has basically formed a consensus: continue to acquire assets and cultivate them as soon as possible, so as to promote multiple rounds of expansion...... At present, the company has a large number of reserve assets, so that we can continue to form an 'echelon' loaded into the REITs platform in the future, such as the next 3 or 5 years, we have different types of assets, which can be filled into the existing REITs products in a planned step-by-step manner, and everyone's enthusiasm for actively participating in REITs is higher. Fan Zhikun said.
In the process of fundraising, both the original investors and the new investors value the management ability of REITs managers. REITs managers with excellent management performance and market recognition are more likely to expand their fundraising.
Zhang Baoqiang, executive director of Shougang Fund, suggested, "From the perspective of industrial investors, it is recommended to encourage a number of REITs brands with self-growth and management capabilities, such as clean energy, parks and other representative products, to use their asset scale and expansion prospects to create industry benchmarks and asset reserves 'new force', and finally reverse the guidance and determination of primary asset transaction prices." ”
In addition, from an investment perspective, the expansion of REITs is also an important node for the original equity holders to adjust their investment structure. Zhu Yuanwei, President of Rise Real Estate Finance Research Institute, told Xinhua Finance, "One of the challenges facing the expansion is how to balance the relationship between new and old investors, and as the market develops in depth, the rules and pricing mechanism of the expansion have the opportunity to be optimized under the promotion of all parties to better meet the balance of interests between new and old investors and original equity holders." ”
With the increase of expanded assets, the management scale of REITs has expanded, and the market share has increased, which can not only attract the participation of public investors and general institutional investors, but also attract the attention of mutual funds, pension funds and other institutions with a large amount of capital investment needs. The larger the scale and the more investors participate, the more liquid the REITs market will be, and the more fully the underlying assets will be publicly valued and priced. This creates a virtuous circle that helps the market to continue to expand.
In addition, the current source of REITs expansion assets is still dominated by the original equity holder's own assets. "There can be more market-oriented external mergers and acquisitions in the future, so as to make it easier to balance the interests of products. Zhu Yuanwei also suggested that in the future, restrictions on the use of recovered funds may be appropriately relaxed, so that they can be more freely invested in opportunities such as value-added mergers and acquisitions.
Editor: Wang Zhe
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