Contributing to the development of the public REITs market - Interview with Ding Liye, Chairman of SCPG Group

　　Recently, the website of the Shenzhen Stock Exchange disclosed the second quarter report of 2024 of the CICC SCP Consumer Infrastructure Closed-end Infrastructure Securities Investment Fund (abbreviation: CICC SCP Consumer REIT, fund code: 180602). According to the report, the infrastructure project of the product operated smoothly, with an occupancy rate of 98.4% and a rental collection rate of 100% at the end of the reporting period, and the amount available for distribution was higher than the level predicted in the prospectus for the same period.

　　As one of the first approved consumer infrastructure funds, CICC SCP Consumer REIT was listed on the Shenzhen Stock Exchange on April 30, 2024, and is committed to continuously bringing long-term investment value to investors. Recently, what is the significance of the launch of consumer infrastructure REITs for commercial real estate? Since its listing, how has the underlying assets of CICC SCPG Consumer REIT been operated? Whether there is an expansion plan in the future and other issues, the "Economic Information Daily" reporter exclusively interviewed Ding Liye, chairman of SCPG Group.

　　Passenger flow continues to grow and asset operations are stable

　　The underlying asset of CICC SCP Consumer REIT is Hangzhou Xixi Impression City, located in Yuhang District, Hangzhou City, Zhejiang Province, which is connected to Hongyuan Station of Hangzhou Metro Line 3 and is the largest subway shopping center in the west of Hangzhou.

　　According to Ding Liye, Hangzhou Xixi Impression City is positioned as a city-level shopping center for families and urban youth. Since its opening in 2013, with the development of Hangzhou's consumer market, Hangzhou Xixi Impression City has continued to improve its brand level by creating a one-stop shopping experience business combination, continuously serving the improvement of the consumption conditions of residents in Hangzhou and Yuhang District, radiating a population of one million, and becoming a benchmark commercial property with important influence and regional representation in Hangzhou.

　　According to reports, in May 2024, Xixi Impression City held the "Fifth Impression Music Festival" during the anniversary celebration month, which continued the original impression IP series and achieved the in-depth dissemination of the project's reputation and influence, with the passenger flow increasing by 11.6% year-on-year and 5.4% month-on-month. Driven by the anniversary, sales increased by 11.0% month-on-month in May. At the same time, it continued to try the IP+ pop-up store model, and the Q version of Pig Man made its debut in Hangzhou, and related activities were widely disseminated on mainstream social platforms. The butter indulgence town IP flash mob accurately reached the vertical group, attracting young fans of the "baby circle" to watch the exhibition.

　　It is worth affirming that over the years, Hangzhou Xixi Impression City has relied on the 20 years of experience in the field of business management of SCPG Group, and has maintained the overall operation and operation in a good state through proactive operation management and profound brand resource accumulation. Since its opening in 2013, the turnover of Hangzhou Xixi Impression City has shown an upward trend, with a total project turnover of more than 3.5 billion yuan in 2022; From January to September 2023, the nine-month turnover exceeded 3.2 billion yuan, hitting a new record high.

　　"The stable operation of the underlying assets is one of the highlights of CICC SCPG Consumer REIT." In an exclusive interview with reporters, Ding Liye said that from the perspective of tenant formats, Hangzhou Xixi Impression City covers retail, catering, entertainment, and services, which can meet consumers' one-stop various consumption experiences. From the analysis of the proportion of leasing area and rental income of different tenant formats, the tenant business structure is relatively stable, and the proportion of leasing area and rental income of various types of business formats is relatively scattered, which can effectively alleviate the potential impact of market risks of a single format on the project.

　　"The retail format is the traditional advantageous format of Hangzhou Xixi Impression City, and through the successive adjustments in recent years, we have continuously increased and strengthened the proportion of the catering format, especially the introduction of market hotspots and head brands, which is also an important reason why we have been able to have stable performance in recent years." Ding Liye said that since the listing of CICC SCPG Consumer REIT on April 30 this year, the passenger flow and sales of Hangzhou Xixi Impression City have maintained year-on-year growth.

　　According to the disclosure, from April 16, 2024 (the effective date of the fund contract) to June 30, 2024, the total operating income of the Hangzhou Xixi Impression City project held by CICC SCP Consumer REIT was 69.1629 million yuan, and the rent collection rate was 100%; In the first half of 2024, the passenger flow will reach 10.52 million, a year-on-year increase of 3.26%. At the fund level, during the reporting period, the amount available for distribution was 36.81 million yuan, with an annualized distribution rate of 5.44% based on the issuance scale and 104.37% of the level predicted in the prospectus.

　　Consumption and investment should be pursued simultaneously to build a virtuous circle

　　The launch of the first batch of consumer public REITs is a concrete measure for the capital market to implement the decision-making and deployment of the CPC Central Committee and the State Council and the spirit of the Central Financial Work Conference, which will effectively promote consumption and stabilize growth, enrich the asset types of REITs and investors' investment targets, and build a virtuous cycle of "investment, financing, construction, management and withdrawal" in the field of consumer infrastructure, injecting new impetus into the long-term and healthy development of the mainland REITs market.

　　In Ding Liye's view, one of the biggest characteristics of consumer public REITs is that they have formed a closed loop of benign investment and consumption. "Consumer public REITs convert consumers into investors, consumers spend with you, and the return on rent belongs to investors, so consumers are willing to come to you to consume. In this way, investment drives consumption, consumption drives investment, and the entire business forms a closed loop. Ding Liye explained.

　　"The underlying assets of consumer public REITs are the infrastructure and important carriers for residents to participate in consumption, and with the launch of products, it will be conducive to promoting the revitalization of existing assets, expanding effective investment and boosting consumption." Ding Liye lamented that in the past 20 years, SCPG has been exploring the business model of "investment, financing, management and withdrawal", but it has not been able to find a good solution for "withdrawal". The launch of consumer public REITs is of great significance to commercial real estate. In terms of business model, it has opened up the last mile of "retreat", forming a virtuous circle of "investment, financing, construction, management and withdrawal". In terms of management and operation, it also gives commercial real estate an anchor goal, so that the management action has a very clear path, and it will not be deformed during the implementation process, and finally it will be recognized by the market.

　　Strengthen capital operation and carry out fundraising expansion in a timely manner

　　For the public REITs market, expansion is the only way for market development, which makes it possible for a single fund to expand extensively, which is conducive to the continuous inclusion of high-quality stock assets in the REITs market, the growth of market scale, and the improvement of liquidity in the REITs market.

　　The key to the continuous expansion of REITs is the operation and management capabilities of the asset side. The reporter learned that the initiator of CICC SCPG REIT, SCPG Group, is a platform for the development and operation of shopping malls under Vanke. According to public information, Vanke became a significant shareholder of SCPG Group in 2016 by holding an interest in the investment fund. Up to now, the operating efficiency of commercial projects managed by Vanke has increased by more than 20%.

　　It is worth mentioning that since its establishment 20 years ago, SCPG has always focused on the investment, development and operation of shopping malls with an international vision, and its business runs through the entire value chain in the field of consumer infrastructure. As of December 31, 2023, SCPG has operated and managed more than 160 projects in 53 cities across the country, providing a broad imagination for the future expansion of CICC SCPG Consumer REIT.

　　"CICC SCP Consumer REIT is not only a project for the group, but also a platform to connect with the capital market. At present, the scale of this platform is still small, but the group operates many excellent commercial real estate projects that can be installed at the right time. Ding Liye revealed that according to the existing rules, CICC SCP Consumer REIT can be expanded one year after its listing, and the fund manager and the group will carry out the expansion work in a timely manner.

　　Ding Liye said that in the future, SCPG will continue to work together with managers, give full play to its comprehensive advantages, rely on high-quality underlying assets, improve the efficiency of operation and management, strive to provide good investor services, and contribute to the high-quality development of the public REITs market. (Reporter Zhang Wen reports from Shenzhen)

Source: Economic Information Daily