firepowerpinball| Third anniversary of approval of public offering REITs| The "initial launch + fundraising expansion" two-wheel drive investor base is expected to further expand

"as the earliest participant, witness and promoter of public offering REITs in ChinaFirepowerpinballIn practice, we develop and progress with the industry, and gradually explore our own model. " Liu Liyu, executive director of the innovation and investment department of CICC, said.

What Liu Liyu said is also the common aspiration of the first batch of public offering REITs managers. It has been three years since the first public offering of REITs was approved in May 2021. So far, the stable cash flow and high proportion of dividends in public offering REITs have become more and more prominent. While winning the favor of investors, the relevant fund managers not only continue to launch new products, but also actively promote the "IPO + fund expansion" two-wheel drive.

As an important bridge between the financial market and the real economy, REITs is an important part of economic transformation and high-quality development. However, in the process of development, there are still some difficulties and challenges. In the view of people in the industry, how to give full play to the important role of REITs in invigorating existing assets, expanding effective investment and reducing the leverage ratio of physical enterprises, and take the road of the development of the REITs market with Chinese characteristics, has also become an urgent problem for fund managers and common interests.

High proportion of dividends favored by investors

As a kind of innovative products, compared with other public offering fund products, public offering REITs has unique characteristics such as long closure period, stable income, high proportion of dividends and so on.

Summing up the operation and management experience in the past three years, the Infrastructure Investment Department of the Clay Innovation Fund said that the performance of the public offering REITs was stable and its overall performance was better than the IPO forecast. This is mainly due to the fact that all issued projects have mature, high-quality, sustained and stable infrastructure projects as underlying assets with a high dividend ratio, which is favored by investors.

Wang Hongying, dean of China (Hong Kong) Financial Derivatives Investment Research Institute, believes that the underlying assets of the public offering REITs are relatively stable, and the dividends and returns brought to investors are also relatively certain. In addition, due to the rising intrinsic value of infrastructure, it will also bring capital gains to investors, which is suitable for investors who pursue relative soundness. Wang Hongying also mentioned that high-frequency sub-dividends are expected to become the future development direction of public offering REITs.

It is worth mentioning that China's infrastructure public offering REITs has the attribute of compulsory dividend, and a high proportion of dividend is also one of the product features. Previously, the guidelines on Public offering Infrastructure Securities Investment funds (for trial implementation) issued in August 2020 required that the public offering REITs should operate in a closed manner, with an income distribution ratio of not less than 90 per cent of the annual available allocation of the merged fund.

Dividend is the main source of income for investing in public offering REITs. Excellent cash flow production and sustainable distribution ability can also reflect the revenue performance of the underlying assets of the public offering REITs and the professional operation level of the operation and management institutions, which provides an intuitive reference for investors to evaluate the investment value of public REITs products. At present, the rate and frequency of cash dividends have become one of the main considerations for investors to participate in public REITs investment. Fund managers also pay more attention to the timeliness of dividends and strive to improve investors' sense of achievement by increasing the frequency of dividends. " Liu Liyu said.

Flush iFinD data show that as of May 16, there were 31 public REITs products paying dividends, with a total of 122 dividends.Firepowerpinball.1.9 billion yuan. Among them, Ping an Guangzhou Guanghe REIT and CICC Anhui Traffic Control REIT ranked in the top two, with cumulative dividends exceeding 1 billion yuan, 1.553 billion yuan and 1.464 billion yuan respectively.

From the point of view of the number of dividends, there are also a number of public REITs dividends. Data show that, as of May 16, a total of 28 public REITs have accumulated more than one dividend, among which Ping an Guangzhou Guanghe REIT, Zhongjin GLP REIT, Huaxia China Communications and Construction (601800) REIT, Huaxia Yuexiu Expressway REIT have the highest cumulative dividend times, all reaching 7 times.

The Infrastructure Investment Department of the Clay Innovation Fund also mentioned that for investors, the dividend income of the public offering REITs has mandatory and tax advantages, providing investors with the opportunity to participate in high-quality infrastructure projects and share stable cash flow returns. During the closed period, the higher dividend ratio enables investors to share the investment return of the project through dividend income. In the future, with the maturity of the market, the normal dividend mechanism will be further improved, thus improving the efficiency of investors' use of funds.

Walking on two legs

With the continuous improvement of the product market and mechanism, the public offering REITs continues to expand, at the same time, some stock products have also been expanded. The so-called public offering REITs expansion refers to the behavior of raising funds again after the initial public offering of REITs, and using the funds for newly purchased assets.

According to Liu Liyu, the expansion of the stock REITs and the continuous absorption of high-quality assets is one of the main ways for the public offering REITs to give full play to the function of the listing platform and achieve scale appreciation. Public offering REITs can acquire assets at the right time, optimize the investment portfolio, disperse risks, achieve value growth under management empowerment, improve the distributable cash flow of unit funds, and enable investors to share the long-term cash flow growth and liquidity improvement of the fund.

"with the rapid development of the public offering REITs market, the two-wheel drive of 'IPO + expansion' has played an important role. Only by walking on two legs can we develop faster and more steadily." Boshi Merchants Shekou (001979) Industrial Park REIT fund manager Liu Xuan sighed.

Liu Xuan further mentioned that fund-raising is a specific measure to implement relevant policy requirements, which will help to further invigorate the stock of high-quality assets of fund sponsors (original rights holders), enhance development capacity, reduce debt level, really practice stock with increment and financing to promote investment, improve investment efficiency and investment level, improve market-oriented and legalized mechanism, and promote the healthy development of infrastructure REITs. It will help to further broaden the sources of funds for infrastructure projects, better activate existing assets, and expand effective investment.

Previously, in May 2022, the General Office of the State Council issued the "opinions on further invigorating existing assets and expanding effective Investment", which pointed out that we should establish and improve the fund-raising mechanism and explore the establishment of a multi-level infrastructure REITs market. In May of the same year, Shanghai and Shenzhen also issued guidelines for the expansion of public offering REITs. With the support of the policy, the first batch of applications for public offering of REITs were also approved.

On March 31, 2023, Boshi Merchants Shekou Industrial Park REIT, Clay Innovation Yantian Port (000088) Warehouse Logistics REIT, CICC GLP Warehouse Logistics REIT, Huaan Zhangjiang Everbright Park REIT a total of four product expansion applications were first approved by the China Securities Regulatory Commission. At present, AVIC Jingneng Photovoltaic REIT has applied for fund-raising and has been accepted by the Shanghai Stock Exchange.

In the view of CITIC Capital (601066) Fund, the expansion mechanism is not only an important feature of public REITs, but also an indispensable part of the construction of public REITs market. The REITs expansion mechanism is conducive to the listed high-quality operators to rely on the market mechanism to issue additional shares to purchase assets, optimize the investment portfolio, promote M & An activities, and truly realize the long-term strategic value and sustainable development ability of REITs as an "asset listing platform". The well-functioning REITs becomes bigger and stronger through the fund-raising mechanism, and it is also an important way to form a market-oriented survival of the fittest, promote a virtuous circle of investment and financing, and improve the overall market performance of REITs.

Jianxin Fund also believes that from the experience of the international mature REITs market, M & An is the only way for REITs to become bigger and stronger. If the domestic sponsors want to give full play to the important role of the REITs listing platform, through the expansion of fund-raising to form a long-term mechanism and sustainable development of "investment-cultivation-maturity-reinvestment into REITs-", the "two-wheel drive" pattern of the listing of new REITs and the expansion of listed REITs may be more significant. In addition, from the perspective of REITs management, fund-raising expansion can also play a positive effect in dispersing risks, realizing large-scale management, and improving their own investment and financing capabilities.

Multiple policies guarantee broad prospects for the future

Since the infrastructure REITs pilot project was launched in April 2020 and the first batch of public offering REITs was approved in May 2021, all work has been carried out in a steady and orderly manner. Public data show that as of May 15, 2024, a total of 36 REITs have been listed, raising more than 110 billion yuan. The project covers toll roads, industrial parks, sewage treatment, warehousing and logistics, clean energy, indemnificatory rental housing, new energy and other asset types.

It can be seen that in the development in recent years, the asset types of public offering REITs have been continuously enriched, but due to the particularity of investment in this kind of products, the development of public offering REITs still faces difficulties and challenges such as operational risk and liquidity risk.

For example, the Infrastructure Investment Department of the Clay Innovation Fund mentioned that due to the particularity of the public offering REITs investment, the risks it faces are also more complex. In addition to the traditional risks such as market risk and credit risk, special attention should be paid to the operational risk and liquidity risk of the industry in which the infrastructure project is located. At the same time, as the investment in the public offering REITs involves the actual operation of the underlying assets, the transparency of information disclosure is particularly important. Investors need to fully understand the investment strategy, asset status, operation and other information of the public offering REITs in order to make rational investment decisions. Therefore, it is necessary to continuously improve the information disclosure system to ensure that the disclosed REITs project information is timely, accurate and complete.

Jianxin Fund also said that the current development of public offering REITs is facing some challenges. First of all, market liquidity needs to be further improved. On the one hand, when the product is newly issued, the share held by the original rights holders and strategic investors will be locked, resulting in a small share of market circulation; on the other hand, the current investors are mainly institutional investors, and the proportion of equity investors and individual investors still has room to improve. Institutional investors do not trade frequently due to reasons such as the time limit for capital allocation. For multiple reasons, market trading activity needs to be further improved to avoid magnifying effect.

Second, the fundamentals of asset management still face downside risks. China's infrastructure public offering REITs assets are rich in types, including property assets and management assets. The operation of all kinds of assets is facing the impact of the external macro environment and industry cycle. Generally speaking, the basis for investors to form investment expectations comes from the operating performance of assets. When the macro environment is facing fluctuations, higher requirements will be put forward for project operation and management capabilities.

However, some head public offering insiders also mentioned that although China's public offering REITs still faces challenges such as the legal and supervision system to be improved, the multi-level governance structure is complex, and the supporting tax preference system is not sound enough, as an important bridge between the financial market and the real economy, REITs is an important part of economic transformation and high-quality development, and occupies an important position in asset revitalization and asset withdrawal, with policy support. The future has a bright future. At present, there is still a lack of high-yield assets in the capital market, while REITs still has a place in asset allocation by relying on its stable and high-quality underlying assets and superimposed dividend characteristics. With the gradual repair of the performance fundamentals of the underlying assets and the steady progress of cash distribution, the allocation value of REITs as a long-term asset gradually appears.

As the aforementioned public offering insiders said, public offering REITs has continued to usher in a variety of favorable policies since its development. The release of the new "National Nine articles" also provides policy support for the REITs market and points out the direction of development. In addition, in April this year, the China Securities Regulatory Commission also issued 16 measures for capital markets to serve the high-level development of science and technology enterprises, which mentioned supporting conditional new infrastructure, new infrastructure such as data centers, and scientific and technological innovation industrial parks to issue REITs in the field of scientific and technological innovation, so as to broaden the sources of incremental funds.

Under the guarantee of multiple policies, some fund managers have also indicated that they will continue to promote the issuance of new projects. Huaxia Fund said that it will step up its work in four aspects. First, on the basis of strict control of project quality, continue to promote the issuance of new projects and the expansion of stock projects, broaden the types of product assets, and provide high-quality REITs products for the market; the second is to effectively protect the interests of investors. For issued projects, we should give full play to the professional capabilities of fund managers and operation management institutions, strive to improve project operating performance and enhance investors' sense of achievement; third, pay attention to the social value of products and, on the basis of continuously optimizing information disclosure, strengthen ESG-related evaluation and promotion work to promote high-quality and sustainable development of REITs products; fourth, promote professional investment research and investor education work on REITs products.

Looking to the future, the public offering REITs market is expected to achieve normal issuance on the basis of quality assurance and efficiency improvement, infrastructure asset types, original rights holders, and investor groups are expected to be further expanded, the REITs ecosystem is gradually established, and the construction of a multi-level REITs market continues to advance. Under the double-wheel drive of 'IPO + expansion', the public offering REITs market will continue to expand and improve its quality and flourish. " Liu Liyu said so.

Beijing Business Daily reporter Li Haiyuan