According to CICC, the market value of Chinas REITs will reach a trillion yuan level. If commercial real estate is also actively included in the future, the scale is expected to exceed 5 trillion yuan.
The plan is basically a public fund + asset support special plan (equity trust). All transaction documents and credit enhancement measures are set up around this point, which has a good demonstration significance After reading the guidelines, an ABS industry person in Beijing said.
First finance and economics noted that compared with the draft for comments on April 30, the official draft of the guidelines relaxed the requirements in terms of product setting, due diligence, scope of investors and leverage restrictions, reduced project landing obstacles, and emphasized the active management ability of fund managers.
One example is that in the draft, the fund and asset-backed securities are one-to-one, but the formal draft cancels the single setting, that is, one infrastructure public fund can invest in more than one asset-backed securities; another example is that the project operation time requirement is changed from operating for more than 3 years to operating for more than 3 years in principle, no longer requiring 3 years.
Due to the difficulty in the operation of new projects in the underlying assets of ABS, the adjustment can facilitate the fund to directly invest in new ABS with new projects as the underlying assets when acquiring projects during the period of existence. Guojin securities fixed income analyst Zhou Yue said.
At the same time, due to the low proportion of existing infrastructure facilities meeting the conditions, the marginal relaxation of operation time requirements is conducive to more project alternatives. However, the core requirements of stabilizing cash flow and not relying on third-party subsidies have not changed, and project quality still needs to be strictly controlled.
In addition, it is worth mentioning that the formal draft is obviously revised than the draft for Soliciting Opinions on the work arrangement of due diligence. In the draft, fund managers need to independently carry out due diligence, and then hire financial consultants. In the official draft, it is changed to carry out due diligence jointly by the fund manager and the asset-backed securities manager, and only under certain circumstances can financial consultants be employed.
The official draft is more conducive to institutional investment and will promote the smooth landing of the first batch of products. The person in charge of the real estate business of the above-mentioned fund companies said that with the formal legal and policy support for the public offering REITs pilot project, the product landing is just around the corner.
Income competitiveness is gradually emerging
On August 3, the national development and Reform Commission issued the notice on the application of real estate investment trust funds (REITs) pilot projects in the field of infrastructure, which clearly states that the expected net cash flow distribution rate (estimated annual distributable cash flow / target real estate evaluation net value) in the next three years shall not be less than 4%.
However, it can also be seen that the yield of 4% has been significantly higher than the 10-year Treasury bond yield and stock dividend payout rate, so infrastructure REITs has a certain investment value.
Penghua Qianhai Vanke REITs, which was issued in 2015, is a quasi REITs product launched under the previous regulatory legal framework, which has certain similarities with the standard REITs in the mature market. It is also the first public offering fund in China to invest in the equity of the target company in the closed period to obtain the rental income of commercial property.
First finance and economics noted that the official draft of the guidelines is to improve the yield and relax the limit on leverage ratio.
The guideline has significantly relaxed the restrictions on fund liabilities, changing from the total amount of borrowing shall not exceed 20% of the fund assets to the total assets of the fund shall not exceed 140% of the net assets of the fund. The upper limit of leverage ratio is further increased from 20% to 28.57%, but it is still lower than the 45% liability limit of overseas REITs projects.
Zhou Yue believes that for the acquisition of new projects for debt fund use, since there is basically no retained earnings after the dividend payment of the fund, the acquisition project relies on debt and raising. After the release of liability limit, the operational space of fund managers for active asset management has been significantly improved, which is conducive to timely replenishment of high-quality projects by the fund to enhance investors income.
Some people in the industry also suggest that the original equity holders can consider the cultivation of investors and market construction to a certain extent, and give appropriate space in the pricing of the issue, so that the secondary market can have better performance and attract more investors to participate. For investors, the investment of public REITs is equivalent to the IPO of infrastructure assets, and the investment value is still relatively large. The above ABS industry insiders believe that investors also need to pay attention to pricing, growth, operation and management level and various risk factors. Even in the commercial real estate industry, effective domestic market tracking data is very scarce, not to mention the infrastructure industry. In the long run, the improvement of industry transparency and tracking data quality will help to improve the recognition and valuation level of REITs, but whether the short-term lack will have a significant impact on pricing remains to be seen. Great Wall Securities also analysis said. Source of this article: Guo Chenqi, editor in charge of first finance and Economics_ NBJ9931
Some people in the industry also suggest that the original equity holders can consider the cultivation of investors and market construction to a certain extent, and give appropriate space in the pricing of the issue, so that the secondary market can have better performance and attract more investors to participate.
Even in the commercial real estate industry, effective domestic market tracking data is very scarce, not to mention the infrastructure industry. In the long run, the improvement of industry transparency and tracking data quality will help to improve the recognition and valuation level of REITs, but whether the short-term lack will have a significant impact on pricing remains to be seen. Great Wall Securities also analysis said.