Recently, ‘CITIC Qihang Special Asset Management Plan’(hereinafter referred as ‘CITIC Qihang’) issued by CITIC Securities has been approved by China Securities Regulatory Commission(CSRC) for establishment, and will be transferred by listing on Shenzhen Stock Exchange (SZSE) Comprehensive Trading Platform as of 21 May, 2014. As the first exchange traded real estate investment trust (REITs) launched in China, ‘CITIC Qihang’ represents a significant measure of implementing Researching and Establishing REITs System and Related Product Operation Model and Plan pushed forward in Opinion on Furthering the Innovative Development of Securities Institutions issued by CSRC.
In recent years, REITs of the overseas developed markets such as USA and Australia have become an important innovative financial instrument with strong developing momentum in the capital market in Asia, with Japan, Singapore, South Korea, Taiwan, Hong Kong successively launching exchange traded standardized REITs. Essentially different from REITs issued by the domestic trust companies for investing in developing property, exchange traded REITs principally target on the investing and managing mature property assets, and strictly control the real estate development projects invested in to avoid becoming a financing instrument of real estate development.
It is of great significance to launch exchange traded REITs in the securities market at the present stage in China. Firstly, the variety of investment products in the securities market is enriched. REITs possess both investment features of fixed-income products and equity products, for REITs’ income stem from both rent and added value of mature property. Therefore, the launch of exchange traded REITs provides an investment product with new risk and income structure for the investors of securities market. Secondly, through participating in product design and operational management, securities companies and related intermediary organizations would be able to create a new profit mode, and enhance their core competitiveness. Thirdly, the pricing mechanism of REITs that based on stable dividend and core with rent in expectation will facilitate rationalization of real estate price, and consequently become the important market benchmark for the pricing of property and will thus guide investors to pay more attention on rent return of real estate investment.
The first exchange traded REITs--‘CITIC Qihang’ adopted some innovative mode in product structure design. Firstly, through multi-layer carriers with special target, such as special asset management plan issued by securities companies, private placement fund, and companies with special target, and through trading structure design, ‘CITIC Qihang’ guarantee to the maximum extent to transfer the rent and added value of the property as income for investors. Secondly, through separate layer arrangement of inner priority/ secondary products, diversified investing needs of various investors can be matched, with on the one hand priority investors mainly acquiring rent income, which is relatively more stable, on the other hand secondary investors mainly acquiring income from property added value. Both priority and secondary investors are limited to qualified institutional investors. Thirdly, ‘CITIC Qihang’ is transferred on SZSE Comprehensive Trading Platform by listing through the carrier of asset securitization special asset management plan in accordance with relevant rules on asset securitization.
SZSE have been embarked on research on REITs ever since 2003, and have cooperated with related market bodies in designing products, reserving projects since 2006, and have actively participated on the system design and project demonstration of REITs organized by CSRC. SZSE has made solid preparation for launching REITs products. Due to ‘CITIC Qihang’’s innovativeness in the trading structure, income distribution method, SZSE, while providing transfer service for REITs, intensifying measures on investors appropriateness continuous management, through setting varied trading threshold for primary/ secondary products, notifying the product risk differences by various channel, so that investors rights and interest can be protected. For the next step, on the basis of summarizing product operation experience, managing risk control and investor appropriateness management, SZSE will actively probe into REITs’ function of serving developing guarantee real estate and continually launch REITs oriented individual investors.
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