Cushman & Wakefield and China Real Estate Association Release 2020 Asia REIT Market Report

HONG KONG SAR – Media OutReach – 15 June
2021 – Cushman & Wakefield, a leading global
real estate services firm, released the 2020 Asia REIT Market Report today
at the 9^th China Real Estate Finance Forum, in conjunction with the
China Real Estate Association (CREA). The report presents a REITs market overview
for major Asia countries and regions, together with an analysis of properties
in mainland China, and the market for securitization of real estate assets in
China. For the first time, the report also includes a special study of the
infrastructure REITs markets in the U.S., Singapore and India; and offers a
detailed case analysis of Mapletree Logistics Trust – thus providing a reference
for China to draw on in its ongoing development of a public offering-based
REITs market.

REITs in Japan, Singapore, Hong Kong SAR and
India are the focus of the Asia market

 

As at the end of 2020, there were 185 REITs
in the Asia market with a total market value of US$281.4 billion, down around
5% year-on-year. Regulators and REITs managers actively responded to the impact
of the COVID-19 pandemic via a range of measures, providing multi-level supporting
initiatives for REITs to maintain resilience in the wake of the pandemic.

• There were 62 REITs in Japan, with a total market value of approximately
  US$139.4 billion. Although the market value contracted by 9% compared with
  2019, Japan still accounted for more than half of the Asia REITs market, making
  it the largest REITs market in Asia and the second largest globally.
• The Singapore REITs market was active in 2020. Driven by regulatory
  policies, consolidation and merger activities were prevalent and transaction
  liquidity improved. By the end of 2020, there were 42 REITs in Singapore, with a
  total market value of around US$81.4 billion and a dividend yield of 6.4%.The REITs market in Hong Kong SAR faced
  challenges and also embraced reforms in 2020. Total REITs’ stock prices dropped
  by 11% overall, depressed both by the impact of COVID-19 and an environment of
  lingering social unrest. The average dividend yield was 6.3%; the average gearing
  ratio was 28% which is lower than those in Singapore and Japan.
• India’s REITs market saw two office property
  REITs issued in 2020 and early 2021, along with two infrastructure INVITs,
  namely, IRB and Indigrid, engaging in roads and power networks, respectively.

 

The real estate securitization market in mainland China continues to
expand rapidly

 

This report
focuses on an analysis of changes and highlights in REITs, CMBS and CMBN
products in the mainland China market in 2020, and summarizes the disposal of products
that expired prior to the end of 2020:

• In 2020, 90 products were issued, totaling RMB179.86 billion, up 8.4%
  and 13.1% respectively over the previous year in terms of number and value.
• Two infrastructure REITs were issued in 2020, providing an innovative
  model for the financing model in domestic infrastructure industry.
• By the end of 2020, 32 products had successfully exited. The disposal of
  R&F Guangzhou International Airport – Integrated Logistics Park CMBS, and
  Beijing Huayuan Yingdu commercial REITs, attracted extensive attention from the
  industry.

The 2020 Asia REITs Research Report
also robustly analyzes the market performance of infrastructure REITs listed in
the U.S., Singapore and India. Chris Yang, Director, Valuation & Advisory
Services, Beijing and Leader of Asset Securitization
Business Line at Cushman & Wakefield, said: “The 2020 report
analyzes the infrastructure REITs in detail, including AMT and Corenergy in the
U.S., Hutchison Port Trust in Singapore, and IRB Invit in India, aiming to
explore the development of overseas infrastructure REITs and present a more usable
outlook and forecast for China’s public offering-based REITs”

 

Cushman & Wakefield
has been involved in over 100 real estate securitization projects

 

As one of the professional firms earliest engaged
in the practice and research of REITs in China, Cushman & Wakefield has been
actively participating in the development of China’s real estate
securitization. By May 2021, it had completed due diligence and valuation work
for 113 issued REITs, CMBS and CMBN projects, with a combined value exceeding RMB270
billion. Representative projects include Cainiao Network Logistics, the first
expandable REIT in China;  Poly multifamily,
China’s first shelf offering renting house REIT; Shenzhen Anju Group’s Talent
Apartment, the first talent apartment REIT in China; and Suning Yunxin, the
first REIT allowed for subsequent issuance in China.

 

Public offering infrastructure
REITs to arrive in the China market soon

 

Recently, nine public offered infrastructure
REITs products gained official registration permission from the China
Securities Regulatory Commission and have entered the sale stage. This
development was one of the focus of discussion among participants at the China
Real Estate Finance Forum. Feng Hu, Senior Director, Head of  Valuation & Advisory Services, North
China, Cushman & Wakefield, said, “As the nine public offered infrastructure
REITs pilot projects entered the sale stage, the long-expected REITs market in
China finally drew back the curtain. Cushman & Wakefield was excited to be involved
in the due diligence and valuation  work of
five of these projects. The underlying assets include logistics warehousing,
industrial parks, waste disposal and power generation facilities. Cushman &
Wakefield supports the sustainable and healthy growth of the public offered infrastructure
REITs with its experience and professional services.

Hong
Kong REITs Market

In
Hong Kong, to enhance the competitiveness of the city’s REITs market and
promote its long-term development, while safeguarding the interests of
investors, the SFC announced and implemented a revised Code on Real Estate
Investment Trusts (REITs) in December last year.

The
proposed amendments include:

(i)           
allowing REITs to make minority-interest investments
in properties (Minority-owned Properties) subject to various conditions;

(ii)          
allowing REITs to make investments in property
development projects in excess of the existing limit of 10% of gross asset
value (GAV) subject to unitholders’ approval and other conditions;

(iii)         
increasing the borrowing limit for REITs from
45% to 50% of GAV;

(iv)         
broadly aligning the requirements for REITs’
connected party transactions and notifiable transactions with the requirements
for listed companies, in line with existing policy and practices.

 

The
Chief Executive has also stated in the latest policy address that the
government would strive to promote Real Estate Investment Trust (REITs) in Hong
Kong to develop Hong Kong into a vibrant REIT market in Asia. LINK REIT (00823)
as the largest REIT in Asia in terms of market capitalization, has actively
developed into a global real estate investment and management institution
through the acquisition of multiple domestic and overseas properties and the
right of ownership in recent years. The company has assets spread in Hong Kong,
Beijing, Shanghai, Guangzhou, Shenzhen, London and Sydney. It plans to explore
business growth opportunities in various markets continuously.

A
couple of REITs are launched by reputable companies lately in the Hong Kong’s
REITs market, including China Merchants Commercial REIT (01503) and SF REIT
(02191), which were listed in December 2019 and May 2021 respectively. Other
REITs are also reported to be preparing for listing in the market.

Mr. Andrew Chan, Cushman & Wakefield’s Managing
Director, Valuation and Advisory Services, Greater China, commented, “REITs
are an important asset class in the capital market. With the implementation of
the newly revised Code on Real Estate Investment Trusts (REITs), the amendments
will allow Hong Kong REITs with greater investment flexibility. Coupled with
the listing of China’s Infrastructure REITs, we believe that there will be more
positive and comprehensive development in the Hong Kong and China’s REITs
market.