China Resources Land, Jinmao and SCPG get go-head for Reits, as first batch of Chinese developers taps alternative funding channel

The first batch of Chinese developers to benefit from the new funding avenue of real estate investment trusts, or Reits, through the spin-off of their shopping centre assets, has received approvals from Chinese regulators.

The applications to list Reits by China Resources Land (CR Land), China Jinmao Holdings and SCPG Holdings, have been approved a month after they were received, according to notices from the China Securities Regulatory Commission (CSRC) and fillings on the Shanghai and Shenzhen stock exchanges.

The developers must launch their Reits no more than six months after receiving approvals, which were dated November 24, and the fundraising process should not be longer than three months after the approvals were received, according to the CSRC.

The approvals came after regulators launched supportive measures in October. These included an update to a directive by the CSRC that added “consumption-related infrastructure projects” such as shopping malls and department stores to China’s Reits programme.

Reits, which are investment vehicles that derive a regular and stable stream of income from underlying assets, were introduced in China in April 2020 with limited coverage. The asset types covered initially included large-scale infrastructure developments such as toll roads, industrial estates and warehouses.

CR Land’s Reit will be issued through its commercial unit, China Resources Commercial Asset. It has been approved to issue 1 billion shares and aims to raise 6.9 billion yuan (US$965.8 million) through the Reit, with net proceeds estimated at 4.9 billion yuan.

The CSRC offices in Beijing. Photo: Simon Song

China Jinmao, which has been allowed to issue 400 million shares, will issue its Reit through its unit Shanghai Xingxiumao Business Management. Jinmao did not provide details of its fundraising targets in its initial proposal.

SCPG Holdings, a unit of China Vanke Holdings, China’s second-largest developer by sales, can issue 1 billion shares. It intends to raise around 4 billion yuan with estimated net proceeds of 3.6 billion yuan, according to a proposal submitted in October.

The spin-offs are “credit positive” for rated property developers, because Reits will monetise shopping malls, creating a new and alternative funding channel, international ratings agency Moody’s said in a report earlier this month.

So far, 29 Reits have gone public in China, with 20 listed in Shanghai and nine in Shenzhen, according to the two stock exchanges.