Cold Thinking Under The Hot Issue Of Reits: Short Term Risk In Secondary Market, Long Term Risk In Product And Industry

        On June 2, the first four public offering REITs listed on the Shenzhen stock exchange took the lead in releasing the placement ratio.

The proportion of public subscription and placement of Shougang green energy was the lowest, which was 1.76%. The public subscription and allocation proportion of Shekou Industrial Park, Guangzhou Guanghe and Yangang REIT was slightly higher, which were 2.39%, 10.80% and 8.80%, respectively.

This data has refreshed the historical minimum placement ratio of public offering.

        Previously, the minimum allocation ratio of public offering was Guangfa science and Technology Innovation Fund issued in 2019, and the effective subscription application confirmation ratio of the fund was 3.298%, which set a new low for public offering fund.

     “ It's so popular that some REITs products have raised more than ten times in the morning. " A broker channel source said that due to the limited amount, some institutions have also joined the public investors to subscribe.

As another innovative financial product besides traditional financial instruments such as stocks and bonds, REITs has a compulsory dividend mechanism, but the dividend rate is not fixed, and there are income risks and operational risks. Moreover, due to the opening of public REITs, there may be irrational behaviors in the secondary market, which will affect the more rational institutional investors.

Therefore, many institutions interviewed by 21st century economic report said that investors should carefully analyze the specific situation of basic assets and clearly understand the characteristics of risk return before purchasing.

Core value points of popular REITs

During the inquiry period, Shekou Industrial Park is the most popular one, with an overall subscription multiple of 15.31 times.

According to the data, the underlying assets of the REIT in Shekou Industrial Park include Wanrong building and Wanhai building in Shekou Wanggu, which were completed in 2014 and have been in operation for about six years, with building areas of 41700 square meters and 53600 square meters respectively.

According to real estate appraisers, industrial park business is a 2.5 industry between the secondary and tertiary industries. It is a new concept emerging in recent years. It not only has the functions of service, trade, settlement and other tertiary industry management center, but also has the functions of unique R & D center, production center of core technology products and modern logistics operation of secondary industry.

Therefore, the corresponding dividend sources of REITs in industrial parks include the rise of rent and assets. The rent mainly considers the full rent rate and rent level.

According to the recruitment brochure of Boshi Shekou Industrial Park REIT, by the end of 2020, the rental rates of Wanrong building and Wanhai building were 84% and 94% respectively.

It is understood that at present, the lease term of Wanrong building and Wanhai building project is mainly 1-3 years, and the distribution of lease expiration time point is relatively uniform. In terms of the distribution of tenant industry, the largest proportion of both are the new generation of information technology industry and cultural and creative industry, accounting for more than 50%.

In terms of the amount available for distribution, the predicted distributable amount of the fund in 2021 and 2022 is 91.3457 million yuan and 92.672 million yuan respectively; The net cash flow distribution rate was 4.10% and 4.16% respectively.

Relevant people of oneness city renewal believe that after the target assets enter the stable operation period, the future profit level will be further improved through industrial investment, industrial service, industrial operation and other innovative profit models. Due to the extremely high professional requirements of industrial equity investment and generally long cycle period, industrial services need to be implemented in a refined and systematic way, This is still a long-term challenge for park operators.

Certainty and uncertainty of investment return

Compared with bonds, REITs does not have a fixed interest return, but has a mandatory dividend mechanism, which does not mean that there is a stable cash flow every year.

The deputy director of CITIC Securities Research Institute and chief ficc analyst clearly believes that REITs has the return characteristics of equity and debt.

The REITs of Shekou Industrial Park are more equity oriented, and the future growth will be the embodiment of comprehensive strength.

Therefore, in the evaluation of such products, the expected distribution yield of about 4% is more important for its endogenous growth and denotative growth. Endogenous growth includes the growth rate of contracted rents, lease renewal and market comparable rents, value-added services, property upgrading, quality and operating area. The denotative growth includes the assets reserve and raising plan of the sponsors, the capital market environment and feasibility of raising funds. Therefore, the performance in the market will test the management ability of fund managers and operators. It is expected that through the test of the market in the future, the performance of each fund will be quite different.

21st century economic reporter also understands that the delisting of Ruifu REITs in Hong Kong is a typical management non-compliance event.

The underlying assets of Hong Kong Ruifu project are of high quality, but the manager makes systematic arrangements for rent fraud. After the exposure of the incident, the REITs were subject to regulatory penalties and delisted, and the project manager and all relevant intermediaries were severely punished.

The REITs of franchise infrastructure are more debt oriented, and their income sources are mainly vehicle tolls, fixed sewage treatment fees and garbage treatment fees. The future cash flow is relatively stable and fixed. However, there are also uncertain factors, such as future subsidy income, renovation plan and so on.

Cheng Chen, a researcher at Huatai Securities, believes that the asset appreciation of franchise projects accounts for a small proportion of the project income, and the market trading is relatively inactive.

"Whether the public offering REITs is good or not depends on whether the underlying assets are of high quality and whether the cash flow is stable and can continue to grow." Kong Lingyi, chief investment officer of Shenzhen Venture Capital real estate fund and member of infrastructure fund investment decision-making committee of laterite Innovation Fund Management Co., Ltd., told 21st century economic reporter that the evaluation of underlying assets depends on the supply and demand relationship of the market, whether the industry is a good industry with development prospects, and the management ability of managers and external management agencies.

Short term and long term risks of REITs in China

A public offering person in South China pointed out that the annualized yield of REITs is determined by two factors: one is the dividend situation of the underlying projects; the other is the transaction discount premium in the secondary market after REITs listing.

"The first batch of infrastructure public offering REITs have good underlying asset quality, mature operation mode, and sustained and stable income and cash flow." According to the above-mentioned public funds, about 60 REITs were reported to the public, and 9 products were selected from them.

Although the quality of the underlying assets is up to standard, due to the opening of the products, public offering people are worried that there will be irrational behavior in the secondary market. Due to the immature investors, there will be a sharp rise and fall. Institutional investors will also wait and see, "so the company has been focusing on investor education."

From overseas experience, REITs has become a medium and long-term investment product for institutional investors such as insurance, annuity and social security. With the participation of institutions, the market has become mature and rational.

As far as the project is concerned, the risk in the later stage of public offering REITs mainly comes from the underlying asset quality.

For example, some problems of REITs in the U.S. market mainly come from two aspects: one is the decline of the development of the industry in which the project is located; the other is the problems in the development and management of the project itself. For example, the leverage ratio of some projects is too high, resulting in insolvency.

In this regard, Liang CE, the proposed fund manager of red earth innovation Yantian Port REIT, said that in addition to the port storage assets, the company's shareholder, Dongfang Shen venture capital group, has also actively invested in a number of high-standard warehousing and logistics assets, and has actively arranged on transportation infrastructure, rental housing, clean energy, industrial park, data center and other tracks to reserve project resources.

        Wells Fargo also said that the company will focus on exploring high-quality basic assets of public REITs in the fields of ecological and environmental protection, low-carbon new energy, warehousing and logistics, science and technology parks and other fields in line with the domestic economic development trend, so as to provide customers with more high-quality public REITs products. In the medium and long term, it will continue to sum up the experience and lessons in the actual operation process, formulate effective infrastructure asset operation strategy, summarize scientific and reasonable operation and management plan, provide high-quality information disclosure content, and protect the interests of fund holders.