SF REIT, C&W and Baker Mac See Greater China REIT Sector on the Rise: MTD TV Asia REIT Forum 2021

 
More real estate investment trusts (REITs) are likely to be listed in mainland China and Hong Kong over the near term as policy support drives interest and growing investor awareness sparks demand, industry leaders told MTD TV on Tuesday.

Speaking at the second session of Mingtiandi’s Asia REIT Forum 2022, Hubert Chak, chief executive officer of SF REIT, which debuted as the first logistics-specific real estate investment trust on the Hong Kong exchange last year, pointed to the opportunity for investors to gain access to the income from vehicles targetting high-yielding asset classes like warehouses as boosting interest in the REIT sector.

Joining Chak on the panel, Andrew Chan, managing director and head of valuation and advisory services for Greater China at Cushman & Wakefield and Jeremy Ong, a partner at global law firm Baker McKenzie specialising in REITs, concurred on the opportunity to establish targetted portfolios, while also pointing to the stability and transparency of listed trusts of real assets as attracting more investors to the sector.

The panel discussion, which was sponsored by Yardi, also looked at the impact that China’s developing REIT sector is having on the market, after 14 trusts of real assets were listed on exchanges in Shanghai and Shenzhen over the past year, and with Hong Kong gradually liberalising its REIT code to enhance the sector’s appeal.

Waiting for Data Centre REITs

During the discussion, Chak explained that by establishing SF REIT, its parent company SF Holdings, which also operates China’s largest express messenger service, was able to recycle capital from a set of warehouses that it uses to operate its business, while still maintaining control over the properties and leasing them to its other business units.

Baker McKenzie’s Ong, who advised on SF REIT’s $334 million IPO last year, pointed out that the same approach of an operating company spinning off real estate assets to free up capital, while continuing to run the business on the premises in the portfolio, could also be applied in other sectors, such as data centres.

“I do think that there will be data centre REITs in China and maybe even Hong Kong as well because it’s an asset class where I think it makes sense for the owner of the asset,” said Ong. “Any asset owner that has a heavy operation side like a data centre, I do think that this model makes sense for them – they can retain control, continue to utilise those assets and at the same time, reinvest in those parts that investors want to see grow.”

Cushman & Wakefield’s Chan concurred that targetted vehicles such as SF REIT represent an emerging trend in Asia’s REIT world and predicted that there will be more companies following similar strategies.

“I think we do expect there’ll be more and more sector-specialised REITs coming up on the market,” said. “No matter if we are talking about Hong Kong REIT or even China REIT, we may have different specific sectors [like] IDC (internet data centre), and affordable housing as well as clean energy.” he added.

Investor Appeal

With mainland China having listed a total of 14 REITs in Shanghai and Shenzhen over the past year, the market is beginning to attract more media coverage and investor attention, which the panelists agreed is leading to increased activity and a more liquid market.

Although many REITs listed in Hong Kong own assets in China, the panelists also agreed that the debut of C-REITs provided benefits to Hong Kong’s REIT market while competition remained limited because of some key differences between the two markets.

While the REIT market in China is driven to some extent by public policy, in Hong Kong diversification and capital reinvestment are the biggest drivers for companies listing trusts of real assets, Ong said.

“We think that China and Hong Kong are different markets,” Ong said. “If you want to list a commercial REIT, you don’t have to worry about those policy objectives.”

With China having now established REITs on its own exchanges, the panelists also pointed to the potential for the establishment of a “REIT Connect” scheme which would allow mainland investors to buy into Hong Kong REITs, and vice versa, as providing a potential boost for the market.

As REITs are currently excluded from the Stock Connect system, which has already boosted share markets in Greater China, the panelists urged regulators to consider creating a REIT connect mechanism as a benefit to investors in both Hong Kong and the mainland.

MTD TV Returns in September

Today’s session marked the conclusion of Mingtiandi’s first ever REIT forum, with MTD set to return in September with its third annual APAC Data Centre Forum.

Expanded to six sessions this year, the data centre forum will feature panel discussions on hyperscale networks and on sustainable data centres, as well as dedicated sessions on the Greater China, Japan and Korea markets.

In October, Mingtiandi return to a physical stage with its Singapore Focus Forum 2022, a full day event on-site at the Lion City’s ParkRoyal Marina Bay hotel, which will also be carried on MTD TV.

The Singapore forum features a one-on-one interview with Warburg Pincus head of Southeast Asia and head of Asia Pacific real estate Jeffrey Perlman, and a series of panel discussions with industry leaders including Blackstone managing director Peng Wei Tan and Terence Teo of TE Capital, as well as experts from JLL, Cushman & Wakefield and ESR-affiliated blockchain investment platform SDAX, which was formerly known as SDAX Minterest.