Client Update: REIT preparation developments in China
22 April 2009
In brief: Media releases indicate that China's first listed Real Estate Investment Trust may be sponsored by Shanghai Lujiazui Finance & Trade Zone Development Co. Ltd, a major real estate developer in Shanghai. Partners Nigel Papi (view CV) and Tim Manefield and Senior Associate Troy Zhang report.
Since the State Council gave its in-principle approval for Real Estate Investment Trusts (REITs) to be launched in China, the China Banking Regulatory Commission and the China Securities Regulatory Commission have been preparing rules governing the operation of REITs to be traded in the inter-bank market or the stock market. It is envisaged that REITs are more likely to be traded first on the inter-bank bond market in which the participants are institutional investors, ie primarily banks and other financial institutions.
On the other hand, real estate developers and operators have also been considering ways in which to structure possible REIT projects. A recent news article has revealed that the first REIT trial project in China may be launched in Pudong, Shanghai, later this year and that Shanghai Lujiazui Finance & Trade Zone Development Co. Ltd (Lujiazui Development) may take up the role of sponsor of this pilot project.
Media reports indicate that the term of the proposed initial REIT may be as long as 15 to 20 years and its rate of return is estimated to be approximately 8 per cent. Also, it is likely that this REIT's sponsor would choose the Chinese inter-bank market for its listing.
Lujiazui Development is, as its name indicates, primarily committed to the development and construction in Shanghai of the Lujiazui Finance & Trade Zone, which is the city's financial centre, and in which many major financial institutions have set up their head offices or regional head offices. Lujiazui Development owns different types of properties, such as offices, commercial properties, buildings for research and development uses, and exhibition centres; however, the details of the properties to be packaged and transferred to this first REIT are yet to be disclosed.
If you have any queries about this or any other real estate matter in Greater China, please contact one of the people below.
Published 22 April 2009
For further information, please contact:
- Nigel PapiPartner,
Sydney
Ph: +61 2 9230 5179
Nigel.Papi@aar.com.au - Robert ClarkeManaging Partner - Singapore,
Singapore
Ph: +65 6535 6622
Robert.Clarke@aar.com.au - Nigel RussellPartner,
Ho Chi Minh City
Ph: +84 8 3822 1717
Nigel.Russell@aar.com.au
