Since its birth, public REITs, which bears the heavy responsibility of revitalizing infrastructure, have experienced a rollercoaster-like **, from the attention of thousands of people, the share is hard to find, to the change of color, and the active liquidation of new products, it took less than 1 year.
If you want to ask when the public REITs began to "cool down", I can probably only remember that in mid-May this year, OPPO disbanded its chip team Zeku (Zeku) And the withdrawal of the lease from Shanghai Zhangjiang Industrial Park, resulting in the loss of the largest tenant in Hua'an Zhangjiang Industrial Park at once, this landmark event, so that investors worried about the operation of public REITs, from the previous highway project, to the previous industrial park project that has been at a high premium, and then the panic spread, almost all types of REITs have not been spared.
Data**: wind, is an example only and does not represent a recommendation.
Of course, the ** of the public REITs did not start in May this year, and judging from the trend of the CSI REITs (** index, the obvious ** of the entire variety probably started on Valentine's Day in the West on February 14 this year. In other words, this is also a "sad" index, which has basically been all the way since its release in December 2022, with a decline of nearly 30%, almost a year, and it has not stopped falling.
Data**: wind, is an example only and does not represent a recommendation.
The author has been paying attention to the domestic listing of REITs since June 2021, and has maintained a high premium for this long-term and closed product, and has only participated in the new development of this variety in the first half of 2022 and before. Later, as the performance of this breed deteriorated, he did not participate again, but still kept an eye on it.
In the past six months or so, the author has paid attention to some changes in public REITs, and here I would like to share with readers and friends:
As of December 8, public REITs have dominated the list of closed base discounts on the market, with a maximum discount of 30%-40%, and the market's confidence in this variety has dropped to the freezing point.
Data**: Leek circle, this is only an example and does not represent a recommendation.
If there is still room for arbitrage in ordinary closed-end ** discounts, then no one dares to arbitrage this kind of public REITs with a closed period of 99 years. Therefore, from the beginning, the author believes that public REITs cannot be sustained at a premium, and can only exist for a short time when they have a certain scarcity in the early stage, and then they can only be invested at a significant discount. Moreover, it is also necessary to have a sound institutional framework to protect it, so that there will be long-term funds willing to invest in this variety. There was a lot of discussion in the evening about the design of the system, and the author will put forward some thoughts at the end of the article.
We see that in order to enhance the investment value and liquidity of REITs, the regulator has successively allowed public FOF and social security to include public REITs in the scope of investment, but, as of the third quarterly report, basically did not see the public FOF ** holding REITS, from the performance point of view, this is also a responsible behavior for FOF holders, after all, it is the principle not to invest in what you don't understand.
In fact, at present, many asset management institutions do not specialize in the staffing of public REITs, and are mostly placed in fixed income research or allocation research teams, which are relatively marginal varieties, which is also related to the small number and scale of REITs.
The expansion of public REITs is considered to be an important way to improve the quality of underlying assets and investment value, after all, it is difficult for such a long-term variety to adapt to market changes if it remains unchanged for decades.
However, with the difficult completion of the expansion of the first batch of 4 public REITs (it will lose money as soon as it is completed), the subsequent trend has also made the expansion have to come to a standstill.
On March 24, 2023, ** issued the "Notice on Standardizing and Efficiently Doing a Good Job in the Application and Recommendation of Real Estate Investment Trusts (REITs) Projects in the Infrastructure Sector", proposing for the first time to allow commercial projects such as department stores and shopping malls to issue infrastructure REITs. Finally, at the end of the fourth quarter, 3 of the 4 consumer infrastructure projects passed the issuance application, and there is a high probability that the fundraising will be completed within the year.
At present, the underlying asset types of public REITs mainly include: warehousing and logistics, energy infrastructure, park infrastructure, transportation infrastructure, affordable rental housing, ecological and environmental protection, and consumption infrastructure are 7 categories. Compared with overseas, it is still relatively small, and the profitability is generally low.
Recently, the Ministry of Finance and the Ministry of Human Resources and Social Security drafted the Measures for the Administration of Domestic Investment in the National Social Security ** (Draft for Comments), which not only includes public REITs in the scope of investment, but also states that in terms of investment proportion restrictions, it is "calculated at cost."The proportion of equity financial products such as REITs and ** shall be uniformly controlled, and the total shall not be higher than 40%.”。This statement can be understood as characterizing public REITs as equity assets!It is believed that other asset management institutions will soon follow suit and include the public REITs as equity asset management.
Referring to overseas experience, REITs are undoubtedly equity assets, the author previously wrote an introduction to overseas REITs, and also found that although overseas REITs are different from domestic in form, the underlying assets are similar, and overseas characterizes them as equity assets, and from the perspective of ** fluctuations, they are basically similar to equity assets. In the minds of most investors, domestic REITs projects are still regarded as "quasi-fixed income" products with mandatory dividends, and this wrong perception is likely to mislead investment.
In the last part of this article, I would like to talk about some prospects for the future of public REITs:
ETF is a listed exchange-traded index**, which is based on the index, and there is no public REITs index that can only be real-time**, and the current CSI REITs (**Index does not provide real-time trading hours**, so it cannot become an index on which the ETF is based. Only when the relevant indices are issued, can the issuance of ETFs be put on the agenda, of course, this needs to be met at the right time, place and people.
Before the birth of ETF** (or over-the-counter low-cost index**), although the variety of public REITs could also be invested through a single **, it was not conducive to reducing costs and achieving risk diversification, so the investability of such assets was weak, and it was difficult to attract long-term allocation funds.
Among the latest 4 consumer infrastructure REITs, one private project has not yet passed the issuance approval, and the original owner submitted the original owner to make up the difference in the consultation clause, in order to realize the project's approval. This is more recognized as an investor - if the project does not reach the set dividend distribution ratio, the original owner will use only funds to make up the difference to other investors, which can effectively protect other small and medium-sized investors.
Of course, the author knows that the disguised redemption is a reversal of history, but don't forget, this is an equity asset, not a debt project, and it is also a common operation for investors to require the original equity holder to sign a "performance VAM" before listing.
Moreover, if there is such a clause, when the project is declared, the original equity holder and the sponsor will not dare to exaggerate the future profitability of the project without restrictions, so that the project can have a more reasonable valuation, which is beneficial to the performance after listing.
The author has always believed that as equity assets, the information disclosure standard of public REITs should refer to **, rather than public offering**. Many investors may not know much about the difference between the two, but I will point out just a few points to make everyone understand the importance of doing so: ** will disclose shareholder information, so that there is nowhere to hide;**Sound financial information will be disclosed to make the business situation more clearly understood by investors** Disclose information about executives, including executive compensation, and expose relevant personnel to public scrutiny**There is an investor interaction platform that allows investors and companies to have a direct dialogue channel.
In addition, there are multiple dimensions of valuation indicators, which can help investors compare the investment cost performance of ** more easily, but the valuation indicators of public REITs are single and inconvenient to obtain. This is also a sign that the system has not kept up.
Risk Warning: This article is the author's personal opinion and does not represent investment advice to anyone.