The net value plummeted by 62, and Wells Fargo s first water REIT became a leek harvesting tool

Mondo Three rural Updated on 2024-01-31

No one expected that a income right REIT that focuses on stable returns would become a "leek" harvesting tool.

As of December 18, 2023, Wells Fargo Capital Water REIT hit its lowest intraday low since listing: 2631。Although there was a succession of ** in the following days, it was still a 20% drop from the issue price two years ago.

In June 2021, the issue price of this REIT was as high as 37 yuan, institutions ** rushed to buy. From listing to February 2022, in just over half a year, the net value of Wells Fargo Capital Water REIT has increased from 37 yuan rose to 6775 yuan, an increase of more than 80%.

Subsequently, under the pressure of the imminent lifting of the ban on placing institutions, the net value of ** fell all the way. As of December 15, 2023, the net value of Wells Fargo's Capital Water REIT fell to 26 yuan, 30% lower than the issue price two years ago, and 62% lower than the highest price a year ago.

In 2023, the first water REIT of Wells Fargo will be 28%, and many people who are rushing for 6% annual dividends will pay 5 years of future income as tuition fees first.

A water revenue right REIT that advertises stable income has fluctuated by more than 142% for more than two years, and the trend has been turbulent more than a lot, and many have been deeply trapped, even if the first ** is still losing money now, what is the reason behind it?

The risk warning is insufficient

The ** of Wells Fargo's first water REIT has a certain relationship with the first round of REIT products being speculated. Most of the REITs in the first batch of listings have been frantically hyped, and the quasi-fixed income products that were expected to have an annualized yield of 4%-8% have been hyped into ups and downs. And after the skyrocket, it is a long time.

However, excluding the factors of market speculation, we must also see that product issuers are not well prepared when introducing complex financial products, and the risk reminders to investors are insufficient, especially when the net value of the product is speculated to the crazy stage, and there is no timely restriction on subscription, which is also an important reason for the tragedy of this round of REIT.

In the case of Wells Fargo's first water REIT, Wells Fargo** emphasized in the issuance materials that the main purpose of the product is to obtain stable cash flow such as sewage treatment service fees for infrastructure projects. But few investors know thatThe franchise fee model on which the underlying underlying assets of the product depends is more special, and the longer the operating life, the lower the market value of the assets held, which will lead to a continuous decrease in the net value of the product and eventually tend to zero.

This means that although the income is stable, the value is negatively correlated with the remaining life of the income right. In a sense, a considerable part of the dividends of ** holders are at the cost of the continuous loss of ** net value. A large part of the income obtained by investors comes from the investor's principal, which many investors do not understand. Although the franchise model was introduced in the prospectus, the risk warning that the net value of the company would eventually be zeroed was only mentioned in a few words, and the risk notification was not sufficient.

When the first water REIT in Fuguo was speculated to more than 6 yuan, the overall valuation of the product reached 3.5 billion yuan. The actual value of the underlying assets of the product is less than 1.8 billion yuan, and the management team of Wells Fargo ** is not clear that this completely deviates from the fundamentals of the product

According to public information, the first time that Wells Fargo ** reminded Wells Fargo of the transaction risk of Capital Water REIT was on January 18, 2022, when the net value of the ** had risen to 64 yuan, distance 3The issue price of 7 yuan has been **42%. Is it normal for a product with an annual dividend rate of only 7% to have a net value of more than 6 years of dividends in half a year?But the rich country** has not been warned of the risk.

On January 18, 2022, Wells Fargo Capital Water REIT issued a risk warning for the first time, but only stated that "with the significant increase in the transaction, the net cash flow distribution ratio will decline significantly".

Is the risk simply a significant drop in the cash flow distribution ratio?Isn't it clear that the ultimate destination of the first water REIT in Wells Fargo is to return to zero in net worthIf there is no high dividend, is it impossible for investors to get their principal back?

In the more than 6 yuan*** Fuguo Capital Water REIT, the cash flow distribution rate is only about 4%, which means that it will take about 25 years to recover the cost. WhileWells Fargo's most lucrative underlying project for the first water REIT has less than 10 years to live。Therefore, investors who will be at a high level of 6 yuan in 2022** Wells Fargo Capital Water REIT, even if they hold it until 2047, if they are lucky, they can get back the principal and make money.

On February 9, 2022, with the **net worth becoming crazier**, Wells Fargo** issued a risk warning again. This time, Wells Fargo** finally mentioned that **net worth**, in addition to affecting the dividend rate, the greater risk is that **net worth will eventually go to zero.

The problem is that when Wells Fargo issued this risk warning, the net value of Wells Fargo's first water REIT was already at the top, and there were countless *** prisons.

It is not normal for a REIT to have a net value fluctuation of more than 15% during the year, and the manager should give timely and serious risk warnings for such speculation, and can completely close the subscription channel if necessary. However, the only action of the rich country** was to symbolically issue a few risk warnings when the net value rose to more than 6 yuan. What is this not a tacit consent to money speculation?

To put it bluntly, on the issue of the soaring net value of the first water REIT in Wells Fargo, Wells Fargo, as the issuer and manager, is extremely irresponsible, whether intentionally or unintentionally, it has acted as a "leek cutter" for speculative funds, and has not fulfilled its duty to protect the rights and interests of investors.

High-level expansion of ** fourth-tier city projects

What's even more outrageous is that after the net value of the product** and a large number of *** residences, Wells Fargo** issued an announcement in September 2022, announcing the expansion of the purchase of new infrastructure projects. At this time, the net value is still at 4A high of $6. Under such terrible conditions for investors in the initial project, what is the purpose of the rich country** hurriedly announcing the expansion at a high level?

According to the announcement, the proposed purchase of the first water REIT in Wells Fargo isCapital Water in Changzhi City, a fourth-tier city in Shanxi Province, has an asset appraisal value of about 10300 million yuan, with a concession period until July 31, 2047.

According to the financial data disclosed by the project, from January to June 2019, 2020, 2021 and 2022, the main business income of Changzhi Capital was 85.77 million yuan and 12.1 billion yuan, 1The gross profit of 3.3 billion yuan and 66.74 million yuan was 757930,000 yuan, 2264270,000 yuan, 3178$130,000 and $2,160060,000 yuan, gross profit margins were. 98% and 3237%;The total profits were -16.79 million yuan, -520,000 yuan, 5.43 million yuan and 10.17 million yuan respectively.

Prior to the expansion, the underlying assets of Wells Fargo Capital Water REIT included two sub-projects: the BOT franchise project of Shenzhen Fuyong, Songgang and Gongming Water Purification Plants and the PPP project of Hefei Shishilihe Sewage Treatment Plant. The market value of all underlying assets exceeds 1.7 billion yuan. Among them, the market value of the asset group of the Shenzhen project is 81.7 billion yuan, of which the market value of the asset group of Gongming Water Plant is 26.4 billion yuan, the market value of the asset group of Fuyong Water Plant is 25.5 billion yuan, the market value of the asset group of Songgang Water Plant is 29.8 billion yuan. The market value of the Hefei project asset group is 9$2.9 billion.

In 2022, Wells Fargo Capital Water REIT's underlying asset income was 29.4 billion yuan, net profit of 31.64 million yuan. In the first half of 2023, the Shenzhen project revenue will be 85.22 million yuan, and the Hefei project revenue will be 59.97 million yuan. In the first half of the year, the net profit was 20.23 million yuan.

The prospectus reads,The first concession in Shenzhen expires in 2031 and 2033, and the first in Hefei expires in 2047。If a new infrastructure project is not included in a timely manner, the net value will be zeroed out upon the expiration of the operating rights.

From the point of view of the residual value of the underlying assets held,Shenzhen Fuyong Water Plant and Songgang Water Plant will end in 2031, and there are currently 8 years remaining;The operation period of the Gongming Water Plant will end in December 2033, and there are currently 10 years remaining. The first Hefei project will end in September 2047, with 24 years remaining.

This means that after 8 years, only Shenzhen Gongming Water Plant and Hefei project will remainIn 10 years, Phu Quoc Capital Water REIT will have only one project in Hefei. The project will last for 26 years, until the contract expires in 2047**.

From the perspective of the revenue contribution of each project, in 2022, the revenue of Hefei project will be 10.8 billion yuan, Shenzhen project income of 18.1 billion yuan, accounting for 37% and 63% of the total revenue respectively. In terms of gross profit margin and net profit margin, the Shenzhen project is far better than the Hefei project. But it is precisely the project that has contributed the most and has the shortest duration.

For example, in the first half of 2023, the gross profit margin of the Hefei project was 2364% and a net profit of 179%;The gross profit margin and net profit margin of the Shenzhen project were 37., respectively4% and 2442%。

Therefore, the assets that generate the most cash flow and the largest net profit contribution of Wells Fargo Capital Water REIT actually have a duration of less than 10 years, and after 8-10 years, the net cash flow and net profit of Wells Fargo Capital Water REIT will both be cut in half, and the return on dividends will decline sharply.

Wells Fargo** announced the expansion of the fundraising and the purchase of new underlying projects, which should be to offset the impact of the decline in revenue and net profit after the exit of the Shenzhen project in the future, but Changzhi pioneered this project and the Shenzhen project is not comparable, although they are all water infrastructure projects, but we all know that this kind of basic asset facilities have always been the strongest in first-tier cities, followed by second-tier cities, and then third- and fourth-tier cities. Although the duration of Changzhi's first venture is very long, it is located in a fourth-tier city, and compared with the Shenzhen and Hefei projects, both revenue and profitability are doubtful. Moreover, the project has been losing money in 2019 and 2020, and only turned around in 2021, but it is difficult to judge how sustainable it is based on the information provided in the manual.

It is worth noting that after Wells Fargo** announced the expansion of the purchase of new projects, the net value of Wells Fargo's Capital Water REIT continued**, and until now, **net value has actually fallen below the issue price. It can be seen that the secondary market is not optimistic about the underlying assets to be purchased.

The internal rate of return is as low as 266%

From the perspective of investment returns, the actual return of Wells Fargo's Capital Water REIT is not as good as advertised.

In the prospectus, the net cash flow distribution ratio of the wastewater treatment facilities held before the expansion (i.e., the Shenzhen and Hefei projects) provided by Wells Fargo Capital Water REIT is expected to be 68% and 682%;After the expansion, the net cash flow distribution ratio of all sewage treatment facilities (i.e. Shenzhen Project, Hefei Project and Changzhi Project) is expected to be 664% and 664%。

The inspector noted that in the 2021 prospectus, the full-cycle internal rate of return (IRR) of Wells Fargo Capital Water REIT** was about 6% over the lifetime.

Many people think that this yield looks very good, doesn't it?However, after a lot of hype, the internal rate of return of the first water REIT in Wells Fargo has been miserable.

In September 2022, the expansion prospectus of Wells Fargo Capital Water REIT stated that the IRR (internal rate of return) indicator was used to calculate the average market value of ** in the 20 trading days before the announcement date**The IRR for infrastructure assets held prior to the expansion is 114%;After the completion of the expansion, the IRR of all assets will be 266%。

The inspector noticed that a year after the listing of Wells Fargo Capital Water REIT, its performance began to change. In the initial prospectus, the revenue for 2021 and 2022 was 29.5 billion yuan and 300 million yuan, ** net profit of 59.74 million yuan and 65.75 million yuan respectively;However, in reality, the revenue in 2022 was 29.4 billion yuan, and the net profit was only 31.64 million yuan. The actual net profit is less than half of the ** net profit.

Now, if Wells Fargo is trying to use the expansion method to take the water assets of the fourth-tier cities to hedge the risk of the future exit of the assets of the first-tier cities, will investors buy it?

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