- The notice is an echo of the guideline on asset injection that was finalised in late May. The NDRC, as one of the key regulators for approving applications, has simplified the procedures for approving asset injections. Easing requirements on asset values (to lower than Rmb1bn) offers greater flexibility to REITs
- The listed CREITs with a 1-year history are set to speed up their asset injection plans given the clearer guidance as most are trading at favourable yields and have strong support from parents
- Share prices of CREITs were under pressure during Apr to May on concerns over the possible offering of rental concessions, especially for those CREITs with a SOE background
- Minimal impact from expiry of lock-up period for strategic investors on 21th June, share prices remained largely stable
- Supported by the favorable policy and liquidity environment, we expect C-REITs’ share prices to regain momentum
What’s new
The National Development and Reform Commission (NDRC) has issued further details which will simplify the approval procedure for asset injections into CREITs.
Our views
Another meaningful step to ramp up scalability. The notice is an echo of the guideline on asset injection that was finalised in late May. The NDRC, as one of the key regulators for approving applications, has simplified the procedures for approving asset injections. We believe this is a positive signal to the market. Easing requirements on asset values (to lower than Rmb1bn) offers greater flexibility to REITs, in our view. The listed CREITs with a 1-year history are set to speed up their asset injection plans given the clearer guidance as most are trading at favourable yields and have strong support from parents.
Some assets facing near-term disruptions. Share prices of CREITs were under pressure during Apr to May on concerns over the possible offering of rental concessions, especially for those CREITs with a SOE background. Zhongguancun Indpark REIT (508099 CH) has announced that it is offering a 6-month rental waiver for small-and-micro enterprises which operate in regions previously classified as medium-to-high risk, and a 3-month waiver for the rest. The company expects that the impact could be partially offset by potentially lower fees charged by both the REIT manager and project manager, as well as subsidies and tax reliefs.
Minimal impact from expiry of lock-up period. Share prices remained largely stable after the expiry of the 1-year lock-up period for strategic investors on 21th June. Apart from Zhangjiang Indpark REIT, the other C-REITs did not experience any meaningful uptick in daily transaction volume. Supported by the favorable policy and liquidity environment, we expect C-REITs’ share prices to regain momentum.
Summary of the key points of the notice
