ceo presentation reit
DESCRIPTION
REIT presentation featuring REIT introduction, structure, characteristics, legal framework, regulations, risk & return, trends in Mainland China.TRANSCRIPT
For ‘the 2nd International CEO Roundtable of Chinese and Foreign Multinational Corporations’
REITREITReal Estate Investment
TrustPrepared by:
Ben TseValuation & Advisory Services, Greater ChinaCB Richard Ellis
15th November 2008
CB Richard Ellis | Page 2
Content REIT Development REIT Legislation REIT Structure Characteristics of a REIT Risks of a REIT REIT vs. Direct Property Investment Impact of Subprime Crisis REIT in Mainland China Managing a REIT Conclusion
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REIT Development
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REIT Development
SINGAPORE
JAPAN
TAIWAN
20 S-REITsMkt. Cap. about US$ 8.2 billion
8 T-REITsMkt. Cap. about US$ 1.2 billion
4 listed CR-REITsMkt. Cap. about US$ 0.15 billion
SOUTH KOREA
MALAYSIA
13 REITsMkt. Cap. about US$ 1.2 billion
HONG KONG
7 listed H-REITsMkt. Cap. about US$ 5.1 billion
42 listed J-REITsMkt. Cap. about US$ 23.3 billion
Data as of late October 2008
REITs in Asia REITs in Asia (excluding Property Funds)(excluding Property Funds)
Source: Bloomberg and CBRE Research
CB Richard Ellis | Page 5
REIT DevelopmentREITs in Asia REITs in Asia (excluding (excluding Property Funds) Property Funds)
No. of listed REITs Market Capitalization (US$ billion)
As of late Oct 2007
As of late Oct 2008
As of late Oct 2007
As of late Oct 2008
Japan 42 42 46.5 23.3 (-50.0%)Singapore 17 20 18.9 8.2 (-56.6%)Hong Kong 7 7 8.9 5.1 (-42.7%)Taiwan 8 8 1.7 1.2 (-29.4%)South Korea 9 4 0.8 0.15 (-81.3%)
Malaysia 11 13 1.4 1.2 (-14.3%)
TOTAL 94 94 78.2 39.2 (-50.0%)
Amongst others, South Korea had 5 REITs delisted leaving an 81.3% contraction in total market cap.
In Japan, although the number of listed REITs remains unchanged, the total market cap. dropped significantly by 50%
The number of listed REITs in Singapore increased to 20; nevertheless, the total market cap. recorded a dramatic 56.6% drop. Hong Kong also suffered significantly, with 42.7% drop in total market cap.
Source: Bloomberg and CBRE Research
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REIT Development
REITs in Hong KongREITs in Hong Kong
Late 2005 saw the Hong Kong REIT market burst into life, with the listing of three REITs on the Stock Exchange of Hong Kong including The Link REIT, Prosperity REIT and GZI REIT
To date, there are seven listed REITs with market capitalization of about US$ 5.1 billion (HK$ 39.8), down 42.7% in total market cap., when compared to late Oct 2007
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REIT Development
Other Asian countries planning for setting Other Asian countries planning for setting up of REITsup of REITs
In light of the rapid development in Japan, Singapore and HK, other countries are planning for setting up of REIT like India, Pakistan, Indonesia & Vietnam
India is currently in the process of formulating definitive legislation for the introduction of REIT in the Indian real estate market
Pakistan is also ready to allow REIT. It is understood that the Securities & Exchange Commission of Pakistan will follow regulatory framework similar to that of Singapore and Hong Kong REIT
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REIT legislation
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REIT Legislation
As mentioned earlier, Japan, Singapore, Hong Kong, Taiwan, South Korea and Malaysia already developed the REIT structure
The legislation structure in these six countries will be discussed
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REIT LegislationJapan Singapore Hong Kong Taiwan
Structure Trust or corporate (listed REITs are all corporations)
Collective Investment scheme (Unit Trust) or corporate
Unit Trust Trust (Real estate asset trust or investment trust)
Management structure External External Internal/External Internal/External% invested in real estate
For listed J-REIT, at least 75% of assets must be invested in real estate
At least 70% of deposited property should be invested in real estate or real estate-related assets
Only invest in real estate
cash, government bonds, property, property-related rights, beneficiary securities or ABS issued under real estate securitization Act/Financial Asset Securitization Act (RESA/FASA) must form at least 75% of the NAV
Geographical restrictions
No restriction under the Investment Trust and Investment Company Act, but no overseas acquisition have been made as the requirements on real estate appraisal of overseas properties are ambiguous
No No No restriction under the RESA; subject to approval
Property developments Restricted – at least 50% of total assets are income producing and unlikely be sold within one year
Property developments and investments in uncompleted projects should not exceed 10%
Prohibited, but H-REIT may acquire uncompleted units comprising less than 10% NAV
Prohibited – this rule is undergoing revision to allow for urban renewal infrastructure or public amenities construction
Leverage No restriction Over 35% of total assets permitted with disclosed credit rating (capped at 60%)
Capped at 45% of gross asset value
Ratings of twAA or above by two credit rating agencies: 50%; ratings of twA or above: 35%; those with credit ratings: 25%
Source: CBRE Research
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REIT LegislationSouth Korea Malaysia
Structure Corporate-Restructuring, Entrusted Management, Development-Specialized, Self-Managed
Unit trust
Management structure Internal/External External% invested in real estate At least 70% in real estates or
corporate restructuring related properties
At least 75% in real estate, SPCs, real estate-related assets or liquid assets for listed REITs. The criteria for unlisted REIT is 70%
Geographical restrictions No No restriction basically, subject to approval from SC and relevant authorities
Property developments Allow Prohibited, but may enter into conditional forward purchase agreement with cover for construction risks
Leverage REITs are permitted to have exceptional borrowing up to 1000% of equity capital, upon special approval of shareholders
50% of total asset value (revised from 35%)
Source: CBRE Research
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REIT Structure
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REIT Structure
What is a REIT?What is a REIT?
A company that owns, and in most cases, operates income-producing real estate
Some of the REITs finance real estate
To be a REIT, a company must distribute certain portion of its taxable income to shareholders annually in the form of dividends. (e.g. in Hong Kong, not less than 90% of its audited annual net income after tax shall be distributed in the form of dividends)
The REIT structure was designed to provide a similar structure for investment in real estate similar to mutual funds which provide for investment in stocks
Source: THE REIT STORY, the National Association of Real Estate Investment Trusts
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REIT Structure
Types of REITTypes of REIT
REIT can be classified as equity, mortgage or hybrid
• EQUITY generates income from property ownership and operation
• MORTGAGE provide a source of loan to property owners and operators directly or via collateral bonds
• HYBRID a mixture of the above two types
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REIT Structure
Specific Legislative Model of Asian Specific Legislative Model of Asian REITREIT
Adopt specific legislation on its establishment, structure, investment and distribution of REIT
Services ServicesTrust Manager
Asset Management
CompanyREIT
Properties
REIT Holders
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Characteristics of REIT
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Characteristics of a REIT
REIT InvestmentREIT Investment
Focus on Property Investment but without becoming a landlord
Tax Concession Minimum Payout Ratio Better Investor Protection
• Better Disclosure Requirement• Restricted to Property Related Activities• Restriction on Development Activities• Limit on Gearing
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Characteristics of a REIT
REIT InvestmentREIT Investment
Relatively stable income with no minimum investment requirements
High Liquidity Management Expertise Access to large and high quality projects /
properties Diversification Economy of Scale Low Transaction Cost
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Characteristics of a REIT
AdvantagesAdvantages
High liquidity Transparency Tax benefit High dividend yield Inflation hedge Portfolio diversification Lower risk
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Characteristics of a REIT
High LiquidityHigh Liquidity
Liquidity is a key concern to the investment. Generally, value of high liquidity investment vehicles are worth more than less liquid ones
Direct investment in property requires a large lump-sum payment and involves a high transaction cost
Direct investment faces the difficulties of matching a buyer and a seller
REITs are publicly traded on stock exchange with high liquidity
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Characteristics of a REIT
TransparencyTransparency
Corporate governance and internal control are important issues in today’s business operation
REIT, just like stocks, requires regular reporting, independent audit and appraisal
These improve the quality of investment and investor’s confidence
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Characteristics of a REIT
Tax BenefitTax Benefit
For a REIT to become qualified (in Hong Kong), a real estate company must agree to pay in dividends at a minimum of 90% of its taxable profit
By having REIT status, a company avoids corporate income tax
A regular corporation makes profit and pays taxes on the entire profits, and then decides how to allocate its after-tax profits between dividends and reinvestment
However, a REIT simply distributes all or almost all of its profits (excluding tax)
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Characteristics of a REIT
High Dividend YieldHigh Dividend Yield
Although risks are apparent, REIT receives special tax considerations and typically offer investors fairly high yields (see next slide for more details) as well as highly liquid method of investing in Real Estate
As mentioned previously, it must distribute most of its profits as dividends
The high dividend yield provides a relatively stable income stream to the investors
Therefore, it is relatively safe to invest in REIT in a volatile market
CB Richard Ellis | Page 24
Characteristics of a REITDividend Yield of Hong Kong REITsDividend Yield of Hong Kong REITs(As of late Oct 2008)(As of late Oct 2008)
Name of REIT Stock Code Dividend Yield
RREEF CCT REIT 00625 9.06The Link REIT 00823 5.55
Prosperity REIT 00808 16.45GZI REIT 00405 15.90
Champion REIT 02778 20.87Sunlight REIT 00435 20.68
Regal REIT 01881 24.90Average 16.20
Hysan 0014 5.24Wharf Holdings 0004 5.33
Wheelock Properties 0049 4.62Average 5.06
Source: Bloomberg
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Characteristics of a REIT
Inflation HedgeInflation Hedge
REIT invests in property market
Traditionally, investments in tangible hard assets are good for hedging against inflation
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Characteristics of a REIT
Portfolio DiversificationPortfolio Diversification
REIT has a low correlation with stock and bond investments
According to modern portfolio theory, adding REIT to a portfolio with stock and bond would improve return and reduce risks
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Characteristics of a REIT
Lower RiskLower Risk
The risks in the investment of REIT are relatively lower than that in investment of property stocks
More details on risk of REIT will be discussed in the next section
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Risks of a REIT
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Risks of a REIT
Volatility of REITVolatility of REIT
Volatility is a measure of risk
Unpredictable, unstable and explosive are some of the words, which can best describes the share market in the last 12 months
For REITs, investors need to remember that they are still buying shares, not bricks and mortar
Therefore, the share price will be influenced by what is happening in the commercial property market
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Risks of a REIT
Name of REIT Stock Code Annualized VolatilityRREEF CCT REIT 0625 43.09
The link REIT 0823 33.84Prosperity 808 40.16GZI REIT 0405 33.77
Champion REIT 2778 45.10Sunlight REIT 0435 35.06
Regal REIT 1881 38.20Average 38.46
Hysan 0014 47.03Wharf Holdings 0004 60.04
Wheelock Properties 0049 49.08Average 52.05
Hang Seng Index 49.14Source: Bloomberg
Volatility of HK REITs vs. HK property stocksVolatility of HK REITs vs. HK property stocks
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Risks of a REIT
Volatility of REITVolatility of REIT
The volatility of REIT, which is a measurement of the daily change of stock price, is smaller than those of property stocks
The volatility of REITs is also smaller than that of the Hang Seng Index, which is a representative index for the overall movement of the stock market
Therefore, the risks in investment of REIT are relatively lower
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Risks of a REIT
Beta Coefficient of REITBeta Coefficient of REIT
Looking at the stock market, we could use Beta to measure the sensitivity of REIT to the stock market
It is a measure of the volatility, or the systematic risk of a security on a portfolio in comparison to the market as a whole
Beta is calculated by using regression analysis and it can be described as the correlation of the move of a security to the swings in the market
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Risks of a REIT
Beta coefficient of REIT (cont’d)Beta coefficient of REIT (cont’d)
A Beta of 1 indicates that the security's price will movewith the market
A Beta of less than 1 means that the security will move less than the market
A Beta of larger than 1 indicates that the security's price will move more than the market
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Risks of a REITBeta coefficient of Hong Kong REITsBeta coefficient of Hong Kong REITs(As of late Oct 2008 over 2 years)(As of late Oct 2008 over 2 years)
Name of REIT Stock Code BetaRREEF CCT REIT 625 0.74
The link REIT 823 0.61Prosperity 808 0.69GZI REIT 405 0.72
Champion REIT 2778 0.70Sunlight REIT 435 0.80
Regal REIT 1881 0.76Average 0.72
Hysan 0014 0.81Wharf Holdings 0004 0.91
Wheelock Properties 0049 0.84
Average 0.85Source: Bloomberg
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Risks of a REIT
Beta Coefficient of REIT (cont’d)Beta Coefficient of REIT (cont’d)
From the table provided, the average Hong Kong REIT Beta is around 0.72
The average Beta for property developers and the market are 0.85 and 1 respectively
This indicates that REIT is less sensitive to the market change
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Risks of a REIT
Risk associated with REITRisk associated with REIT
Performance of the Property Market• Fall in the prices/ valuations of properties will drag down unit
prices• Low occupancy and rental will affect distributable incomes
Insufficient diversification• Location• Number of properties• Variety of property type
Tenancy durations and quality of tenants • shorter tenancy terms
-> higher number of tenant changes / voids -> unstable rental income
Rental Guarantee and IPO Valuation • Special financial engineering• duration and validity of rental guarantees provided by the
property vendors • effects on the IPO valuation
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REIT vs.
Direct Property Investment
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REIT vs. Direct Property Investment
After discussing the unique characteristic and risk of REIT,
the difference between REIT and direct property investment will be highlighted
Factors for considerationFactors for consideration
Return on Investment Leverage/ Cost of Borrowing Valuation Volatility Taxation
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REIT vs. Direct Property Investment
REITREIT PropertiesProperties Revenue Property Income
-Interest Payment (depends on leverage) - Landlord's Expenses
- Management Expenses Net Income Yield Operating income - Tax Net Income x Payout Ratio
Dividend Dividend Yield
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REIT vs. Direct Property Investment
Liquidity of Property Assets• Investment Fund Available• The potential buyers – Buying sentiment expectations• Strata-title properties available in market
Maturity of Property Market• Frequency of transactions • Legal Framework on Conveyancing, Leasing and Asset
Management• General Perception of buy / sell sides
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Impact of Subprime Crisis
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Impact of Subprime Crisis
Although REIT is relatively stable and less sensitive to the market change, the performance of REIT still suffered considerably under the turmoil of subprime crisis, followed by global credit crunch
Under the impact of subprime crisis, the entire Asian REIT market, REIT IPO, REIT acquisition, market sentiment all turn sluggish and lose their impetus
CB Richard Ellis | Page 43
Impact of Subprime Crisis
Sluggish REIT MarketSluggish REIT Market
The leading Asian REITs market experienced consolidation, following the broad correction in the global equity markets in the first half of 2008 as the subprime crisis spilled over to other financial market segments and the macro economic environment turned dimmer overall
The total market capitalisation of Asian REITs recorded a 9.4% contraction within the first six months in 2008, following a 4.5% decline in the second half of 2007
The three major growth drivers for Asian REITs – new listings, acquisitions and robust property fundamentals – are all losing their impetus to varying degrees.
CB Richard Ellis | Page 44
Impact of Subprime Crisis
Sluggish REIT Market (cont’d)Sluggish REIT Market (cont’d)
Given the continuing credit squeeze, IPO fund raising and financing for on-going acquisitions have become more difficult since late 2007
Property fundamentals, although still basically resilient for most Asian REITs, they have shown signs of softening as office demand may be impacted by a growing conservation in corporate expansion plans and rental growth is decelerating after the huge run up experienced by most markets in recent years
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Impact of Subprime Crisis
Major Acquisition by Asian REITs (1Major Acquisition by Asian REITs (1stst Half 2008) Half 2008)
The first half of 2008 continued to witness REIT acquisition activities, despite the prevailing pessimism, especially on the part of financially sound REIT
One of the notable transactions of the period was Champion REIT’s acquisition of Langham Place retail and office portions from its major shareholder Great Eagle at a total consideration of HK$12.5 billion (US$1.6 billion)
However, the global credit squeeze is making it difficult for REIT to raise further funds to buy new assets. Japan saw a number of REITs cancel their planned acquisitions due to capital raising difficulties. Such situation is most pronounced among REITs with high gearings
CB Richard Ellis | Page 46
Impact of Subprime Crisis
Forecast of REIT performance in 2008 year Forecast of REIT performance in 2008 year endend
Against the backdrop of extremely low vacancy in prime locations and sustained high rental income, prices of many REITs in Asia have dipped below their respective net asset value (NAV), resulting in higher yield level
In Hong Kong, the yield increased from 6.03% to 6.67% in the first six months of 2008, against the 2.95% of the overall stock market
Under the current market conditions, investors are likely to remain cautious with respect to any investment decisions and pace of acquisitions by REITs could further slow should the tight credit environment show no improvement in the year’s remaining months
CB Richard Ellis | Page 47
Impact of Subprime Crisis
Hong Kong REIT marketHong Kong REIT market
Amid jitters in the equity and credit markets worldwide, the IPO market in Hong Kong experienced rapid cooling in the first half of 2008 and no new REIT was launched during the period under review
Total number of HK-REIT remained at seven, with a total market capitalisation of US$ 5.1 billion (HK$39.8 billion)
The dull market condition for Hong Kong REIT has forced property owners to re-consider their plans to list their real estate investment trusts
In January, Far East Consortium International Limited announced its plan to spin-off its mid-market hotels into the HK Hotel REIT. However, given the volatility of the capital market and unattractive pricing, Far East finally decided to postpone the spinoff programme in March even though the ordinary resolution to undertake the spin-off was passed in EGM.
CB Richard Ellis | Page 48
Impact of Subprime Crisis
Hong Kong REIT marketHong Kong REIT market
Following the SFC’s clarification in October 2007 that overseas acquisitions do not need approval, REIT started to amend their investment scopes
Investment activities of Prosperity REIT and Regal REIT will no longer be restricted to Hong Kong or Greater China region
Similarly, GZI REIT was permitted to shed its former restriction of being only permitted to invest in Guangdong Province and will henceforth be permitted to target properties in mainland China, Hong Kong and Macau as well
CB Richard Ellis | Page 49
Impact of Subprime Crisis
Hong Kong REIT marketHong Kong REIT market
REIT acquisitions in Hong Kong have not been active since the inauguration of the listing of REIT in the SAR in 2005
Given the current slowdown in real estate investment activities, REITs are likely to temporarily cease purchasing new assets and rather concentrate their efforts on existing portfolios to sustain revenue growth
Launching new REIT can remain challenging, if the general securities market remains in bearish mood
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Impact of Subprime Crisis
Hong Kong REITs Performance (as of late Oct 2008)Hong Kong REITs Performance (as of late Oct 2008)
Name of REIT
Stock Code Date Listed Offer price
(HK$)
Closing price as of late Oct 08
(HK$)
% change since Date
Listed
The Link REIT 00823 25-Nov-05 10.300 13.40 + 30.1%Prosperity REIT 00808 16-Dec-05 2.160 0.82 - 62.0%
GZI REIT 00405 21-Dec-05 3.075 1.50 - 51.2%Champion REIT 02778 24-May-06 5.100 1.83 - 64.1%
Sunlight REIT 00435 21-Dec-06 2.600 1.17 - 55.0%Regal REIT 01881 30-Mar-07 2.680 0.72 - 73.1%RREEF CCT REIT 00625 22-Jun-07 5.150 1.98 - 61.6%
Source: Bloomberg and CBRE Research
CB Richard Ellis | Page 51
Impact of Subprime Crisis
The Hong Kong Hang Seng Index (HSI) plummeted from 31,492 in early-Nov 2007 to 13,968 in late-Oct 2008, down by 55.6% over the year. Starting from Sept 2008, the HSI experienced a severe drop, triggered by global financial tsunami
Hong Kong Hang Seng Index香港恒生指数
Source: http://hk.finance.yahoo.com
CB Richard Ellis | Page 52
Impact of Subprime CrisisStock Price PerformanceStock Price PerformanceFrom early-Nov 2007 to late-Oct 2008From early-Nov 2007 to late-Oct 2008
Link REIT 领汇房地产投资信托基金 Prosperity REIT 泓富产业信托
GZI REIT 越秀房地产投资信托基金 Champion REIT 冠君产业信托
- 23.8% - 48.8%
- 52.7% - 60.2%
Source: http://hk.finance.yahoo.com
CB Richard Ellis | Page 53
Impact of Subprime CrisisStock Price PerformanceStock Price PerformanceFrom early-Nov 2007 to late-Oct 2008From early-Nov 2007 to late-Oct 2008
On average, more than 50% decline was recorded in HK REITs during the period
Amongst others, Link REIT relatively outperformed the other REITs, with only 23.8% decline during the period
Sunlight REIT 阳光房地产投资信托基金 Regal REIT 富豪产业信托
RREEF CCT REIT睿富中國商業房地產投資信托基金
- 53.6% - 70.4%
- 44.8%
Source: http://hk.finance.yahoo.com
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REIT in Mainland China
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REIT in Mainland China To date, there is no setting up of REIT in Mainland China
Due to the slowdown of China economic growth, the macro-economic control is relaxed and measures are taken as follows:-• Enable regional government to rescue the economy• Reduce the deed tax in relation to property transaction• Strengthen alarming system of property market
Under such circumstances, in order to facilitate financing, it is expected the structure of REIT will be set up at the end of 2008
Also, in order to reduce the exposure of risk from banks, the government is planning to securitize the assets, thus encouraging various methods of financing
Source: HK Wenweipo [2008-10-20]
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REIT in Mainland China
Problem faced by REIT in Mainland ChinaProblem faced by REIT in Mainland China
Setting up REIT-related limited companies and Setting up REIT-related limited companies and companies limited by sharescompanies limited by shares
May result in conflicts with relevant provisions in Company Law and Securities Law. Also, setting up special purpose vehicle (SPV) to REIT IPO is still not passed
Problems faced:-• In accordance with Company Law, the net asset value
(NAV) of foreign investment shall not exceed 50% • Conflicts in profit exist in company management and
asset management
Source: CNETNews.com.cn [2008-10-21]
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REIT in Mainland China
Problem faced by REIT in Mainland ChinaProblem faced by REIT in Mainland China
Offshore REIT management company for REIT IPOOffshore REIT management company for REIT IPO
As stipulated in Securities Investment Fund Law of the PRC, the financial assets for investment shall be:-• Publicly listed stocks and bonds• Other securities approved by regulatory bodies from
the State Council
To issue REIT in terms of securities investment fund may require amendment of relevant laws passed by the National People’s Congress
Source: CNETNews.com.cn [2008-10-21]
CB Richard Ellis | Page 58
REIT in Mainland China
Problem faced by REIT in Mainland ChinaProblem faced by REIT in Mainland China
Setting up unit trust of REIT in terms of trust basisSetting up unit trust of REIT in terms of trust basis
Despite less regulatory restrictions, there is no precedent for REIT IPO in stock markets
As stipulated in Trust Law, the single issue of trust shall not exceed 200 units
The regulatory bodies remain doubtful about the issuance of REIT in terms of trust basis
Source: CNETNews.com.cn [2008-10-21]
CB Richard Ellis | Page 59
Managing a REIT
CB Richard Ellis | Page 60
Managing a REIT
Asset Asset ManagementManagement
Provide management services from routine property and facilities operations to decision making at strategic levels
To maximize the net return and enhance the capital value of the property
Risk Management
Sustainable Development
Property Portfolio
ManagementCash Flow Analysis
Leasing
Acquisition & Disposal of Assets
Advice on Capital Market
Activities
Strategic LevelsStrategic Levels
CB Richard Ellis | Page 61
Managing a REIT
Property Portfolio ManagementProperty Portfolio Management
Diversification Economy of Scale Look for the best combination to maximize
return and minimize risk To formulate, implement and advise on policies
and programs on portfolio level To advise on financial viability of major
renovation / redevelopment / disposals
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Managing a REIT
Strategy Planning & SettingsStrategy Planning & Settings
Strategic levels embrace posing the proper questions and seeking the answers to fulfill long-term decision making
• Increasing recognition of Portfolio Management’s importance in preserving and enhancing the value of properties.
• Evolvement of Property Market Merge with Capital Market. • Acquisition / Disposal Strategy Look global to maximize returns and diverse risks
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Managing a REIT
Cash Flow AnalysisCash Flow Analysis
To maximize the net return, whilst preserving and enhancing the capital value of the property.
The return can be variously measured in terms of income and income growth or capital appreciation or a combination of the two Decision Analysis
Payback methodReturn on
capital employedapproach
Discounted cash flow approach
Net present value technique
Internal rate of return
approach
CB Richard Ellis | Page 64
Managing a REIT
Good ManagementGood Management
Portfolio and Asset Management expertise Market knowledge – ahead and strategic Transparency Good understanding of the requirement of
investors Match with management objective. Valuation Methods
• Net Asset Value (NAV)• Net Present Value (NPV)• Earnings Per Unit (EPU)• Funds From Operation (FFO)
CB Richard Ellis | Page 65
Managing a REIT
REIT-related services in real estate REIT-related services in real estate industryindustry
Due Diligence Purposes• Valuation & Advisory Services• Consulting Services (including market studies)• Building Consultancy Services
Pro-acquisition Purposes• Asset / Property Management• Leasing / Agency
CB Richard Ellis | Page 66
Conclusion
CB Richard Ellis | Page 67
Conclusion
There is already the implementation of REIT in Japan, Singapore, Hong Kong, Taiwan, South Korea and Malaysia. It is foreseen that there would be more and more countries launching REIT in the very future but in a very cautious manner
Traditionally, REIT is accounted for high liquidity, tax benefit, transparency, high dividend yield, inflation hedge, lower risk and portfolio diversification. It could be the alternative to direct real estate investment
CB Richard Ellis | Page 68
Conclusion (cont’d)
Under the turmoil of Subprime crisis, the entire Asian REIT market, REIT IPO, REIT acquisition, market sentiment all turn sluggish and lose their impetus. The total market capitalisation of Asian REIT recorded a 50% contraction as of late Oct 2008 when compared to late Oct 2007
After overcoming the regulatory impediments, the implementation of REIT in Mainland China is yet to be launched for greater financing opportunities
A strategic and specialized management of properties in the portfolio of REIT certainly adds value to the asset itself as well as investors
CB Richard Ellis | Page 69
Q&A
CB Richard Ellis | Page 70
Thank you