Singapore’s GIC, Chinese mall operator Grandjoy to pilot REIT listing in China

People visit the Bund in front of Shanghai's financial district of Pudong in Shanghai, China September 28, 2017. REUTERS/Aly Song/Files

Singapore sovereign wealth fund GIC and Chinese shopping mall operator Grandjoy Holdings Group have received regulatory permission to pilot China’s first publicly listed real estate investment trust (REIT), according to a South China Morning Post report.

GIC and Grandjoy join several firms that the securities regulator has picked to try the country’s first publicly listed Reit. Chinese commercial real estate operators have for years been calling for a REIT to debut on the stock exchange.

The pilot REIT program allows Chinese investors to acquire shares in rent-yielding properties for the first time. China, however, lags behind Hong Kong and Singapore, which have mature REIT markets.

Grandjoy, formerly known as Cofco Property Group, is the property arm of state-owned conglomerate Cofco. In China, the firm is known as a shopping mall operator that embraces youth subculture. It operates 13 malls in major Chinese cities with 11 in the pipeline.

In an interview with SCMP, Grandjoy’s chief financial officer Xu Hanping, revealed that the possible float of the REIT could add an exit route for the firm’s real estate funds’ investment.

However, Xu said she still does not know when the pilot REIT programme will be launched.

The pilot REIT will give investors a good return from the property market without having to spend huge amount to acquire a flat or an entire apartment. At present, REITs in China could only raise funds by collateralising properties through asset-backed securities.

China’s REIT market could potentially be worth more than 12 trillion yuan ($1.8 trillion), surpassing the US REIT market’s size, if legal and tax barriers were removed, according to a report released by Peking University’s Guanghua School of Management in 2017. In the US, the publicly floated REIT market had a capitalisation of $1.01 trillion by the end of 2016

Grandjoy and GIC collaborated in 2017 to launch an Rmb11.4 ($1.7 billion) buyout fund that targets underperforming or distressed assets and then turned them into Grandjoy malls. The firm also co-launch a fund that seeks to spend up to Rmb2.5 billion ($373 million) to upgrade properties in Beijing and other cities.

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