Beijing government published "Plan for epidemic control and economic growth stabilization”; SSE published new rules on Infrastructure REITs; CRC Logistics Plans to Acquire Two Warehouses in Hong Kong
On June 2, the Beijing Municipal People's government issued the “Plan for epidemic control and economic growth stabilization” (the “Plan”), striving to expand investment in key areas such as integrated circuits, new energy vehicles, and medicine and health. The government also stresses to facilitate infrastructure layout, and speed up development of Beijing Yuanbo Digital Economic Industrial Park, Zhongguancun Jingxi Artificial Intelligence Innovation Centre, and other projects. At the same time, the Plan addressed to accelerate procedures of key investment projects, promote the construction of accommodation housing, facilitate the issuance of special bonds, and promote the issuance and listing of more qualified public infrastructure REITs. The Plan also outlines to introduce more funds into development of key projects.
The Plan aims to stabilize economic growth and facilitate investment towards infrastructure and industrial development, and create an optimal economic environment through development of large-scale infrastructure projects. Thanks to the stable operation and prominent cash flow, public infrastructure REITs offers an alternative financing channel, as well as a safer investment option to the public. As the economic structure continues to optimize, energy infrastructure projects, affordable rental housing, logistics, biomedicine and intelligent manufacturing industrial parks, as well as data centres will likely become the new potential for REITs in the future.
On 31 May, the Shanghai Stock Exchange (SSE) issued “Guideline of the Shanghai Stock Exchange for Publicly Offered Infrastructure Real Estate Investment Trusts (REITs) No. 3 – Newly Acquired Infrastructure Projects (Trial)” (the “Guideline”), which clarifies rules on purchasing new projects. The document outlines requirement and guidance on key aspects such as conditions, implementation procedures, information disclosure, suspension and resumption on SSE, and expansion of funding relating to the new project acquisition.
Article 8 of the Guideline requires fund managers to “follow the principle of prioritizing interests of fund shareholders, and rationally determine purchase price or price range of infrastructure projects largely based on the valuation and fair value of the infrastructure projects” At the same time, Articles 13 and 14 of the "Guideline" also suggest that "fund managers shall consult law firms, valuation companies, accounting firms and other professional institutions to provide opinions on newly purchased infrastructure projects"; appointed valuation firm should follow "valuation standards and norms", "assessment of the infrastructure projects and issuance of the valuation report must also comply with the “Guideline”
The “Guideline” requires fund managers conduct due diligence and obtain valuation report issued by a professional valuation company prior to acquiring new projects. Fund managers are also encouraged to make reference to the fair value provided by the valuation firm when determining the pricing.
The release of the “Guideline” strives to promote the healthy development of the REITs market by regulating market behavior, protecting rights and interests of investors, and improving the policy environment in addition to encouraging the issuance and listing of more infrastructure projects that meet requirements. The opinions of third-party professionals will provide important reference for fund managers and investors throughout the investment cycle of REITs.
On May 20, Kerry Properties Limited announced its acceptance of the binding written offer made by CRC Logistics to purchase 100% equity of two project companies with a total consideration of HK$4.62 billion (about RMB3.93 billion). The two projects companies holds two warehouses assets in Chai Wan and Shatin, Hong Kong. The total GFA of Chai Wan warehouse is about 521,253 square feet (48,426 sq m) and the estimated cost of Chai Wan company was about HK$2.29 billion (about RMB1.95 billion). The total GFA of Shatin warehouse was 404,374 square feet (37,568 sq m) with an estimated cost of about HK$2.33 billion (about RMB1.98 billion). The announcement also stated that transaction will be subject to the final agreement between the buyer and the seller.
In the past few years, China Resources Logistics has acquired logistics projects in Kwai Chung, Tuen Mun, Fanling and other places in Hong Kong, and investors such as Link REIT and Black Stone has acquired logistics projects in Gaungzhou, Dongguan and Foshan. As an important logistics hub at home and abroad, Great Bay Area enjoys convenient transportation, sound manufacturing foundation, and sophisticate online retail environment, which all propel the healthy development of logistics market. As major logistics enterprises, developers, and investors continue to establish and expand footprints, GBA will continue to be a highly sought-after submarket nationwide.