China’s first exchange-traded Real-Estate Investment Trust (REIT), launched by Chinese brokerage firm CITIC Securities Co., began trading on the Shenzhen Stock Exchange today, according to information posted on the exchange’s website.
The Qihang Specific Asset Management Plan raised RMB5.2 billion (US$835 million) in April by selling to Chinese institutional investors.
The REIT is backed by rents from two CITIC Securities-owned office buildings in Beijing and Shenzhen.
The product is divided into two tranches. The first tranch yields between 5.5% to 7%, with minimum subscription of RMB5 million (US$802,000). The second tranch yields between 12% to 42%. Its minimum subscription is RMB30 million (US$4.81 million).
In April, Fitch Ratings said in a report that the CITIC REIT is more similar to asset-backed securities (ABS) than a REIT that investors are familiar with in developed markets such as the U.S.
It is because the CITIC REIT will be traded privately, instead of traded publicly on an exchange with good liquidity.
The CITIC product also offers predetermined yields to investors, instead of delivering at least 90% of distributable income, which is a feature commonly seen in REITs.
Lastly, the product has a finite time horizon and may be subject to refinancing risk at maturity.