Securitising China real estate: a tale of two China‐centric REITs

Abstract

PurposeThere is currently no real estate investment trust (REIT) listed in China. As of date, only two REITs – GZI REIT of Hong Kong and CapitaRetail China Trust (CRCT) of Singapore – have securitised Chinese property assets. The purpose of this paper is to examine the driving forces and the obstacles surrounding China REITs, and evaluate REIT securitisation as an exit strategy for Chinese properties.Design/methodology/approachThe paper analyses the performance of the two cross‐border REITs and investigates whether REITs holding Chinese assets outperform other listed REITs.Research limitations/implicationsCRCT outperforms GZI REIT as well as some of the other Singapore REITs, while GZI REIT ranked second lowest in terms of price performance when compared to other Hong Kong REITs. The limited history of CRCT suggests that when a well‐structured REIT holding Chinese assets can perform very well. We also infer that performance is closely linked to portfolio composition and diversification, growth story and originator reputation.Originality/valueThe study shows that there is indeed a strong local demand for China REITs, and that REITs can provide an alternative source of real estate financing for Chinese developers and promote a better regulated Chinese real estate market.