Did you really do your homework before buying?

Author/ Chen Dengxin

edit/ Meng Huiyuan

At the moment, young people are extremely sensitive to funds.

On June 21, 2021, the first batch of nine publicly offered REITs were officially listed, showing a trend of opening higher and lower prices, but all closed up as of the close, with the highest increase of 14.72%.

The so-called public offering REITs are standardized financial products that publicly raise funds from investors to form fund assets and hold infrastructure projects through infrastructure asset-backed securities.

In layman’s terms, it is a special fund that seeks to hold dividends, can be traded freely, and is open to the public.

However, as aborigines of the Internet, young people have different interpretations of new species. They treat publicly-raised REITs as new stocks, and stage a magical scene.

Are REITs and new stocks stupidly unclear?

“It feels like you are playing new stocks, and you can add chicken legs if you win,” Li Pengfei said.

Li Pengfei, who is located in Wuhan, has been working for three or four years. Since he has no plan to buy a house, he has more money on hand, so his financial needs are urgent.

“I heard from my friends that it is good to buy a fund. I watch the market from time to time, and it has risen better than stocks, so just follow.” Li Pengfei told Zinc Scale that he started to contact the fund in mid-June 2020.

Li Pengfei knows little about public REITs.

However, seeing that his friends around him took action, Li Pengfei was naturally unwilling to let others go. After participating in the purchase of Shougang Green Energy, one of the nine publicly-raised REITs, “what needs to be scrambled is the good thing.”

According to public information, Shougang Green Energy originally planned to issue 10 million copies to public investors. A total of 144,091 valid subscriptions were received on that day. The number of valid subscriptions was approximately 682 million, which was 68.2 times the original plan. The placement ratio after the callback mechanism was only 1.76%.

The degree of popularity can be seen. In the call auction stage, Shougang Green Energy opened 20% higher, leading the way among the nine publicly-raised REITs. Li Pengfei looked forward to the future: “We are waiting for the number of boards.” First day performance of nine public offering REITs But I didn’t want to. Not only did it fail to reach the 30% first-day daily limit, but it fell back a lot. “It’s the same to subscribe, and the signing rate is the same. It’s not as strong as new stocks.” Unlike Li Pengfei, Zhao Guangwei has a deeper understanding of public REITs. “Post-95” Zhao Guangwei told Zinc Scale that buying publicly raised REITs is equivalent to becoming a “chartering company” and enjoying the dividends of China’s infrastructure madman. “My landlord’s greatest happiness is collecting rent every day. After rent collecting, I drink tea, listen to music, and watch the sunset. The days have passed by, I really envy.” Zhao Guangwei said that buying public-raised REITs is more out of his heart’s approval. “Pretend that you have real estate.” Nevertheless, Zhao Guangwei chose to sell on the first day. The reason for this is because I am afraid of the chicken feathers after the stir-frying. “The drivers are thinking about jumping off the car. Shouldn’t we run early and wait for the car to roll over?” An industry insider said that the supply of publicly offered REITs is abundant in the later period, and the sharp fall in the premium is a high probability event. Investors must not treat the new stocks of publicly offered REITs that were originally normalized, otherwise they may suffer a big loss. “Every leek will enter the market. Thinking that you are a sickle, you may not escape the fate of being cut in the end.”

REITs are a long-distance runner

In fact, public REITs are not new. As early as 1960, it was born in the United States. The first three public REITs, Winthrop Real Estate Trust, Washington Real Estate Investment Trust, and Pennsylvania Real Estate Investment Trust, still exist in the New York Stock Exchange. However, it has been tepid since then, and it was not until the 1990s that it ushered in a blowout. The reason is that publicly offered REITs enjoy tax care, and then superimposed to change the way of playing, no longer directly hold the property, but enjoy the investment income as a partner. As a result, public REITs have successfully attracted pension funds and other institutions that focus on long-term investment. According to the “Red Star Restaurant” report, the United States has the world’s largest REITs market, accounting for 66.6% of the global market value. The long-term annualized returns from 1980 to 2020 have performed well, outperforming the Dow Jones Industrial Index and basically the same as the S&P 500. . The United States has the world’s largest REITs market Looking at it this way, public REITs are a long-distance runner. It should be noted that, as an imported product, REITs entered China late. According to public information, the People’s Bank of China, China Securities Regulatory Commission and China Banking Regulatory Commission established REITs research groups in 2007, which kicked off the construction of REITs market. . However, for a long time, domestic REITs have existed in the form of private equity, such as Poly Rental Housing REITs and Penghua Qianhai Vanke REITs. From the pilot private placement to the liberalization of public placement, this means that China’s REITs are gradually becoming mature and can contribute more to the Chinese economy. On the one hand, reduce debt levels . Infrastructure, commercial real estate, etc. often require large-scale investment, and the demand for funds is quite large. Under this background, high debt has become a common feature of the industry and has also become the focus of controversy in the capital market. With the help of publicly offered REITs, companies can reduce overall liabilities, reduce leverage, and reduce financing costs, thereby enhancing their overall competitiveness. More importantly, it is to promote the transition from the pursuit of short-term profitability to long-term operation. On the other hand, revitalize existing assets. With the help of publicly offered REITs, infrastructure, commercial real estate, etc. can obtain the liquidity of stock assets through market-based pricing, thereby increasing the utilization rate of stock assets. In this regard, Huatai Securities analysts told Zinc Scale: “Issuing infrastructure REITs products can achieve the effects of revitalizing existing assets, broadening financing channels, reducing local government leverage, and promoting economic upgrading and transformation. This is the direction of policy encouragement.”

Three major uncertainties cannot be ignored

The current public offering REITs are all aimed at infrastructure, and there are no lack of related public utility stocks in A shares. What is the difference between the two? For example, the Shanghai-Hangzhou-Ningbo Expressway REITs and the listed company Nanjing-Shanghai Expressway both belong to the transportation category. The latter’s dividends are stable and show a trend of increasing year by year. The dividend rate of Nanjing-Shanghai Expressway is not high In fact, according to the requirements of the Fund Infrastructure Guidelines, public offering of REITs shall not be less than once a year if the distribution conditions are met, and public utility stocks are usually at most once a year. In addition to more stable dividends, the risk levels are also different. Huatai Securities analysts told Zinc Scale: “Infrastructure REITs are internationally accepted allocation assets, and are typical medium-income, medium-risk financial products. From international experience, infrastructure REITs products are affected by market factors and have relatively large returns. Less. For the majority of investors, soundness, safety, moderate returns, and suitable for long-term holding are the “role positioning” of public REITs as investment products. Stocks are high-risk investment products with high volatility.” Nevertheless, there are still uncertainties in public REITs. First, there are uncertainties in the level of operations. The underlying assets of public REITs are operated by professional companies. Once the project is determined, professional companies will not be easily changed, and the operating level of professional companies is closely related to the level of investment income. This means that the actual operating level of different projects may vary. The problem is that at the beginning of the investment, the level of professional companies is difficult to judge from the surface. Second, there are uncertainties in asset quality. The underlying logic of public REITs is long-term investment, and the requirements for asset quality are more stringent. The selection of the best among the best has become the consensus of the industry. However, the lack of motivation for the listing of high-quality projects has become a contradiction. With the full rollout of publicly offered REITs, the above-mentioned contradictions will gradually deepen. Once projects with insufficient asset quality are mixed in, they may face difficulties such as poor yields and unrepayable loans. Third, there is uncertainty about taxation. From the perspective of the global REITs market, almost all have relevant tax care. However, there is no relevant legal framework support in China for the time being. It is not ruled out that there will be corresponding arrangements or improvements in the future, but at this stage, we still cannot draw conclusions. In any case, public offering REITs are officially on the road. For related companies, there is an additional financing channel and the direction of transition to a service platform; for investors, they can reap stable rental income from real estate and long-term asset appreciation trends, so as to enjoy the dividends of China’s rapid economic development. This is a win-win outcome