The launch of China’s first real estate investment trust (REIT) has earmarked the country for future investment, an international law firm has said.
Paul Hastings Janofsky & Walker says that Guangzhou Investment Co’s HK$230m (£17m) GZI REIT, which comprises a commercial portfolio based in the People’s Republic of China (PRC), has created a “template” for developers and investors following its recent debut on the Hong Kong Stock Exchange.
The firm said that the GZI REIT offered new methods of overcoming legal and other challenges faced by property investors, such as unclear ownership structures, high taxes and a clamp-down by Beijing on property-related lending.
It added that, since the launch, several similar deals involving PRC assets are in the process of being structured: “The successful listing of GZI REIT has helped to show that legal, regulatory and tax issues arising from structuring such a novel transaction can be overcome.”
Hong Kong partner Vivian Lam said that the GZI REIT had produced “enormous interest” from Chinese developers exploring the possibility of listing their properties offshore.
“The lead time for preparing a Chinese property portfolio for listing is much longer compared to a Hong Kong property portfolio, so we think that this will be a year of HK property REITs, but the continued growth of the HK REIT market will come from Chinese properties,” he said.
The GZI REIT closely follows the launch of the world’s largest REIT Link Management Co’s HK$19.8bn (£1.47bn) Link REIT in Hong Kong last year.
The Link REIT packaged only local assets, and comprised 180 government-owned shopping centres and 79,000 car-parking lots divested by the Hong Kong Housing Authority.
References: EGi Legal News 29/03/06
