Securities Daily｜SSE Establishes Leading Market for Concession-Type REITs with 13 Listings

Translated from Securities Daily

In late June and early July, the Shanghai Stock Exchange (SSE) welcomed the listings of ICBC Hebei Expressway REIT and TBEA New Energy REIT, marking a successful period for the issuance of China's publicly offered real estate investment trusts (REITs) in the first half of the year and a great start for the second half of the year. At that point, China had 38 infrastructure publicly offered REIT products, amassing a total financing scale of approximately RMB 125.8 billion (including expanded offerings).

Notably, these two newly listed products belong to concession-type projects—financial instruments backed by concession or operating income rights as underlying assets. These projects primarily focus on government-authorized  assets such as expressways, ecological and environmental protection, and new energy projects. The simultaneous entry of these two REITs into the SSE market highlights the SSE as the "preferred option" for listing concession-type REITs.

Data indicate that, to date, 13 concession-type REITs have been listed on the SSE, representing 81.25% of all concession-type REITs. The total amount of funds raised has reached RMB 58.1 billion, accounting for over 80% of the total raised funds for this category. Since the start of 2024, four newly listed concession-type REITs have chosen to be listed on the SSE, collectively raising approximately RMB 10 billion.

SSE Adds Two More Concession-Type REITs

After more than three years of practice and development, the primary market for publicly offered infrastructure REITs in China has initially evolved into a dual-driver development paradigm of "initial offering + expanded offering." Particularly this year, the pace of new product launches has accelerated significantly, with both the number and scale of newly issued infrastructure public REITs surpassing those of the previous year.

Regarding the reasons behind the accelerated issuance of publicly offered infrastructure REIT products in China, a representative from Hebei Expressway Group Limited told a reporter from Securities Daily that original equity holders can use publicly offered REITs to revitalize high-quality assets, diversify equity financing instruments, reduce asset-liability ratios, and enhance asset management capabilities. This approach helps build a sustainable capital operation platform that supports ongoing offering expansion. Converting mature infrastructure projects into publicly offered REIT shares that can be traded on the market facilitates the high-quality development of the real economy and contributes to establishing a new development paradigm.

It is reported that the ICBC Hebei Expressway REIT and the TBEA New Energy REIT successfully raised RMB 5.698 billion and RMB 1.164 billion, respectively. The relevant person in charge of Hebei Expressway Group Limited informed the reporter from Securities Daily: "The project raised RMB 5.698 billion, with net recovered funds amounting to approximately RMB 1.170 billion. These funds will be used exclusively for the reconstruction and expansion of the Langfang-Zhuozhou section of the Capital Area Loop Expressway (G95), in strict accordance with regulatory requirements. This initiative is expected to stimulate new investments of about RMB 7.3 billion and promote the enhancement of the Beijing-Tianjin-Hebei expressway network."

It is noteworthy that both the ICBC Hebei Expressway REIT and the TBEA New Energy REIT are concession-type projects. The ICBC Hebei Expressway REIT is Hebei Province's first publicly offered infrastructure REIT. Its underlying asset is the Rongcheng–Wuhai Expressway (Dawangdian Hub Interchange to the Hebei-Shanxi Boundary Section), which is a crucial segment of the national expressway backbone network and the first expressway serving Xiong'an New Area. On the other hand, the TBEA New Energy REIT's underlying asset is the Hami PV Power Generation Project, which has been operational for over seven years with an installed capacity of 150MW, making it a high-quality clean energy project.

Li Chao, the Investment Director at Sansheng Capital, mentioned in an interview with Securities Daily that concession-type REITs can help revitalize public infrastructure and bolster local fiscal revenue. By endowing real estate with liquidity, these REITs can support more public infrastructure projects.

Facilitating the Listing of Concession-Type REITs

In fact, as the relevant person in charge of Hebei Expressway Group Limited highlighted, publicly offered infrastructure REITs play an indispensable role in revitalizing existing assets, innovating investment and financing mechanisms, and expanding equity financing channels.

Consequently, since the pilot program was launched in April 2020, China's infrastructure REITs market has been developing steadily and rapidly. As a vital component of China's publicly offered infrastructure REITs, concession-type REITs play a crucial role in advancing market development.

The SSE has implemented several measures to facilitate the listing of concession-type REITs and is committed to establishing a significant market presence for these REITs.

For example, in May 2023, the SSE issued the revised Guidelines No. 1 of the Shanghai Stock Exchange on the Application of the Rules for Publicly Offered Infrastructure REITs – Review Considerations (for Trial Implementation). This revision aims to clarify key review and information disclosure points for toll road projects, enhance the importance and relevance of evaluations, strictly control project quality, and improve information transparency.

According to data from Wind Information, there are currently a total of 16 concession-type REITs in the market, with 13 listed on the SSE. These include 4 energy projects, 8 expressway projects, and 1 ecological environmental protection project. In addition, since the beginning of this year, four new products have been listed on the SSE: Harvest China Power Construction Clean Energy REIT, E Fund Shenzhen Expressway REIT, ICBC Hebei Expressway REIT, and TBEA New Energy REIT.

As the pace of issuing China's publicly offered infrastructure REITs continues to accelerate, Qiu Ping, an expert from Cogdel Think Tank and a lawyer at Shanghai Brilliance Law Firm, told Securities Daily that he recommended further efforts to enhance laws and regulations, optimize the market environment, broaden financing channels, strengthen regulatory coordination, and promote innovative development. Specifically, Qiu highlighted the need for better collaboration and information sharing among various supervisory departments to achieve supervisory synergy. Additionally, he emphasized the importance of bolstering supervision and risk prevention capabilities for concession-type REITs to ensure the market operates smoothly.

According to the reporter, under the guidance of the China Securities Regulatory Commission, the SSE plans to expand the range of underlying assets for REITs, enhance market cultivation, clarify review standards, and stabilize market expectations. While continuously strengthening the market, the SSE aims to attract more medium- and long-term investors and expand the REITs market.

The above information is provided for reference purposes only and does not constitute investment advice.