On February 10, 2021, Hong Kong Stock Exchange documents showed that SF Real Estate Investment Trusts (REITs) had submitted an IPO application to the Hong Kong Stock Exchange. This is also the first public offering of logistics real estate REITs in China.

SF Real Estate Trust prospectus link:

https://www1.hkexnews.hk/app/sehk/2021/103188/documents/sehk21021000156_c.pdf

SF REITs has become the third mainland public REIT to be listed in Hong Kong, following Yuexiu and China Merchants REITs.

In December 2005, Yuexiu Real Estate Investment Trust was listed on the Hong Kong Stock Exchange, becoming the world's first listed real estate investment company that invests in properties in the People's Republic of China and mainland China. Trust funds;

In December 2019, China Merchants Commercial Real Estate Investment Trust Fund was officially listed on the main board of the Hong Kong Stock Exchange. It was the first IPO of Hong Kong REITs after 2014.

Documents show that the investment portfolio of SF REIT initially includes the following three properties in Hong Kong, Foshan and Wuhu. All of these properties are modern logistics real estate and strategic Strategically located within major logistics hubs in Hong Kong and China.

As of December 31, 2020, the total leasable area of ??the three properties was approximately 3,079,90.8, with an assessed value of HK$6,093.6 million. The average property occupancy rate is 94.9%.

As of September 30, 2020, the property contract had 32 tenants. For the month as of September 30, 2020, the total rental income ranked among the top five Tenants (three of whom are connected persons of SF REIT) accounted for approximately 83.3% of the total rental income, while SF related tenants accounted for approximately 81.8% of the total rental income during the same period. Approximately 81.9% of the tenants (in terms of lettable area) are from the logistics industry, while the remaining tenants include tenants from the pharmaceutical, technology and other industries.

Knowledge point: Hong Kong REITs

Development status:

Compared with the Hong Kong REITs market, mainland real estate-related companies are more willing to go to Hong Kong for IPOs. This is mainly due to the "Real Estate Investment Trust Fund Code" which stipulates that "REITs listed in Hong Kong need to use 90% of their net profits after tax for dividends, and the total amount of borrowings shall not exceed 45% of the total asset value of the fund." For the rapidly developing mainland real estate market, the limitation on financing amount has become an obvious limitation.

However, the current situation in the Hong Kong REITs market is likely to change.

First, the domestic real estate market is transforming from an era of incremental development to existing operations;

Second, the state has intensified financial supervision, tightened financing channels for real estate companies, and tightened financing costs. Rising double from under pressure.

Two changes in the domestic real estate market have made Hong Kong REITs a feasible way for real estate companies to revitalize existing assets.

Market conditions:

In 2005, the Hong Kong Securities and Futures Commission issued the "Real Estate Investment Trust Fund Code". It laid a legal foundation for the development of REITs in Hong Kong and was revised on November 27, 2020.

Hong Kong REITs are collective investment plans formed in the form of trusts and mainly invest in real estate projects. The specific transaction structure mainly includes three links: first, injecting the property into the SPV company, second, establishing a trust fund, and third, issuing trust fund shares to raise funds to invest in the SPV company, thereby obtaining property ownership and rental income generated by the property. (This trust fund mainly provides holders with rental income returns from real estate properties)

Market release: In 2005, Hong Kong’s first REIT - Link Real Estate Investment The trust fund (formerly known as The Link Real Estate Investment Trust) was successfully listed on the Hong Kong Stock Exchange.

It has been 15 years since Hong Kong introduced REITs products. There are currently 11 REITs listed and traded on the Hong Kong Stock Exchange, with total assets of approximately HK$510 billion and a market value of approximately HK$210 billion. There are 6 REITs with domestic assets, namely Spring Real Estate Trust, Huixian Real Estate Trust, Link Real Estate Investment Trust, Yuexiu Real Estate Investment Trust, Kaiyuan Industrial Investment Trust, and China Merchants Real Estate Trust.