Saturday, 10 January 2009

Chinese Reits

Nice idea; shame about the timing. Amid the steepest global property downturn in decades, China is expediting plans to allow developers to raise funds through public real estate investment trusts, or Reits. A televised presentation by the country’s vice housing minister earlier this week emphasised that China wanted to learn from the horrendous recent performance of these structured vehicles, which lagged global equities by about 13 per cent last year.

The proposal makes sense on paper. Every serious international capital pool has shifted property risk from banks to its stock market. Cash-strapped developers may jump at the chance to diversify funding, even if that means selling properties into a Reit at a discount. And investors are easily bewitched by the chance of owning a piece of a gleaming tower or shopping mall.

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