China: Update on China REIT regulations

02 Aug 2024    2 minute read

In brief

On 26 July 2024, the National Development and Reform Commission of the PRC (NDRC) published the "Notice on Comprehensively Promoting the Normalized Issuance of Real Estate Investment Trusts (REITs) Projects in the Infrastructure Sector" ("Notice") which takes effect from 1 August 2024.

Contents

The Notice sets out several updates to the China REIT regime including:

  • Restating the eligible asset classes which, in addition to warehousing and logistics (including cold storage), new economy infrastructure (including data centres), rental housing, industrial parks, shopping centres, clean energy and other previously accepted assets, now includes:
    • Offices
      • Provided they are physically inseparable from a shopping centre, held by the same owner and (together with hotels) do not exceed 30% of the total floor area of the underlying assets (50% in exceptional cases)
    • Hotels
      • Provided they are physically inseparable from an industrial park or shopping centre, held by the same owner and (together with ground floor shops or offices, as applicable) do not exceed 30% of the total floor area of the underlying assets (50% in exceptional cases for shopping centres); or
      • Within the planning scope of tourist attractions held by the same owner
    • Registered senior living facilities
  • Removal of the minimum yield requirement which was previously 3.8% distribution yield for properties owned by the sponsor (or 5.0% internal rate of return for state-owned properties which are only operated / franchised by the sponsor)
  • Simplified filing process including no longer requiring pre-REIT consultation with relevant industry experts and prescribing time limits for relevant authorities to complete certain steps during the filing process
  • Increasing the net IPO proceeds that do not need to be reinvested in new/existing projects to 15% (previously 10%)

Baker McKenzie welcome these updates, which have been designed to encourage more sponsors to list their assets via China REITs. We look forward to further enhancements to the China REIT regulations as the market matures, including updates on the timing and eligibility requirements for "REIT Connect".

Talk with us!

We will continue to monitor further developments on China REITs and REIT Connect. If you have any questions on any of the above matters, please do not hesitate to liaise with your usual contact at Baker McKenzie or the lawyers listed in this client alert.

Click here to read the Chinese version.

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Contact Information
Jeremy Ong
Partner at BakerMcKenzie
Hong Kong
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jeremy.ong@bakermckenzie.com
Hang Wang
Partner
Beijing
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hang.wang@bakermckenzie.com
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Guangshui Yang
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Beijing
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yangguangshui@fenxunlaw.com

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