Former CapitaLand retail chief 'to list $1b Reit'

[Nick]

I don't think Chinese assets have very high asset yield and the best assets tend to be owned by SOEs and those in the market for the past 2 decades. REITs have no choice but to buy lower quality assets in 1st tier cities or go for higher yielding malls in the more risky 2nd and 3rd tier malls. It must also be noted that the land lease in China tend to be around 4-8 decades as well. Hence personally, I think it is much better to invest in a company which has the ability to develop its own properties. This could be done by investing heavily in asset enhancement schemes in lower quality malls in 1st tier cities or by developing new malls in 1st tier city or using good foresight to develop new malls in attractive 2nd tier city. A REIT cannot do any of those - only a property developer (like CMA) or a developer trust (like TCT) has such abilities. Hence, if the above company lacks an established sponsor, I think its wise to structure it as a developer trust with much lower payout ratio.

I cannot comment on the merit or demerit of this particular investment since I don't even know what they own etc !