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Tuesday, 28 June 2011 03:36

Hong Kong's REIT legislation was announced in August 2003 and the HK Housing Authority was the first to list with The Link REIT (a portfolio of busy suburban retail centres).

In July 2003, The Hong Kong Securities and Future Commission (SFC) issued the Code on Real Estate Investment Trusts (Code on REITs), setting up the foundation for the establishment of Hong Kong Real Estate Investment Trusts (HK-REITs). The code was ratified in 2005 and 2007 for the formal regulatory operation of HK-REITs. In 2010, further amendments were made to encourage the growth and attractiveness of HK-REITs to investors. The changes included lifting the maximum borrowing ratios from 35% to 45% and allowing overseas investments and new property sectors. In November 2005, the Link REIT became the first Hong Kong REIT (HK-REIT) to be established through the world’s largest initial offering at that time. At June 2012, there were 7 HK-REITs listed on the Hong Kong Stock Exchange (HKEx) with a total market capitalisation of US$15 billion (Table 0.6). This saw Hong Kong being the third largest REIT market in Asia, after Japan and Singapore. HK-REITs engaged across the retail (2 REITs), diversified (2), office (2) and lodging (1) industry. The retail REITs dominated the market, accounting for almost 60% of the total market capitalisation. The profiles of HK-REITs at June 2012 are provided in Table 0.7. HK-REITs are often established and supported by major property players in the country. Link REIT, the largest REIT in Hong Kong and Asia, was established by the Hong Kong Housing Authority. At June 2012, it had a market capitalisation of US$8.6 billion and the portfolio consisted of 180 properties with an internal floor area (IFA) of approximately 11 million square feet (1 million sqm) of retail space. Several other HK-REITs are also founded by leading property companies, such as Prosperity REIT (Cheung Kong), Champion REIT (Great Eagle) and Sunlight REIT (Henderson Land). With many positive regulatory changes in recent years, Hong Kong is considered the second most attractive REIT market in Asia, after Singapore, in terms of overall potential, property market growth and regulatory support (Trust 2011). Hong Kong is also an important gateway for investors to gain access to the mainland China’s property market. Many HK-REITs hold substantial assets in mainland China. Hui Xian REIT (backed by Cheung Kong) was the first RMB-denominated REIT in the world and established in April 2011. As of June 2012, it was the second largest REIT in Hong Kong and ranked 6th in Asia. All of its investment properties are located in mainland China; i.e. the Beijing Oriental Plaza and the Sheraton Shenyang Lido Hotel. Other China-focus HK-REITs include the Regal REIT and the GZI/Yuexiu REIT.

Source: Prof. Alex Anh Khoi Pham - University of Western Sydney: The Development of REIT Markets in Asia (1/1/2014) - Link.

Last Updated on Friday, 14 March 2014 05:27