On April 30, China Securities Regulatory Commission and National Development and Reform Commission jointly issued the "Circular on Promoting the Pilot Work of Real Estate Investment Trusts (REITs) in the Infrastructure Sector" (i.e. Circular 40), and China Securities Regulatory Commission issued the Exposure Draft of " Guidelines on Public Offering of Infrastructure Securities Investment Funds (Trial)" (hereinafter referred to as the "Exposure Draft "). These two documents aroused widespread attention and heated discussions among the industry insiders in the market for a while, and WINS Investment immediately carried out detailed abstraction and analysis to the two documents and forecasted the business strategy trends.

Adhere to the principle of equity orientation and follow the market principles. In line with the definition and characteristics of REITs based on the international mature capital market standard, this will mean that the pilot products to be launched will, in a fully market-oriented way, consider the relevant decisions of pricing and issuance based on the needs of both investment and financing parties. REITs in which investors in will truly realize the indirect holding of underlying real estate stock assets and enjoy the income and value appreciation during the asset holding period created by professional managers, and will also bear the corresponding risks of the equity share.

Highly implement the government's decision-making and deployment of preventing risks, deleveraging, stabilizing investment, and making up for shortcomings, and actively support the implementation of major national strategies.Priority will be given to supporting industries that make up for shortcomings in infrastructure, including transportation facilities such as warehousing and logistics and toll roads, municipal projects such as water, electricity and heat, and pollution control projects such as urban sewage and garbage treatment and solid waste and hazardous waste treatment. Encouragement will be given to new infrastructure such as information networks, as well as emerging industrial clusters oriented to national strategies, high-tech industrial parks, and characteristic industrial parks to carry out pilot projects. On the other hand, it is required to focus on key areas, give priority to supporting key areas such as Beijing-Tianjin-Hebei, Yangtze River Economic Belt, Xiongan New Area, Guangdong-Hong Kong-Macao Greater Bay Area, Hainan, and Yangtze River Delta, and support national new areas and qualified national economic and technological development zones to carry out pilot projects.

Clarify the independent and stable cash flow and structured "risk isolation" attributes of the assets that meet relevant requirements. The underlying assets are required to have mature operation models and market-oriented operation capabilities, have generated continuous and stable income and cash flow, have good return on investment, and have sustainable operation capabilities and good growth potential. PPP projects shall comply with the relevant regulations of government and social capital management in accordance with laws and regulations, and the source of their income shall be mainly user fees. The source of cash flow has a high degree of dispersion, and is mainly generated by market-oriented operations, and does not rely on non-recurring income such as third-party subsidies.

Professional institutional investors will play an important role in the evaluation and pricing of pilot products and product investment. In the early stage, offline inquiry targets are limited to professional investors such as securities companies, fund management companies, insurance companies, special government funds, and industrial investment funds. After deducting the distribution to strategic investors, the proportion of offline offering shall not be less than 80% of the number of this public offering. Public investors will participate in the subscription of fund shares through sales agencies at the price determined by inquiry.

Public offering REITs will more effectively promote the establishment of a sound development mechanism for real estate stock assets.The process of the issuance and subsequent listing and transaction of public offering REITs is a continuous process in which major participants including managers, custodians, intermediaries and investors jointly inspect and supervise project investment and operation and management income and effectiveness, forming a benign development mechanism for asset performance, product structure and investor income return. The successful establishment and issuance of the product is as important as the operation management and value appreciation at the later stage. The sound development mechanism of REITs product and the stock asset market requires major participants to combine their core expertise to give full play to their respective advantages and roles in product issuance and establishment and subsequent operation and management. 

Opportunities for investors to widely participate in investment of real estate stock assets. Institutional investors, private capital or individual investors who were previously unable to participate in the investment of substantial projects of stock assets due to funding thresholds and professional capabilities, can participate in the transaction of stock assets in an open and transparent manner through investment in REITs products, and enjoy the investment income created by stock assets and professional managers.

The launch of public offering REITs products will provide a better stage for professional managers to show their abilities, and put forward higher requirements for professional investment operation and management. The public offering REITs products are based on the underlying assets as an important key foundation. Their income is mainly reflected in the increase in stock prices brought about by factors such as regular dividends and net asset appreciation. The promotion of the products, will, while attracting more professional market institutions to participate in management, fully, openly and transparently display the managers' performance in asset operation and management efficiency and asset value enhancement, thereby promoting the continuous maturity of managers in the specific sub-format of real estate stock assets.

With regard to the original stakeholder/initiator, the strategic effect of REITs platform is much higher than the profit and loss of a single asset project. Based on the requirements of REITs for project dividend rates, the exit value of REITs issued by a single project will generally be lower than the exit value of sales to a specific type of investor. According to the operating experience of international mature markets, the strategy effect of asset package portfolio, diversified financing tools, lower financing costs and other advantages occurring after the formation of the platform effect of REITS, will have more important strategic significance for the continuous and steady development of the original stakeholder/initiator's investment management platform with a high capital turnover utilization efficiency.

Public offering REITs have a huge room for development in China and rely on the further improvement of market valuation and pricing systems, governance mechanisms, related financing products, and taxation mechanisms.Considering the development holdings of China's real estate stock assets and the investment potential of investors, the good balance characteristics of REITs products with lower risk and stable investment income, are in line with the general needs of investors in the mature stage of the real estate financial market. The market valuation and pricing system relies on professional managers, investment banks, financial consultants, third-party intermediaries, institutional investors and other major participants to take the underlying assets as an important basis, and combine market judgments, product portfolio strategies, asset appreciation potential and managers' professional ability and other conditions for subjective and systematic assessment. According to the experience of mature international markets, the further improvement of REITs related governance mechanisms, rational development and application of financing products, and taxation mechanisms also play a key role in the development of the market.

WINS Investment is a professional platform of real estate investment management under Gemdale Group. As an important part of Gemdale Group's "one body and two wings" strategy, it always persists in making efforts and explorations in the field of asset securitization, cooperates with market-leading partners, and completed the initiation and establishment of the first domestic asset securitization product of cultural and creative park ("Harvest-Gemdale No. 8 Bridge Asset-backed Securities") and the product of "asset-light" apartment shelf-type asset-backed securities ("Gemdale Strongberry Asset-backed Securities") as the general coordinator and transaction consultant. In the future, WINS Investment will rely on its accumulated professional experience, international vision and knowledge and technology to continue to conduct innovative explorations in the field of public offering REITs, discover and create value for investors, and contribute to the healthy development of the real estate market!