YINTAI

Editor's note: Recently, China Business Times interviewed Shen Guojun, member of the National Committee of the Chinese People's Political Consultative Conference and founder and chairman of Yintai Group, and published a report entitled "Exclusive interview with Shen Guojun: Accelerate commercial real estate securitization to drive domestic demand and stabilize employment". See the full text below.

“The combined impact of Covid-19 and online consumption has impacted many new shopping centers, hotels and office buildings and other commercial real states which unwillingly lowered rents to resist risks. Many commercial complexes have been rising against the wind through online promotion, livestream selling and night market economy and increased the value of commercial real estate assets by enhancing their operational management capabilities. This has made commercial real estate securitization a public concern." Shen said in an interview with our reporter that at present, the pace of commercial real estate securitization is relatively slow, which hinders the high-quality development of the industry to a certain extent. Regarding this issue, he submitted the Proposal for Accelerating Commercial Real Estate Securitization so as to Contribute to Promoting Domestic Demand and Stabilizing Employment at the two sessions this year.

In a survey conducted over the past year, Shen found that commercial complexes, typified by large shopping centers, have become the main setting for new retail and consumption upgrading, and there is enormous potential for securitizing quality commercial real estate to promote liquidity. Meanwhile, the successful launch of China’s public offering of infrastructure REITs (real estate investment trusts) has also provided positive references for commercial real estate securitization.

As such, Shen believed that the time for accelerating commercial real estate securitization has arrived. However, the legal system, oversight, tax and other relevant policies require further improvement. He advised that the legal environment for the securitization of commercial real estate be enhanced first. The class and attribute of investable financial assets of a similar nature in REITs should be clarified, and the lines of responsibilities of fund managers and operating managers should be distinctly delineated. He also advised that supporting tax policies relevant to REITs be improved from the perspectives of land VAT, stamp duties and income tax.

Next, the oversight system for commercial real estate securitization should be enhanced. On the one hand, the establishment of an asset appraisal and credit evaluation system should be accelerated, so that the evaluation and oversight effectiveness of, among others, the cash flows of REIT enterprises may be fully leveraged. On the other hand, supervision and guidance on information disclosure of innovative products similar to REITs should be strengthened. The completeness and other areas of information disclosure of these products should be on a par with other more mature standardized products that are in the market.

He also suggested that the pilot program for REITs should be carried out with well-run commercial real estate as the underlying asset. Enterprises with an ample pool of assets should be given priority for participation in the pilot. Last but not least, guidance should be provided to participants to take note of the quality of the underlying assets, and to focus on the basic concept of “asset financing”. Real estate owners or asset managers should be given guidance to create core competitiveness for REIT products by improving asset operational and management capabilities.