In less than a month, the public subscription multiple record for publicly offered Real Estate Investment Trusts (REITs) has been shattered once again, signaling a booming interest in these investment vehicles within the financial marketOn February 12, the fundraising announcements for the Huaitianfu Jiuzhoutong Pharmaceutical REIT unveiled a staggering subscription multiple of 1192 times for public investorsThis remarkable figure surpassed the prior record of 813.44 times held by the Guotai Junan Asset Management Jinan Energy Heating REIT.

The enthusiasm for public REITs has not only been evident during their issuance in the primary market but also in their performance in the secondary marketAccording to data from Wind, the CSI REITs Total Return Index has gained an impressive 8.86% year-to-date by the end of February 12, with several products recording increases over 20% during the same period.

The record-breaking subscription reflected the growing interest and engagement from investorsThe announcement from Huaitianfu Jiuzhoutong Pharmaceutical REIT on February 12 detailed that it had successfully raised a total of approximately 1.158 billion yuan (around $164 million) through the issuance of 400 million fund shares priced at 2.895 yuan per shareThe structure of the fund’s offering comprised strategic placement, offline sales, and public salesSpecifically, 75% of the total shares offered were allocated to strategic investors, while 30% was earmarked for public investors.

The fund's sale initiated on February 10, originally intended to last two days, reached its full subscription on the very first day due to overwhelming demand from the public, necessitating an early closure of the offeringThe allocation results disclosed on February 12 revealed that strategic investors received a full allocation, while offline investors had a subscription ratio of approximately 2.015%, showing a robust interest in this financial product.

In the context of such robust demand, it is essential to consider the factors driving this heightened interest in public REITs

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Several analysts attribute this phenomenon to the unique characteristics of the market, such as the scarcity of available products and the attractive yields from new subscriptionsJian Yi, an analyst from Guohai Securities, remarked that in the long run, as public REIT issuances become normalized and investor understanding of these financial instruments improves, the market may return to a more rational stateHowever, for the immediate future, the strategy of launching new funds is likely to yield high success rates and returns, supported by favorable policies and the health of the secondary market.

Additionally, it is worth noting the enthusiastic participation of institutional investors in the offeringHuaitianfu Jiuzhoutong Pharmaceutical REIT is notable for being China's first pharmaceutical warehousing and logistics REIT, with the project spearheaded by Jiuzhoutong Group, recognized as the largest private pharmaceutical enterprise in the countryJiuzhoutong Logistics, which boasts a vast infrastructure supporting a comprehensive pharmaceutical supply chain, covers over 96% of the national logistics network.

Three key reasons underpin the selection of Jiuzhoutong’s warehouse logistics center as foundational assets for this REITFirst, the future of the pharmaceutical logistics industry appears promising, particularly as the aging population continues to escalate the demand for medications, thus propelling further growth in the logistics segmentSecond, the pharmaceutical logistics sector is characterized by considerable barriers to entry and strict regulatory oversight, necessitating a high level of specialization to ensure quality and operational efficiencyThird, Jiuzhoutong, as an industry frontrunner, has established a solid client base with mature operational processes, providing a competitive edge against potential new entrants.

Li Xinning, the proposed fund manager, described how a meticulous evaluation led to the selection of the Dongxihu Modern Pharmaceutical Warehouse Logistics Center, which has been recognized as one of China’s top ten intelligent warehousing and logistics demonstration bases

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Over the past three years, the center has exhibited excellent operational performance with compound growth in net operational income exceeding 6%, coupled with steady increases in rent and occupancy ratesThis forecast of long-term stability reinforces confidence in the underlying assets’ growth potential.

Beyond the issuing frenzy, the performance of publicly offered REITs in the secondary market also captured investor attentionOn February 12, data indicated a robust 8.86% increase in the CSI REITs Total Return IndexNotably, several REITs, such as the CICC Yinyi Consumption REIT, surged by 22.44%, while others like Huaxia Hefei High-tech REIT and Huazhong Zhangjiang Industrial Park REIT exceeded a 15% rise.

Analysts from Huaxia Fund identified that the climb in asset value coincides with a phase of recovery post-2022’s market adjustmentsConsequently, the steady performance of underlying assets, regulatory enhancements supporting higher participation in REITs, and the overall favorable climate surrounding public investments have attracted investors keen on consistent income streamsAs interest in high dividend returns rises with declining bond yields entering a new lower phase, public REITs are increasingly becoming a focal point for diverse investment strategies.

Moreover, the unique nature of public REITs as primarily focused on stable cash flow-generating infrastructure assets—such as highways, sewage treatment facilities, and logistics warehouses—has further contributed to their appeal in investor portfoliosThe operational profit generated from these assets supports their appreciation and provides attractive returns to investors, resulting in relatively lower volatility compared to other high-risk investments.

Supportive government policies for public REITs are also playing a crucial role in enhancing market quality and capacity to better serve the real economyAn opinion released on February 7 contained specific provisions aimed at promoting the issuance of REITs in new infrastructure sectors, including artificial intelligence and digital transformation projects, as well as strengthening R&D financing within health and eldercare sectors.

This current trend illustrates not only the maturation of the public REIT market but also its increasing relevance as a vehicle for investment amidst fluctuating market conditions

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