The case introduces various forms of real estate investment trusts (“REITs”) existing in different markets in the world such as REITs in the United States, Japanese REITs (J-REITs) and Singapore REITs (S-REITs). The development Hong Kong’s REITs (H-REITs) market started in 2005 when Link Real Estate Investment Trust listed its shares on the Stock Exchange of Hong Kong (SEHK), following the promulgation of the REIT Code in 2003. Development was slow. There were 11 REITs listed between 2003 and 2013, with one being suspended for trading; there was no listing of new REITs for six years, until December 2019 when China Merchants Commercial Real Estate Investment Trust listed its shares on the SEHK.
REITs had developed rapidly in overseas markets such as Australia and the United States since the 1990s and had emerged in other markets like Japan and Singapore since the 2000s. And mainland China was developing its REIT market and could soon become one of the world’s largest. Under the presence of strong competitions from neighbourhood markets and the potential opportunities from mainland property firms’ fundraising needs and the development of Guangdong-Hong Kong-Macau Greater Bay Area, students take on the role of the SFC to consider how to better develop the Hong Kong’s REITs market and make Hong Kong a capital formation centre for REITs.
After learning with the case, students will be able to
- Evaluate the merits and risks of REITs as a financial innovation to investors
- Determine the benefits of REITs to property developers and the role played in the development of real economy
- Conduct comparative analysis to identify the challenges and opportunities in the development of REITs in Hong Kong
- Propose the strategies from the perspective of regulators, REITs sponsors and investors to enhance Hong Kong’s REITs market competitiveness.
- To gain basic understanding of the development of REITs market in US, Singapore, and mainland China.