China Vanke’s first public commercial real estate investment products faced a 3% drop in early trade on their debut, signaling caution towards the second-largest developer in China amid a prolonged property market downturn. The CICC-SCPG Consumption Infrastructure real estate investment trust (REIT) listed in Shenzhen is backed by shopping centers owned by SCPG Holdings, the commercial property platform of Vanke.
The listing of the REIT came after the approval of three other REITs in the same batch, reflecting the challenges faced by Vanke. The company’s onshore shares have plummeted by 28% since the beginning of the year, reaching levels near the lowest since 2014.
The launch of these REITs follows China’s expansion of the scope of REITs to commercial properties last year, aiming to support the struggling property sector. Despite raising around 3.26 billion yuan ($449.88 million) through the issuance of this REIT, the fresh funds are still relatively small compared to Vanke’s cash burn.
Analysts, including John Lam from UBS, have expressed concerns about Vanke’s declining cash position, which is at 5.6 billion yuan per month. With a total cash position of 83.1 billion yuan as of March 2024, the current cash levels may only support 15 months’ cash outflow if market conditions remain the same.
Shenzhen Metro Group, the largest shareholder of Vanke, subscribed to 29.8% of the units of the REIT. Vanke recently reported a second consecutive quarterly loss and a decrease in cash levels, highlighting the challenges faced by the company in the current market conditions.