A second wave of Chinese real estate investment trusts (C-REITs) have been launched, led by two companies that have raised RMB5.1bn (€712m) between them.

Yuexiu Transport Infrastructure’s Yuexiu Expressway REIT, made its debut on Tuesday on the Shenzhen Stock Exchange, raising more than RMB2.1bn.

A second REIT, which will own Beijing’s Zhongguancun Science Park, has raised RMB3bn and will float the Shanghai Stock Exchange on Friday, according to Sigrid Zialcita, CEO of the Asia Pacific Real Estate Association.

“These two new REITs were both 50 times oversubscribed,” Zialcita told IPE Real Assets. “Investors like these products.”

The successful capital-raising was despite ongoing financial travails of China’s large, indebted residential developers, notably China Evergrande, which credit rating agency Fitch Ratings last week downgraded to “restricted default”.

C-REITs are subject to strict borrowing limits, with gearing limits lower than those for Hong Kong and Sinagpore REITs, according to Jeremy Ong, head of the Hong Kong REIT practice at law firm Baker McKenzie.

“Their underlying assets must have a track-record of stable income,” he said. “On this basis, they may be regarded as more conservative investments compared to other PRC developers recently in the news.”

The latest round follows the long-awaited launch of the first C-REITs earlier this year and the subsequent establishment of new guidelines that broadened the types of assets that can be held by C-REITs, including infrastructure, affordable housing and renewable energy.

Yuexiu Transport Infrastructure owns toll roads, bridges and ports through a combination of controlling equity stakes and associates and joint ventures.

A spokesperson said the successful listing of the Yuexiu Expressway REIT marked an important milestone and received an “overwhelming” subscription.

Zialcita said the timing of a third C-REIT, which will own the industrial park of Lingang in Shanghai, sponsored by Shanghai Lingang Economic Development, had yet to be confirmed. “It is in the process of approval from Shanghai Stock Exchange,” she said.

The fourth C-REIT will be a toll-road company. Its sponsor, China Communications Construction Company Investment, is currently working through the approval process with authorities for a planned listing in Shanghai.

Ong said these IPOs were riding on momentum created by the success of the first 10 listings in June, which raised RMB31.4bn

Zialcita said the current combined market capitalisation of these vehicles was RMB40.9bn, up from RMB 33.5bn at the time of their IPOs.

“Investors are pretty positive on C-REITS,” she said. “All 10 REITs have achieved positive returns since IPO, and nine of the 10 have increased 20% since IPO. Four of the 10 posted returns above 30%.”

Social housing C-REITs have yet to be launched, but Zialcita said some companies were preparing to launch some.

Ong said he expected demand for C-REITs to remain strong because they “theoretically” offered safer returns in a volatile market, limited to specific asset classes that had been strategically selected by Chinese authorities. “We expect further C-REITs to be listed in 2022,” he said.

Interest in the product from both sponsors and investors was largely domestic. “All but one of the current C-REITs has a domestic sponsor,” Ong said. “As other foreign sponsors establish their own C-REITs, we may see further interest from international investors.”

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