China approves first REIT product as market cools

BEIJING, April 11 Fri Apr 11, 2014 3:01am EDT

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BEIJING, April 11 (Reuters) - China's securities regulator has approved the country's first property trust investment product, giving developers a new source of funding and investors an alternative choice amid initial signs of cooling in the frothy property market.

CITIC Securities Co Ltd, the country's biggest brokerage, got approval from the China Securities Regulatory Commission (CSRC) in January to launch a real estate investment trust (REIT) product valued at 5.2 billion yuan ($837 million), according to a document seen recently by Reuters.

REITs, which invest mainly in commercial property and pay rent from their property to shareholders as dividends, will provide developers with a new avenue for funding, allowing them to effectively sell finished commercial buildings to investors.

The launch of a REIT comes as China's residential property market has shown signs of cooling with local governments tightening controls on speculative buying, and as banks have made it harder for home buyers and small developers to get loans.

The government has been working on launching REITs for nearly a decade and a pilot scheme was once suspended in 2009 due to the global financial crisis and a government crackdown on the property market.

CITIC's REIT targets qualified institutional investors and will be listed mainly for block trading in the Shenzhen Stock Exchange, the document showed. Investors will get rent dividends from two buildings owned by CITIC securities in Beijing and Shenzhen.

Last month, China lifted a ban on equity financing for listed property developers for the first time in four years, a step that could herald less government intervention in the sector and ease funding concerns as credit grows tight and the economy slows.

($1 = 6.2125 Chinese Yuan) (Reporting By Zhang Xiaochong and Kevin Yao; Editing by Jacqueline Wong)

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