Development Of Real Estate Investment Trusts (reits) Mode

Real Estate Investment Trusts (REITs) is a major form of asset securitization, and a key financing channel for real estate market as well. Before the 2008 financial crisis throughout the world, the high liquidity, risk aversion, together with the high profitability of REITs produced far-reaching effects to the global real estate financial market. Like stocks on listed markets, the value of property can be realized through securitization. This kind of securitization not only helps capital mobilization, but also provides incomparable liquidity versus traditional property investments aiming at ownership. Compared to direct investment on properties, listed transaction is much more transparent and with less information asymmetry. In addition, the professional management of REITs greatly separates operation and ownership.The performance of REITs was deeply influenced by the financial crisis from 2008, but REITs were not among financial innovations which led to the crisis, and their leverage is much lower than those of other financial derivatives. Therefore, considering international and domestic economic situation and the development of Chinese real estate industry, the State Council announced the 'Nine-Article Financial Policy' and '30-Article Financial Policy' in December 2008, which specifically suggested innovating investing and financing patterns to broaden the financing channels for enterprises and launching REITs at an appropriate time. It is expected that REITs will develop gradually in China.This paper firstly introduces the past and status quo of REITs from the top down, identifying that the US and HK models are two major set-up models of REITs. Through comparing the background, development, model, structure, type and characteristics of these two major REITs models, this paper confirms that REITs model in China will be a legislation-incentive model and the mainstream in Asian countries too. Meanwhile, through the case analyses of trials in establishing REITs from home and abroad by certain Chinese institutions, this paper indicates the set-up, operation and monitoring models adapting to the domestic market and monitoring system under new financial environment nowadays. To develop REITs under effective supervision will enhance the development model transformation and industry upgrade of domestic real estate market, and will also profoundly influence the establishment of multilayer capital market in China.