In recent weeks, the Chinese market has witnessed an extraordinary surge in public offerings of Real Estate Investment Trusts (REITs), culminating in a stunning record for public subscription multiplesThe event has not only attracted the attention of institutional investors but has also sparked interest among retail investors, indicating a robust and growing market in this sector.

On February 12, the Huitianfu Jiuzhoutong Pharmaceutical REIT announced its subscription results, revealing a staggering effective subscription multiple of 1192 times from the public, breaking the previous record established by the Guotai Junan Asset Management Jinan Energy Heating REIT, which had a multiple of 813.44 timesSuch remarkable figures highlight the heightened appetite for REIT investments in recent months.

The success is reflective of a broader trend, where the issuance market is thriving, and the secondary market is equally buoyantAccording to financial data provider Wind, the CSI REITs Total Return Index has seen an impressive rise of 8.86% so far this year, with some specific products experiencing increases of over 20%. This growth reflects the increasing acceptance and understanding of REITs among investors in China.

The details surrounding the Jiuzhoutong Pharmaceutical REIT are fascinatingAs the first pharmaceutical logistics REIT in China, it has benefitted from a combination of strategic pre-allocations, offline placements, and public offerings, which contributed to its successful capital raising of approximately 1.158 billion yuan, sold at a unit price of 2.895 yuan eachThe demand was so high that the initial selling period was concluded a day early, as investors rushed to secure their shares.

The success in fundraising was segmented into various categories: strategic placement accounted for 75% of the total shares, while offline and public sales accounted for 70% and 30% of the remaining shares, respectivelyThis strategic allocation ensured substantial leverage from institutional investors, which is vital in establishing confidence around such financial instruments.

Before the Jiuzhoutong REIT, the previous record was held by the Guotai Junan asset management REIT, which reported a public subscription multiple of 813.44 times, a record that stood for only a brief period

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Industry experts attribute the popularity of public REIT offerings partly to their scarcity and the potential for new investment gainsAccording to analyst Jin Yi from Guohai Securities, the recent boom in REIT sales may weaken as the market stabilizes and investors develop a more rational understanding of the availability and value of public REITs.

In discussing the recent surge in subscriptions, many experts point to the characteristics of the underlying assets in the REITs, particularly in the health and logistics sectorsThe Jiuzhoutong Pharmaceutical REIT represents a vital aspect of the distribution of pharmaceuticals in China, which has witnessed exponential growth due to aging demographics and rising consumer demand for healthcare productsThe Jiuzhoutong Group, as the largest private pharmaceutical enterprise in the country, is well-positioned to capitalize on these trends, boasting a robust supply chain logistics framework that covers over 96% of China’s regions.

The project's chosen asset, the Dongxihu Modern Pharmaceutical Warehouse Logistics Center, not only serves as a testament to the growth potential of the pharmaceutical logistics industry but also highlights the strategic vision behind selecting high-quality underlying assetsFund manager Li Xinning emphasized three primary reasons for this selection: the promising future of the pharmaceutical logistics sector amidst China's aging population, the high entry thresholds and strict regulatory framework governing the industry, and the established market position of Jiuzhoutong with its loyal customer base.

Li noted, “The past three years of operational performance at the warehouse reflect a solid net operating income growth of over 6%, indicating a strong upward trend in rental rates and occupancy.” This long-term upward trajectory is vital for sustainability and instills confidence in investors looking for steady returns.

Moreover, the positive performance of public REITs is evidenced not only by the high subscription multiples but also reflected in their secondary market performance

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