Asia REIT Market Insight 2023

ASIA REIT MARKET INSIGHT 2022-2023

2022-2023 ASIA REIT MARKET INSIGHT

Table of Contents

CHAPTER 1

Overview of the Asia REIT Market

04

CHAPTER 2

Recent Changes in the Asia REIT Market

05

CHAPTER 3

Analysis of REIT Performance in Japan, Singapore and Hong Kong

09

CHAPTER 4

18

The Growth of Mainland China and India REIT Markets

CASE STUDY

22

CapitaLand China Trust

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CHAPTER 2 RECENT CHANGES IN THE ASIA REIT MARKET

2.1 Number of REIT Products As of Dec. 31, 2022, there were a total of 220 REIT products active in the Asia market, an increase of 18 REIT products from the previous year. New additions in the mainland China, Thailand, South Korea, Philippines and Malaysia markets totaled 21 products. There were three product losses, with the Singapore market del isting two REITs via mergers and a further delisting in Thailand. The new products mostly focus on warehouse and logistics assets, industrial facilities, and office buildings; as well as airport infrastructure and clean energy assets. As with the mainland China market, the Tha i l and RE I T ma r ket i nv i tes f ur ther exploration, with the benefit of offering both freehold REITs and leasehold REITs. In addition, the Philippines REIT market welcomed its first renewable energy REIT listing, primarily holding photovoltaic assets and land leased to photovoltaic operators. In the Singapore market, Mapletree North Asia Commercial Trust (MNACT) officially merged with Mapletree Commercial Trust (MCT) in August 2022 to form Mapletree Pan Asia Commercial Trust (MPACT). Following the merger, MPACT holds 18 commercial, retail, and vehicle parking assets, with a total managed portfolio of S$17.1 billion, making it the third-largest REIT in Singapore and one of the top ten REITs in Asia.

CHAPTER 1 OVERVIEW OF THE ASIA REIT MARKET

Cushman & Wakefield data shows that a total of 220 REIT products were active in the Asia market at the close of 2022, with a combined market valuation of US$263.8 billion, a drop of 14.7% on the prior year. Wi thin the region, Japan, South Korea and Singapore were the early pioneers in establishing REIT markets. But with strong support from regulatory authorities, nations including Thailand and the Philippines, as well as India, have successfully established their own REIT markets in recent years, encompassing diversified offerings in sectors such as commercial office, infrastructure, warehousing and logistics, industrial facilities, and renewable energy. The emergence of infrastructure REITs in mainland China has also brought new changes to the Asia REIT market landscape, and mainland China is now the fourth largest REIT market in Asia.

Overall, the Asia REIT market experienced declines in stock prices and overall market values through 2022, predominantly due to the influence of the U.S. interest rate hikes. Despite this, the Asia REIT market has still performed better than its U.S. and European counterparts. Nevertheless, a drop in REIT acquisition and merger activities around mainland China assets in the Singapore and Hong Kong markets has indicated a more cautious view by investors. We have also seen that the persistent effects of the COVID-19 pandemic continue to pose global challenges for cyclical commercial real estate asset sectors, such as hotel, office, and retail. However, the impact of this is becoming increasingly counteracted by growing market attention to new economy sectors, such as modern logistics facilities and data centers, as well as living sectors, extending from multifamily assets to healthcare facilities.

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Table 1: Total Market Value of Active REITs on Major Asia Exchanges

Figure 2: Market Value Share of REITs Active on Asia Exchanges

Number of REITs by Property Type

Quantity Market Value （ USD billion ）

%

1.3%

At the end of 2022, 40% of the active REITS in the Asia market were invested in multiple property types, together with 15% in industrial and logistics properties, 13% in office assets, 12% in hospitality, and 10% in retail assets. Of the remaining 10%, REITs were invested in infrastructure assets, sustainability-focused assets, healthcare, and data centers. In this report, we have adjusted asset categories to integrate apartments and hotels into the hospitality category, which also includes the rental housing sector in mainland China. The infrastructure category has been added, predominantly represented by highway products in mainland China and airport products in Thailand. The new sustainability category includes clean energy products in mainland China and the photovoltaic product in the Philippines.

2.1% 1.6%

Japan Singapore Hong Kong, China Mainland China India

2.3%

Japan

61

120.89

45.8%

2.8% 2.6%

Singapore

40

73.13

27.7%

Hong Kong, China

11

24.17

9.2%

4.7%

Mainland China

23

12.37

4.7%

9.2%

45.8%

Thailand Malaysia South Korea Philippines Others

India

3

7.41

2.8%

Thailand

29

6.73

2.6%

27.7%

Malaysia

18

6.13

2.3%

South Korea

21

5.50

2.1%

Philippines

7

4.13

1.6%

Others

7

3.30

1.3%

Figure 1: Number of REITs by Property Type in Asia

Source: Bloomberg Database, compiled by Cushman & Wakefield Valuation & Advisory Services. Data as of December 31, 2022.

TOTAL

220

263.75

100.0%

20 30 40 50 60 70 80 90 100

Source: Bloomberg database, compiled by Cushman & Wakefield Valuation & Advisory Services *Data as of Dec. 31, 2022

89

The contraction seen in the Asia REIT market in 2022 was primarily influenced by global macro policies and events. The U.S. Federal Reserve’s seven rounds of interest rate hikes, totaling 450 bps, sparked a global trend of rate rises. Elevated geopolitical risk, combined with supply chain concerns, also led to global inflation tracking above 6%–8%. Finally, heightened financial market volatility, at similar levels to that seen around the peak during the Q4 2008 global financial crisis, has also meant higher financing costs in many capital markets. As a result of these and other factors, the total return index for the global REIT market in 2022 was at -24.4%, according to the Nat ional Association of Real Estate Investment Trus t s (NARE I T) . By reg i on , the European market recorded the worst performance, at -40.5%, followed by North America at -24.8% and Asia at -10.9% in 2022.

34

29

27

23

7

5

4

0 10

2

综合 工业 / 物流 办公 住宿 零售 基础设施 可持续 健康医疗 数据中心

Retail

Office

Industrial

Mixed Use

Hospitality

Healthcare

/Logistics

Data Center

Sustainability

Infrastructure

Source: Bloomberg Database, compiled by Cushman & Wakefield Valuation & Advisory Services.

2.2 Market Value

At the close of 2022 the combined value of the Asia REIT market was at US$263.8 billion, down 14.7% compared to the end of 2021. The mainland China REIT market value surged 80% on the back of new product offerings, but the remaining Asia markets all experienced declines in market value. The Malaysia market witnessed the most evident contraction in market value, enduring a 34% fall, despite a new product listing. At the other end of the table, the Thai market saw the smallest contraction, displaying

an overal l decl ine of approximately 4%. In between, the Hong Kong REIT market value dropped by 20%, Japan by 18%, and S i ngapo r e by 1 4% . The s e t h r e e major markets experienced a significant cumu l at i ve deva l uat ion amount i ng to US$45 billion. In Japan, a wider interest rate gap and weakened yen have led to the J-REIT underperformance, keeping some investors on the sidelines due to potential funding concerns amid elevated uncertainty surrounding the interest rate outlook.

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CHAPTER 3 ANALYSIS OF REIT PERFORMANCE IN JAPAN, SINGAPORE AND HONG KONG

2.3 Overall Market Situation The Asia REIT market was established relatively late, with Japan only officially listing its first REIT in 2001. However, over the past twenty years the Asia market has achieved rapid growth, with the total number of REITs reaching 220 by the end of 2022, and the total market value growing to US$263.8 billion. Although REIT products have now been issued in many countries in Asia, they are still heavily concentrated in Japan, Singapore, and Hong Kong, which together account for more than 80% of the overall Asia REIT market share. The mainland China REIT market has also climbed rapidly to rank as the fourth largest Asia market in 2022.

Japan, Singapore, and Hong Kong account for more than 80% of total REIT market share in Asia. Consequently, this report section focuses primari ly on analysis of these three key markets. Unless otherwise noted, we refer to the annual financial reports published by REITs, focusing on the four financial indicators of gearing ratio, dividend yield, total return, and price-to book (P/B) ratio. At the time of this report there were 61 REITs listed on the Tokyo Stock Exchange, 40 on the Singapore Exchange, and 11 on the Hong Kong Exchange.

2021: The first batch of mainland China infrastructure REITs go public.

Figure 3: The Course of REIT Development in Asia

2002: The first REIT in Singapore,

CapitaLand Commercial Singapore Trust, is listed on the main board of the Singapore Exchange.

2019: The first REIT in India is listed.

2014: The first REIT in Thailand is listed.

US$ billions

350

300

2001: The first two REITs in Japan go public on the Tokyo Stock Exchange.

2011: The first REIT in South Korea is listed.

2020: The impact of the COVID-19 pandemic drags down the overall value of the Asia REIT market.

250

2022: The influence of rising interest rates in the U.S. again impacts Asia REIT market values.

200

2005: The first REIT was listed in Hong Kong SAR and Malaysia.

150

100

2008: The global financial crisis

50

negatively impacts the overall value of the Asia REIT market.

Figure 5: Number of REITs by Property Type

0

30

28

2011

2021

2017

2012

2015

2013

2018

2016

2019

2014

2001

2010

2022

2007

2002

2020

2003

2005

2008

2006

2009

2004

25

Source: Bloomberg Database, compiled by Cushman & Wakefield Valuation & Advisory Services.

20

Figure 4: Asia REIT Market Share (2001-2022)

中国内地 菲律宾 印度 韩国 台湾 泰国 中国香港 新加坡 马来西亚

15

20% 30% 40% 50% 60% 70% 80% 90% 100%

11

10

9

10

8

7

Japan Singapore Hong Kong, China Mainland China Others

6

5

5

5

4

5

3

2

2

2

2

1

1

1

0

综合 办公 工业 / 物流 零售 酒店 公寓 健康医疗 数据中心 日本 新加坡 中国香港 Mixed Use Office Industrial/ Logistics Retail Hotel Apartment Healthcare Data Center Japan Singapore Hong Kong, China Singapore Hong Kong, China Japan

0% 10%

Source: Bloomberg Database, compiled by Cushman & Wakefield Valuation & Advisory Services.

Source: Bloomberg Database, compiled by Cushman & Wakefield Valuation & Advisory Services.

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In this report we define dividend yield as the ratio of dividends for the past 12 months (total dividends for the past year) to the stock market price of the REIT (price as of Dec. 31, 2022). In 2022, the average dividend yield of REITS in Hong Kong was 7.9%, up 80 basis points (bps) on the previous year's 7.1%, while that of Singapore was 7.7%, up 157 bps on the previous year's 6.1%. The Japan market registered an average dividend yield of 4.2%, 40 bps higher than the previous year's 3.8%. The increase in dividend yield is related both to REITs’ operations and secondary market prices. 3.2 Dividend Yield

At the end of 2022, the yield spreads in Hong Kong, Singapore, and Japan were at 4.2, 4.6, and 3.8 percentage points (pp), respectively. As expected, the yield spreads in Singapore and Japan were slightly higher than in 2021. In contrast, the yield spread in Hong Kong was 149 bps lower than in 2021, as the dividend yield did not increase proportionately with the rise in government bond yields, as REITs in Hong Kong have been traded at a discount for several years.

3.1 Asset-to-Debt Ratio | Gearing Ratio

In this report, we define the gearing ratio as the ratio of total liabilities to total assets. The gearing ratio of REITs listed in Hong Kong and in Singapore is capped at 50% of the total asset value, either directly or via special purpose vehicles (SPV). Japan’s authorities place no restrictions on REIT gearing ratios, but stipulate that REITs may only borrow from qualified institutional investors. In 2022, the average gearing ratio in the Hong Kong REIT market was at 27.8%, remaining flat compared to the previous year. Its median was 22.8%, far below the 50% limit. Two REITs had gearing ratios of over 40%: Regal REIT (hotel) and Yuexiu REIT (commercial). The average gearing ratio in the Singapore REIT market was at 37%. Its median was 37.5%, showing little change compared to the previous year, which was lower than the regulatory requirement but higher than the average level in the Hong Kong market. Six REITs had gearing ratios above 40%, including CapitaLand Integrated Commercial Trust (CICT) and Suntec REIT, whose underlying assets chiefly comprise office and commercial properties located in Singapore. Three products had gearing ratios below 30%: Fraser Logistics Trust (industrial logistics), SASSEUR REIT (outlet retail), and Digital Core REIT (data centers).

Figure 6: Gearing Ratio

10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0

44.6

37.0

27.8

Figure 7: Comparison of Dividend Yield: REITs vs. 10-Year Government Bonds

0.0 5.0

9.0%

日本 Japan

新加坡 中国香港 Singapore Hong Kong, China

百

7.9%

7.7%

8.0%

Source: Bloomberg Database, SGX website, compiled by Cushman & Wakefield Valuation & Advisory Services

7.0%

6.0%

In Japan, J-REITs may determine their optimal debt levels to minimize their costs of capital. Low interest rates have meant their average gearing ratios have been higher than in the Greater China markets, which have mandatory gearing ratio limits. In 2022, the gearing ratios of J-REITs were relatively concentrated, with both the average and the median at 44.6%, up just 0.6 percentage points compared to the previous year. Overall, debt burdens tend to align with the parent company’s funding strategy, with the top five REITs by market value having lower financial leverage than the national average. A number of the top ten REITs in terms of debt ranking focus on residential apartment assets, with their high gearing ratios reflecting the low volatility of the underlying asset performance.

4.2 pp

4.6 pp

5.0%

4.2%

3.7%

4.0%

3.1%

3.0%

3.8 pp

2.0%

1.0%

0.4%

0.0%

中国香港 新加坡 Singapore

日本 Japan

Hong Kong, China

Dividend Yield 10-Year Government Bonds

Source: Bloomberg Database, Hong Kong SAR Exchanges website, SGX website and Tokyo Stock Exchange website, compiled by Cushman & Wakefield Valuation & Advisory Services

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Figure 8: Dividend Yield Return by Property Types (%)

Analysis of dividend yields alone is not sufficient to determine the overall performance and integrated earnings of a REIT. Sometimes, REITs with higher dividend yields may face challenges such as insufficient growth or volat i le performance, requi r ing them to compensate for high volatility in share price with higher dividends. Conversely, REITs with lower dividend yields may not necessarily underperform, and could have the potential for higher growth with rising stock prices. Investors need to weigh both dividend income and capital gains, although dividend income is generally less volatile when compared to capital gains. The dividend yields of REITs by property type have continued the trend seen in the previous year. Mixed-use, office, and retail REITs have enjoyed higher dividends, ref lecting the economic cyclical characteristics of these assets. Industrial/logistics, healthcare, and data center assets have been favored by investors as new growth drivers in recent years. Some of these REITs present excellent pr ice performance and thus have lower dividend yields.

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%

12.4%

9.8%

8.6%

8.1%

8.1%

7.4%

7.0%

7.0%

6.6%

6.0%

5.0%

4.8%

4.5%

4.4%

4.3%

3.9%

3.8%

3.8%

2.4%

Singapore 综合 办公 零售 工业 / 物流 酒店 公寓 健康医疗 数据中心 日本 新加坡 中国香港 Mixed Use Office Industrial/ Logistics Retail Hotel Apartment Healthcare Data Center Hong Kong, China Japan

Source: Bloomberg Database, Hong Kong Exchanges website, SGX website and Tokyo Stock Exchange website, compiled by Cushman & Wakefield Valuation & Advisory Services

By market, the hotel sector in Japan delivered the lowest dividend yield among all property types, standing at only 2.4%. This is far lower than the 6.1% recorded in 2020, but an improvement on the 1.9% performance of 2021. Nevertheless, the border reopening has seen the hotel sector already recover to the level reported in Q4 2019. In Singapore, the lowest dividend yield is also in the hotel sector, at 4.4%, 90 bps higher than the previous year. In Hong Kong, the retail sector provided the lowest dividend yield, represented by the Link REIT and Fortune REIT, at 5.3% and 6.8%, respectively.

Figure 9: Historical Average Dividend Yield

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%

Office REITs in the three prime markets offered the highest yields among all property types. Office REITs in Singapore enjoyed dividend yields of 13.5%. All office REITs in Singapore delivered higher yields than the average of 7.9% and the yields of two REITs, PRIME U.S. REIT and MANULIFE U.S. REIT, both invested in the U.S. property market, exceeded 17%. Nevertheless, according to data disclosed by NAREIT, office REITs in the U.S. experienced a significant decline of 37.6% in total returns in 2022. In the healthcare sector, the dividend yields of J-REITs was at 3.8%, down from the previous year, primarily due to rising operational costs. Healthcare REITs in Singapore produced a dividend yield of 7%, chiefly driven by a yield of 10% from FIRST REIT.

Singapore 日本 新加坡 中国香港

Japan

Hong Kong, China

Source: Bloomberg Database, Hong Kong Exchanges website, SGX website and Tokyo Stock Exchange website, compiled by Cushman & Wakefield Valuation & Advisory Services

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3.3 Total Return

The total return of a REIT is a key income indicator for investors, consisting of the change in the stock price per fund unit, and the dividend; and this provides a more comprehensive profile of a given REIT, from the asset end to the capital end. The following section selects the Tokyo SE REIT Index, iEdge S-REIT Index, and Hang Seng REIT Index to represent the overall market conditions in Japan, Singapore, and Hong Kong, respectively. In the first half of 2022, the indexes in the three key markets remained stable. However, in the second half, a trend of volatility across financial markets led to each index failing to recover to the levels recorded at the beginning of the year.

Figure 10: Performance of REIT index

In 2022, the Total Return Index of Hang Seng REITs (HSREIT TRI) in Hong Kong declined by 23.7%. From September 2021, the TRI started to enter a slow downward trend and hit a bottom in October 2022. It experienced a rebound in November and December, showing q-o-q growth of more than 10% in the last three months of the year. The downward performance of the HSREIT TRI was primarily influenced by the decline in the REITs Price Index (HSREIT PI). The iEdge Singapore REIT total return index (iEdge S-REIT TRI) was at -11.9% in 2022. According to the Singapore Exchange, the hotel and industrial/logistics sectors recorded the best total returns in 2022. In contrast, the data center and office sectors experienced the largest declines. However, this generated only limited impact as the two sectors account for only 5% and 15% of the total market value of REITs listed on the Singapore Exchange, respectively.

The Tokyo Stock Exchange REITs Total Return Index (TSEREIT TRI) reflects the relatively strong resilience of the Japanese REIT market. Its TRI declined 4.8% for the full year, with investors welcoming the Bank of Japan’s decision to keep interest rates steady, under new governor Kazuo Ueda. The hotel/apartment sector outperformed the J-REIT benchmark return in 2022. In contrast, the office sector posted the steepest decline, with the cumulative fall since Q4 2019 now at approximately 30%.

1200

1000

800

600

400

iEdge S-REIT Index

TSEREIT Index

HSREIT Index

Note: 1,000 points as of January 1, 2022. Source: Bloomberg’s database, compiled by Cushman & Wakefield Valuation & Advisory Services

Table 2: Total Return of Major REITs Index in Asia Markets

Total Return of Major REITs Index in Asia Markets

Market

Index

One-year Total Return

Japan

Tokyo SE REIT Index

-4.8%

Singapore

iEdge S-REIT Index

-11.9%

Hong Kong China

Hang Seng REIT Index

-23.7%

Source: SGX Chartbook, compiled by Cushman & Wakefield Valuation & Advisory Services

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3.4 Price to Book (P/B) Ratio

The J-REIT market witnessed a rare fall of P/B ratio to less than 1.0. At the end of 2022, the average P/B ratio of J-REITs was at 0.98, tracking within a relatively narrow range. The highest ratio was in the healthcare sector, led by Healthcare & Medical REIT at 1.42 and followed closely by Hoshino Resorts REIT at 1.31. The latter owns hotel properties and supporting cyclical assets in resort dest inat ions. More than twenty REITs fell within the range of 1.0 to 1.2, while the majority traded in the range of 0.8 to 1.0.

We define P/B ratio as the ratio of the market price per fund unit (based on the market price as of Dec. 31, 2022) to the net asset value per fund unit (the net asset value per fund unit as of Dec. 31, 2022). If the ratio is greater than one, it is at a premium, and if it is less than one, it is at a discount. At the end of 2022, all three major REIT markets presented discounts compared to their net asset values. The Hong Kong market has remained at a discount status for a long time, but the situation became more severe in 2022. Data shows that the average P/ B ratio of REITs in Hong Kong was 0.91 as at their IPO date. As at the end of Dec. 31, 2022, the average P/B ratio of REITs in Hong Kong dropped to 0.45, meaning that the trading price on the secondary market was only 45% of the net asset value, a further drop from last year’s 60%. I n 202 2 , t h e S i ng a po r e ma r ke t exper ienced a reversal and saw a decline in the P/B ratio. The average P/ B ratio of REITs in Singapore was 1.01 as at IPO date, which edged down to 0.96 at the end of 2020, rose to 1.0 at the end of 2021, and then dropped to 0.78 at the end of 2022. Nineteen REIT products had P/B ratios below the average, including Dasin Retai l Trust, with the lowest ratio at only 0.2. The Parkwaylife REIT, in the healthcare sector, presented the highest ratio at 1.6.

P/B ratios for REITs vary greatly by property type. The impact of COVID-19, coupled with global interest rate hikes, caused P/B ratios of mixed-use, office, retail and hotel REITs to drop sharply. In a similar manner as in the previous year, the P/B ratios of hotel REITs in all three markets were at less than 1.0, while mixed-use and office sectors also continued to stay at less than 1.0. In contrast, the P/B ratios of “new economy” assets such as industrial/logistics, healthcare and data center REITs remained relatively high. Average P/B Ratio By Property Type

Figure 12: P/B Ratio by Property Type

2.00

1.42

1.50

Figure 11: P/B Ratio by Market

1.20

1.08

1.07

1.03

1.00

0.96

0.95

1.00

0.90

0.88

1.00

0.80

0.76

0.78

0.98

0.61

0.58

0.57

0.57

0.43

0.41

0.36

0.50

0.45

0.00

Hong Kong, China

Singapore

Japan

综合 工业 / 物流 办公 零售 酒店 公寓 健康医疗 数据中心 Mixed Use Office Industrial/ Logistics Retail Hotel Apartment Healthcare Data Center Singapore Hong Kong, China Japan

Source: Bloomberg Database, Hong Kong Exchanges website, SGX website and Tokyo Stock Exchange website, compiled by Cushman & Wakefield Valuation & Advisory Services

Source: Bloomberg Database, Hong Kong SAR Exchanges website, SGX website and Tokyo Stock Exchange website, compiled by Cushman & Wakefield Valuation & Advisory Services

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2022-2023 ASIA REIT MARKET INSIGHT

Also as of the end of June 2023, the average distribution yield for the 16 real estate asset-based REITs (comprising seven industrial park REITs, four affordable rental housing REITs, three logistics REITs, and two industrial plant REITs) was at 4.2%, representing an increase from the 3.3% of the nine projects in the same period last year, although the rise was primarily due to price drops in the secondary market.

Figure 14: Dividend Yield

10.0%

CHAPTER 4 THE GROWTH OF THE MAINLAND CHINA AND INDIA REIT MARKETS

8.0%

6.0%

4.0%

2.0%

0.0%

Industrial parks

Industrial plants

Warehousing and logistics

Affordable rental housing

Ecological conservation

Clean energy

Highway sectors

4.1 Mainland China REIT Market The overall infrastructure REITs market in mainland China experienced stable development in 2022, demonstrating continued popularity with investors. During the period this report section covers, from the end of March 2022 to the end of June 2023, a total of 17 new products were introduced into the public REIT market. The new entrants demonstrated development momentum across seven categories of underlying assets: industrial parks, warehousing and logistics facilities, industrial plants, affordable rental housing, highways, clean energy, and other ESG-related projects. At the end of June 2023, there were 28 public REITs listed in mainland China, with total market value standing at RMB87 billion, approximately 10% below the initial issuance value of RMB97 billion. Of the 28 REITs, seven were focused on highway assets, seven on industrial parks, four on affordable rental housing, three on warehousing logistics, three on clean energy, and two each were focused on industrial plants and ecological protection assets.

Data source: Wind, Cushman & Wakefield Valuation & Advisory Services

On March 24, 2023, the Mainland China Securities Regulatory Commission (CSRC) issued the Notice on Further Promoting the Normalized Issuance of Real Estate Investment Trusts (REITs) in the Infrastructure Sector. The Notice presents a total of 12 measures which are summarized into three areas as here:

1 2 3

Expand the types of pilot asset issuances to include retail projects, and prioritizing support for rural and urban commercial outlets projects, such as department stores, shopping centers, and farmers' markets, and community malls. In terms of projects for franchised operation rights and operating income rights, their IRR during fund duration should not be lower than 5% in principle, while for non-franchised operation rights and operating income rights projects, the projected annual net cash flow distribution rate should not be lower than 3.8% for the next three years. For affordable rental housing projects that issue infrastructure REITs for the first time, the net value of the real estate valuation in the current period should not be less than RMB800 million in principle.

Figure 13: Number of REITs in Mainland China

7

7

4

3

3

2

2

Highway sectors

Industrial parks

Affordable rental housing

Warehousing and logistics

Clean energy

Industrial plants

Ecological conservation

Data source: Wind, Cushman & Wakefield Valuation & Advisory Services

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Table 3: Profiles of India REITs

4.2 India REIT Market

Embassy Office REIT

Brookfield Office REIT

Mindspace Office REIT

Nexus Select Retail REIT*

A total of four REITS were listed in the India market as of May 2023, comprising three office REITs and one retail REIT. The three office products have been in existence for more than two years, while the retail product was a new listing in May 2023. REIT regulations have been in place since 2014, but all four REITs have been launched in a four-year period since 2019. REITs have proven popular with both institutional and retai l investors in India since the first l isting in 2019, with each of the four IPOs gaining positive subscription attention. The office REITs’ operational asset distribution is largely concentrated around major cities such as Mumbai, Bengaluru, Delhi-NCR, Hyderabad, and Pune. However, the Nexus Select retail REIT has a wider operational spread that also includes second-tier cities. The three office REITs hold approximately 74 million sq ft of completed office stock as of March 2023, with an additional 21 million sq ft portfolio at various stages of development. The combined portfolio size, including both completed and under-construction, accounts for approximately 14% of India’s total Grade A office stock today. Looking at the success of the existing office REITs, more developers are now consol idating their office assets for bundling into REIT products, with market estimates suggesting we could see an additional 90 to 95 million sq ft unfold soon. Consequently, there could be approximately 180 million sq ft of office space held by REITs by the end of 2024. We estimate that this volume may account for approximately 22% of overall Grade A office stock at that time. Moreover, Indi a ’s market regu l ator SEBI has been consistently making efforts towards making REITs and InVITs more transparent and friendly for retail investors. These moves are helping to further encourage participation from small investors in the real estate growth story.

Listing month

Apr-19

Feb-21

Aug-20

May-23

Overall IPO subscription status Completed area (MSF) (Mar-23) U/C + F/D area (MSF) (Mar-23) Latest occupancy rate (Mar-23)

O/S by 2.57x

O/S by 8.0x

O/S by 13x

O/S by 5.5X

34.3

14.3

25.8

9.8

7.9 + 2.8

0.6 + 3.9

2.5 + 3.7

N.A.

86%

84%

89%

96%

Bengaluru (75%), Mumbai (10%), Pune (9%) and NCR Delhi (6%)

NCR-Delhi (68%), Kolkata (22%), Mumbai (11%)

Hyderabad (44%), Mumbai (36%), Pune (17%), Chennai (3%)

Distribution of operational office assets (Mar-23)

South India (36%), West (34%), North (25%), East (5%)

Source: latest investor presentations on website; *ICICIdirect brokerage report on Nexus Select IPO (May-23) Note: O/S= over-subscribed; U/C= under-construction; F/D= Future Development

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2022-2023 ASIA REIT MARKET OVERVIEW AUTHORS ：

Kate Zhang Senior Manager, Valuation and Advisory Services, North China kate.zhang@cushwake.com Gilbert Dong Senior Manager, Valuation and Advisory Services, North China gilbert.yf.dong@cushwake.com

Wynter Zhang Senior Manager, Valuation and Advisory Services, North China Wynter.Zhang@cushwake.com

EDITORS:

Simon Graham Senior Communications Manager, Greater China, simon.graham@cushwake.com

Catherine Chen Director, Capital Markets Research, Asia Pacific, catherine.chen@cushwake.com

REPORT CONTRIBUTORS:

Mari Kumagai Head of Research & Consulting, Japan mari.kumagai@cushwake.com Rosanna Tang Head of Research, Hong Kong Rosanna.Tang@cushwake.com

Xian Yang Wong Head of Research, Singapore xianyang.wong@cushwake.com Suvishesh Valsan Director, Research, India suvishesh.valsan@cushwake.com

FOR REQUESTS ON GREATER CHINA REIT VALUATION, PLEASE CONTACT:

Chris Yang Senior Director Valuation & Advisory Services, North China chris.z.yang@cushwake.com

Feng Hu Deputy General Manager, Beijing Office Head of Valuation & Advisory Services, North China feng.hu@cushwake.com

Andrew Chan Managing Director, Valuation & Advisory Services, Greater China andrew.kf.chan@cushwake.com

FOR REQUESTS ON REIT RELATED SERVICES INCLUDING CAPITAL MARKETS ADVISORY IN ASIA PACIFIC, PLEASE CONTACT:

James Young Head of Investor Services, APAC & EMEA james.young@cushwake.com

Gordon Marsden Head of Capital Markets, Asia Pacific gordon.marsden@cushwake.com

Dennis Yeo Head of Investor Services and Logistics & Industrial, Asia Pacific dennis.yeo@cushwake.com

The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

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About Cushman & Wakefield

3 6 | C u s h m a n & Wa k e f i e l d Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in approximately 400 offices and 60 countries. In Greater China, a network of 23 offices serves local markets across the region. In 2022, the firm reported global revenue of US$10.1 billion across its core services of valuation, consulting, project & development services, capital markets, project & occupier services, industrial & logistics, retail and others. It also receives numerous industry and business accolades for its award-winning culture and commitment to Diversity, Equity and Inclusion (DEI), Environmental, Social and Governance (ESG) and more. For additional information, visit www.cushmanwakefield.com.