Research On Like-kind Reit Finance Instrument Of Suning Appliance

Real estate investment trust(REIT)have attracted worldwide attention for years of rapid development around the world,but only like-kind REIT whose structure is similar to REIT for various domestic reasons currently exists in mainland China financial market.However,domestic companies tend to raise capital by like-kind REIT,with 34 like-kind REIT issued and a total size of 79.212 billion yuan.Therefore,it is valuable to explore the reasons why companies finance by like-kind REIT,as well as features of like-kind REIT and specific impact on the users.This paper,at the same time,finds out some problems in the use of like-kind REIT,and thus gives countermeasures and suggestions.Based on the review of relevant research,this article briefly introduces the situation of foreign REIT and like-kind REIT in China,and then uses case analysis and comparative analysis,combined with qualitative and quantitative research methods,to discuss the case that Suning Appliance raise capital by like-kind REIT.The paper draws the following conclusion.First,Suning set up new financing ways to cope with the pressure brought by its strategic transformation,due to the constraints of the external environment,the imbalance of internal financing structure and insufficient internal financing capacity.Second,Suning selects warehousing facilities which possess strategic and commercial value as the target asset of like-kind REIT,debt is structured and equity is the main transaction target through the process.Also,transaction structure of the like-kind REIT performs as dual SPV,and the like-kind REIT is actually a sale and leaseback transaction.Third,the like-kind REIT financing instrument directly injects a large amount of capital for Suning,optimizing the financial statements for the company,but compress its financial elasticity to a certain extent.Fourth,there are series of problems in the process of the like-kind REIT:the complexity of the transaction process increases financing cost as well as risks.The nature of the underlying assets ultimately leads to the failure to achieve bankruptcy isolation and may cause the company to fall into a dilemma.The rents of the target property is lower than others.The whole process is politically risky.Therefore,the paper proposes solutions accordingly,that is,it is recommended that a variety of guarantees should be adopted to ensure payment of equity transfer payments,multiple tenants should be introduced and a reasonable percentage of leases should be stipulated.Furthermore,companies should assess the political risks adequately.