Research On The Development Mode And Governance Mechanism Of Public REITs In China

Real Estate Investment Trusts(REITs)is an innovative financial instrument that pool investors’ funds to invest in Real Estate assets that can generate stable cash flow by professional managers and distribute the cash flow to investors in a timely manner.As China’s economy enters the new normal,the construction of REITs market can provide a new financing channel for China’s real estate enterprises and infrastructure construction,and provide Chinese residents with inclusive financial assets.It is a "stabilizer" and "booster" to ensure the stable operation of China’s economy and promote economic transformation under the COVID-19.Due to the limitation that China has not established a clear REITs system,the market only can create “ likeREITs ” which is a private placement product with poor liquidity,high issuance cost and only has some functions similar to the standard REITs.Under the increasing demand of investment and financing,it has become a key concern of the regulatory authorities and the market participants to identify the development mode of localized public REITs suitable for China’s national conditions and establish effective governance mechanism to protect the legitimate rights and interests of the holders as soon as possible.Looking back at the construction and development of the international REITs market,it can be seen that for any economic entity the introduction of REITs is a complicated process of mutual adjustment with the system.After summarizing the general rules and effective governance measures of mature REITs market in foreign countries,this paper,on the basis of making full use of the existing legal environment and the development experience of “likeREITs”,makes a research on the legal carrier,initiation path and corresponding supporting systems of public REITs in China.At the same time,based on the analysis logic of “parameterization method of distribution function” in principal-agent theory,the behavior of managers under different conditions is analyzed.Combining the shortcomings and efforts of “like-REITs” in governance,systematically construct the governance mechanism of public REITs in China.At present,our country should develop equity and contract REITs as the priority,select high-quality commercial property such as rental apartment or infrastructure assets,with "public funds+ABS" as a starting point to introduce REITs pilot as soon as possible,and then combined with the pilot experience to lay down the special legislation to REITs.In the early stage of the development of public REITs,the “captive REITs” provided the young market with a channel of credit guarantee and steady growth,but also increased the difficulty of governance.In this mode,there is a triple principal-agent relationship among the initiators,the investors other than the initiators and the REITs managers,which not only requires reasonable incentives and constraints to make the managers work hard for the growth of the value of REITs,but also needs to prevent the initiators from engaging in improper related transactions to harm the interests of other investors.Based on the particularity of public offering REITs governance in our country,we need make a clear regulation and strict supervision for approval of market access qualifications of REITs,the approvement and disclosure of related party transactions,manager compensation structure,the trustee’s power and responsibility and the exercise of holders’ rights.Form a comprehensive governance system which is centered on internal governance,assisted by external governance like government,industry self-discipline organizations,intermediary organizations and so on.