A Case Study Of REITs Financing In Baowan Logistics

In recent years,the rise of e-commerce industry and the continuous development of the retail industry have pushed the transformation of logistics industry.Logistics facilities have gradually transformed from traditional warehouses to modern highstandard warehouses,as traditional logistics facilities could not meet peopled demand for logistics industry services.Logistics property therefore has become a competitive industry,and the competition has become increasingly fierce.However,the logistics real estate industry is characterized by large initial investment,slow return of capital and long operating time,which causes the industry to face problems such as high debt ratio and a shortage of funds.Logistics real estate developers are beginning to consider how to revitalize their stock of assets and solve the problems they face.Under this background,Real Estate Investment Trust(REITs),as an innovative financing tool,enters the public’s field of vision and provides a new channel for the financing of the logistics property industry.REITs can effectively help enterprises to revitalize their stock of assets and to facilitate the industry’s transformation of the operation model from“capital-inclined" to“light-heavy combination".With the introduction of the pilot notice of infrastructure public REITs in April 2020,China’s infrastructure public REITs officially set off.Infrastructure public REITs are mainly based on new infrastructure such as industrial parks,warehousing and logistics,and 5G base stations proposed by the state as the underlying assets.As a priority industry to be supported by this infrastructure REITs,warehousing and logistics has characteristics such as high debt ratio and stable cash flow,which can be perfectly combined with REITs.Based on the logistics real estate industry,this paper adopts the research method of case study and takes the“Huatai Jiayue-Baowan Logistics Phase Ⅰ Asset-Backed Special Scheme" as the subject of the case study.With a thorough understanding of REITs and logistics real estate related concepts and the current development status,this paper introduces in detail the overview of Baowan Logistics Holdings Limited,the motivation of project financing,and the basic information of Baowan Logistics REITs product,including the participating parties,transaction structure,underlying assets,credit enhancement measures and the exit mechanism,based on the theory of principalagent,asset securitization theory and the theory of Pecking Order Theory.Then,the case of Baowan Logistics REITs financing is analysed from three aspects:financing effect,financing risk and REITs product deficiency.The specific conclusions are as follows:Firstly,through the issuance of REITs,Baowan Logistics has achieved the objectives of reducing its asset and liability ratio,revitalizing its assets and optimizing its financing structure.Secondly,the analysis of this case reveals that the successful financing of Baowan is attributable to the high-quality underlying assets and excellent operational management capabilities.Thirdly,the transaction structure of REITs products of Baowan is complex,which increases enterprises’ financing cost of and reduces the product fluidity.Fourthly,the shortage of a taxation system in China leads to higher taxation costs for enterprises.Lastly,through case study,this paper gives suggestions for the development of REITs from the perspective of enterprises and relevant government policies,providing implications for the development of REITs in China from private to public offering.