China Vanke aims to raise RMB 1.16 billion ($160 million) from a Shenzhen-listed infrastructure REIT seeded with three warehouse parks from the mainland property giant’s industrial division, VX Logistics.

The proposed spin-off would comprise an initial portfolio of two assets in Zhejiang province and one in Guangdong province’s Foshan, Vanke said late Friday in a filing with the Hong Kong stock exchange. The builder chaired by Yu Liang disclosed the IPO target in a Shenzhen stock filing on Saturday.

The REIT, dubbed CAMC-VX Warehousing and Logistic Close-end Infrastructure Securities Investment Fund, is to be managed by state-backed China Asset Management with its parent CITIC setting up the trust’s asset-backed security scheme. The vehicle would be Vanke’s second China REIT after the developer’s mall trust received registration approval from authorities last November.

The separate listing in the mainland capital market will better reflect the value of the spun-off assets and assist with continuous capital-raising for future warehouse construction, according to Shenzhen-based Vanke.

“As such, the board is of the view that the proposed spin-off will bring significant commercial benefits to the group,” it said.

Industrial Trusts Take Off

Vanke’s REIT plan remains subject to approval by China regulators and the Shenzhen Stock Exchange.

The trust’s three seed assets span a combined 296,700 square metres (3.2 million square feet) of gross floor area, led by the 109,200 square metre VX Shaoxing Zhuji Logistics Park south of Zhejiang’s capital of Hangzhou.

The second Zhejiang asset, VX Huzhou Deqing Logistics Park, comprises 89,000 square metres of GFA, according to a 2017 announcement, while VX Foshan Nanhai Logistics Park provides 98,400 square metres.

Vanke holds an 81.6 percent stake in VX, which was founded in 2015 and boasts more than 12 million square metres of warehouse space across 170 projects.

Chinese REITs received an initial green light from regulators in early 2021. Regional industrial specialist GLP became the first international firm to list a REIT in China when its GLP C-REIT commenced trading last June.

Warburg Pincus-backed DNE Group achieved an industrial REIT listing in late 2022 after winning approval for D&J New Economy Industrial Park REIT, a RMB 1.38 billion ($200 million) trust, in September of that year. Warburg-backed warehouse titan ESR announced its own RMB 2.88 billion ($404 million) listed trust last December.

Debt Worries Flare Again

Vanke, China’s second-biggest developer by sales, is testing the waters in the mainland REIT market as it faces renewed concerns about its debt load.

A Vanke creditor, New China Asset Management, on Sunday took the step of denying a rumour circulating on Chinese social media that Yu Liang had visited Beijing to ask for an extension on RMB 10 billion ($1.4 billion) in debt and got rejected.

Moody’s Investors Service last November downgraded Vanke’s senior unsecured bonds and medium-term note programme to junk status, citing sales declines and uncertainty over the state-backed developer’s access to funding. The agency also lowered Vanke’s issuer rating, putting the group just one rung above speculative grade.

Vanke’s tenuous investment-grade issuer rating reflects the developer’s scale and brand identity in China, its disciplined approach towards financial management and its links to the Shenzhen government, Moody’s said.