Standardize and efficiently implement real estate investment trust (REITs) projects in the field of infrastructure

First, do a good job in the early stage of the project

(1) Fully understand the importance of early cultivation work. The early-stage cultivation of infrastructure REITs projects includes sorting out and screening assets, formulating product solutions, improving compliance procedures, solving difficult problems, etc. It is of great significance to strengthen project reserve, guarantee project compliance, improve asset quality, promote sound operation and improve recommendation efficiency. Local development and reform commissions should attach great importance to the early cultivation of infrastructure REITs projects, help and guide sponsors (original rights holders), fund managers, etc., to jointly do a good job in project cultivation, promote the project to meet the declaration conditions as soon as possible, and timely reflect the common problems and solutions to the Commission.

(2) Ensure that the application materials are true and objective. The initiator (the original owner) shall, in accordance with the Notice of the National Development and Reform Commission on Further Doing a good job in the pilot work of Real Estate Investment Trust (REITs) in the field of Infrastructure (Development and Reform Investment (2021) No. 958) and the General Office of the National Development and Reform Commission on doing a good job in the field of infrastructure Real Estate Investment Trust (REITs) newly purchased projects Recommendation of the relevant work Notice (Development and Reform Office Investment [2022] No. 617), this notice and the requirements of the project declaration format text, carefully prepare the project declaration materials, true, comprehensive and objective reflection of the project situation, shall not use fraud, avoid serious light, illegal packaging. Provide the historical income data of the project truthfully, comprehensively analyze the factors that may affect the income of the project, and objectively predict the future income level of the project. If the promoters (original rights holders), fund managers, etc., do not truly, comprehensively and objectively reflect the project situation, deliberately conceal or even cheat, the Commission will, depending on the seriousness of the circumstances, take reminders, suspension of acceptance and other ways to deal with, and ask the relevant departments to punish according to law.

3. Organizing and coordinating departments. The local development and reform commissions should strengthen communication and cooperation with the local offices of the China Securities Regulatory Commission, the Shanghai and Shenzhen Stock exchanges, as well as the departments of industry management, natural resources, ecological environment, housing and urban and rural construction in the region, jointly coordinate to solve the key and difficult problems encountered in the early stage of project cultivation, and shorten the project cultivation cycle as much as possible. In accordance with the requirements of document No. 19 issued by the State Office of the People's Republic of China (2022), under the premise of law and compliance, actively implement the project activation conditions, focusing on the improvement of investment management procedures, the handling of property rights certificates, land use compliance, and the confirmation of asset transfer conditions, etc., and coordinate relevant parties to support the project issuance of infrastructure REITs.

2. Reasonably grasp the project issuance conditions

4. Supporting the development of consumer infrastructure. Implement the decision and deployment of the Party Central Committee and The State Council on restoring and expanding consumption in a priority position, research and support consumer infrastructure that enhances consumption capacity, improves consumption conditions, and innovates consumption scenarios and issues infrastructure REITs. Give priority to supporting urban and rural commercial network projects such as department stores, shopping centers, and farmers' markets, and issue infrastructure REITs for community commercial projects that guarantee basic people's livelihood. The nature of the project land should conform to the relevant regulations of land management. The project sponsor (original owner) shall be an independent legal entity holding consumer infrastructure and carrying out related business, and shall not engage in commercial residential development business. Promoters (original rights holders) should use the recovered funds to increase investment in convenience business, smart business circle, and digital transformation to better meet the consumer needs of residents. It is strictly prohibited to circumvent the real estate regulation requirements, and it is not allowed to provide disguised financing for commercial residential development projects.

(5) Reasonable control of project income and scale. According to the specific conditions of different types of infrastructure REITs projects, the project income level should be reasonably grasped. Declare and issue the franchise rights and operating income rights of infrastructure REITs, and the internal rate of return (IRR) of the fund's duration shall not be less than 5% in principle; For non-franchise and operating income rights projects, it is expected that the annual net cash flow distribution rate in the next three years will not be less than 3.8% in principle. Through stripping inefficient assets, expanding income sources, reducing operating costs, improving management efficiency and other ways, we can strive to improve the level of project income and meet the requirements of project issuance. For the affordable rental housing projects of infrastructure REITs issued for the first time, the current target net value of real estate is not less than 800 million yuan in principle.

(6) Strict investment management compliance. Whether the investment management procedures are in compliance should be based on the laws and regulations and national policies at the time of project investment and construction. The relevant procedures that do not need to be handled during the project investment and construction but should be handled according to the current provisions shall be grasped in accordance with the provisions at the time, and the relevant information shall be explained; Project investment and construction should go through the relevant procedures, but the current provisions have been cancelled or combined with other procedures, if there is a lack, the relevant responsible department should explain the situation or issue opinions; In accordance with the relevant procedures required for project investment and construction and current regulations, if there is a lack, in principle, the relevant responsible department should make up for it according to law, and if it cannot be made up, the relevant responsible department should issue a handling opinion. If the project has undergone major renovation and expansion to change the functional use, its investment management compliance should be judged mainly on the basis of the relevant procedures at the time of renovation and expansion.

Third, effectively improve the efficiency of reporting and recommendation

(7) Standardize the acceptance process of project declaration. After the completion of the pre-cultivation stage of the project and basically meeting the application conditions, the initiator (the original rights holder) shall submit the project application materials to the relevant provincial development and Reform Commission in accordance with the requirements of the Development and Reform Investment (2021) 958 document and the Development and Reform Office Investment (2022) 617 document. The provincial development and Reform Commission shall conduct a preliminary review of the project application materials in a timely manner, and the projects that basically meet the conditions shall be formally accepted within 5 working days; It will not accept those that obviously do not meet the issuance conditions or the materials are incomplete and incomplete, and reply within 5 working days.

After the acceptance of the project, the Committee and the provincial Development and Reform Commission will clarify the docking of special personnel, optimize the work process, accelerate the work progress, and jointly carry out the project judgment. The provincial development and reform Commission shall submit the qualified project application documents and relevant materials to the Commission in a timely manner. In order to improve work efficiency, if the relevant matters involving other provincial departments have been issued by the department (including its subordinate departments) no objection letter or written support opinions, the provincial development and Reform Commission should not be repeated when submitting the project declaration document to the Commission.

8. Improving the application process for central enterprises. The central enterprise can submit the project application materials and the opinions of the provincial development and reform Commission where the project is located directly to the Commission, or it can be submitted through the provincial development and reform Commission. If directly submitted, the Commission will conduct a preliminary review of the project application materials in a timely manner, and formally accept the projects that basically meet the conditions within 5 working days; It will not accept those that obviously do not meet the issuance conditions or the materials are incomplete and incomplete, and reply within 5 working days.

(9) Timely consultation and evaluation. For the projects formally submitted by the provincial Development and Reform Commission and directly accepted by the Commission, the Commission will, in accordance with the provisions of the Notice of the National Development and Reform Commission on the revision and issuance of the "National Development and Reform Commission Investment Consultation and Evaluation Management Measures" (Development and Reform Investment Regulation (2022) No. 632), select consulting and evaluation institutions in a timely manner and handle the consulting and evaluation mandate. The consulting evaluation agency shall conduct a comprehensive evaluation on whether the project meets the recommended conditions. Project evaluation time generally does not exceed 30 working days; If the consulting and evaluation institution is really difficult to complete within the prescribed time limit due to special circumstances, the completion time limit may be appropriately extended after obtaining the written consent of the investment Department. The consulting evaluation agency shall submit the evaluation report within the prescribed time limit.

(10) Accelerate project recommendation. Within 3 months from the date of formal acceptance of the project, the relevant work of submitting the project to the provincial Development and Reform Commission, entrusting consultation and evaluation, countersigning the relevant business departments, and recommending the project to the China Securities Regulatory Commission should be completed. The time for the initiator (original equity owner), fund manager, etc. to supplement or modify the project materials as required shall not be counted in the above time.

Fourth, give full play to the role of experts and professional institutions

(11) Giving play to the role of experts in early counseling. In the pre-cultivation stage of the project, the committee will organize relevant industry experts to guide the project in a timely manner, and make suggestions on the compliance of investment management procedures and the stability of project income. In the process of preparing project application materials, the committee will organize industry experts to put forward suggestions for modification and improvement as needed. For individual key issues that have a significant impact on the project, the sponsor (the original owner) can engage an authoritative independent third party to issue professional opinions. The Committee will, according to the needs of the work, organize professional forces when necessary to carry out on-site verification of relevant projects.

(12) Ensure that the consultation evaluation is objective and fair. The consulting and evaluation institutions shall independently, objectively and impartially carry out the consulting and evaluation work, carefully sort out the project problems, and put forward opinions and suggestions to ensure the timeliness and quality of the evaluation. The consulting and evaluation institutions and relevant evaluation personnel shall strictly abide by the discipline of integrity and confidentiality. Without the consent of the Commission, they shall not communicate with the promoters (original rights holders), fund managers, asset-backed securities managers and relevant intermediaries privately, and shall not disclose the consulting and evaluation information. Consulting and evaluation institutions and their directly affiliated units, holding or participating enterprises, as well as all evaluation personnel, shall not have an interest relationship or direct business competition relationship with the initiator (original equity owner), fund manager, asset-backed securities manager and other units, shall not participate in the preliminary preparation of the infrastructure REITs issued by the evaluated project.

(13) Urging intermediary institutions to perform their duties. Financial advisers, legal advisers, audit institutions, assessment agencies, tax consultants and other intermediaries providing services for infrastructure REITs projects shall not be included in the list of seriously dishonest subjects during the provision of services, have not been punished for dishonesty, and have not been prohibited or restricted by relevant regulatory agencies to carry out infrastructure REITs-related or similar businesses due to violations of laws and regulations. Law firms and accounting firms should not have major violations of laws and regulations in the past three years. The above institutions shall give full play to their business expertise, perform their duties according to law and regulations, and ensure that the relevant materials issued are scientific, compliant, true, comprehensive and accurate.

Fifth, make good use of recovered funds to promote effective investment

(14) Strictly control the use of recovered funds. The net recovery funds of infrastructure REITs (refers to the recovery funds after deducting funds used to repay related debts, pay taxes, participate in strategic placement according to rules, etc.) shall be mainly used for projects under construction and new projects with mature preliminary work (including new projects, reconstruction and expansion projects); Among them, no more than 30% of the net recovered funds can be used to revitalize the stock of assets projects, and no more than 10% of the net recovered funds can be used for minority shareholders of listed infrastructure projects to withdraw or supplement the working capital of the sponsors (original rights holders). Under the condition of meeting the national policy and the main business requirements of the enterprise, the recovered funds can be used across regions and industries; Except for special provisions of the State, no place or department may set restrictions to affect the use of recovered funds by enterprises in accordance with market principles.

(15) Urge the recovered funds to be used as soon as possible. Accelerate the investment progress of the net recovery funds of infrastructure REITs, form a virtuous cycle of investment as soon as possible, and better support the development of the real economy. Within 2 years from the date of completion of infrastructure REITs acquisition projects (including initial issuance and new acquisition projects), the utilization rate of net recovered funds should in principle be not less than 75%, and all use should be completed within 3 years. If the progress of the use of net recovered funds is obviously not as expected, the arrangement of new purchased projects should be carefully considered. If the actual investment project of the recovered funds is inconsistent with the project to be invested in the declaration, it shall be filed with the relevant provincial development and reform Commission and explain the situation as required.

(16) Establish a direct reporting system for the use of recovered funds. In order to ensure that recovered funds are used for project investment as soon as possible and effectively support the development of the real economy, the sponsors of listed infrastructure REITs projects (original rights holders) should directly report the use of recovered funds to the investment Department of the Commission within 5 working days after the end of each quarter, and simultaneously copy the provincial Development and Reform Commission involved in the reinvestment project. If the progress of use of recovered funds is not as expected, the Commission will promptly remind the relevant project sponsors (original rights holders); If necessary, the relevant provincial development reform commission will be asked to talk about the project unit, understand the specific situation, and put forward rectification suggestions.

6. Strengthen operation and management

(17) Fully understand the importance of operation management. Strengthening the operation and management of infrastructure REITs projects is conducive to better providing public goods to the society and protecting public interests. It is conducive to improving the quality of project operation and earning capacity, and protecting the interests of investors; It is beneficial to realize the organic unity of the public attribute and the economic attribute of the project, and ensure the stable and healthy development of the infrastructure REITs market.

(18) Focus on project operation sustainability. The operation management organization shall, in accordance with the project situation, innovate the operation mode according to law and compliance, formulate the operation plan scientifically and reasonably, do a good job in updating and maintaining the underlying assets, and ensure the sustainability of the project operation and income. We should actively adopt new technologies, new processes and new materials to improve operation quality, reduce operating costs and ensure project profitability. Efforts should be made to innovate the business model, tap the commercial value of the project, broaden the source of project income, and enhance the market value of REITs products.

(19) Strengthen guidance on asset operation management. When the fund manager discloses the annual operation situation to the fund investors every year, the relevant information shall be copied to the Commission and the relevant provincial development and reform Commission; In case of major unexpected events affecting asset value and project income, a copy shall be sent in time after the relevant information disclosure procedures. Relevant provincial development and reform commissions should strengthen assistance and guidance for projects with major problems, and put forward opinions and suggestions. Infrastructure REITs newly purchased projects should be linked to the actual operational performance of the issued projects, the operational performance is seriously inconsistent with expectations, cause a large negative public opinion or major production and operation safety accidents, should be suspended the new purchase project arrangement.