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Infrastructure Real Estate Investment Trust - Deloitte-infrastructure construction in china

Construction Predictions 2022 | The Age of With... AI in construction and infrastructure: Creating value through data Construction Predictions 2022 | The Age of With... AI in construction and infrastructure: Creating value through data
Infrastructure Real
Estate Investment Trust
Written by:
Lily Yin Eric Shi
Partner- Audit& Assurance Partner- Audit & Assurance
Deloitte China Deloitte China
lilyin@deloitte.com.cnc erishi@deloitte.com.cn
14 15
Construction Predictions 2022 | Infrastructure Real Estate Investment Trust Construction Predictions 2022 | Infrastructure Real Estate Investment Trust
Market REIT Primary business
AMERICAN TOWER (NYSE: Communications tower, distributed
AMT) antenna system.
CORENERGY Upstream and midstream energy
INFRASTRUCTURE TRUST infrastructure assets, oil and gas
(NYSE: CORR) pipeline, storage terminal, and
gathering system.
US CROWN CASTLE (NYSE: Base station tower, small base
CCI) station nodes, and fiber router.
SBA COMMUNICATIONS Base station equipment leasing;
CORP (NYSE: SBAC) installation, optimization, and
integration services for cellular base
UNITI GROUP (NYSE: Communications distribution
UNIT) system.
Takara Leben
Infrastructure Fund, Inc.
Ichigo Green
Investment Corporation
Infrastructure real estate investment Features of the infrastructure sector An overview of global infrastructure REITs Renewable Japan Energy
REITs have been issued in more than 40 countries and regions, with Infrastructure Fund, Inc.
trusts (REITs) and their impact on ? Large investment, a long investment term, and high capital the US, Japan, Australia, and Singapore among the largest markets6. Japan Canadian Solar Solar power generation assets.
the construction sector requirements. Retail and commercial property, residential apartments, industrial Infrastructure Fund, Inc.
parks, and warehousing are the most common underlying assets. Tokyo Infrastructure
Infrastructure construction projects mainly involve transportation, As of October 2021, there are 7,784 infrastructure projects with
Energy Fund, Inc.
water and power supply networks, communications facilities, a total investment of more than RMB11 trillion (approximately Since the classification of REITs varies across countries and regions, Enex Infrastructure
Investment Corporation
ecological and environmental protection, and municipal facilities. US$1.7 trillion) registered in China's National private public this article classifies infrastructure REITs in their narrow sense, Japan Infrastructure
In recent years, infrastructure has become a way for countries partnerships(PPP) information platform4. Average investment per i.e., REITs with infrastructure construction as underlying assets. Investment Corporation
to promote economic growth and secure employment due to project exceeds RMB1.4 billion (approximately US$220 million), Below are some of the major infrastructure REITs in various global Keppel infrastructure Natural gas and sewage disposal
its "multiplier effect", which can drive total social demand that is and each project has a partnership term of more than 10 years5. markets (Figure 1). Singapore Trust
several times the size of infrastructure investments. Since 2020, Heavy investment and lengthy partnerships impose high capital Netlink NBN Trust Wideband transmission equipment
global economic growth has slowed as the COVID-19 pandemic requirements on investors in infrastructure projects. Infrastructure REITs currently occupy only a small proportion of APA Group Gas pipelines
has taken hold, and major economies have sought to stimulate the global REIT market. However, their strong anti-risk capability AusNet Services Power grid, power distribution
economic growth through infrastructure construction1. For ? Limited return on investment (ROI). and stable earnings make infrastructure REITs an important part network, gas distribution network
example, in China, the Government has been promoting "new of many investment portfolios. As the world's largest market for Infigen Energy Wind power and solar power plant
infrastructure" since 20202 and in November 2021, the US Congress ? The public nature of infrastructure projects means their pricing infrastructure investment and construction, China's infrastructure Australia Atlas Arteria Tollway
passed the Infrastructure Investment and Jobs Act (IIJA)3. Finding is subject to government administration or policy regulation. REIT market is set to expand rapidly following the initial issuance of Spark Infrastructure Power distribution network
sustainable, replicable solutions for investment and construction is Although a market mechanism has been introduced into the infrastructure REITs in 20217.
a point of focus for all stakeholders in the infrastructure sector. PPP model in recent years, the nature of the sector means it is Sydney Airports Sydney Kingsford Smith Airport
impossible to achieve a high ROI. Transurban Group Tollway
IRB InvIT FUND Highway
? Stable cash flow and a large proportion of debt financing. IndiGrid InvIT Trust Power transmission network
Zheshang Huhangyong Tollway
? The features of infrastructure projects, including stable cash
Expressway REIT
flows and low asset liquidity during operations, mean they Fullgoal Beijing Capital Sewage disposal
Sewage REIT
feature a large proportion of debt financing and difficulties in Pingan Guangzhou Tollway
equity financing. China Communications
Investment Guangzhou-
Heyuan Expressway REIT
AVIC Shougang Green Biomass energy
Energy REIT
Huaxia Yuexiu Tollway
Expressway REIT
Figure 1: Source: Deloitte China "REITs"
1. Deloitte China "REITs", published 6 January 2022 https://www2.deloitte.com/cn/zh/pages/energy-and-resources/articles/analysis-
report-impact-infrastructure-reits-oninfrastructure-industry.html Accessed 7 January 2022 5. China's National private public partnerships(PPP) information platform, published October 2021. https://www.
2. Wang Xiaosong "New infrastructure can boost economy", China Daily, published 14 May 2021. http://global.chinadaily.com.cn/a/202005/14/ tzxm.gov.cn:8081/tzxmspweb/tzxmweb/pages/pppInfo/pppIndex.jsp Accessed 27 November 2021
WS5ebc85c0a310a8b241155809.html Accessed 27 November 2021 6. Deloitte China "REITs", published 6 January 2022. https://www2.deloitte.
3. "Biden signs $1.2 trillion US infrastructure bill into law", China Daily, published 16 November 2021. http://www.chinadaily.com.cn/a/202111/16/ com/cn/zh/pages/energy-and-resources/articles/analysis-report-impact-infrastructure-reits-oninfrastructure-
WS6192d45fa310cdd39bc7577d.html Accessed 27 November 2021 industry.html Accessed 7 January 2022
4. China's National private public partnerships(PPP) information platrm, published October 2021. https://www.tzxm.gov.cn:8081/tzxmspweb/tzxmweb/pages/pppInfo/ 7. Deloitte China "REITs", published 6 January 2022. https://www2.deloitte.
pppIndex.jsp Accessed 27 November 2021 com/cn/zh/pages/energy-and-resources/articles/analysis-report-impact-infrastructure-reits-oninfrastructure-
industry.html Accessed 7 January 2022
Construction Predictions 2022 | Infrastructure Real Estate Investment Trust Construction Predictions 2022 | Infrastructure Real Estate Investment Trust
REITs' role in promoting infrastructure construction Outlook for infrastructure REITs
Infrastructure REITs are an effective way of involving capital
? Strengthen the reinvestment capability of infrastructure markets in the infrastructure sector. This reduces reliance
enterprises. on government investment for infrastructure construction,
expands sources of capital, and improves the financial structure
By issuing infrastructure REITs, investors can obtain early returns of infrastructure investment enterprises. It also enhances the
on capital for reinvestment or debt repayment. At the same industry's capacity for sustainable growth.
time, the listing and sale of infrastructure assets helps reduce
balance sheet ratios and enhance refinancing and reinvestment Financial deficits and government debt continue to rise in many
capabilities. countries. Infrastructure REITs - now one of the few viable options
for governments to stimulate economic growth without creating
? Create sources of capital for infrastructure project investment an additional fiscal burden from infrastructure investment and
and construction. construction - are set to develop rapidly.
Infrastructure REITs feature moderate risk, stable cash flows, and
medium liquidity, enabling institutions and retail investors to invest
in infrastructure by purchasing REIT shares and expanding the For further information, please visit www.deloitte.es
available sources of capital for infrastructure construction.
Deloitte refers to Deloitte Touche Tohmatsu Limited
? Form a "closed loop" of investment and financing for the
("DTTL") and its global network of member firms and
their related entities, either to one or several of them.
infrastructure sector. DTTL (also called "Deloitte Global") and each of its
member firms are legally separate and independent
"Investment, construction, operation, exit, and reinvestment"
entities. DTTL does not provide services to customers.
For more information, see www.deloitte.com/about.
form a complete chain and virtuous circle in the infrastructure
sector. Generally, there are limited investment exit options from Deloitte provides audit, consulting, legal, financial
infrastructure projects due to the large investment required and
advisory, risk management, tax, and related services to
public and private clients spanning multiple industries.
long investment term. Infrastructure REITs provide investors with a With a globally connected network of member firms
normalized, standardized withdrawal channel and enhance project in more than 150 countries and territories, Deloitte
brings world-class capabilities and high-quality service
to clients, delivering the insights they need to address
their most complex business challenges. Deloitte's
more than 312,000 professionals are committed to
making an impact that matters.
This communication contains general information only,
and none of Deloitte Touche Tohmatsu Limited, its
member firms, or their related entities (collectively, the
"Deloitte Network") is, by means of this communication,
rendering professional advice or services. Before
making any decision or taking any action that may
affect your finances or your business, you should
consult a qualified professional adviser. No entity in
the Deloitte Network shall be responsible for any loss
whatsoever sustained by any person who relies on this
? 2022 For information, contact Deloitte, S.L
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What are the characteristics of Chinese construction workers? In addition, Chinese workers are multi-skilled and will be involved in each section of construction. Whereas it is normal practice to employ tiered hierarchies of workers, it has been found that Chinese artisans can also double up as site diggers and participate in manual labour as well as the more skilled undertakings of an artisan.