China Securities Co., Ltd.: Pressure and Surprise Coexist in the REITs Industry, Market Expected to Stabilize and Recover in the Second Half of the Year.

China Securities Co., Ltd. released a research report stating that 81 REITs disclosed their second quarter report for 2026, with the overall performance of new projects exceeding 100%, while the performance of existing projects remained stable with continued differentiation in business formats. Among the 65 existing REITs included in the statistics, the revenue, EBITDA, and distributable amount increased by 3.0%, 1.7%, and 2.0% year-on-year respectively, but profits and dividends fell compared to the previous quarter. In terms of business formats, the rental housing sector maintained stable operation and benefited from expansion and inclusion; the consumer sector showed resilience in the off-season, with some high-quality projects continuing to demonstrate growth; industrial parks and warehousing logistics faced continued pressure on rent and occupancy rates; overall, highway operations remained stable but with varying performances of individual projects; the energy sector was affected by fluctuations in resources and pressure on some new energy prices, with subsidy returns supporting dividend payouts. In terms of investment strategy, selected primary market targets with reasonable valuation and seizing opportunities for marginal improvement in supply and demand dynamics in the secondary market. The main points of China Securities Co., Ltd. are as follows: Summary In the second quarter, the overall performance of new projects exceeded 100%, while the existing projects remained stable with continued differentiation in business formats. (1) In terms of achievement rate, a total of 16 new REIT projects were selected to calculate the performance achievement rate. The overall revenue, EBITDA, and distributable amount in the second quarter of 2026 averaged 109.8%, 114.5%, and 113.9% respectively, exceeding expectations overall; (2) Regarding performance, for existing REITs, the performance in the second quarter remained stable, with the rental housing sector continuing to show high growth, while industrial parks and warehouses logistics faced continued pressure. Overall, the average year-on-year changes in revenue, EBITDA, and distributable amount were 3.0%, 1.7%, and 2.0% respectively, showing minor growth overall. Business Formats Rental housing and consumer sectors showed resilience, industrial parks and warehousing logistics faced pressure, with varying performances in transportation and energy projects. (1) Industrial Parks: Performance under pressure year-on-year, with varying occupancy rates and rents still at a bottoming stage; (2) Warehousing Logistics: Performance dragged down by rent pressure, with some projects seeing marginal improvement in occupancy rates; (3) Rental Housing: Maintained high occupancy rates, stable and increasing rents, with expansion driving sector growth; (4) Consumer: Off-season operations still resilient, with revenue and profits increasing year-on-year; (5) Data Centers: Revenue and profits continue to exceed expectations, with high billing rates and shelf rates supporting stable operations; (6) Transportation: Overall stable operations on the management end, with varying project performances and cash flow timing amplifying dividend fluctuations; (7) Municipal: Operational stability supported by essential needs, with hydrology, seasonality, and repayment pace leading to performance differentiation; (8) Energy: Operations dragged down by fluctuations in natural resources and declining electricity prices, with subsidy reimbursements supporting dividend payouts. Investment Recommendations The REIT market is expected to stabilize and recover in the second half of the year, with selected primary market targets with reasonable valuation and opportunities for marginal improvement in supply and demand dynamics in the secondary market. In the primary market, focus on new listings and allocation strategies centered on cautious valuation and pricing. In the secondary market, focus on three main themes: stable cyclical sectors with consumer, policy-driven rental housing, municipal environmental protection, and stable races in water and hydroelectric and thermal power in the energy sector; sectors with high economic prospects aligned with national strategies, including data centers, high-quality warehousing logistics, and highway projects with recovering traffic volumes; and targets with strong demands for additional equity issuance from the original equity holders and high-quality reserve assets. Risk Analysis 1. Risks of approval and issuance progress falling short of expectations; 2. Risks of policies being less favorable than expected; 3. Risks of fluctuations in the secondary market.