Financial Street Holdings is systematically incorporating its core office properties into an asset securitization framework. On July 30, the company announced the formal establishment of the 4th Phase of its commercial real estate asset-backed special plan, the Financial Street Building CMBS. This marks the second office CMBS product launched by the company in 2026 and serves as the latest chapter in its ongoing expansion of core asset securitization.
According to the announcement, the Financial Street Building CMBS received actual subscription funds of 570 million yuan, with the principal amount in the collection account reaching the agreed target. The special plan employs a tiered structure. The senior tranche is valued at 561 million yuan, carries a AAA credit rating, and offers an expected yield of 2.69% (tax-inclusive) with an 18-year term structured as 3+3+3+3+3+3 years. Each unit has a face value of 100 yuan, totaling 5.61 million units. The subordinated tranche is valued at 9 million yuan and has the same term structure as the senior tranche.
With the establishment of the Financial Street Building CMBS, the total cumulative funds raised under Financial Street Holdings Co.,Ltd.'s 17-billion-yuan shelf-offering CMBS quota have reached 16.85 billion yuan, utilizing approximately 99.1% of the available quota. From the Shanghai Rongyue Center, the Beijing Financial Street Center, and the Shanghai Hailun Center to this latest project, the company is systematically including its prime office assets within its asset securitization portfolio.
Methodical Implementation of the 170 Billion Shelf Offering
According to market observations, Financial Street Holdings Co.,Ltd. has utilized two shelf-offering systems: an initial 5-billion-yuan round and a subsequent 17-billion-yuan round. The underlying assets cover four core office properties: the Financial Street Center, the Financial Street Building, the Hailun Center, and the Shanghai Rongyue Center. In 2023, the company began laying the groundwork for its 5-billion-yuan CMBS shelf offering. The board approved the issuance plan in February of that year, and it received a no-objection letter from the Shenzhen Stock Exchange in April, successfully securing the quota. Under this framework, the company issued two phases of CMBS products in July and August 2023—the Hailun Center CMBS and the Financial Street Building CMBS—raising a total of 4.37 billion yuan, achieving a utilization rate of 87.4% and marking an initial securitization trial of its core office assets.
Based on this early experience, on January 24, 2024, Financial Street Holdings Co.,Ltd. announced plans to apply for a shelf-offering CMBS with a total size not exceeding 17 billion yuan (inclusive). The plan would be executed in no more than five phases, with product terms not exceeding 18 years. The resolution is valid for 36 months from the date of shareholder approval, providing ample time for issuance. The four products in this round all share a unified design: an 18-year term segmented into six periods, a senior-plus-subordinated tiered structure, and a standardized face value of 100 yuan. This approach eliminates the cumbersome process of repeated applications, due diligence, and approvals for individual projects, significantly shortening the issuance cycle. The economies of scale from bulk issuance also continuously optimize financing costs, enabling the regular, efficient, and low-cost activation of core office assets.
Tracing the path of office asset securitization under the 17-billion-yuan shelf offering reveals a sequential issuance trajectory. In January 2025, the 1st Phase (Shanghai Rongyue Center) was established, raising 4.6 billion yuan with a senior tranche yield of 2.80%. In December of the same year, the 2nd Phase (Financial Street Center) was established, raising 8.1 billion yuan with the senior tranche yield dropping to 2.25%, setting records for both scale and cost. In June 2026, the 3rd Phase (Hailun Center) was established, raising 3.58 billion yuan with a senior tranche yield of 2.65%. In July 2026, the 4th Phase (Financial Street Building) was established, raising 570 million yuan with a senior tranche yield of 2.69%. It can be observed that the company adopted a strategy of prioritizing core assets and large-scale issuance, securitizing the highest-value, most market-recognized assets first, while allowing for flexible issuance sizes for subsequent assets based on their specific conditions. This strategy maximizes the financing efficiency of core assets while preserving operational flexibility for future projects.
Compared to earlier CMBS products, the underlying assets for the 3rd Phase Hailun Center CMBS and the 4th Phase Financial Street Building CMBS, both issued in 2026, had previously been securitized under the first 5-billion-yuan shelf offering in 2023. As these 2023 products entered their first 3-year exercise window in 2026, Financial Street Holdings Co.,Ltd. used the new shelf offering to establish new CMBS for debt replacement. The yield on the Financial Street Building CMBS decreased from 3.20% to 2.69%, and the Hailun Center CMBS from 3.18% to 2.65%, representing a reduction of over 50 basis points. This has effectively lowered the company's financial burden, achieving a dual optimization of existing asset value and financing costs. As of the establishment of the Financial Street Building CMBS, the company has completed four phases of CMBS issuance under this framework, raising a cumulative total of 16.85 billion yuan, or 99.1% of the total 17-billion-yuan quota. From the establishment of the first phase (Shanghai Rongyue Center) to now, in less than two years, the company has nearly exhausted the entire shelf offering quota, indicating a rapid pace of execution. Currently, only about 150 million yuan of the 17-billion-yuan quota remains. Based on the maximum of five issuances, a fifth phase could theoretically be launched, but the remaining quota is too small to support an independent new project, suggesting the shelf offering is nearing its conclusion.
Underlying Asset Support
The safety and profitability of a CMBS product ultimately depend on the quality, operational performance, and valuation of its underlying assets. Amid the overall pressure on the office market in key cities from 2025 to 2026, the underlying assets of the four CMBS phases have demonstrated varying degrees of resilience. According to Financial Street Holdings Co.,Ltd.'s 2025 annual performance report, the Financial Street Center, Shanghai Rongyue Center, Hailun Center, and Financial Street Building generated revenue of 460 million yuan, 113 million yuan, 106 million yuan, and 56 million yuan, respectively, for the period. Their fair values at the end of the period were 7.175 billion yuan, 7.695 billion yuan, 4.398 billion yuan, and 612 million yuan, respectively. The occupancy rates for 2025 were 90%, 100%, 89%, and 100% in that order. While annual rental income for all four core office assets declined year-on-year due to the industry-wide downturn, their occupancy rates outperformed the average levels in their respective city markets.
The underlying assets for the four phases are high-quality office properties located in core business districts of Beijing and Shanghai. The significant scale differences between the phases, from the 8.1-billion-yuan Financial Street Center to the 570-million-yuan Financial Street Building, stem from the inherent value and quality of the underlying assets. The 2nd Phase Financial Street Center, valued at 8.1 billion yuan, accounts for nearly half (47.6%) of the total quota. As the headquarters of Financial Street Holdings Co.,Ltd. and a landmark office building in the core area of Beijing's Financial Street, its asset value is the highest among the four products. The Financial Street Center is located at No. 9 Financial Street, Xicheng District, Beijing, with a total gross floor area of approximately 140,000 square meters. It is the largest and highest-quality underlying asset among the four CMBS phases. In 2025, it generated full-year rental income of about 460 million yuan and maintained a 90% occupancy rate. Its proximity to key financial regulatory bodies like the People's Bank of China, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission means it hosts many leading financial enterprise headquarters, fostering strong tenant stickiness. This has allowed it to maintain a stable occupancy base during cyclical rent adjustments, making it a core pillar of the asset's cash flow.
Both the Shanghai Rongyue Center and the Financial Street Building achieved full-year full occupancy. The former is located opposite the North Square of Shanghai Railway Station, adjacent to Metro Lines 1, 3, and 4, with a total GFA of about 279,000 square meters. Of this, 75,000 square meters of self-owned office space in Building A of the Shanghai Rongyue Center is leased in its entirety to China Merchants Bank. The project also includes approximately 60,000 square meters of self-operated commercial space. Achieving 100% occupancy in 2025, a time when the vacancy rate for Grade A offices in Shanghai exceeds 20%, is a notable achievement. Overall, against the backdrop of Grade A office vacancy rates exceeding 10% in Beijing and 20% in Shanghai, the occupancy rates of the underlying assets for the four CMBS phases in 2025 were significantly higher than the market averages. This highlights the strong counter-cyclical capabilities of high-quality office assets in core cities. In an environment of rising national Grade A office vacancies and investor caution towards commercial properties, only landmark properties in the core business districts of first-tier cities maintain the capital market recognition necessary for continuous securitization financing.
Furthermore, within the policy context of allowing commercial properties to be included in REIT issuance, the model adopted by Financial Street Holdings Co.,Ltd.—using CMBS to activate existing asset value and raise long-term funds in a single move while retaining asset ownership and operational control—offers a reference path for the industry. As the 17-billion-yuan CMBS shelf offering nears completion, the story of Financial Street Holdings Co.,Ltd.'s office asset securitization is poised for a new chapter. The company still holds a reserve of self-owned Grade A office properties in core financial districts of Beijing, Shanghai, and Tianjin, including the Financial Street (Yuetan) Center, Tongtai Building, Tianjin Financial Street Nankai Center, and Tianjin Global Financial Center, providing a solid foundation of underlying assets for continued securitization. On the product innovation front, leveraging its mature experience with carbon-neutral CMBS operations, the company can continue to develop low-carbon and ESG-themed securitization products in the future, precisely targeting long-term specialized investment funds to further reduce comprehensive financing costs and diversify its product mix.
Compared to the debt financing nature of CMBS, public REITs are an equity financing tool, enabling the true off-balance-sheet disposal of assets and capital exit. Financial Street Holdings Co.,Ltd. has explicitly stated its intention to actively explore diversified asset securitization tools like REITs and ABS to perfect its asset management and urban renewal business cycle. While the cash flow from its core properties remains resilient currently, over-reliance on CMBS to extend debt maturities and refinance will increasingly test the long-term stability of office rents. Successfully advancing public REITs in the future could establish a fundamental closed loop, transitioning from debt financing to an equity exit model, thereby unlocking a channel for capital recycling.
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