Comparing IPO and REITs Through Analysis of Invitation Homes Inc. and Sunac China Holdings Limited

Abstract

Real estate companies have various channels for financing, with IPOs and the establishment of REITs being two significant options. Hence, this study aims to examine and compare the distinct effects resulting from utilizing these two financing channels on the company. This article focuses on the analysis of Invitation Homes Inc. and Sunac China Holdings Limited, investigating the changes in their asset structure, liability composition, and gearing ratio before and after financing, as well as to draw potential conclusions by examining the future implications of these changes. In 2017, Invitation Homes Inc. embarked on IPO and subsequently transitioned into a REIT. In 2010, Sunac China Holdings Limited completed IPO, but it did not adopt the structure of a REIT. The findings derived from the data analysis indicate that after Invitation Homes' transition into a REIT, its asset structure demonstrates improved optimization, its liability exhibits a greater inclination towards long-term loans, and its gearing ratio shows a reduction. Comparatively, for Sunac, following its IPO, various indicators of the company have significant improvement. However, it is noteworthy that the overall structure of the company has remained unchanged. By summarizing the data results, a conclusion can be made that after transitioning into a REIT, the company's assets undergo optimization for the specific REIT type it belongs to. Furthermore, the inherent stability and reliable return characteristics associated with REITs can significantly enhance investor confidence. This research offers reference points for companies in the process of preparing for their IPO and REIT structure.