The rules of land auction will change, and the "vest" will stage a final madness

(Image source: Visual China)

On October 17, the Economic Observation Network learned that the Ministry of Natural Resources is beginning to issue a document recommending that cities cancel the upper limit on land prices and the 1.0 limit on the plot ratio of far-reaching counties.

Developers are worried that changes in land auction rules will increase the uncertainty of land acquisition, and have "rolled in" in advance. For example, in the face of rumors, investors in North China of a large state-owned enterprise responded that regardless of whether the new regulations are true or not, and when they will be implemented, the land listed within the year "should be auctioned".

Under the current land auction rules, where land prices peak and become lotteries, it takes a certain amount of luck to get good land in first- and second-tier cities such as Beijing. Developers believe in the "luck" component and have traveled to temples everywhere; Every time when shooting the ground, not only the front-line investment, but even the group executives who watched the "battle" from a distance uniformly wore all red clothes, taking a lucky picture...

Of course, these investors who crisscross the land market will not rely entirely on metaphysics on the possibility of participating in the construction of a plot or an area. In addition to more refined accounting, they need to artificially improve their "good luck", for example, to stock up on more "vests" that go into the lottery box, which are all chips in the lottery.

In the context of the cold and intensified differentiation of land auctions, land departments in many cities need to study and formulate rules that are more suitable for the current land auction market. In particular, core cities such as Beijing and Shanghai face a choice before following up on the policy of "abolishing the land price cap".

This uncertainty has heightened the anxiety of the few developers who can still acquire land for investment, and they try to grab land before the "boots" land. Now, perhaps, the last of the developer "vest".

Mysterious vest

"Vest" usually refers to other accounts that a person owns at the same time.

In the real estate industry, the bidding rules for popular land plots in first- and second-tier cities are usually that after the land price reaches the upper limit, after superimposing the bidding for high-standard construction plans, bidding for construction or supporting area, etc., in the final round, the developer draws a lottery to determine the bidder, and the same group enterprise is not allowed to bid for the same parcel.

Under this rule, developers have two ways to increase the probability of acquiring land: one is "back-to-back", who shakes the plot, other allies can participate in cooperation; The second is to find a small company as a "vest" to bid for the lottery, and the capital behind it, the follow-up development and construction are all completed by large companies.

The "vest" is mysterious, but there are traces to follow, and most investment personnel have practiced the ability to distinguish suspected "vests" in three ways.

Taking the Beijing market as an example, you can focus on the fresh faces on the auction list: first, the main business of foreign enterprises is not in Beijing, and they suddenly enter the Beijing auction site; Second, the search was carried out by enterprise inspection, Tianyan inspection, etc., and traces of other developers appeared in the company's foreign investment and senior management employment information; Third, within 1-2 months of land auction, the publicity such as the name of the plot was changed to another large real estate enterprise.

Since the beginning of this year, many new faces have appeared in many soil auctions, such as Fujian Xiongwang, Shanxi Yutongsheng, Hongxi Real Estate, Yangzhou Huapeng, Jiangsu Shishan, Chengdu Lingyang Real Estate, Shanghai Jinxiang Derui, Chengdu Hongzhe Real Estate, Shanghai Runzhe Hongsheng, Xiamen Yanyaosheng and so on. For example, a company called Taiyuan Cuifeng Real Estate registered on June 12, 2023, and signed up to acquire land the next day.

On June 1, plots 19-69 in the 19th block of Beijing's Shunyi New Town attracted 45 real estate enterprises to hunt, and was finally shaken by Fujian Xiongwang, which has only been established for more than half a year. At that time, the outside world hotly discussed it as Xiamen C&D's vest. From the shareholder information, the five companies involved in Fujian Xiongwang's shareholders have all cooperated with Xiamen C&D. Two months later, the plot officially announced the name of the case - Jianfa Guanyun.

Similarly, on June 14, a parcel of land in the second block of Beijing's Shunyi New Town was acquired by Shijiazhuang Genesis, which was accused of being a vest of Longhu. Tianyan investigation shows that Shijiazhuang Genesis invested in a real estate development company called Hebei Lingtuo, and the company's major shareholder is a subsidiary of Jinan Longhu Real Estate Co., Ltd. Until early August, the name of the project was announced, which is the second phase of Longhu Yuhu Realm.

On September 27, a parcel of land in Beijing's Chaoyang Shibali Store attracted 34 real estate companies to participate in the auction, and was finally shaken by Chengtongjing Real Estate, which was established less than two months ago, with a registered capital of only 10 million yuan. A person close to Poly revealed to the Economic Observation Network that Chengtongjing Real Estate is Poly's vest. From the equity information, the actual controller of the company once served as an executive at Poly (Beijing) Real Estate Development Co., Ltd.

Chen Qi, an investor in a Top5 state-owned enterprise, has figured out the vest matrix in Beijing. Taking Beijing as an example, developers looking for vests have obvious geographical characteristics, which generally overlap with the regional coverage cities where the Beijing company is located, for example, the North China region of a central enterprise is in charge of Beijing, Shandong and Hebei, and the vests it is looking for are mostly small real estate enterprises and upstream and downstream companies in Shandong and Hebei.

"The waistcoat where to find is mainly determined by the network of executives and investors of this regional company, and which regional enterprises and regional platforms have a better relationship with will go to cast a wide net to find out." Chen Qi also revealed that the vest company is not necessarily exclusive, there have been a number of real estate companies sharing the vest, this soil auction and A cooperation, the next one may represent B to auction the land.

Bet on luck

The vest needs to meet two basic conditions: be qualified in real estate development and have money.

Lin Zhang, a Beijing investment pioneer at another central real estate enterprise, explained that real estate development qualifications are divided into one to four levels, and Beijing only requires qualifications, and there are no restrictions on specific levels. Even if the vest does not have qualifications, you can apply for temporary qualifications, so qualifications are not a problem.

The most critical requirement is that the vest company has enough own funds to pay the deposit of the plot.

If the vest has no money, the investment developers also have a way, "the land acquisition funds must be their own funds, but at present, Beijing's land acquisition fund review only targets the enterprises that have acquired the land, and will not check all the participating enterprises." Chen Qi sometimes needs to help the vest company advance the deposit, as long as the vest gets the land, he will give a deposit to the parent company of the vest, and then the parent company will increase the registered capital of the vest.

"Once the land is obtained, the capital review can be circumvented by enlarging the registered capital. As long as the land payment comes from the registered capital, that is, from the share capital, it can be explained. As for how the money for the share capital comes from, the land department will not pursue it. Chen Qi said.

In order to ensure the safety of funds, Chen Qi generally requires the other party to provide equal guarantees and pledges and sign an agreement. "The general people looking for vests are central state-owned enterprises, which have strict requirements on the necessity and security of each fund allocation, and may also require condominium bank accounts."

According to Lin's observations, the battle for some popular land plots is very fierce, and many central enterprises will sacrifice 4-6 vests to fight. Generally, there are two modes of cooperation: first, if one vest shakes, the two parties cooperate to develop the plot, and the rest of the vest is the right to accompany the run; Second, as long as one family is shaken, all vests participate in the development of the plot.

"For vests, it's a gamble on luck at almost no cost." Lin explained that the general lottery is high-quality land, so that the vest can cooperate with real estate enterprises with strong trading ability, brand real estate enterprises operate, the vest only for financial investment, and then there are profits and shareholder dividends, "equivalent to making money lying down after the shake."

Lin revealed that the industry generally promises to give 10%-30% of the equity of the vest company after the shake, and the two parties will receive equal remuneration for the same shares.

After acquiring the land, the project company needs to transfer equity and introduce real capital or construction parties. Generally, the equity change of private enterprise vests is very fast, and it can be completed within 1-2 months after acquiring land; If it is a state-owned enterprise vest, it needs to be listed on the production exchange, the cycle is slightly longer, and the developer will set certain guarantee clauses to prevent being "robbed", Lin said.

Theoretically, as long as the problem of qualifications and security deposits is solved, housing companies can summon dozens of vests to grab land, but there are still many housing companies that cannot find vests.

A Shenzhen-based state-owned enterprise is struggling with a large amount of investment left over from this year and has not spent it. In order to shake the plot, the company once organized groups to go to the Lama Temple, Tanzhe Temple and even travel to Wutai Mountain to pray for more good luck.

It's not easy to find a vest, "The outside world saw that I had found 4 companies, and I had to find more than 20 companies behind me to talk." Chen Qi further said that in fact, not so many vests are willing to participate in the auction, such as the Fengtai Qingta plot, where 17 real estate companies and consortiums have signed up, but the plot hides certain flaws. For a national vest real estate enterprise, it will look at the land of the whole country together, especially in the second half of the Beijing property market downturn, the return of payment is relatively slow, in contrast, the money and personnel of the vest real estate enterprise to auction land in Hangzhou, Chengdu and other cities will be a better choice.

There is also a practical problem, in the developer's limited investment team, each person needs to dock 4-5 vest companies at the same time. In order to cooperate in auctioning a piece of land, Chen Qi was busy receiving the boss and team of the vest company in Beijing, and also had to assist with registration, prepare meeting materials, consider how to solve the deposit, and negotiate the specific terms of the cooperation agreement between the two sides. We're exhausted just a few gizzles."

New regulations in the future

Chen Qi has repeatedly reported the vest chaos to the land supply department, and the response is that the relevant department believes that the existence of vests is a good thing, "indicating that the land market is hot."

Shanghai has been certified by developers as the city with the strictest "vest" blockade in the country.

In October 2016, Shanghai issued a document to strengthen the supervision of land transaction funds, bank loans, trust funds, capital market financing, asset management plan allocation, insurance funds, etc. cannot be used to pay land bidding deposits, deposits and subsequent land transfer prices, that is, land acquisition funds must be their own funds.

For example, all developers are required to submit a "Supplementary Declaration and Commitment on the Source of Funds for Commodity Housing Land Transactions" as verified by an accounting firm before registering for the auction. "The developer first asks the accounting firm to penetrate the source of funds, give a confirmation report, and then submit all the information to the corresponding audit unit in the regulation department for review." A person familiar with the land market in the Yangtze River Delta explained.

At the same time, each participating company must deposit its own funds in the supervision bank in advance to seal and supervise, which is usually 100%-110% of the starting price of the plot. This has become a hard threshold for developers to try to get on the vest.

Unlike Beijing and other places, Shanghai supervises the sale of land plots after the fact - enterprises that register for a land plot but do not win the bid are not allowed to participate in the cooperation of the land plot in any form, that is, the enterprises participating in the auction cannot participate in the subsequent equity or equity changes of the land plot, so as to prevent the phenomenon of increasing the probability of the lottery.

The above-mentioned people familiar with the land market in the Yangtze River Delta believe that for local governments, land prices and premium rates have set upper limits, which means that selling a piece of land, the upper limit of fiscal revenue is already a certainty, and dozens of more enterprises sign up to acquire land, creating a very hot atmosphere in the land market is of little significance.

A person from the eastern city planning department recalled that in the past, when the land market was hot, his city adjusted the rule that the highest price wins and added a lottery link, and at that time received feedback from many bidders that "the lottery is fair to every participating enterprise, regardless of the central state-owned enterprises or private enterprises, it all depends on the hand."

The Economic Observer Network learned that the Ministry of Natural Resources is starting to issue a document recommending that cities abolish the upper limit on land prices and that the 1.0 limit on the plot ratio of far-suburban counties be removed.

In many cities, under the background of cold land auctions and intensified differentiation, local land departments need to study and formulate rules that are more suitable for the current land auction market.

For example, if the lottery and the land price ceiling are abolished and the era of "the highest price wins", will it push up the land price? If the real estate price spread narrows and the developer's profit is compressed, will it affect the subsequent product quality? There is no upper limit on land prices, which also means that the competition for high-standard construction plans will be withdrawn from the rivers and lakes... This is a question that the above-mentioned people in the eastern urban planning department are thinking about.

Hearing that the rules of soil auction would change, Chen Qi became alert, and quickly contacted potential vest real estate enterprises as "spare tires", striving to get a few more pieces of land within the year, "I am afraid that the land behind is becoming more and more difficult to take, everyone is very panicked, and in the past, the vest chaos attacked in groups, hit 12345 together, and complained to the self-regulation commission." But if the vest is really removed, then in what way to replace it? ”

Lin Zhen is also confused, the company's investment in North China wants to spend but has not been able to spend, in the last two months of the year, "basically, except for the kind of land that cannot be seen at a glance, such as the special deviation outside Beijing's sixth ring road, all the remaining listed land plots will follow."

(At the request of interviewees, Chen Qi and Lin Zhen are pseudonyms)