Attention: Sentiment Index
Abstract:The entry threshold for public REITs will be higher, and the ABS products of housing rental holding real estate will be more flexible in terms of underlying assets, transaction arrangements, use of funds, and approval process.
On May 10, according to the Shanghai Stock Exchange, the status of the CCB Housing Leasing Fund Holding Real Estate Asset-Backed Special Plan Project (CCB Housing Rental Holding Real Estate ABS) was updated to "feedback", and the acceptance date is March 30, 2024, and the special plan holds the underlying assets by transferring the equity of the project company. It is understood that this is the first housing rental holding real estate ABS.
The original owners of the project are CCB Housing Leasing Fund (Limited Partnership), Jianrong Anju (Beijing) Equity Investment Fund (Limited Partnership) and Jianwan (Beijing) Housing Rental Investment Fund (Limited Partnership), both of which are sub-fund products established by CCB Housing Leasing Fund and a third party.
Among them, CCB Housing Leasing Fund was publicly announced by CCB in 2022 and operated by CCB, with a fund raised of 30 billion yuan, of which CCB subscribed 29.999 billion yuan.
In terms of operation, it is mainly engaged in equity investment, investment management, asset management and other activities in the form of private equity funds. The positioning and goal of the fund is to invest in the stock assets of real estate enterprises, transform them into rental housing, increase the supply of market-oriented long-term rental housing and affordable rental housing, and explore a new real estate development model that combines rental and purchase.
At the beginning of its establishment, the fund acquired some commercial lease conversion projects, and subsequently included public lease conversion, collective construction land conversion to rental housing projects, etc.
New ideas for financing
The fund is the key to CCB's transformation from credit support to equity investment in the housing rental industry. CCB mentioned in its 2023 performance report that as of the end of 2023, CCB Housing Leasing Fund had signed contracts to acquire 25 projects, with an asset scale of 11.889 billion yuan, of which the fund contributed 6.631 billion yuan, and 9 sub-funds jointly invested and established with market-oriented entities, with a total raised capital of 32.5 billion yuan.
Data source: public information, opinion index collation
In addition, as early as April 15, CCB's CCB Jianrong Home Rental Housing REIT received feedback from the Shanghai Stock Exchange. The main feedback issues include: compliance with non-residential reconstruction, identification and leasing model of Beijing Starlight Project, business model of the underlying project, reasonableness of project valuation, operation management mechanism, operation management capability, operation stability and other related issues.
From the feedback, it is not difficult to see that public REITs have clear requirements for the compliance of the underlying assets, the reasonableness of valuation, and the compliance of participating institutions.
Founded in 2018 by CCB Housing Services Co., Ltd., the original owner of the public REIT product is CCB's main platform for operating housing leasing business, including the operation of a comprehensive housing rental service platform, housing storage business, housing rental REITs, asset management, and affordable rental housing services.
According to CCB's 2023 annual report, as of the end of 2023, CCB had 159,500 housing units under management, 287 long-term rental communities of "CCB Jianrong Homes" were in operation, and more than 51 million individual users of the "CCB Jianrong Homes" platform.
The underlying project of CCB Jianrong Homes Rental Housing REIT is derived from the stock assets revitalized by CCB Housing and CCB Housing Leasing Fund in a market-oriented manner, which also means that the assets of CCB Housing Rental Fund mentioned above can be securitized in the form of public REITs and ABS of housing rental holding real estate.
Most of the original owners of public rental housing REITs funds are housing rental operation and management institutions, entrusted with the daily operation and management of infrastructure, and have the ability and experience to operate the underlying assets. The original owner of the ABS product mentioned above is a private equity fund investment platform, and the president of CCB Housing Leasing Fund has suggested earlier that the real estate private equity investment fund should be supported to become the original owner. At the same time, accelerating the construction of a multi-level REITs market can further enhance the value discovery effect of public REITs and help stabilize the public REITs market.
In terms of review method, the REIT project of Jianxin Jianrong Home still needs to be approved by the China Securities Regulatory Commission and the Shanghai Stock Exchange, and there is uncertainty, and the ABS approval authority for holding real estate is the exchange.
In addition, public REITs have clear requirements on the underlying asset format, NOI, use of funds, distribution rate, etc. Compared with public REITs for rental housing, ABS products for housing rental holding real estate are more flexible in terms of underlying assets, transaction arrangements, use of funds, approval process, etc., and have a relatively lower barrier to entry.
When it is unable to meet the issuance of public REITs, or wants to explore other asset exit paths, holding real estate ABS products bring more new ideas on asset exit and financing to the leasing industry.
Diversified financial instruments
At present, in the field of housing leasing, it has successfully issued five public REITs for rental housing, including Hongtu Innovation Shenzhen Anju REIT, CICC Xiamen Anju REIT, ChinaAMC Beijing Affordable Housing REIT, China Resources Youchao REIT and Guotai Junan Urban Investment Kuanting Rental Housing REIT, and at the same time, the company is also actively promoting the public offering of rental housing REITs.
For example, Vanke disclosed in its 2023 annual report that it is currently carrying out the application of rental housing REIT, and is also continuing to build a Pre-REITs fund, and the project cooperation with Jianwan Leasing Fund is also being promoted. As of the end of the first quarter, 108,200 rental housing units managed by Vanke Bo Apartment have been included in the affordable rental housing.
Recently, it has been reported that Yuexiu Group is actively promoting the relevant preparations before the declaration of rental housing REITs, and plans to select the Guangzhou International Trade Center Innovative Talent Apartment Project and the Baqi Erma Road Talent Apartment Project as the first batch of basic assets to enter the pool, so as to effectively revitalize the affordable rental housing assets.
The opinion index noted that many companies, including Vanke, CCB Housing and Yuexiu Group, mentioned above, have expressed their willingness to participate in rental housing REITs, and it is foreseeable that the scale of rental housing REITs will be further expanded.
At the beginning of this year, Shanghai New Huangpu Industrial Group Co., Ltd. issued an announcement on the application and issuance of affordable rental housing public REITs projects, planning to take the Meilong Community Project in Minhang District, Shanghai as the underlying asset for the first time to apply for rental housing REITs, with a planned issuance amount of not less than 800 million yuan.
It is worth mentioning that the pre-REITs mentioned above refer to the funds established before the formal establishment and issuance of infrastructure public REITs, which are used to invest, acquire, and cultivate infrastructure with the potential to issue public REITs, with the ultimate goal of achieving asset exit through the issuance of REITs or the sale to listed REITs.
At the end of November last year, Greenland Hong Kong and Gaohe Capital successfully signed a cooperation agreement on rental housing Pre-REITs in Shanghai, with Greenland Hong Kong Jingshe Apartment as the initial asset of REITs, and jointly established a Pre-REITs fund to create a public REITs platform.
Through the establishment of a Pre-REITs fund, the two parties have laid the foundation for the issuance of public REITs in the later stage, and jointly built an asset management platform based on rental housing.
It is worth noting that, according to the Notice on Further Promoting the Normalized Issuance of Real Estate Investment Trusts (REITs) in the Infrastructure Sector, the net value of the current target real estate appraisal shall not be less than 800 million yuan in principle, and the scale of expandable assets shall not be less than twice the initial offering scale for affordable rental housing projects that apply for the issuance of REITs for the first time. This means that when investing in Pre-REITs, multiple assets need to be acquired to meet the issuance size requirements, which requires a certain degree of flexibility in the fundraising of private equity funds.
In addition, on February 28, the first phase of the asset-backed special plan for China Securities Construction Investment-Shenzhen Talent Housing Rental Housing in 2024, with Shenzhen Talent Housing Group Co., Ltd. as the issuer, was successfully issued on the Shenzhen Stock Exchange, and the product category is enterprise asset securitization.
The special plan is the first phase of Shenzhen Talent Housing Group's 5 billion yuan rental housing REITs storage shelf product, with an issuance scale of 865 million yuan and a yield of 3.00% on senior securities, setting a new low in the issuance rate of REITs products in the rental housing industry.
The underlying assets of the project are affordable rental housing projects owned and operated by Shenzhen Talent Housing Group, including a total of 1,142 sets of rental housing, with a total construction area of about 91,000 square meters and an overall occupancy rate of 98%. The successful issuance of REITs for rental housing of Shenzhen Talent Housing Group is another important exploration for the housing rental industry to realize asset revitalization.
In summary, the housing rental sector is building a market pattern of coordinated development of public REITs, private REITs, and Pre-REITs funds, so as to better revitalize the stock of housing rental assets and improve the efficiency of capital use through the use of diversified financial instruments.