Original title: China’s first public rental housing REITs product approved – innovative financial products to wake up “sleeping” assets
A few days ago, the public REITs (real estate investment trust fund) market has added another newcomer. Huaxia Beijing Affordable Housing Center Rental Housing REIT (referred to as Huaxia Beijing Affordable Housing REIT) has received the approval of the China Securities Regulatory Commission for registration, becoming the country’s first public rental REITs product in the field of public rental.
From the initial industrial parks, highways, warehousing and logistics, to the recently approved affordable rental housing, infrastructure public offering REITs cover more and more areas of assets. Many people in the industry believe that the successive implementation of affordable rental housing REITs projects is a concrete practice of the positioning of “housing, not speculating”, which will effectively help revitalize existing assets, support new investment in affordable housing, and is expected to promote the public offering REITs market. Further development.
Rental housing REITs accelerate expansion
In recent years, my country has continuously promoted the construction of the affordable rental housing system. In the eyes of industry insiders, the construction of affordable rental housing is another new exploration in the reform of the housing system under the new situation in my country. It is the focus of solving the structural problems of housing in big cities. effective means of stable development.
The launch of affordable rental housing REITs will help revitalize existing assets, recover funds for the construction of new affordable rental housing projects, promote the formation of a virtuous cycle of investment and financing, and play an important role in maintaining the stable and healthy development of the real estate market.
Specifically, the approved China AMC Beijing Affordable Housing REIT is an infrastructure public offering initiated by Beijing Affordable Housing Center Co., Ltd. as the original owner, CITIC Securities as the special plan (ABS) manager, and China Asset Management as the fund manager. REITs. The underlying assets of the project are two public rental housing projects in Wenlong Homestead, Haidian District, Beijing, and Xiyueshang County, Chaoyang District, Beijing.
It is reported that the Wenlong Homeland Project and the Xiyue Shangjun Project were put into use in 2015 and 2018 respectively. The buildings are of short age, the property quality is good, the living facilities in the community are complete, the rooms are delivered to a high standard, and the occupancy rate is high. It is a representative public rental housing project in Beijing. After the cultivation and improvement of management in recent years, the two projects have entered a stable period of operation, with a total valuation of about 1.151 billion yuan. The recovered funds from this project will be mainly used for the construction of housing projects on the remaining plots of the Beijing Coking Plant.
Previously, the first two affordable rental housing REITs were the first to be approved on July 29, namely Hongtu Innovation Shenzhen Talent Housing REIT and CICC Xiamen Housing REIT. Therefore, Huaxia Beijing Affordable Housing REIT has become the third affordable rental housing REITs product in China.
More importantly, since the underlying assets of Huaxia Beijing Affordable Housing REIT are two public rental housing projects, this means that public rental housing has been included in public REITs for the first time, which is of great significance for further revitalizing existing assets.
Mo Yifan, administrative director of the Infrastructure and Real Estate Investment Department of China AMC, said that the implementation of affordable rental housing REITs is in line with the long-term policy of “housing, not speculating,” and it is a financial support to solve the housing difficulties of new citizens, young people and other groups. Important measures, by revitalizing the stock assets of affordable rental housing, better support the construction of the housing security system, form a virtuous cycle of investment, increase the supply of affordable rental housing market, and better solve people’s livelihood problems.
“In addition, public REITs, as an important innovative product in the domestic capital market, attract social capital to actively participate in the investment of mature assets of affordable rental housing, which will help the investment and operation entities related to affordable rental housing to revitalize existing assets and accelerate the construction of affordable rental housing. Improve the effective supply of affordable rental housing; it will also help domestic affordable rental housing to form a market-oriented pricing benchmark; it will also help promote the transformation of the affordable rental housing service model to a market-oriented and professional transformation.” Mo Yifan said.
Policy supply consolidates the foundation for development
Against the background of the steady progress of my country’s public REITs market, the promotion of affordable rental housing REITs has received strong guidance and support from supervision and policies. As of August 10, a total of 14 infrastructure REITs have been listed and issued in the market, with a total issuance scale of 54.143 billion yuan and a total market value of 62.824 billion yuan. From the perspective of asset types, it includes expressways, industrial parks, warehousing and logistics, sewage treatment, garbage treatment projects, and affordable rental housing projects waiting for official sale.
Since the beginning of this year, rental housing REITs have officially entered the fast lane of development. On May 25, the General Office of the State Council issued the “Opinions on Further Revitalizing Existing Assets and Expanding Effective Investment”, proposing to promote the healthy development of real estate investment trusts (REITs) in the infrastructure sector; further improve the efficiency of recommendation and review, and encourage more qualified The infrastructure REITs project was issued and listed.
Subsequently, on May 27, the China Securities Regulatory Commission and the National Development and Reform Commission jointly issued the “Notice on Regulating the Work of Real Estate Investment Trusts (REITs) in the Infrastructure Field for Pilot Issues of Affordable Rental Housing” to promote the standardized and orderly development of the rental housing REITs business. . The “Notice” mentioned that it is encouraged to use the net recovery funds to invest in new projects with clear, mature conditions, and effective investment in the short term, so as to promote the formation of a virtuous circle of investment; projects should have clear ownership, mature operating models, and sustainable markets. It has been recognized as an affordable rental housing project by the relevant departments.
On July 29, the China Securities Regulatory Commission also mentioned at the 2022 system mid-year supervision work meeting and the regularization and long-term mobilization and deployment meeting for inspection and rectification, steadily expanding the scope of REITs pilot projects, accelerating the promotion of normalized issuance, and promoting the revitalization of stock assets.
Publicly offered REITs, known as “IPO of assets”, are a financial tool that can effectively revitalize existing assets, allowing large-scale “sleeping” infrastructure assets to obtain a liquidity premium, and then use the recovered funds for new infrastructure projects. building. Industry insiders pointed out that the construction of affordable housing requires a lot of capital investment, and the public offering of affordable rental housing REITs can become an effective tool to broaden direct financing channels, which is also an important reason why the current infrastructure REITs are highly supported by policies.
Dong Zhongyun, chief economist of AVIC Securities, said that the subsidized rental REITs project is based on subsidized rental properties and supported by rental income. For the issuer and the real estate market, subsidized rental REITs can effectively connect the asset side and the capital side, and broaden the insurance coverage. The source of rental funds, the revitalization of existing assets, and the priority of net recovery funds from REITs products for the construction of new affordable rental housing projects can ensure the smooth operation of the real estate security system; for investors, rental housing REITs provide new investment varieties , and has a long-term stable cash flow, allowing investors to participate in the development of the rental housing market by investing in corresponding REITs projects.
In addition to the “paving” of the policy, the successive implementation of public rental REITs projects for rented houses is directly related to the high degree of adaptation of its product characteristics. CITIC Securities analyst Mingming pointed out in the research report that from the perspective of subsidized rental housing, REITs have an obvious role in broadening their financing channels, revitalizing existing assets, and promoting effective investment. Securitization; from the perspective of the REITs market, the long-term operation goals of leased houses, relatively stable rents, and high occupancy rates are highly matched with REITs’ requirements for underlying assets. The combination of the two can expand my country’s REITs. The size of the market can also bring certain benefits to investors.
Has long-term investment value
In addition to “turning” the huge real estate assets and promoting the stable and healthy development of the rental housing market, industry insiders also pointed out that, as property-based public offering REITs, affordable rental housing REITs projects usually have long operating periods, stable rental rates, and anti-cyclical properties. It has the characteristics of strong attributes, has good long-term investment value, and can further meet the growing wealth management needs of Chinese residents.
The relevant regulations of my country’s infrastructure public offering REITs have certain requirements on the integrity of the ownership of the underlying infrastructure assets, the maturity of operations, the dispersion of cash flow sources, and the stability of income. Judging from the 3 affordable rental housing REITs that have been approved, the underlying projects are all located in first- and second-tier cities, and they are all located in employment-concentrated areas with complete living facilities. Such assets are often regarded as assets with relatively guaranteed quality.
Take CICC Xiamen Anju REIT’s ground-floor assets Yuanbo Apartment and Hengqi Apartment as examples, both of which meet the requirements of the pilot phase of infrastructure public offering REITs. Specifically, both projects have been certified by Xiamen Municipal Housing Security and Housing Administration for affordable rental housing; as of the end of March 2022, the occupancy rate has exceeded 99%; there are 4,665 rental housing units, mainly individual tenants. Sources are more dispersed; cash flow distribution ratios are expected to be 4.04% and 4.05% in April-December 2022 and 2023, respectively.
It is worth mentioning that the first two rental housing REITs have attracted active subscriptions from various institutional investors. On August 8, according to the “Fund Share Offering Announcement” issued by Hongtu Innovation Shenzhen Talent Housing REIT, this inquiry has received inquiries and quotations from 252 placement objects managed by 83 offline investors. All placement objects The total number of proposed subscriptions is 18.6241 billion, which is 133.03 times the number of initial offline offerings, setting an industry record for publicly offered REITs that have been issued in the industry. The enthusiasm of investors for rental housing REITs is evident.
“Affordable rental housing is one of the ideal asset types for my country’s infrastructure public REITs. Compared with the underlying assets of other public REITs, affordable rental housing has the characteristics of long operating period, stable cash flow, and strong anti-cyclical properties. For investors, affordable rental housing REITs will provide them with a relatively long-term and stable source of income while enriching their asset allocation,” said the relevant person in charge of CICC Fund.
Mo Yifan believes that the investment value of rental housing REITs is mainly reflected in two points: one is the multi-faceted support from policies, and this investment field has certain policy dividends; Rental housing REITs provide high-quality investment targets. “The underlying assets of rental housing REITs have long-term and stable cash flow, and are suitable for stable investors who pursue long-term stable investment returns, such as insurance funds, pensions and other investors.” He also mentioned.
“For investors, subsidized rental houses are in line with the country’s important positioning of ‘housing to live without speculation’, and the policy dividends such as land and taxation have significant advantages. Subsidized rental house REITs are a new investment variety, with long-term investment value, but also It is noted that since the rental price of guaranteed rental houses is guided by the government, which is generally lower than the market-oriented level, it is more suitable for stable investors with low risk appetite.” Dong Zhongyun said. (Economic Daily reporter Ma Chunyang)