REITs for affordable rental housing have landed one after another. How do enterprises change business logic?

The industry believes that the listing of affordable rental housing REITs has opened the curtain of industry financialization.

Since the beginning of this year, China's housing leasing industry has once again ushered in a substantial turning point. The construction of 40 pilot cities for affordable rental housing was accelerated, and the preparation progress was announced one after another in many places, and the supply increment expanded rapidly. More concerned by the industry, affordable rental housing REITs (real estate investment trust funds) have been launched one after another, and the rental housing REITs of Huaxia Beijing Affordable Housing Center have been approved, while the previous red soil innovative talents Anju REITs and Jinzhong Mansion Anju REITs have completed their inquiry and will be listed soon.

So, does this mean that China's affordable rental housing REITs will usher in a wave of issuance? How should market-oriented long-term rental participants embrace public offering REITs? From the perspective of yield, what is the focus of public offering REITs with a yield of more than 4%?

The industry believes that the listing of affordable rental housing REITs has opened the curtain of industry financialization.

Three-single affordable rental housing REITs landing

Recently, the White Paper on Housing and Urban-Rural Construction in Beijing (2022) was officially released. It is mentioned that in 20021year, Beijing raised 6 1003 sets of policy housing, exceeding the annual task of 50,000 sets. Among them, collective land lease houses 1 1899 sets, public rental houses 325 1 sets, property houses 7042 sets, and directional resettlement houses 3881sets. In 2022, Beijing will improve the long-term financing mechanism of affordable housing, establish an institutional mechanism to promote multi-subject investment in the construction of affordable rental housing, continuously optimize the audit and distribution mechanism, continuously improve the standardized level of public rental housing operation and management, and further improve the living standard.

The development of affordable rental housing is the top priority of China's housing system construction. At the beginning of this year, the Ministry of Housing and Urban-Rural Development made it clear that during the Tenth Five-Year Plan period, 40 key cities planned to add 6.5 million sets (rooms) of affordable rental housing, and in 2022, they hoped to build and raise 2.4 million sets (rooms) of affordable rental housing.

In this context, many parts of the country have increased the construction of affordable rental housing. Judging from the feedback from the provinces in the recent first half of the year, most cities have achieved their targets for the first half of the year, and some cities have also achieved their targets for the whole year. Take Zhejiang as an example. According to the news released by the People's Government of Zhejiang Province, in the first half of this year, Zhejiang Province has raised 310.9 million units (rooms) of affordable rental housing, fulfilling the annual target of 300,000 units (rooms) ahead of schedule.

The construction of 40 pilot cities for affordable rental housing was accelerated. At the same time, the supply increment has expanded rapidly, and the good news from the financial side has spread frequently, especially the affordable rental housing REITs is gradually approaching. Recently, three affordable rental houses REITs were approved, which opened the curtain of public offering REITs in the housing rental industry.

Among them, Hongtu Innovation Shenzhen Talent Anju Real Estate Investment Trust Fund and Admiralty Xiamen Anju Real Estate Investment Trust Fund have completed the inquiry and will soon enter the sale procedure. The recruitment period is from August 6, 2006 to August 7, 2007. In addition, after being approved on August 5th, Huaxia Beijing Affordable Housing Center REITs quickly entered the inquiry stage and made an inquiry on August 12, which is the third single affordable rental housing REITs approved by the market.

"The listing of affordable housing rental REITs is a new era in the industry, which has opened the curtain of industry financialization." 12 In August, at the press conference of "Blue Book of Housing Leasing Brand Value in China", Zhao Ran, Dean of ICCRA Housing Leasing Industry Research Institute, said that institutionalization, scale and financialization are the three key words of the housing leasing industry. Among them, institutionalization is the foundation and premise; Scale is the only way for enterprise development; And financialization is the driving force of the industry from germination to maturity.

Or form a pattern of "big fish eat small fish"

From the initial industrial parks, highways, warehousing and logistics to affordable rental housing, infrastructure public offering REITs cover a wider range of assets.

Zhao Ran pointed out that public offering of REITs is a financial innovation tool, which will help to further revitalize existing assets, broaden social investment channels, and expand the scale of affordable rental housing. Especially under the requirement that the CSRC has clearly defined the reinvestment destination of recovered funds, it will definitely increase the effective supply of the industry, thus truly achieving the goal of stabilizing rents and housing prices. In addition, public offering REITs is also an active management tool, which can help rental housing projects to achieve a stable and continuous increase in operating cash flow, and ultimately realize the preservation and appreciation of assets or asset packages.

"For leasing companies, on the capital side, public offering of REITs belongs to direct financing, which can not only reduce the capital cost of enterprises, but also effectively reduce the asset-liability ratio of enterprises; In terms of products, public offering of REITs will force enterprises to think deeply about how to improve overall revenue and reduce operating costs by optimizing products. " Zhao Ran said.

So, does this mean that China's affordable rental housing REITs will usher in a wave of issuance? How big will the future issue scale be?

In Zhao Ran's view, the scale of affordable rental housing REITs will not reach dozens or hundreds. A problem that cannot be ignored is that a good REITs target needs to have a certain scale. As a result, the industry may form a "big fish eat small fish" situation, and small-scale and well-operated assets will have the opportunity to be merged into it. In addition, the funds from public offering of REITs will continue to be invested in the construction of rental housing, and the scale of the industry will continue to expand. Therefore, in the future, the number of brand leasing enterprises may gradually decline, while the volume of a single brand may increase day by day.

It is worth mentioning that at present, the main enterprises that issue REITs for affordable housing are all state-owned enterprises. When people in the industry call for opening public offering REITs to high-quality market-oriented long-term rental projects, how should market-oriented long-term rental participants embrace public offering REITs and what preparations should they make?

In this regard, Zhao Ran said that the standard of REITs for affordable rental housing is asset compliance and rate of return. At present, some market-oriented leasing projects still need to be overcome in terms of compliance. For projects with up-to-standard rate of return and insufficient scale, they will have the opportunity to participate in the expansion of listed public offering REITs in the future.

In addition, state-owned enterprises and local city investment companies are still the main participants in renting houses, whether investors, builders or operators. However, with the deepening of the pilot project, in order to expand the supply channels, some cities have included the existing market-oriented long-term rental apartment projects into rental housing, such as Anxin Youth Community in Shanghai, Longzhimeng Store in Hongkou District, Jiuting Center Store in Shanghai, Wuhan Urban Construction and Jianguo Road Store in Apollo.

In this process, some non-state-owned enterprises have also obtained admission tickets for renting houses. For example, Vanke Apollo, Xuhui Youyu and Longhu Guanyu are all long-term rental apartment brands. In addition, Anxin, Yumiyu, etc. They also participated in the operation of rental housing by bringing a market-oriented long-term rental apartment project they operated into the rental housing system.

In the eyes of the industry, this may provide opportunities for non-state-owned enterprises to pilot affordable rental housing REITs.

Housing rental enterprises need to turn to the "track" of asset management

As REITs with financial product attributes, products with stable cash flow as the standard are the yardstick to ensure future returns, and the stability of the underlying assets determines risk control and future returns. In Zhao Ran's view, in the future, there is still much room for improvement in the yield of public offering REITs. There are many types of high-quality public offering REITs, and diversification will make its yield more stable. Then, from the perspective of rate of return, what is the key point that the rate of return of public offering REITs exceeds 4%?

From the perspective of life cycle, the life cycle of rental housing includes five stages: investment-financing-construction-management-return. Zhao Ran believes that in the incremental era, "investment", "integration" and "construction" are the key points of leasing enterprises. When the supply reaches a certain scale, especially after the indemnificatory rental housing REITs break through the financial closed loop and provide an investment exit path, the asset management ability of housing leasing enterprises becomes particularly critical.

"The underlying logic of housing leasing has become the logic of asset management, which is what housing leasing companies should pay special attention to now." Zhao Ran said that on the track of asset management, leasing companies should pay more attention to brand operation. How a brand can cut into the market with the help of brand strategy and achieve a rate of return of 4% or even higher has become the best indicator to highlight its brand power.

In Zhao Ran's view, as a kind of holding real estate, the significance of brand operation of rental housing is much more complicated. Different from selling real estate built and sold, leasing real estate emphasizes the ability of operators to continuously collect rents and hold the property for a long time to generate value-added income. If the sales-driven brand methodology is familiar with marketing tools such as logos and spokespersons, then the holding brand methodology is more about operational capabilities such as process management, product positioning and personnel reserve.

"Housing leasing is a low-profit industry, and taking the road of institutionalization and scale is the only way for industry participants to' survive'. With the release of policy and financial dividend, the key for housing leasing enterprises to seize the opportunity lies in whether they can go deep into the bottom of brand operation and scientifically formulate a series of tightly coupled strategies such as asset layout, product layout, personnel reserve and supply chain management. The idea of asset management and long-term operation forces enterprises to optimize products and services, and then supply more high-quality housing, so that rental housing can truly become the ballast stone for the housing needs of new citizens and young people. " Zhao Ran said.