China’s First REITs Product in the Long Term Residential Rental
Asset Category: The Special CYPA Project Was successfully Launched in the Shenzhen Stock Exchange.
Based on Shenzhen Stock Exchange fixed income website, “China Young Professionals Apartments REITs Special Project” was successfully launched on October 11th, with a proposed issuance of 270 million. The Young Professionals Apartments Project (CYPA) is the very first REITs product in the long term residential rental properties category. The successful launching of this project marks an innovative and “icebreaking” attempt to securitize tangible assets in response to the call for innovation from the supply side and in the context of China’s ongoing state policies to step up the housing leasing market. It is also a major achievement in implementing the General Office of the State Council on Several Opinions on Accelerating the Cultivatation and Developmemt of the Residential Rental Market (State Council No. 39 [39]) and the Notice on Accelerating the Development of Residential Leasing Market in Midium to Large Cities with Fast Growing Net Population Inflows (Ministry of Housing and Urban-Rural Development [2017] No. 153). The successful launch of this REITs product will play an examplery role for asset securitization and for the full initiation of REITs in China’s domestic residential rental market.
Founded in 2013, CYPA is the first long term residential rental brandname in China, whose assets were acquired by using private equity funds and are under professional management. It is the earliest initiator and operator of condomeniums for both investment and rental purposes. CYPA and its investor SAIF Investment Fund jointly launched the SAIF Real Estate Fund in 2013 and acquired the 70-year residential title property located in the core district of Beijing’s International Trade Center and then, in a major overhaul, converted it to brandname condmomiums for long-term holding and self operation, during which it has achieved a significant increase in rent efficiency and asset value. According to asset securitization experts, the success of the CYPA’s equity type of REITs shows that the long term rental model is an effectively way to revitalize the value of residential properties and to prove to be true the idea of “houses are for people to use”. Moving forward, this model will provide the best practices to Chinese developers in holding their properties for leasing and operation and for asset securitization for greater profits.
It is worth noting that this project did not rely on any third party for credit support. Its senior trench of assets obtained the AAA rating solely on the merits of CYPA’s own operations and assets qualities. It is reported that with full prelaunch preparations and communications, this project took fewer than 20 days from the project registration to its final approval, a superb example of great work efficiency in the field of asset securitization. The project team harnessed expertise of the top professional institutions in the realm of asset securitization, including SAIF Fund, Gaohigh Capital, Bohai Huijin Securities Asset Management Co., Ltd, China Merchants Bank, Zhonglun Law Firm, United Credit Ratings, Co. Ltd, DTZ Debenham Tie Leung, BDO China Shu Lun Pan Certified Public Accountants LLP and so on.
