China Construction Bank and China Young Professionals Apartments Ltd. Jointly Launch a Special Buyout Fund for House Leasing Securitization
On March 12, 2018, China Construction Bank (CCB) and the first long-term rental housing brand named China Young Professionals Apartments Ltd.(CYPA) jointly launch a property buyout fund based on asset securitization (China Apartment REITs) in domestic rental housing market, with an initial scale of RMB 2 billion. The scale will be expended according to the need of acquisition.
The fund is established in Shenzhen, China. The target of acquisition will be focused on acquiring stock assets and developer-long-term-owned properties in first-tier and second-tier core cities. CYPA will remodel and manage the assets as the young professional apartments. This buyout fund will be managed by a team of experts including SAIF investment fund, CYPA and equity investors. CBC, as the founding investor, participates in making major project decisions and provides with comprehensive financial innovation support. Investors also include Kylin Investment which participated in equity of CYPA’s REITs products, Bohai Securities, and Bohai Huijin . It is reported that many financial institutions and well-known developers are actively negotiate to become one of the first equity investors as well.
Since the reform of China’s housing system in 1980s, the slogan of “Buy the house, go to CCB” has accompanied and supported generations of Chinese people the dream of housing. In housing finance sector, CCB has unique leadership and market position. It has accumulated rich experience in operating capabilities and credit risk assessment. As the example of Shenzhen Branch of CCB, the balance of personal housing mortgage loans was RMB 240.7 billion, accounting for 22.4% of local peers. In the same year, CCB has obvious first-mover advantage in entering rental housing market, build the long-term rental community of “CCB Jianrong Homes”, launched the first personal home rental loan product “Anju Loans”, issued the first inter-bank long-term rental housing ABN, carried out “Long-term Inclusive Project”, created brands and slogan “Buy the house, go to CCB” and “The houses are for living in, and rental is not bad”, etc.
It is understood that Founder Wang Gehong came up with an idea of establishing the fund and visited CCB after CYPA launched the first China quasi-REITs in Shenzhen Stock Exchange. In response to the CCP’s principal of “The houses are for living in, not for speculation” and based on promising future of house leasing securitization, Wang and CCB has reached an agreement. CCB would take the advantage of existing platform to strongly support and train companies and institutions with long-term rental operating capabilities such as CYPA. This is also the specific implementation of principle from CPC’s Central Economic Work Conference.
Wang Gehong said, “The reason why we cooperate with CCB is based on CCB’s on-going innovation moves into rental housing market, its solid financial support and the professionalism in risk assessment”. CCB Shenzhen representative stated that CYPA opened up the channel from acquisition to REITs, which has laid a foundation for CCB to support and establish buyout fund.
CYPA is the leading brand which took four years from M&A to assets holding, and achieve asset appreciation as well as investment income through REITs. The successful exploration of this model has provided a good reference for the future of China’s stock of assets and developer’s lease-only property. As one of the earliest financial institutions that entered rental housing market, CCB, CYPA and combine with other institutions’ buyout funds are of great significance to the practice of financial innovation in this market.
