In the twenty-first century, economic reporter yang ji jin shanghai reported that “the real estate industry is currently facing an overall lack of liquidity and that the business model of `high leverage, high debt' needs to be changed. In the recent past, the country has introduced a number of policy measures to support the smooth and healthy development of the real estate market, to promote credit rehabilitation in the real estate sector and to stabilize market expectations, of which the pif pilot is an important initiative.” on 24 february, wang jianping, director of the securities commission's second department, stated at the fifth global wealth management forum. The forum was hosted by the magazine financial affairs, the financial intelligence bank。
On 20 february, the cvm announced that it had launched a pilot project for a private investment fund for real estate. The cvm directs the foundation industry association to create a new category of “intestate private investment fund” within the framework of private equity funds and to adopt a differentiated regulatory policy. In accordance with the principle of first-in-first-in-first-in-first-in-first-in-first-in-first-in-first-out, private equity fund managers who meet certain conditions may, in accordance with the pilot requirements, raise and establish private equity investment funds to pilot real estate investments. The pilot was read in depth at the meeting。
Six features of the pilot
Wang jianping, this pilot has six features:
The first is to be precise and to create a category of private investment funds for real estate. By creating an innovative category of “private equity investment funds”, distinguishing them from mere equity investments, adopting targeted regulatory policies and accompanying rules, and granting appropriate policy facilities such as relaxing equity-to-equity restrictions, private equity funds can be better able to play an active role in supporting the smooth and healthy development of the real estate market, as well as to enrich the types of private equity fund products and satisfy diversified asset allocation needs。
At the same time, the “two-legged walking” approach continues to allow managers of private real estate-type funds who are unable or unwilling to participate in the pilot to continue to file in accordance with established policies, but do not enjoy the benefits of the pilot policy and are not listed under the category of private real estate investment funds alone。
The second is to broaden the scope of investment to serve the real economy with precision. The scope of investment in this private real estate investment fund pilot has been broadened to include specific housing units (including stock of commercial housing, guaranteed housing, market rental housing), commercial housing (writing buildings, shops, hotels), infrastructure projects, etc。
In particular, in the area of specific housing, in order to balance regulation and development, services for “back-to-back” work are limited to stocking of five certificates (state land-use certificates, land-use planning permits for construction, construction works planning permits, construction works permits, pre-sale licences) that have been partially sold or stock housing projects, including general dwellings, apartments, etc., where construction works have commenced. At the same time, in support of the “human security” work, the requirements for guaranteed housing and market rental housing have been appropriately reduced, with guaranteed housing (including public rental housing, guaranteed rental housing, communal property housing, etc.) requiring only one certificate (state land use certificate) and market rental housing requiring only two certificates (state land use certificate, land-building planning permit)。
With regard to infrastructure projects, the scope for investment was clarified, and new infrastructure-building projects, such as 5g, idc (internet data centres), and new energy wind and light, were taken into account, based on support for private real estate investment funds to invest in traditional infrastructure, such as industrial parks, to better adapt to new age infrastructure financing needs。
Thirdly, starting from a sound start, with the advantage of professional bodies. In order to advance the pilot in a sound manner, to maximize the demonstration effect of head managers, to make positive demands from managers on the delivery of capital, the size and experience of real estate investment management, professionals, legal compliance, etc., while explicitly limiting the participation of key funders and managers of real estate developers and their affiliates in the pilot for the purpose of strict control of conductive risks such as self-inclusion。
Specifically, differentiated arrangements have been put in place according to different investor structures, requiring managers to manage the capital of real estate investments at least rmb 3 billion, or at least rmb 6 billion since the registration of the manager; and at the same time, requiring managers to manage real estate investments at least rmb 5 billion, or at least rmb 10 billion since the registration of the administrator。
Fourth, to isolate credit risk and provide policy facilitation. In view of the fact that in practice private equity funds have invested in real estate projects more in the form of a bond-to-stock mix, and in order to better adapt to the investment strategy and business logic of private equity investment funds, some adjustments have been made to the equity ratio of the eligible funds to the invested enterprises, and leverage restrictions have been eased to allow the pilot funds to invest more flexibly. At the same time, it needs to be noted that the pilot fund product should control the bottom assets and isolate the underlying credit risk from the original equity holders。
Fifth, raising the threshold requirement to include appropriate investors. Taking into account the size of private real estate investment funds and the long duration of interest holding, investors and regulators need to have a higher risk recognition and affordability capacity, with higher threshold requirements for private real estate investment funds. For example, private investment funds for real estate are required to pay at least $30 million in the first round and investors at least $10 million in the first round。
In practical terms, the product returns of private real estate investment funds are more in line with the long-term institutional funding needs, and we consider that the pilot products will be used mainly for foreign investment, including qflp. In the near future, efforts have also been made to work with the relevant departments to broaden the channels through which institutions such as the oflp can invest in private funds. At the same time, in order to meet the asset allocation needs of natural persons investors with super-net values, some natural persons investors are also allowed to invest in private investment funds for real estate, but their share of funding and the manner in which the funds are invested are limited。
Sixth is the strengthening of risk control and the smooth advancement of the pilot. In order to regulate the investment of private investment funds in real estate, to strengthen risk controls and to promote sound piloting, we have put in place a series of regulatory requirements in the areas of fund hosting, the necessary terms of the fund's contracts, related transactions, fund leverage, prohibited behaviour, special risk disclosures, fund filing, information disclosure and delivery. At the same time, we will ensure smooth progress in the pilot by providing after-action monitoring。
Four positive roles
According to wang jianping, the real estate private investment fund has four positive effects:
The first is to meet legitimate financing needs in the field of real estate and jointly promote a smooth transition from real estate to a new development model. Private real estate investment funds can help to “feasibility” by meeting reasonable financing needs in the real estate sector and investing in housing stock. At the same time, private investment funds for real estate, based on their specialized advantages, can work in tandem with financial instruments such as credit, bonds and other equity financing to promote a smooth transition from real estate to a new development model。
The second is to enrich asset allocation options and to promote the introduction of institutional investors and long-term finance. At the demand end of the product, domestic institutional investors have a rich financial reserve, a professional in operating management and a greater demand for diversified asset allocation; at the supply end of the product, financial products that have both equity investment attributes and more stable returns over the period are also short。
The size and duration of private real estate investment funds, which generate returns through long-term, stable periods of return or exit from project value addition, enrich investor asset allocation options, add new investable varieties to existing equity and bond products, and meet the asset allocation needs of institutional investors and long-term finance。
Third, active real estate mitigates the liquidity risk of the real estate market. Private real estate investment funds can guide equity funds into operating real estate, activate the liquidity of operating real estate, enhance the “capitalization” of real estate enterprises, repair balance sheets, ease debt pressures and boost market confidence。
Fourth is the risk segregation between high-quality assets and real estate enterprises. Private real estate investment funds can become the subject of independent operations by independently acquiring and controlling the operation of targeted assets from the original equity holders, using the asset independence and risk segregation advantages of private equity funds to achieve the effective divestiture of their assets. In this way, incremental capital can be injected into the stock of real estate and separated from the balance sheets of the original equity holders, effectively carrying out a viable and high-quality asset to help the enterprise alleviate its distress。
