Text丨Qin Jiali
Editor丨Li Zhuang
Following the expansion of the asset types of public REITs from public infrastructure to consumer infrastructure in October 2023, the commercial real estate financing side has welcomed new favorable policies, and the new regulations on operating property loans have been recently introduced, which is expected to release more than 500 billion yuan of new financing.
On January 24, the General Office of the People's Bank of China and the General Office of the State Administration of Financial Supervision jointly issued the Notice on the Management of Business Property Loans (hereinafter referred to as the "Notice"), which provides a new way for housing enterprises to solve their financing difficulties. It is believed that the amount of operating property loans obtained by commercial real estate business owners in the future mainly depends on the size of the unpledged assets. Relevant real estate enterprises will use operating property loans to replace some of the more costly development loans and bonds to reduce financing costs.
The new regulations on operating property loans have been released
or release more than 500 billion yuan of loans
Recently, the new regulations on operating property loans have detailed a number of requirements such as management caliber, term, amount and purpose. Although the "Notice" sets more preconditions for loan issuance, including the implementation period of "before the end of 2024", for "real estate enterprises with standardized operation and good development prospects", the basis for "controllable risks and sustainable business", and "the first repayment** should be the operating income of the loaned property itself", etc., it attaches great importance to the credit risk management of commercial banks. However, in terms of meeting the financing needs of real estate enterprises, the new regulations on operating property loans still provide breakthrough support.
The most significant breakthrough is that, compared with traditional real estate project loans, which are earmarked for specific purposes, the Circular allows operating property loans to be used to repay relevant loans and open market bonds in the stock field of real estate enterprises and their group holding companies. Huaan** said in the report that this move is conducive to the rapid revitalization of stock assets of large-scale high-quality real estate enterprises and the enhancement of the debt repayment ability of non-defaulting enterprises.
In addition to the expansion of the use of loans, the new regulations also have a number of highlights in terms of loan amount and repayment period. It is understood that the new regulations on operating property loans are not a new type of credit, but in the past, the implementation was relatively strict, and banks rarely made operating property loans except for properties in the core areas of core cities due to risk considerations. According to the GF** report, the average pledge rate of investment real estate of domestic listed companies is expected to be about 45%, and most of the valuation rates implemented by banks are less than 50% (Vanke 37%, China Resources 56%, Longfor 42%, Xincheng 31%, China Merchants Shekou 50%).
In contrast, the Notice clarifies that the loan amount shall not exceed 70% of the appraised value of the loaned property in principle; At the same time, it is clarified that the term of operating property loans is generally not more than 10 years and the longest is not more than 15 years, so as to reduce the burden of real estate enterprise debt by "exchanging time for space".
However, not all real estate companies can benefit from operating property loans. According to the business management caliber specified in the Notice, the issuance of operating property loans is mainly for commercial real estate enterprises with operating properties as collateral and good comprehensive benefits, including but not limited to commercial complexes, shopping malls, business centers, office buildings, hotels, cultural and tourism real estate projects, etc., excluding commercial housing and rental housing.
In the eyes of industry insiders, the amount of operating property loans obtained by subsequent commercial real estate business owners mainly depends on the size of unsecured assets. Li Yujia, chief researcher of the Guangdong Provincial Housing Policy Research Center, told this magazine that operating property loans are designed to encourage real estate companies to operate self-owned properties for a long time, and real estate enterprises use holding properties as collateral to obtain low-cost loans. However, now many enterprises are often in a state of high leverage, and many property assets in hand have been mortgaged or even over-mortgaged, and the remaining loan space is not necessarily much, "if the follow-up loan interest rate is low enough, it may guide real estate companies to replace a part of the development loans and bonds with higher interest rates through operating property loans, thereby reducing financing costs." ”
According to Huaan**'s estimates, the scale of new loan financing in the industry after the new regulations may exceed 500 billion yuan. That is, among the listed real estate enterprises that currently hold a large scale of operable properties, the total scale of investment real estate assets of real estate enterprises that have not defaulted and central state-owned enterprises is 13 trillion yuan, the scale of collateral assets is about 480 billion yuan, and the total scale of new financing will exceed 500 billion yuan according to the calculation that 70% of unpledged assets can be financed.
Self-owned property real estate companies have clearly benefited
Longfor is expected to receive a loan of 90 billion yuan
Judging from the business caliber of the new regulations that are clearly aimed at "commercial real estate enterprises with better comprehensive benefits", operating loans are obviously beneficial to real estate enterprises holding properties. According to the Guotai Junan** report, it is difficult to realize the current holding properties, and even if you want to repay your debts through liquidation, you will encounter great obstacles. For real estate companies that have high-quality holding properties but have certain pressure on the parent company's operation, this document will help revitalize the stock without the need for liquidation.
Sorting out the current top real estate enterprises in the industry with the largest scale of operating properties, taking the "2023 China Real Estate Enterprise Operating Income Ranking" released by CRIC as a reference, the domestic real estate enterprise operators with operating income scale in the top 10 and not out of danger, including China Resources Land, Longfor Group, Vanke Real Estate, Xincheng Holdings, China Merchants Shekou, China Overseas Real Estate and Joy City, the threshold for the top 10 finalists in 2023 exceeds 55700 million yuan. If it is relaxed to TOP20, it will include more than 10 real estate companies such as Hopson Development, Lujiazui, Poly Development, and Gemdale Group, with a shortlisted threshold of 24700 million yuan.
Among them, the annual operating income of four real estate companies, China Resources Land, Longfor Group, Vanke Real Estate and Xincheng Holdings, was 25.2 billion yuan and 14.3 billion yuan respectively400 million yuan, 119900 million yuan and 10.5 billion yuan, which are real estate enterprises with in-depth layout in the field of holding properties.
Combined with the China Galaxy Research Report, as of mid-2023, the proportion of investment real estate assets in Hong Kong domestic real estate stocks China Resources Land, China Overseas Land & Investment, and Longfor Group to total assets is respectively. 86%, and the scale of operating properties accounts for a considerable proportion. The leading real estate enterprises have shown excellent operation and management capabilities, and the continuous relaxation of supply-side policies may have a greater marginal impact on some real estate companies.
In fact, some leading real estate companies have used commercial assets for financing. At the investor meeting in January this year, Longfor Group, with "Tianjie" as the main commercial real estate brand, said that it will add more than 15 billion yuan of operating property loans in 2023, and it is expected to be able to issue new operating property loans of 10 billion yuan this year. As early as the 2023 interim results meeting, Longfor said that it is vigorously cooperating with banks to make operating property loans, and in the future, Longfor will continue to enter the market with more than 40 Tianjie (shopping centers), and operating property loans can reach close to 90 billion yuan.
With Wuyue Plaza as its main operating brand, Seazen Holdings currently operates 161 Wuyue Plazas, and in the first eight months of 2023, the company's operating property loans and other financing collateralized by Wuyue Plaza totaled about 11 billion yuan.
Vanke established a commercial division in January this year to unify the commercial business of the seven regions and SCPG Group. As early as the end of 2022, OCT, a state-owned enterprise developer focusing on "cultural tourism + real estate", established OCT Commercial Management Company to manage its commercial projects in a unified manner, and released its commercial real estate strategy at the end of 2023, indicating that it will shift from "cultural tourism thinking" to "cultural tourism business thinking".
According to the company's interim performance report, in the first half of 2023, the turnover of CR Land's operating real estate increased by 41% year-on-year to 107200 million yuan, accounting for 147%；The segment's core net profit increased by 88 percent year-on-year4% to 4 billion yuan, accounting for 355%。
The follow-up new regulations on operating property loans will further release the mortgage financing space for real estate enterprises. According to the statistics of Everbright** and other institutions, the proportion of restricted (mortgaged) investment real estate of real estate enterprises as of the end of 2022, Seazen Holdings has handled mortgage loans of 695% and 56 for Gemdale Group2%, Vanke A is 116%, compared to 42 for Longfor Group1%。For some of the above-mentioned real estate companies, operating property loans can help alleviate the liquidity crisis, for example, Gemdale's debt due in 2024 is 21.6 billion yuan, and the institution estimates that its operating property loans can be released at 8.9 billion yuan.
In terms of the space of assets that can be mortgaged by real estate enterprises, Xue Jianxiong, president of Youtaocheng, told this magazine that local real estate companies with stable asset income may usher in financing opportunities: "In the past, many real estate companies with good cash flow conditions could get money as long as they provided asset package mortgages, on the contrary, a large number of local real estate enterprises with small cash flow had stable asset income but could not lend. At present, the regulator has opened up subdivided lending channels, and many high-leverage large real estate companies can use high-quality assets for mortgage loans are left, while small and medium-sized real estate enterprises in some places still have asset operation income, and they have the opportunity to get low-cost funds. ”
A more cost-effective financing tool
Operating property loans can replace existing debts
Following the "icebreaking" of the application of consumer infrastructure REITs products in October 2023, there are three common forms of financing for domestic commercial real estate, including REITs (real estate investment trusts**) and CMBS (commercial real estate mortgage support**) operating property loans, which correspond to three different financing attributes: equity financing, debt financing, and bank loans.
It is also based on the stock of operating properties as the underlying assets for related financing, CMBS products and quasi-REITs products have actually maintained a considerable issuance scale in recent years. According to the data of the China Index, in 2023, the total amount of CMBS CMBN and quasi-REITs products will be 181.8 billion yuan, a slight decrease of 50%。Among them, the issuance amount of quasi-REITs products was 83.8 billion yuan, driven by the significant growth in the issuance of products with infrastructure as the underlying asset, and the issuance volume increased by 42% year-on-year1%。
However, at present, operating property loans may become a more cost-effective financing channel than CMBS and public REITs.
It is understood that CMBS CMBN, as a bond financing product, is more complex than the operating property loan process, and it is difficult to issue, and most CMBS products require a resale every 3 years, and the repayment period is under pressure; At the same time, in recent years, REITs products have also continued to be in the secondary market, according to wind data, since the beginning of this year (as of January 31) only 5 of the 29 issued public REITs products *** On the whole, the operating property loans after the new regulations have the characteristics of long repayment cycle, high amount and wide range of uses, and can be used more to replace existing debts.
Li Yujia introduced that the current operating property loans have advantages, but CMBS, REITs and other products are still not fungible. Among them, CMBS is a bond issued as an asset based on the sustainable cash flow of the property, and REITs is an equity financing that transfers part of the asset income right; In contrast, the property assets behind the operating loan do not need to be transferred to ownership or management rights.
Zhang Hongwei, the founder of Jingjian Consulting, told this magazine that the clarification of operating property loans can be used to repay the loans and bonds in the field of real estate of the holding company of the group is the biggest highlight of the new regulations, but this does not mean that the regulator has begun to transition from "rescue projects" to "rescue enterprises".
(This article was published in the Feb. 10 issue of Market Weekly.) The ** mentioned in the article is for example only and does not make a recommendation for buying and selling. ）