A Case Study Of Poly Real Estate Long-term Rental Apartment REITs

In recent years,governments at all levels have issued favorable policies for the development of the housing rental market.As a part of the housing rental market,long-term rental apartments have also ushered in a period of rapid development.In the process of financing,long-term rental apartment is faced with such problems as high financing cost,slow return of funds and few financing channels.If the capital market wants to promote the development of long-term rental apartment market,it must provide new financing ways for it.After learning from the development of foreign apartment industry,China began to apply real estate investment trusts(REITs)to the financing of long-term rental apartments.As a form of Securitization,REITs can provide a new financing channel for real estate enterprises,release the stock assets,reduce the financial leverage,and also become a financial tool for investors to allocate assets,lower the threshold for investors to participate in real estate investment.Incorporating REITs into the financing structure of enterprises is conducive to carrying out supply-side structural reform in the real estate sector and realizing the transformation and upgrading of traditional businesses.This paper uses case analysis and comparative analysis to select Zhonglian Qianhai Kaiyuan Poly Real Estate Rental Housing Phase 1 Asset Support Program(Poly long-term rental apartment REITs)for analysis.First of all,this paper analyzes the research background and significance of long-term rental apartment REITs,and collates the relevant literature and theoretical basis.Secondly,in order to make readers further understand the significance of the application of REITs in the field of long-term rental apartment financing,this paper elaborates the main financing methods of long-term rental apartment and the financing advantages of REITs.Thirdly,this paper introduces the background of the issue of Poly long-term rental apartment REITs,the arrangement of offering andliquidity,the underlying assets and the participants,on this basis,the paper analyzes the operation mechanism,investment income,main risks and tax cost of the product,and also analyzes the causes of the deficiencies of Poly long-term rental apartment REITs,so as to provide some reasonable references for the development of REITs.According to the analysis,the following conclusions are drawn:(1)As far as the operating mechanism is concerned,Poly long-term rental apartment REITs advantages include the adoption of dual SPV transaction structure to mitigate cash flow fluctuation;combining the internal and external credit enhancement measures to achieve credit enhancement;dual bankruptcy isolation mechanism to prevent the assets from being mixed;exit options are flexible and diverse,with the interface reserved for REITs public offerings.The shortcomings include too many agent links;the growth of market value is limited;over-reliance on the main credit.(2)In terms of investment income,the yield of Poly long-term rental apartment REITs priority securities is higher than that of domestic REITs in the same period,but the yield of Poly long-term rental apartment REITs priority securities is lower than that of developed regions.Because the coupon rate of Poly long-term rental apartment REITs priority securities is fixed,it may lose its competitiveness because of the low yield level during the lifetime.(3)As far as the risks of Poly long-term rental apartment REITs are concerned,although the term structure design of Poly long-term rental apartment REITs can increase the liquidity of products to a certain extent,it still faces the liquidity risk;Poly long-term rental apartment REITs have high quality underlying assets,but there is still a risk of asset value falling in the context of real estate macroeconomic regulation and control;the details of the investments and dividend payout ratios are not disclosed by Poly long-term rental apartment REITs,there is a risk of opaque flows;Poly long-term rental apartment REITs also faces the risk of falling rents due to the volatility of the rental market,given the low return on investment in domestic rental housing.(4)As far as the tax cost is concerned,the tax burden of Poly long-term rental apartment REITs is too heavy,and the tax authorities do not give REITs tax incentives or exemptions,which increases the tax costs of Poly long-term rental apartment REITs and reduces the return on investment.Finally,this paper puts forward some suggestions for the development of long-term rentalapartment REITs based on the analysis of Poly long-term rental apartment REITs,including reducing the agency link,optimizing transaction structure;weakening the credit of the main body;selecting high-quality assets and strengthening property management;encouraging the public offering of REITs and cultivating small and medium investors;establishing the information disclosure mechanism,regulating the use of funds;strengthening legislative supervision and giving tax preference.