A Case Study On The REITs Of Country Garden's Long-rental Apartment

In recent years,in order to meet the housing demand of residents,the government has allocated more resources to the field of housing leasing,which is evidenced by the introduction of a series of preferential policies.Meanwhile,the real estate development enterprises are confronted with more fierce competition in the real estate market,the slowdown of inventory turnover and the weaker pace of sales.Hence,those enterprises are eager to seek the new points of profit growth.Under the double influence of favorable policies and strategic needs,real estate enterprises have conducted business in long-term rental apartment.However,there are a wealth of challenges in this area of the business,such as long recovery cycle and huge pressure on the cash flow.The traditional financing channels struggle to meet the fund demand of the long-term rental apartment business.Nevertheless,the real estate trust fund(REITs)can convert real estate into cash in circulation,which helps those enterprises to effectively address its capital conundrum in the long-term rental apartment business.Therefore,the study of the REITs can offer enterprises some insights to use the financial instrument in a more reasonable way.Taking the REITs of Country Garden's Long-rental Apartment as a case,this paper will analyze its issuing motivations,issuing scheme and issuing effect in detail,and then summarize the relevant experience and enlightenment.The article will be divided into the following three parts:The first part is case introduction.First,this paper introduces the background of the case,and then summarizes such elements as the situation of securities issuance and the trading structure.The second part is case analysis.This paper makes a detailed analysis of the case from three aspects: motivations?plan and effect.Issuing motivations are divided into two parts,namely internal and external motivation.The external motivation includes that the traditional credit financing mode is subjected to limitation,and that the preferential policies for rental housing are constantly issued,encouraging the issuance of REITs.The internal motivation is that the issuance of REITs can broaden the financing channels of Country Garden,activate the stock assets,accelerate the capital turnover,and promote the transformation of business model.In terms of the issuance scheme,the advantages of this scheme lie in the dual SPV structure of "private fund + asset special plan" is adopted,and the transaction arrangement of "shares + bonds" is constructed.Also,reasonable tax planning has been carried out when achieving financing purpose,which helps to reduce the issuance cost,and the shelf issuance system can increase the scale of fund raising and improve flexibility.However,some problems still exist in "investment,raising,management and withdrawal".As for the issuance effect,through comparative analysis,Z-score Model and event research method to analyze the financing cost,financial risk and market effect of the enterprise,it is found that the financing cost of REITs remains relatively low,which can lessen the financial risk of the company and get a positive response from the capital market.The third part is case revelation.It mainly summarizes the relevant experience and enlightenment on the basis of the above analysis.Accordingly,reasonable suggestions for the REITs in China have been put forward in a way to solve the problems occurring in the analysis process.