Author: Sun Mengfan

  In the past two months, the real estate market has experienced a difficult turn from recovery, shock to stabilization.

  A few days ago, Zhengzhou City, Henan Province issued the "Zhengzhou City Real Estate Relief Fund Establishment and Operation Plan". The central city fund will set up a special real estate relief fund with a tentative scale of 10 billion yuan.

In addition, China Huarong and Sunshine Group signed the "Bailout and Restructuring Framework Agreement", and Asset Management Company (AMC) officially entered the market to bail out the real estate industry.

  Although the 100 billion-level national bailout fund that was widely rumored in the market has not been officially announced so far, from the practice of local governments, it has basically continued to "rescue projects but not enterprises", leveraging more leverage with limited funds, and screening qualified Project companies and other ideas that meet the conditions, adhere to the market-oriented approach, and keep the bottom line of no systemic risks.

  At the 2022 Boao Real Estate Forum held recently, Xia Bin, Counselor of the State Council and Honorary Director of the Financial Research Institute of the Development Research Center of the State Council, said that the current problems of "unfinished buildings" and "broken loans" should be sorted and handled by the central bank and other financial institutions. It is necessary for institutions to take money for assistance first, but there must be a price, and financial resources cannot be wasted.

  He said that the choice of rescue method should not be divided into leading enterprises and non-leading enterprises, state-owned and private enterprises, but should adhere to market principles and restructure and transform a batch of real estate on the premise of maintaining the property handover and stabilizing the society. Companies and bankruptcy of a group of real estate companies that have long been poorly managed and insolvent, and at the same time, specific plans must be introduced.

  At present, both real estate companies and institutional people have a view that the current bailout fund is limited in size and has a high threshold for revitalization. It remains to be seen how much it can actually play.

If there is no more systematic solution, in the case of the slow recovery of the property market, difficult housing companies will still be in a state of blood loss, and the solution to the delivery problem will not be achieved overnight.

  Market-oriented approach cautiously test the water

  Whether the shutdown problem can be properly handled and the rights and interests of homebuyers are protected is crucial to the stability and recovery of the property market.

Local governments and major AMC institutions represented by Zhengzhou have begun to explore ways to bail out housing companies, which undoubtedly injected a boost into the market.

  As a staff member of a real estate company out of danger, Wang Yang (pseudonym) has been particularly concerned about the issue of real estate shutdowns recently.

Although the issue of public market debt is equally thorny, the company's basic working idea now is to try to promote the rollover of bonds to ensure delivery.

  Not long ago, Zhengzhou convened a meeting with Wang Yang's company and other real estate companies to discuss issues such as revitalizing the suspended buildings.

In a document titled "Related Models and Suggestions for the Virtuous Circular Development of Real Estate in Zhengzhou", the official listed four ways to promote the guaranteed delivery of buildings, including shed reform, unified loan and repayment, project mergers and acquisitions, bankruptcy reorganization, security rental housing model.

  Wang Yang said that the company has reported related projects, but until now there has been no substantial progress.

In the past two days, another document was issued. Zhengzhou plans to set up a special fund for real estate relief under the central city fund in accordance with the principle of "government guidance, multi-level participation, and market-oriented operation". The scale is tentatively set at 10 billion yuan.

  This fund will be operated as a parent-sub-fund. Relevant development zones, districts and counties (cities) will attract social capital to jointly set up sub-funds according to the rescue project, hoping to leverage up to 80 billion funds through 10 billion.

After receiving the funds, the distressed housing enterprises should all use them to stop work and stop mortgage monthly payment of real estate, so as to resume work and production as soon as possible.

  According to Wang Yang's understanding, the fund has higher requirements for revitalizing projects. For example, the relationship between the creditor's rights and debts of the project company should be clear, and there should be no seizure or freezing, and there should be no internal disputes between shareholders. Guarantee, also depends on the overall project The value of the goods needs to be relatively sufficient. After the overall conversion, the assets must exceed the liabilities.

  "Most of those projects that have been sold, have been liquidated, or are insolvent do not meet the requirements." Wang Yang said that after screening according to this standard, not many can be declared for revitalization. It is a clean and profitable project. In addition, the fund amount itself is not large, and it depends on the actual landing situation.

  "To leverage the participation of social capital, we must follow a market-oriented and legalized approach to recover the principal and make appropriate profits." Li Yujia, chief researcher of the Housing Policy Research Center of the Guangdong Provincial Urban Planning Institute, believes.

That is to say, by injecting a sum of funds, the project can be activated, and the funds can be recovered through later sales, and the bailout fund can return the investment and invest in the next project.

  Zheshang Securities also stated that the basic implementation logic of the plan is to start with projects with higher net assets among the existing projects, and help difficult housing companies to revitalize funds by easing some of the suspended projects in the market, and then promote the progress of other suspended projects. Rescue housing companies with projects, and then let housing companies save more projects in order to achieve the leverage effect of rescue.

  But in reality, it is precisely those projects whose funds cannot be balanced, such as pre-sale funds and development loans being taken away.

It is also a relatively complicated process for the sub-fund to hire a third party to conduct due diligence on the project. Due to the cross-provincial allocation of funds of national housing enterprises, multi-channel financing, and multi-party mortgages, it is difficult to understand the flow of funds and the real liabilities.

  Source of funding remains a pain point

  Although Zhengzhou is cautiously testing the waters through marketization, it is a relatively positive move from the perspective of all parts of the country.

  In other places, such as Wuhan, China Construction Bank plans to set up a rescue fund of 30 billion yuan with Hubei Province as a pilot project, which will be used to acquire problem projects and convert them into public rental housing; Nanning is expected to establish a real estate stabilization fund with a planned initial scale of 3 billion yuan. However, no further plans have been implemented.

The Ganzhou Economic and Technological Development Zone has returned the land payments of individual housing companies.

  Xizheng Capital believes that under the keynote of "guaranteing the delivery of buildings", there are currently two problems to be solved. One is where does the money come from, whether from local governments, local state-owned enterprises or through social capital channels; Who will lead or implement the bailout and revitalization of unfinished projects, whether it is the state-owned central enterprises, the urban investment platform escrow and the construction, or let the real estate enterprises continue to complete the development.

  Ping An Securities estimates that from 2017 to 2021, the national average residential high-rise construction and installation accounted for about 24% of the national average residential price in the same period, and the total contract liabilities of 23 major out-of-risk or extended real estate companies in 2021 were 2.48 trillion yuan. % Assumption, it is estimated that the remaining construction and installation investment after the pre-sale is 446.4 billion.

  The scale of hundreds of billions of funds is still conservatively estimated. At present, some private real estate companies are still experiencing default events, which will have a chain reaction on their buildings under construction.

For local governments, it is necessary to be cautious when investing large-scale funds or directly "transfusion" for housing companies.

A Zhengzhou local government official told reporters that after the local government invested a lot of money in a certain insurance company at the beginning of the year, the funds recovered in the follow-up were extremely limited, and the finances were also relatively tight.

  For insurance companies, the current financing channels are extremely limited, and it is equally difficult to find money.

Wang Yang said that the current pain point of out-of-risk real estate companies is that there is no positive cash inflow, and they need too much, but they cannot sell, banks are tightened, public financing is impossible, and pre-sale funds are also strictly controlled, which is no longer enough. Not enough, but where to find money.

  Originally, the property market began to show signs of recovery in May and June, but in Wang Yang's feelings, the current industry confidence has not recovered much compared to the past, but has a downward trend.

Including some high-quality companies that have not been out of danger recently, there have also been fluctuations in stock prices and other aspects. In essence, the industry has not entered a better virtuous cycle.

  In the face of liquidity pressure, real estate companies are also actively "saving themselves".

According to CRIC's statistics, the most used methods are the introduction of trust companies, creditors' acquisition of high-quality projects, auction of creditor's rights, and partner custody.

But in reality, the most common way for real estate companies to sell their assets for self-help is not optimistic at present.

  A real estate company person who has participated in the acquisition of insurance company projects said that in order to get "life-saving money", insurance companies often set the payment terms to be more stringent, and even require a one-time payment, which makes it difficult for the two parties to negotiate transactions.

On the other hand, affected by the low temperature of the property market, the book funds of many real estate companies have been significantly impaired, which also affected the sale of transactions.

  Ping An Securities believes that the risk-taking party is more inclined to introduce strategic investors at the company level to revitalize the entire enterprise, while the acquirer is more inclined to acquire high-quality projects.

In fact, this is also the market's concern about the current bailout funds, whether it can attract enough social capital in the case of the low temperature of the property market.

  Ping An Securities believes that local governments need to play more coordination and coordination functions, take the lead in organizing connections with state-owned enterprises and financial institutions, revitalize existing inventories, and solve corporate cash flow problems.

As of 2021, the inventory of 23 major insurance companies will reach 5.7 trillion yuan. Even if the inventory corresponding to the sold properties with contract liabilities of 2.5 trillion yuan is excluded, there are still many realizable assets.

  AMC institutions will play an important role

  In the past real estate cycles in my country, unfinished buildings are not new.

  Zheshang Securities recently published a research report saying that the problems faced by Hainan in disposing of suspended projects in 2000 are similar to the current ones, such as the high cost of land purchase and construction by developers, and the difficulty of price reduction caused by the high cost of home purchase by owners; market supply exceeds demand The resulting revitalization is difficult, the contraction of supply and the promotion of demand need to be exerted at the same time, and relevant experience can be used for reference.

  For example, the local government should follow the principle of "business is suitable for business, living is suitable for living, green is suitable for greening, and demolition is suitable for demolition", according to the characteristics of different projects to be stopped and delayed, to speed up the disposal process; set up a special asset disposal platform as soon as possible Or the company, managed by a professional non-performing asset disposal team, injects liquidity into the project in the form of equity or bonds.

  When dealing with shutdown projects, clarify the reasons for the shutdown, whether it is the bankruptcy of the developer, the illegal withdrawal of funds from the project, or economic disputes.

In the process of disposal, four methods are adopted for revitalization: construction within a time limit, completion or utilization of the status quo, replacement of rights and interests and disposal on behalf of them.

While promoting the resumption of work, relax the regulation and control of the confidence in the repaired off-plan housing market.

  The current Zhengzhou model is also classifying projects and introducing asset management agencies to assist in disposal.

  Jianye Real Estate told reporters that the Zhengzhou Real Estate Relief Fund, which was established by the Zhengzhou National Central City Industrial Development Fund as the parent fund, took the lead and Zhengzhou Real Estate Group Co., Ltd. participated, and reached a cooperation with Jianye Group on the Beilonghu Financial Island office building project.

The bailout fund will create a financial industry cluster here through marketization and legalization.

  Bank of China Securities stated that national and local AMCs are important participants in my country's non-performing asset market, and have great advantages in risk resolution, comprehensive management, mergers and acquisitions, and other aspects.

At present, there are 5 national AMCs and 59 local AMCs in my country, and most of the local AMCs are local state-owned assets.

  "Compared with national AMCs, although local AMCs have a large gap in terms of capital and scale, they have unparalleled geographical advantages, are more familiar with the local economy and local small and medium-sized enterprises, and have closer ties with the local government. Therefore, from the perspective of landing, the speed of local AMC's rescue will be more efficient." Bank of China Securities believes.

  The agency also said that in the process of resolving debt risks for real estate companies, AMC has played more of a role in “promoting debt rollover and capital injection” in the past cycle, but its participation in this round will increase, and debt-to-equity swaps, bankruptcy and reorganization can be used. Models such as consolidation and bailout funds inject new funds into projects, stabilize asset prices, and alleviate liquidity risks.

  In terms of mergers and acquisitions, due to the fact that the risks in the real estate industry have not been fully cleared, some banks still take a wait-and-see attitude towards housing-related loans such as mergers and acquisitions loans, and real estate companies are more inclined to directly acquire land at this stage.

After the introduction of AMC, the creditor's rights can be revoked through all purchases and purchases, so as to better smooth the relationship between creditor's rights and debts and make more effective debt arrangements.

  At the forum mentioned above, Xia Bin said that the problem of unfinished buildings should be classified and dealt with. For some real estate companies with sound corporate governance, the "unfinished" problems caused by insufficient liquidity not caused by their own reasons will be handled by local governments and banks. After coordinating and taking corresponding restraining measures, provide timely merger and acquisition financing and other liquidity support.

For some real estate companies operating in violation of laws and regulations, and project companies that are actually insolvent, the project company will be implemented by consolidating the responsibility of local governments and coordinating banks, asset management companies, third-party market institutions, etc., "one project, one plan". Take over, debt or equity reorganization, mergers and acquisitions, etc. to inject funds, and announce the withdrawal of such companies from the market after the handover of the building.