(Yicai Global) Dec. 26 -- The Shanghai Stock Exchange has approved plans from Ping An Real Estate to set up a CNY5 billion (USD725 million) real estate investment trust backed by rental housing.
The asset-backed security is the first of its kind to get approval for a shelf offering in Shanghai, according to data published by the SSE on Dec. 24. Shelf offerings allow a company to make multiple public offerings with a single registration so it can time the issues to best suit the market.
Financial instruments have become an important tool to develop long-term rental apartments, according to an industry insider. Asset securitization is becoming more and more favorable, he added, saying REITs are one of the most important exit mechanisms for rental apartments.
The REITs will all be backed by properties owned by Ping An and Hong Kong-listed Developer Landsea Green Group. The first security issuance will be CNY1.1 billion with an 18-year term, available for subscription and redemption every three years. The preferred shares will have an AAA credit rating and underlying assets will be the Landsea Apartments Senlan development in Pudong New Area, Shanghai.
The Senlan project is Ping An's first development for long-term rentals. It includes 752 properties spanning 43,500 square meters and targets white-collar workers. Landsea Apartments manages the project. Ping An and Green Fir Investment, Landsea's green finance platform, bought the Senlan development in November last year with plans to turn the apartments into long-term rental properties. The pair would then look to exit via REITs once it enters stable operation.
The two companies are teaming up in multiple developments, with Ping An enhancing the duo's credit rating and Landsea managing the projects.