Source: Leju buy a house2024-01-30 16:19:24
Lead
◎ Text: Shen Xiaoling, Wang Hui, Chen Jiafeng, Zhang Shaoxian
01 Insurance, capital and real estate complement each other, and the cooperation model has become normalized
1. Insurance capital has entered the real estate market for nearly 20 years, and the policy is closely related to the policy to guide the investment of insurance capital into the real estate market, and real estate is a key link between insurance capital and the real estate market. According to the Interim Measures for the Administration of the Use of Insurance Funds adopted in 2010, insurance capital refers to the capital, provident fund, undistributed profits, reserves and other funds denominated in domestic and foreign currencies by insurance group (holding) companies and insurance companies, while the real estate invested by insurance funds refers to land, buildings and other fixtures attached to the land, such as office buildings, commercial buildings, hotels and other traditional investment property types and logistics and warehousing, industrial parks, data centers, Emerging types of investment properties, such as rental housing, are all within the scope of real estate investment by insurance funds. Since the real estate assets that can be invested by insurance capital are closely related to real estate, insurance capital investment in the real estate market is the main embodiment of insurance capital real estate investment. According to CRIC statistics, since around 2006, insurance institutions with strong financial strength have tested real estate through construction and purchase of office buildings for their own use, and the relevant policies of insurance capital investment in real estate can be roughly divided into two stages: the trial period and the improvement period.
- Trial period (2006-2010): Preliminary establishment of the legal status of insurance capital investment in real estate (omitted)
- Improvement period (2011-present): Broaden investment methods and guide the direction of insurance investment (some omitted)
At this stage, the policy environment for insurance capital to invest in real estate has gradually improved, and more clear requirements have been made on the investment method and investment direction. In terms of investment methods, it is clearly stated that insurance funds can enter the real estate market in the form of indirect investment, and at the same time, insurance funds can invest in PPP projects and public REITs, and in terms of investment direction, it has continuously emphasized that insurance funds are prohibited from entering the field of real estate development, and guide insurance funds to enter the long-term rental apartment market, shantytown reconstruction, urban infrastructure, pension industry, etc.
2. Insurance capital and real estate take what they need, and the investment period and income adaptability are high
In addition to policy factors, the "mutual benefit and win-win" of the two industries' demand for funds is also another important factor. Specifically, the entry of insurance funds into the real estate market is mainly based on the consideration of value preservation and profit motives.
From the perspective of the characteristics of insurance capital, the scale of insurance capital is large, the investment cycle is long, and high-quality real estate investment in commercial, office, industrial parks and other real estate can not only accommodate a large amount of funds, but also generate a certain amount of cash flow for its rent, and even generate a certain premium due to the development of the sector, which is very consistent with the investment period and risk appetite of insurance capital
- Profit motive: insurance capital to enjoy dividends, investment in pension, health to help the development of the main business (omitted)
3. Normalized cooperation of "insurance capital + real estate", four common ways to enter the real estate market (some omitted)
Insurance capital has been in the real estate market for nearly 20 years, and a variety of common cooperation models have been formed, which can be divided into the following four types:
First, the listed company carries out equity investment. Historically, many real estate companies have more or less appeared behind the participation of insurance capital, including Poly Development, Vanke Real Estate, China Merchants Shekou, Country Garden, etc. For example, in April 2015, Ping An Life became the second largest shareholder of Country Garden, which was also the first time that Ping An made equity investment in a large real estate company with life insurance funds, and began to deeply bundle with Country Garden for eight years.
The second is to participate in the investment of public REITs. Public REITs are naturally compatible with insurance funds in terms of investment period, risk and return, etc., and in November 2021, the policy allowed insurance funds to participate in the investment of public REITs. Insurance funds usually invest in public REITs through strategic placement, offline placement, and secondary market, and the preferred types of underlying assets are industrial parks and warehousing and logistics.
Third, the most common way for insurance capital to intervene in real estate development is to acquire land independently or jointly through the open market, and to cooperate with real estate enterprises in development. Due to the regulations of the regulators, insurance capital shall not be directly engaged in real estate development and construction, shall not invest in the development or sale of commercial residences, and the land acquired by insurance capital is mostly construction land for medical and health care, pension service industry, commercial office operation, etc., and in project development, insurance capital often plays the role of "investor", and the partner or the introduction of real estate enterprises as the actual operator.
Fourth, the acquisition of holding real estate projects to obtain rental returns. Real estate is in line with the long-term investment attributes of insurance capital, and high-quality properties such as commercial offices, industrial parks, warehousing and logistics are all preferred investment targets for insurance capital.
In addition to the above four types of direct investment, there are also insurance funds that indirectly invest in real estate through investment in financial products such as debt plans and equity plans, which can better circumvent the restrictions on the investment of insurance funds in projects.
At present, insurance capital has become a force to be reckoned with in the real estate market, and its every move has attracted the attention of the industry. As the real estate market enters a period of deep adjustment, how to choose insurance funds, the following article will further discuss the trends and trends of insurance capital investment in the real estate industry.
02
Insurance capital's allocation to real estate stocks and public REITs
This section focuses on the current allocation and investment trends of insurance funds to real estate stocks and public REITs, analyzes the holding logic of insurance funds under the real estate downturn, and the opportunities and challenges faced by participating in public REITs. 1. Under the downturn, insurance funds adjust their positions in real estate stocks, but the current positions are not low
- The total reduction ratio of insurance funds in real estate stocks is nearly 35%, and private insurance funds reduce their holdings most frequently (some omitted)
In 2004, the regulator approved the direct investment of insurance capital in the stock market for the first time, and in 2013-2015, real estate entered a high boom cycle, and real estate stocks became a better choice for insurance capital to allocate assets due to high dividend yield and low valuation. In 2016, the promulgation of the Notice on Matters Concerning the Regulation of Short- and Medium-term Life Insurance Products has put an all-round and systematic strict control over the issuance, operation and management of Wanneng Insurance, and the phenomenon of "hostile takeovers" of insurance funds has been stopped. Since the second half of 2021, private enterprises have been taking risks one after another, market confidence is insufficient, real estate fundamentals have deteriorated, and insurance funds have successively reduced their holdings of real estate stocks. According to incomplete statistics from the media, including Taikang, Dajia, Junkang, Harmony, Huaxia, Sunshine Life, etc., have sold real estate stocks, and there are many targets for reducing their holdings: Vanke, China Merchants Shekou, Overseas Chinese Town, Poly, Gemdale, etc.
Real estate companies have mainly suffered from reduced holdings due to factors such as liquidity, sluggish performance and pressure on earnings. In terms of the nature of enterprises, the number of state-owned enterprises, private enterprises, central enterprises and mixed ownership accounted for 35.7%, 28.6%, 21.4% and 14.3% of the total number of real estate enterprises. In terms of liquidity, all private enterprises (4) are in distress, while the remaining 10 corporate real estate companies have not yet broken out in a credit crisis. In terms of performance growth, except for Tianbao Infrastructure, which was not disclosed, in 2023, only the sales of Zhonghua Enterprises (Shanghai Real Estate) and China Merchants Shekou will increase, and the performance of the remaining 11 will decline, with Country Garden and Beichen declining significantly. In terms of profitability, the net profit of 9 real estate companies in the latest statement is in a loss state, 1 is in 1-2%, and only 4 have a net profit margin of more than 7%. The reduction of insurance capital's holdings in real estate companies with relatively stable fundamentals, such as Poly, Vanke, China Merchants and China Enterprises, is more due to short-term capital withdrawal. On the whole, the current enthusiasm of insurance funds for the allocation of the real estate sector is not high, and the valuation of the sector has been in a historical position for a long time. Based on the judgment of the entire stock market and individual stocks, the insurance capital adjusted its positions, cleared the real estate stocks in distress, and reduced some stocks with performance and profit pressure. However, at the end of 2023, there are still 21 insurance companies in the top ten shareholders of real estate stocks, of which 13 real estate stock insurance companies still hold more than 5% of their shares, and the number of stocks with a shareholding ratio of more than 5% at the end of 2020 is only 14. Insurance capital pursues absolute returns and the safety of funds, while the high dividends and low valuation characteristics of real estate stocks are highly consistent with their investment logic. 2. The market scale of public REITs is limited, and it is difficult for insurance funds to meet the demand for large-scale allocation
- The strategic placement of insurance capital reached 8.1 billion, with a preference for industrial parks, warehousing and logistics (omitted)
- Zhongjin Prologis warehousing and logistics REIT is the most sought after by insurance funds, and has been placed for nearly 1.4 billion yuan (some omitted)
If calculated according to the relative proportion of the strategic placement of insurance capital (the proportion of the strategic placement of insurance capital in the strategic placement / the proportion of the strategic placement in the total issuance), the relative share of the five public REITs with industrial parks and warehousing and logistics as the underlying assets, including Guotai Junan Dongjiu New Economy REIT, Zhongjin Prologis Warehousing and Logistics REIT, CCB Zhongguancun Industrial Park REIT, Harvest Jingdong Warehousing Infrastructure REIT, and Huaxia Hefei High-tech Industrial Park REIT, accounts for more than 20% of the relative share of their strategic placement.
Among the 19 equity public REITs, the insurance capital is the only one that has not made a strategic investment in ChinaAMC Jinmao Commercial REIT, and the strategic investment share of Jiazimei Consumer REIT, which also has consumer infrastructure as the underlying asset, accounts for only 1%. The underlying asset of Jinmao's infrastructure REIT is Changsha Lanxiu City, with an estimated distribution rate of 4.92% in 2024, while Wumart Group's distribution rate is even as high as 6.4%. However, insurance funds still do not prefer commercial real estate, which may be due to the fact that the overall rate of return of commercial real estate is lower than that of industrial parks, warehousing and logistics, with an annualized rate of return of 2.9%-5.4% for commercial real estate.
In terms of the amount of strategic placement of insurance funds (including expansion), the strategic placement amount of CICC Prologis Warehousing and Logistics REIT ranks first, reaching nearly 1.4 billion. Among them, the first strategic placement amount was 1.167 billion yuan, which was subscribed by Taikang Life Insurance at 3.89 yuan/share for 20% of the fund shares, and the strategic investment amount was expanded by 230 million yuan, and Taiping Asset Management, Great Wall Wealth Insurance Asset Management, and Pacific Asset Management subscribed for 24 million shares, 17 million shares and 14 million shares of the fund at 4.228 yuan/share respectively. In addition, CCB Zhongguancun Industrial Park REIT, Hua'an Zhangjiang Industrial Park REIT, Bosera China Merchants Shekou Industrial Park REIT and other insurance funds have placed more than 300 million yuan in their strategic placements.
03
Insurance funds turned to the stock market to invest in high-quality real estate
1. Ping An, China Life and many other insurance funds have taken action one after another, and large real estate transactions are frequent (some omitted) Ping An Life, as the "leader" of insurance investment in real estate, has made continuous efforts in the bulk real estate transaction market and continued to increase investment. Following the RMB33 billion acquisition of part of CapitaLand's six Raffles City asset portfolios in 2021 and the RMB5.015 billion takeover of Sino-Ocean Group's Beijing Sino-Ocean Rui Center project in 2022, the company invested in four more industrial park real estate projects in January 2023, with a total investment of no more than RMB7.333 billion, all of which are currently in the actual investment stage. According to the statistics disclosed on the website of the Insurance Association of China, up to now, Ping An Life has invested a total of 54.951 billion yuan in five large-scale real estate projects. In addition, it is worth noting that Xinhua Insurance launched a fund of 10 billion yuan to invest in real estate, and it is expected that the real estate layout will be accelerated in the later stage. At the beginning of 2024, New China Insurance announced that it had signed a limited partnership agreement with CICC Capital to jointly establish a fund. The size of the fund is 10 billion yuan, with New China Insurance (as a limited partner) to subscribe for 9.999 billion yuan and CICC Capital (as a general partner) to subscribe for 1 million yuan, which will directly or indirectly invest mainly in the invested enterprises with assets of holding real estate projects.
2. Commercial assets are the main investment, and the sale of real estate enterprises drives insurance funds to enter the market to "buy the bottom" (some omitted) From the perspective of the attributes of the underlying assets, the investment of insurance funds in the field of real estate mainly involves commercial complexes, office buildings, logistics and warehousing, industrial parks, pension communities and other projects. According to statistics, since 2021, equity investment and property investment have accounted for more than 8 percent. On the one hand, in the downward cycle of the industry, compared with investment targets such as residential development projects and real estate stocks, holding commercial assets have a higher margin of safety and long-term investment value. At present, insurance investment projects are mainly located in the core business districts of first-tier cities such as Beijing and Shanghai, which are mainly based on asset preservation and long-term investment expected returns. On the other hand, the sell-off of real estate companies has further driven insurance funds to enter the market to "buy the bottom". Under this round of cyclical adjustment, the industry has accelerated the clearance and increased asset disposal, and some real estate companies under pressure on liquidity have frequently put high-quality commercial assets on the shelves in order to speed up asset realization and return funds, and many of them are sold at a discount, bringing opportunities for insurance funds to buy the bottom at a low level.
3. Explore investment opportunities in subdivided tracks, and actively allocate high-quality projects such as logistics and industrial parks (omitted)
04
The real estate investment boom of insurance capital is expected to continue to expand investment channels for ABS and REITs
As the real estate industry enters a period of deep adjustment and moves from the incremental era to the stock era, the investment preference of insurance funds has also shifted from corporate bonds and real estate stocks to real estate projects. Safety, liquidity and profitability have always been the three principles of insurance capital investment, combined with the development trend of the industry and its own asset allocation needs, it can be expected that the future investment of insurance funds in real estate will still be concentrated in the real estate field.
On the one hand, the value of real estate investment has emerged, which occupies an increasingly important position in the asset allocation of insurance funds. In the face of the adjustment of the real estate market and the fluctuation of the secondary market, real estate investment can optimize the asset allocation structure, hedge investment risks to a certain extent, and better balance returns and risks, especially high-quality real estate projects are expected to have better long-term stable returns. At the same time, the overall price of real estate is at a low level, and the disposal of assets in the superimposed market is good, which is good for insurance funds to "buy the bottom" and look for high-quality project investment opportunities.
On the other hand, the approval of insurance capital to carry out ABS and REITs business will further promote the participation of insurance capital in real estate investment. Although the overall market size of ABS and public REITs is relatively limited, it is difficult to meet the needs of large-scale asset allocation of insurance funds, with the continuous expansion of the underlying asset types by future policies, the market scale has great potential for development. On March 3, 2023, the Shanghai Stock Exchange issued and implemented the Guidelines for the Application of the Rules for Confirmation of Listing Conditions for Asset-backed Securities on the Shanghai Stock Exchange No. 5 - Requirements for Insurance Asset Management Companies to Carry out Asset Securitization Business (for Trial Implementation) to encourage qualified insurance asset management companies to actively carry out ABS and REITs business. On October 13, 2023, the first batch of five insurance asset management companies of China Life, Taikang, CPIC, PICC and Ping An were approved to carry out ABS and REITs business on a pilot basis, and on December 20, 2023, the "Huatai-Zhongjiao Road Jianqing West Bridge Holding Real Estate Asset-backed Special Plan" has been successfully established.
On the whole, the boom of insurance capital investment in real estate has continued momentum, but we cannot ignore the current situation of pressure on the operation of some business formats, and we should be particularly cautious in the selection of real estate projects, give more consideration, reasonably and appropriately control the allocation ratio, and do a good job in risk management and control in all aspects of 'fundraising, investment, management and withdrawal'. In addition, approved insurance funds can also actively carry out asset securitization investment, and seize the first-mover advantage of REITs and ABS for asset allocation.
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