China Construction Bank, one of the mainland’s big four lenders, is teaming with rental housing management firm China Young Professionals Apartment Management Ltd (CYPA) to set up a new RMB 2 billion ($315 million) fund aimed at securing and developing new long-term residential rental projects, according to an announcement this week from CCB.
The fund’s immediate focus is on acquiring properties in first and second-tier cities in China, or securing agreements with developers to customise existing projects, according to the statement. The properties would then be standardised and managed by CYPA, as the company expands its business of providing long-term rental housing for the country’s growing middle class.
Details of Rental Housing Fund Still in Progress
While the fund has been announced, some details of the investment vehicle remain up in the air. In an interview with mainland business news site Yicai Global, CYPA founder Wang Gehong said, “The framework for this fund has been established, but it is still undergoing founding procedures, and its interest rate has not been decided yet.”
The partners set the RMB 2 billion figure as an initial investment target for the fund, based in Shenzhen’s Qianhai district, which they indicate will be the first of its kind targetting long-term rental housing. CCB is said to be taking a 50 percent stake in the investment vehicle, with mainland finance firms Kylin Investment Funds, Bohai Securities and Bohai Huijin Securities Asset Management also participating.
China Rental Housing Boom Continues
CYPA’s tie-up with China Construction Bank is the latest in a series of investments in China’s rental housing by developers and finance firms since the central government began promoting home rental as an alternative to buying housing in the country’s increasingly unaffordable first-tier residential markets.
Just two months ago, Ping An Real Estate, a unit of Shenzhen-based Ping An Group, joined with developer Landsea Green Properties to launch their own $1.5 billion fund that will support the development of rental apartment projects in major Chinese cities.
And earlier this month, Warburg Pincus-backed Nova Property Investment, already a significant player in China’s rental housing market, announced the joint launch of a RMB 20 billion ($3.2 billion) fund with developer Sunac China. The Nova-Sunac fund aims to acquire and redevelop office buildings, hotels and shopping centres in the country’s first and second-tier cities.
In January of this year, Chinese rental housing provider Ziroom succeeded in raising RMB 4 billion ($621 million) in new funding from Warburg Pincus, Sequoia Capital China, and mainland tech giant Tencent, along with a number of other investors.
CYPA Notches Second Major Funding Source in Six Months
For CYPA, the news of the fund with CCB is the company’s second major financial victory in the last six months.
In October of 2017, the Shenzhen Stock Exchange announced that the company, along with Chinese private equity firm SAIF Partners, had won approval to create a REIT-like product listed on the Shenzhen exchange. The near-REIT was approved to issue RMB 270 million ($40.77 million) worth of securities based on rental income from homes CYPA operates in China’s first-tier cities.