How Do I Choose the Best Residential REITs?

Real estate investment trusts Real estate investment trusts (REITs) were first defined as "non-corporate organizations consisting of multiple trustees as managers and holding convertible income shares." Therefore, REITs are clearly defined as closed-end investment funds that specifically hold real estate, mortgage-related assets, or both types of assets.

Real estate investment trust

From an international perspective, Real Estate Investment Trusts (REITs) are a way to collect funds from specific investors by issuing income vouchers. Real estate investment operations are managed by specialized investment institutions, and comprehensive investment returns A trust fund that is distributed proportionally to investors. With our country

The first REITs in the world were born in the United States in 1960. Like other financial innovations in the 1960s and 1970s, REITs were born to evade regulation. With the US government formally allowing REITs that meet certain conditions to be exempt from income tax and capital gains tax, REITs have become one of the most important financial instruments in the United States. There are approximately 300 REITs in operation in the United States, with total assets under management of more than $ 300 billion, and nearly two-thirds of them are listed and traded on national stock exchanges.

According to survey data, the proportion of real estate loans in newly-added assets of financial institutions is increasing rapidly. About 70% of real estate development funds come from bank loans, which has become an industry highly dependent on the banking industry. The state has launched a series of macro-controls and a series of policy credit tightening policies by banks, which has revealed the shortcomings of a single real estate financing channel. Therefore, constructing real estate finance with diversified channels, high efficiency, and conducive to risk diversification has become an urgent problem in the development of real estate in China. China's real estate investment trusts are precisely because the state has strengthened the management of real estate company credit funds. Under the high pressure of policies, real estate companies have cooperated with trust investment companies in order to ensure the capital chain, thereby promoting the development of real estate investment trusts.

From the perspective of organizational form, China's real estate investment trusts are all contractual, that is, the trust and investment company launches a trust plan, and then the investor and the trust company sign a trust contract. Each contract has a minimum subscription amount (according to regulations, the minimum is Fifty thousand yuan).

From the perspective of organizational form, the company type has the disadvantages of asymmetric information of fund managers and company shareholders, shareholders' rights are difficult to protect, double tax burdens (corporate income tax and shareholder dividends personal income tax) and other shortcomings; while the contract type is due to the separation of ownership and income rights. The trust property is relatively independent, and the fund income can be protected by law. In addition, the contract type only needs to pay taxes once, which can improve the fund income. The United States, as a mature REITs market, is mainly a company type. Considering that the development of REITs in our country should focus on stability and reduce the possibility of risk, China should adopt a contract model in the early stage. Although it is not conducive to the expansion of funds, it It can guarantee the relative stability of the fund and will not dissolve or weaken the fund due to the withdrawal of investors.

REITs have unique advantages not found in other investment products. First, the long-term returns of REITs are determined by the value of the real estate they invest in. They have a low correlation with other financial assets, have relatively low volatility, and have a value-preserving function during the period of inflation. Second, they can avoid double Taxation and no minimum investment funding requirements; Third, REITs must allocate 90% of their income as a dividend according to regulations, and investors can obtain a relatively stable current income; Fourth, the business operations of REITs in the United States are usually restricted to real estate The sale, purchase and leasing of taxes are calculated on the basis of transfer securities, that is, the vast majority of profits are distributed directly to investors, and the company is not subject to capital gains tax. Fifth, small and medium investors generally can use a small amount of capital even without a large amount of capital. Qian participates in real estate investment; sixth, because REITs shares are basically listed on major stock exchanges, compared with traditional real estate investment for ownership purposes, they have a relatively high liquidity; seventh, listed and traded REITs Compared with direct investment in the real estate industry, the degree of information asymmetry is low, and the operating situation is affected by independent directors, analysts, auditors, business and finance Direct media supervision. In essence, REITs belong to

The property (real estate) trust business in mainland China is actually a "real estate property trust + beneficiary right transfer" business. At this stage, its advantage is that it can break through the 200 limit. The industry often regards China Coal Trust's "Rongfeng 2008" trust project and Beijing SDIC's "Shenghong Building" trust project as representatives of such businesses. The following uses the "Shenghong Building" trust project as an example to analyze the specific process of this business model. The operation process of the project is as follows:

1. Yuanhong Company entrusted Beijing Shenghong Building (a market value of approximately RMB 410 million), a real estate project developed and constructed by it, to Beijing SDIC to establish a property trust in Shenghong Building. Yuanhong Company obtained all the beneficial rights under the trust.

2. Yuanhong Company categorized the beneficiary rights it enjoyed into priority beneficiary rights and ordinary beneficiary rights, and disposed of the preferential beneficiary rights (approximately RMB 250 million) to be transferred or pledged. Beijing SDIC acted as the sole agent in its transfer. The investor becomes the priority beneficiary after receiving the priority beneficiary right.

3. As the trustee of Shenghong Building Property Trust, Beijing SDIC will deposit all the income from the disposal of the trust property into a special trust account opened by Beijing SDIC and manage it. It will be used to pay the principal and income of the priority beneficiaries. Until the beneficiary obtains all the principal and income, other trust beneficiaries will not participate in any distribution.

The project has the characteristics of "trust + agency", and the use of excess asset guarantee and priority-subordinated beneficiary structure in the scheme design has typical meanings. In this project, as the trustee of the property trust, Beijing SDIC needs to perform its fiduciary duties due diligence. As the agent of the beneficiary rights transfer project, Beijing SDIC does not bear any direct responsibility except for fulfilling the agency transfer obligations due to due diligence; however, due to the beneficiary's conversion, Beijing SDIC still has to manage the trust property for the ultimate benefit of the ultimate beneficiary.

China's introduction of real estate investment trust funds has a very important role.

First, the introduction of real estate investment trust funds is conducive to improving China's real estate financial architecture.

As an innovative financing method for real estate companies, real estate investment trusts were first created in the United States in the 1960s. In the late 1960s, the United States, Japan, etc.

Legal system of real estate investment trust funds

Real estate investment trusts (REITs), as a new type of real estate investment tools, are an investment product that requires the market to combine funds from the real estate industry and the financial industry. A comprehensive legal system is required to ensure and maintain fairness, justice, Openness and transparency promote the healthy and rational development of the real estate investment trust industry. To establish a sound legal system, it is not enough to simply promulgate a single Trust Law and Investment Fund Law. The law-making work must be detailed and complete, and some other relevant regulations must be equipped to achieve this goal. First of all, it is necessary to further improve the "Company Law" or formulate the "Investment Company Law" and "Investment Adviser Law" that are specific to the development of investment funds. Secondly, some special management measures for real estate investment trusts can be formulated, such as restrictions on investment channels and investment ratios. The development of China's real estate investment trust funds in a more standardized form from the beginning. In addition, the tax law needs to be reformed to avoid double taxation and create a good tax environment for its development.

Talent Training for Real Estate Investment Trusts

Accelerate and strengthen personnel training for REITs. The development of REITs requires the establishment of a specialized management team that is proficient in business, understands the real estate market, and is familiar with business operations. A professional real estate trust operation agency or professional usually has strong real estate project operation capabilities, is sensitive to the market, and can make appropriate investments in the right projects at the right time. At the same time, such professional institutions or professionals are also Analysts on the stock market. To strengthen the training of talents in real estate trust, it is necessary to establish a team of specialized management personnel who not only understands the trust business, but also understands the real estate market, and is familiar with business operations. At the same time, it is also necessary to actively promote the building of a team of service personnel such as lawyers, accountants, auditors, and asset appraisers, which are essential for trust business.

Moral Hazard of Real Estate Investment Trusts

Judging from the operating experience of real estate investment trusts in the United States, their operations and management are the responsibility of the trustee committee or the board of directors. A trustee committee or board usually consists of three or more trustees or directors, most of which must be "independent". Drawing on the experience of the United States, China may consider establishing a similar trustee committee in trust companies that carry out real estate investment trust business, which is responsible for formulating the business development plan of the real estate trust. To create an environment or system that aligns the interests of investors with the interests of managers as much as possible is crucial to the development of REITs. In addition, the limited partnership form can better solve the problems of constraints and incentives, the unlimited liability of managers and the performance return system of managers, can effectively bundle the risks and benefits of managers and investors, and motivate managers Efforts are made to manage various investments to maximize value and prevent risks to the greatest extent.

Real estate investment trust credit system

Establish a trust enterprise credit system to improve the integrity of the trust market with a sound legal system and ensure the healthy development of the trust market. Establish a trust enterprise credit reporting system, divide the type of trust enterprise information, and realize the opening of credit information data; develop credit intermediary agencies; establish a standardized trust enterprise credit reporting database; establish and improve the system of untrustworthy punishment; regulate the development of credit rating industries; Credit management education.

Real estate investment trust fund disclosure system

Some trust companies put the raised funds into related parties and are guaranteed by the related companies, but this is not disclosed in the trust contract, leaving investors without knowing the potential risks. Trust and investment companies should disclose information truthfully, accurately, timely, and completely, including audited annual reports and temporary reports of major events, etc., disclose various risks and risk management information and corporate governance information in annual reports, and disclose related information in accounting notes. The total number of transactions and the status of major related transactions.