Viewpoint... The latest release of the "Real Estate Private Investment Fund Pilot Filing Guidelines (Trial)

Published:

2023-02-25

In order to regulate private investment funds engaged in real estate investment business, better support the revitalization of real estate, and promote the stable and healthy development of the real estate market. On February 20, 2023, the official website of the China Securities Regulatory Commission (hereinafter referred to as the "China Securities Regulatory Commission") issued a document "The China Securities Regulatory Commission launched a pilot real estate private equity investment fund to support the stable and healthy development of the real estate market". At the same time, the China Securities Investment Fund Industry Association (hereinafter referred to as the "China Foundation Association" or the Association) issued the "Guidelines for the Pilot Filing of Real Estate Private Investment Funds (Trial)" (China Foundation Association [2023] No. 4) (hereinafter referred to as "" Real Estate Fund Pilot Filing Guidelines ") and supporting drafting instructions clearly allow private equity fund managers who meet the requirements to set up real estate private investment funds, invest in specific residential housing, commercial operating housing and infrastructure projects. Clarify the new category of "real estate private equity investment fund", and promote the pilot work in accordance with the principle of pilot first and steadily advancing, and will be implemented on March 1, 2023. there are a total of 21 filing guidelines issued this time, it mainly puts forward normative requirements from the investment scope of real estate private investment funds, the declaration conditions of pilot managers, product types, initial fundraising scale and capital contribution requirements, the necessary clauses of fund contracts, related party transaction rules, fund leverage rules, regulatory requirements for manager management behavior, special risk disclosure rules, fund application procedures, filing procedures, information disclosure and submission requirements, etc, the relevant provisions of the pilot filing guidelines are described as follows: Investment Scope The investment scope of real estate private equity investment funds includes specific residential housing (including stock commercial housing, affordable housing, market-oriented rental housing), commercial business housing, infrastructure projects, etc. The (I) stock of commercial housing refers to the stock of commercial housing projects that have obtained the state-owned land use certificate, construction land planning permit, construction project planning permit, construction project construction permit, and presale permit, and have achieved sales or the main construction project has started. Including ordinary houses, apartments, etc. (II) affordable housing refers to the policy housing that has obtained the state-owned land use certificate and has set up limited standards, limited prices or rents to solve the housing difficulties, including public rental housing, affordable rental housing, shared property housing, etc. (III) market-oriented rental housing refers to the rental housing that has obtained the state-owned land use certificate and construction land planning license, and does not carry out long-term market-oriented rental operation for the purpose of splitting property rights sales, but is not included in the indemnificatory rental housing system. (IV) commercial business premises refer to real estate projects for the purpose of development, construction or operation for commercial activities, including office buildings, shopping malls, hotels, etc. (V) infrastructure projects refer to real estate projects that are developed, constructed or operated for municipal engineering, public life services, and commercial operations, including high-speed railways, highways, airports, ports, warehousing and logistics projects, urban rail transit, municipal roads, water, electricity and heat Traditional infrastructure such as municipal facilities and industrial parks, new infrastructure such as 5G base stations, industrial Internet, data centers, and new energy wind power photovoltaic facilities. Reporting conditions of the administrator In accordance with the principle of pilot first and steadily advancing, the manager may establish a real estate private investment fund in accordance with these Guidelines if it meets the following circumstances: The (I) is registered as a private equity investment fund manager in the association in accordance with the law; The capital contribution structure of the (II) is stable, and the main investors and actual controllers have not changed in the last two years; The main investor and actual controller of the (III) shall not be the real estate development enterprise and its related parties, except in the case where the private equity fund investment needs to send management personnel to the real estate development project enterprise; The (IV) has a sound governance structure, management system, decision-making process and internal control mechanism; The paid-in capital of the (V) is not less than 20 million yuan; The (VI) has real estate investment management experience, and the principal of real estate investment under management is not less than 5 billion yuan, or the cumulative principal of real estate investment under management since the registration of the manager is not less than 10 billion yuan; (VII) has more than 3 real estate private investment projects successfully exit experience; (VIII) professionals with real estate investment experience, the investment department has no less than 8 professionals with more than 3 years of real estate investment experience, of which no less than 3 with more than 5 years of experience; No major violations of laws and regulations have occurred in the (IX) in the last three years; (X) other circumstances required by the CSRC and the Association. If the investors of the pilot real estate private equity investment fund are all institutional investors, the (VI) requirements of the preceding paragraph may be that the principal of the real estate investment under management is not less than 3 billion yuan, or the accumulated principal of the real estate investment under management since the registration of the manager is not less than 6 billion yuan. Product Type The Association adds a "real estate private equity fund" product type under the type of private equity fund. The establishment of a private equity fund engaged in real estate investment business in accordance with these Guidelines shall select the product type as "real estate private equity investment fund". Initial fundraising scale and capital contribution requirements 1. initial raising scale: the scale of the first round of paid-in funds raised by real estate private equity investment funds shall not be less than 30 million yuan. 2. capital contribution requirements: the first round of real estate private investment fund investors paid-in capital is not less than 10 million yuan. Among them, for real estate private equity investment funds with natural person investors, the total contribution amount of natural person investors shall not exceed 20% of the paid-in amount of the fund. In the form of partnerships, contracts and other unincorporated forms, directly or indirectly investing in real estate private equity investment funds by pooling the funds of most investors, it should be penetrated and verified, but basic pensions, social security funds, annuity funds and other pension funds, charitable funds, etc. Social welfare funds, insurance funds, asset management products issued by financial institutions, and QFLP pilot private equity funds established in China to raise funds for foreign investors are excluded. If the manager and its employees invest in the real estate private investment fund under management, they shall not be subject to the provisions of the first paragraph of this article. Special rules for real estate private investment funds to provide loans or guarantees for invested enterprises. A real estate private equity investment fund that provides loans or guarantees to an investee enterprise shall meet the following conditions: The (I) fund contract has a clear agreement and performs the decision-making procedures agreed upon in the fund contract; the maturity date of the (II) loan or guarantee shall not be later than the date of completion of the liquidation of the fund; If the (III) has a natural person investor, the real estate private equity investment fund shall hold more than 75% of the equity of the invested enterprise; If the (IV) are all institutional investors, the real estate private equity investment fund shall hold more than 75% of the equity of the invested enterprise, or hold more than 51% of the equity of the invested enterprise and the invested enterprise provides guarantee, so as to realize asset control. If the amount of equity contribution of the real estate private equity investment fund to the invested enterprise belongs to item (III) of the preceding paragraph, it shall not be less than 1/3 of the total amount of capital contribution to the invested enterprise; if it belongs to item (IV) of the preceding paragraph, it may be agreed upon by the fund contract. According to the fund contract or after fulfilling the decision-making procedures stipulated in the fund contract, the real estate private equity investment fund may, on the basis of commercial rationality, provide the fund property to the external pledge, and expand the source of investment funds by applying for business property loans, merger and acquisition loans, etc. Clarify the mandatory custody requirements for real estate private equity funds. Real estate private investment funds shall be held in trust by institutions that have obtained fund custody qualifications in accordance with the law. The fund custodian shall earnestly perform the duties of the custodian, supervise the investment scope, investment mode and qualified investors of the real estate private investment fund to continuously meet the requirements, and report the operation of the real estate private investment fund investment target and investor changes to the association on a quarterly basis. Clarify the necessary terms of the fund contract for real estate private equity funds. The real estate private equity investment fund contract shall clearly stipulate the following contents: (1) investment scope, investment mode, exit mode, etc.; (II) fund investment decision-making mechanism arrangement; (III) fund expansion, grading arrangement, pledge and other guarantee arrangements (if any); (IV) the invested enterprise to pay dividends to the fund (if any); (V) the convening mechanism, contents of proceedings and voting methods of shareholders' meetings, partners' meetings or fund share holders' meetings; (VI) other contents required by the CSRC and the association. The real estate private equity investment fund contract invested in a single project shall also clearly stipulate the investment target, investment structure, etc. Associated Transaction Rules Where a real estate private equity investment fund conducts related transactions, the manager shall prevent conflicts of interest, establish an effective related transaction and risk control mechanism, and clearly stipulate in the fund contract the prior and in-process information disclosure arrangements involving related transactions, as well as special decision-making mechanisms and avoidance arrangements for related transactions. The above-mentioned related party transactions refer to the transactions between the real estate private investment fund and the manager, the senior executives of the manager, investors, other private investment funds managed by the manager, private investment funds managed by other managers controlled by the same actual controller, or related parties with other significant interests of the above-mentioned subjects. The manager shall not conceal the related relationship or make the related transaction non-related, and shall not use the property of the private investment fund to transfer benefits to the related party and other illegal activities. Clarify the leverage rules for real estate private equity funds. The manager may, in the light of the actual business situation, set a reasonable leverage ratio for the real estate private investment fund, but shall not use the hierarchical arrangement to protect the capital and income in disguise. The total assets of a real estate private investment fund shall not exceed 200 per cent of its net assets. The regulatory principles and requirements of the management behavior of the manager. The manager shall be diligent and responsible, and effectively control the risks of real estate private equity investment funds by supervising the flow of funds and effectively playing the role of shareholders, and shall not have the following behaviors: (1) The manager uses the fund property to provide guarantees for entities other than the fund and the invested enterprise, Damage the rights and interests of investors; (II) managers use private equity fund property to directly or indirectly invest in private equity fund managers, controlling shareholders, actual controllers and enterprises or projects under their actual control; (III) other circumstances prohibited by the CSRC and the Association. Special Risk Disclosure Rules The manager shall disclose the special risks of the real estate private equity investment fund to investors in the "special risk disclosure" part of the collection and promotion materials and the risk disclosure book, and disclose in detail the basic information such as the investment scope and investment mode of the fund. If a real estate private equity investment fund involves other special risks or business arrangements such as related transactions, single investment targets, hierarchical arrangements, pledges, shareholder loans, loans, investment targets through special purpose vehicles, equity holdings of contractual private equity fund managers, etc., it shall be disclosed together in the "special risk disclosure" section of the risk disclosure statement. Application procedures and material requirements for the pilot of real estate private investment fund managers. The manager shall submit the following information and materials to the association before carrying out business activities such as raising and managing real estate private investment funds: (I) the raising plan and investment operation plan of the real estate private equity investment fund to be established; Proof of the suitability of the main contributors and actual controllers of the (II) manager; Proof of paid-in capital of the (III) manager; Proof of (IV) real estate investment management scale; Information on senior management personnel and employees related to (V) real estate investment business; (VI) legal compliance and integrity; (VII) other information and materials required by the CSRC and the Association. Filing procedures and material requirements for the pilot real estate private investment fund manager. The manager shall submit the following basic information and materials to the association within 20 working days after the completion of the real estate private investment fund raising, and go through the filing procedures: (I) private equity contracts; (II) Fund Custody Agreement; (III) fund prospectus; (IV) risk disclosure statements and investor suitability related documents; Proof of (V) the paid-in funds raised; (VI) underlying investment agreements, investment framework agreements or specific investment programmes (if applicable); (VII) the state-owned land use certificate, construction land planning permit, construction project planning permit, construction project construction permit, presale permit that the project company has obtained, as well as the supporting documents proving the progress of the main construction project of the project (if applicable); Other information and materials requested by the (VIII) Association. Special rules for disclosure of information After the establishment of a real estate private investment fund, the manager shall produce a quarterly real estate fund property management report and disclose it to investors, which shall contain at least the following: The opening of the special account for the property of the (I) fund; (II) fund property investment management, operation, disposition and income; The operation of the project in which the (III) invests in the real estate subject; changes in (IV) investment managers or key persons; Description of major changes in the use of (V) fund assets; (VI) of the circumstances involving major litigation or damage to the fund property or the interests of investors; A description of the (VII) involving connected transactions, pledges, shareholder loans, loans, etc; (VIII) other contents stipulated in the fund contract; Other content required by the (IX) Association. Information submission requirements The manager shall report the operation of the real estate private investment fund to the association on a quarterly basis, and report the overall operation of the real estate private investment fund to the association at the end of the year. Scope of application and time of implementation 1. For real estate private equity investment funds, if they are not provided for in these Guidelines, they shall be implemented in accordance with the requirements of private equity fund managers and private equity funds. Managers who do not participate in the pilot program do not apply these guidelines and can carry out equity investment businesses such as affordable housing, commercial real estate, and infrastructure in accordance with the current self-discipline rules of the association. 2. These Guidelines shall come into force on March 1, 2023.

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