The first domestic PE trust (mutual fund style) in real estate industry, Lianxin Jingrui Private Equity Trust (Mutual Fund Style) in Real Estate, was launched during the 2007 Bo-Ao Real Estate Forum in Hainan recently.
For this PE trust, the Chamber of Real Estate Business under the China National Industrial & Commerce Association is the organization sponsor, and Union Trust & Investment Co. Ltd is appointed as the trustee. Other initial sponsors include several leading real estate developers, including China Merchants Real Estate Holdings Co. Ltd, Poly Real Estate (Group) Co. Ltd, Beijing Tian-Hong Real Estate Development Ltd, Beijing Huayuan Real Estate Development Co. Ltd, and SOHO China Co. Ltd. The trust fund will initially raise RMB2 billion and the fund will have a lock-in period for five years.
As the banks have tightened credit facilities to real property projects, raising funds through new sources for property development has become vitally important. This Lianxin Jingrui Trust is more like a real state investment fund raised through private equity placement. Its business models include the investment in environment-protected property projects, mezzanine financing, promotion of IPO of medium and small enterprises, packing of property projects for REITS issuance in domestic and overseas markets, etc. This PE trust is a landmark achievement of creative development of real estate financing in China.
As the trustee’s legal counsel, Zhong Lun’s team in this ice-breaking project was headed by Mr. Xuebing Zhang, Mr. Borong Liu and Mr. Wilson Wei Huo, Other team members include Ms. Yang Yan-ni, Ms. Yang Ting and Ms. Cai Zhijie. The team has provided comprehensive services for reviewing and commenting the deal structure, various ways of capital contribution, management, and division of powers. The team will continue to work for the trust in preparation of numerous trust and other transaction documents. It seems a trend from this project that Zhong Lun will increasingly combine its dominated real estate practice with its prominent innovative financing practice in the future legal services and create more value for the clients.