Shadow banks and trusts in China including MinMetals Trust Co. and Zhongrong Trust Co. have bought stakes in at least 10 real estate projects this year, as per Bloomberg. Others include AVIC Trust, which took control of two residential projects from Evergrande in March. Developers like Logan Group, Zhenro Properties etc. are also selling projects to trusts, Bloomberg notes. It reports that these companies are now betting that the unfinished homes will eventually yield cash to be able to pay off some of the $280bn in property- backed funds sold by trusts to investors. The move would not only help the shadow lenders rescue their own investments, but also provide a relief for investors and developers alike by helping free up cash. “Taking up property projects during an enduring downturn is more about saving themselves… it’s better for trusts to regain the initiative through getting a controlling stake”, said Zhu Yiming, a property analyst at China Real Estate Information Corp. said.
Separately, global alternative investment firm PAG Holdings raised $940mn for a fund focusing on emerging opportunities from China’s property sector bond rout. The funds will be earmarked from a planned $2bn IPO. The fund seeks to “take advantage of the unprecedented dislocation in Chinese real estate bonds and tight liquidity environment in the Chinese real estate sector”, PAG’s documents show. PAG and Arkkan Capital raised money in 2021 to bet on Chinese developers and continue to bet that the bond prices of high-quality developers will rebound.