“It’s the Spring Festival, I can’t go home, and the rent refund can’t be withdrawn…” Yan Feng, who paid half a year’s rent at Eggshell Apartment, said that he had prepaid over 14,000 yuan in rent for Eggshell Apartment, waiting to be withdrawn soon. Month, still did not arrive.
On Weibo, there are many tenants who have the same experience as him. It’s been three months since the eggshell apartment thunderstorm. “Is the eggshell refunded today?” became their daily question. Someone called the rights protection phone and got a response suggesting that they should negotiate with the eggshell to solve the problem. Some asked the police and the neighborhood committee for mediation, but the solution eventually led to a result-“no solution.”
In fact, WeBank, as a partner of the “rental loan”, announced a settlement plan after the incident, changing the creditor’s rights relationship from between tenants and banks to between long-term rental apartment institutions and banks, reducing the number of tenants in a disadvantaged position. Burden, but this cannot solve the tenants’ losses.
These tenants paid half a year or one year’s rent before the accident at Eggshell Apartments. Later, the eggshell funds chain broke and they were unable to pay the landlord on time. They were ordered to move by the landlord and became unable to live in the house after paying the rent. A group of people.
“Users of rental loans have WeBank, and Eggshell employees have to get back a portion of their salaries. Landlords have to compensate for the decoration of Eggshell appliances. They only pay users annually, with the biggest loss, but no compensation at all!” Dahai said Yan Feng suffered the same, but he waited for more refunds.
Judging from the lease contract provided by Dahai, Dahai signed a one-year renewal contract with Eggshell Apartment in June 2020, with a monthly rent of 1,890 yuan. He chose to pay annually, but turned out to be “the most trapped victims.”
After the eggshell thunder, many tenants reported that they had been evicted by their landlords and found that their door locks had been changed after returning home from get off work. More violent landlords even threw their tenants’ belongings out of the door. Dahai also failed to escape the conflict. “I have received a notice from the landlord to move out since November 12 last year. During this period, there were countless confrontations. One time the landlord came over at two in the middle of the night.”
He calculated that he had been carrying it for more than two months and had recovered the loss of nearly 4,000 yuan. As long as he carried it for another five months, the rent would be basically recovered. Dahai posted this experience on the Internet, attracting a lot of social attention, but he can only do so.
In the past few years, driven by capital and market demand, long-term rental apartments have appeared in high profile. However, in 2020, when a variety of complex factors are in parallel, there are not a few long-term apartment companies that are trapped by the broken capital chain. According to incomplete statistics from the Shell Research Institute, in 2020, more than 40 parents renting apartments will be involved in business disputes or broken capital chains.
Prior to Eggshell Apartments, Hangzhou’s Chaoke Apartment, Shanghai’s Yuyi Apartment, Shenzhen’s Lanyue Apartment, Guangzhou’s Kitty Rentals, etc. were all exposed to the news that the boss was suspected of “running off the road” with money, and thousands of tenants were victimized. , Landlords and suppliers came to defend their rights.
In fact, the explosion of long-term rental apartments began in 2018, and the crisis will deepen in 2020. Although there is no bloodless change, the survival rule of the business world is so cruel, but no one expected that it was just an industry reshuffle, but it turned into a tragedy of “all people pay the bill”.
How did this happen?
Domestic long-term rental apartment companies are generally divided into four categories according to the different backgrounds: the government-led leasing platform, namely the “national team”, the “wind riders” represented by real estate agencies and banks, and the “rich people” with a developer background. The second generation”, and “entrepreneurs” like Eggshell Apartment and Qingke Apartment.
Judging from the current situation of liquidation, most of the companies that have problems are startups. If the cause is attributed to the increase in apartment vacancy rate and decrease in occupancy rate due to the epidemic, which in turn triggers large-scale cash flow tightness for leasing companies, I am afraid that the outside world will complain that the long-term apartment industry is too insincere.
Wang Gehong, founder and CEO of Xinpai Apartment, told AI Finance and Economics that the epidemic was only the fuse, and the expansion model that violated the basic business logic in the past few years was the root cause of the thunder.
Xinpai Apartments also belong to the category of entrepreneurs, but their operations during the epidemic were relatively stable. Eight years ago, there were no more than 10 domestic long-term rental apartment brands. It took Wang Gehong a year to open the model store and flagship store of Xinpai Apartment on the side of the Forbidden City in Beijing and the core area of CBD, and both of them were realized within 3 months. Full rent.
Different from other counterparts that rely purely on the development of second landlords, Wang Gehong also tried the asset-light model of acquisition of heavy assets and brand output when he founded Xinpai Apartment. The Xinpai apartment located near Beijing’s CBD International Trade Center was presented after he acquired the stock assets and transformed it. In 2017, he packaged an entire building into REITs (Real Estate Trust Investment Fund) and issued China’s first housing rental apartment REITs product. , The total amount involved is 270 million yuan.
But for many years, Xinpai apartments have only been deployed in Beijing, Chengdu, Shenzhen, and Nanjing, and their scale is not prominent in the industry. “In the past few years, I saw my peers advancing all the way, saying that I don’t envy it is false. Now it seems that scale expansion regardless of cost has laid too many hidden dangers for enterprises.” Following the ups and downs of the industry in these years, Wang Gehong has long rented apartments. Like a dumbbell, one side is the property building and the other side is the capital. The brand operator is the bridge connecting the two.
“The properties in good locations suitable for leasing in China are in the hands of the government and developers, and the large capital is in the hands of financial institutions.” Wang Gehong summarized the reasons for the thunder and believed that the state currently lacks credit funds for operators, plus public offerings. REITs have not yet landed, so many entrepreneurial long-term rental apartment companies formed a capital pool through misallocation of rent loans, and expanded their scale through high income and low rent, which eventually led to corporate thunder.
It is understood that bank loans and CMBS (commercial real estate mortgage-backed securities) require mortgage property ownership, but most long-term rental apartment companies in the sublease model have no assets to mortgage, and it is difficult to raise funds through such financing channels.
Moreover, the ABS issuance approval based on the assets owned by the project is strict, and it needs to evaluate the historical operation of the company, the performance of the lease, and the credit of the tenant. Most companies cannot meet the requirements. Domestic REITs products are faced with issues such as liquidity, applicability of underlying properties, and double taxation, and do not yet have the conditions for the issuance of standard REITs.
In addition, rental housing is a business with a long return period and complex operating links. Among them, the rental cost of the second landlord’s charter model accounts for more than 50% of the total cost, and the decoration and operation also require higher cost inputs. The Shell Research Institute has counted the status of companies that have operating problems. More than 60% of the companies have registered capital below 2 million yuan, and there is no actual capital investment in the previous operation, and more than 90% of the companies have no paid-in registered capital. “The industry lacks barriers to entry, and companies fall into a scale trap, without considering their own operational management capabilities, blindly expanding the size of the management room, and finally leading to a break in the capital chain.” Wang Gehong told AI Finance and Economics.
Successful companies have their own abilities, and failed companies have similarities. However, for the Qingke Apartment that was the first to go public in the United States and the Eggshell Apartment that followed the New York Stock Exchange, Wang Gehong believes that there should be a comprehensive and objective evaluation of the two. “You can’t kill the company just because the company has a problem. “.
Wang Gehong said that not long ago, he had a simple communication with the investors of Eggshell Apartments, and he “can feel the disappointment of the capital in the industry”. Unlike the early days of the industry, long-term apartment equity financing has now entered a cautious investment stage, and the scale of financing will decline significantly in 2020.
However, rental housing is a rigid demand, and it is one of the few markets with a trillion-scale market. This is the consensus of the industry. When the industry integration is over and there is a model that can prove healthy expansion, Wang Gehong feels that capital “will come back.”
He suggested that entrepreneurial companies need to demonstrate their two capabilities in the future, one is to attract tenants’ product capabilities, and the other is to improve the efficiency of asset management capabilities. Only when these two capabilities are established can they be needed by property owners and capital. “Otherwise, the main force of long-term rental apartments in the future will be developers, national teams and financial institutions. This is not pessimistic, this is a cruel trend.”
At present, the government has asked the government to help solve the problem of Qingke and eggshells. Under the carrier of listing, enterprises still have the opportunity to stand up, but the premise of all this cannot be a repetition of the old model.
The day before
“There is always a dust of dust!” On the last day of 2020, Wang Gehong wrote this sentence in the circle of friends.
For the housing leasing industry, 2020 is indeed too difficult. It has not only experienced a force majeure market environment, but also experienced the industry’s growing pains. Can long-term rental apartments in China work? Wang Gehong and his colleagues are also looking for ways to break the game.
Looking at the world’s experience in developing a healthy housing rental market, the United States and Japan have relatively mature models: one is the information trading platform model, such as the US CoStar (similar to the domestic shell house search), and the other is apartment REITs, such as the US rental apartment Leading companies such as EQR and AVB. The second-landlord model also existed in the early stages of apartment development in the United States, but because it does not conform to business logic, it has been transformed into asset-heavy REITs.
Four months ago, Wang Gehong visited the United States and found that the leasing markets in China and the United States are similar in scale and consumption. He believes that as long as China opens up public offering of apartment REITs, the experience, system and capital of US listed apartment REITs can be connected with the Chinese market, and many opportunities will arise between the two markets.
In August 2020, the American long-term rental apartment brand Greystar Capital acquired assets near Shanghai Zhongshan Park through an overseas fund. After refurbishing it, it launched the first high-end rental community brand. This is an important signal for the domestic long-term rental apartment industry. Wang Gehong told AI Finance and Economics that the EQR and AVB companies that he visited in the United States this time have a positive attitude towards the entry of Star Capital into China.
The global apartment rental return rate data in 2019 shows that Dallas, Osaka, Japan, Tokyo, Japan, Hong Kong and other places can reach as high as 7%, but the return rate of Guangzhou, Shanghai, Shenzhen and North is less than 3%. Research on the REITs industry also pointed out that with such a rate of return, even if publicly offered REITs are liberalized, long-term rental apartment assets are difficult to allocate. The key to the problem depends on the quality of the underlying assets.
But from another perspective, under a mature operating mechanism, China’s long-term rental apartment industry still has a lot of room for development. On the eve of the Spring Festival, Beijing, Shanghai, Guangzhou, and Shenzhen respectively issued corresponding notices on regulating the order of the housing rental market. Among them, Beijing clearly stated that leasing companies must not collect more than 3 months of rent, and require companies to report to the competent authority before opening to reduce the payment cycle of rent and deposit. It has passed “high income and low output”, “long income and short payment” and Companies that violate scale expansion such as “rental loans” will gradually be eliminated.
In addition, various localities also stipulate that it is necessary to open a fund supervision account or a special account for unified management of tenants’ deposits, so that when a company encounters a capital chain crisis, it can give priority to protecting the rights and interests of landlords and tenants, and avoid the establishment of fund pools for non-operations. Use phenomenon. This is the result of the market voting with feet. Huang Hui, a senior analyst at the Shell Research Institute, said that in today’s increasingly complete supervision of the leasing industry, companies can only focus on their own operational capacity building, iterative product services, and stable operations in order to cultivate in the long term. The core competitiveness of leasing companies is the value generated by professional services. .
The Research Center for Leaseable Apartments of the China Public Committee believes that housing leasing is related to the field of social and people’s livelihood. Decentralized apartments like eggshells have huge body mass and poor resistance to risks. During special periods such as the epidemic, it is a problem for the industry and society. Determining factors, which objectively proves that the housing leasing industry needs to carry out refined asset management with a long-term mentality.
In Wang Gehong’s view, the basic elements for a brand that can top the long-term rental apartment industry in China in the future may be those with property resources, capital, tenant loyalty, and asset capabilities. “After the success of infrastructure public offering REITs, the next most likely is housing rental public offering REITs, which will be a key financial innovation to revitalize the liquidity of a huge amount of leased assets.”
When capital has an exit channel, big money, long money and cheap money will flow more to long-term rental apartments. Perhaps then, long-term rental apartments will usher in their own golden age. And tenants, perhaps no longer need to fall into the suffering of rights defense because of renting a house.