The performance has been under pressure for years, and the lawsuit vortex is deeply involved…The future of Qingke Apartment, which is under the aura of “the first share of long-term rental apartments”, is worrying.
Since its establishment in 2012, Qingke Apartment has faced a loss problem. The latest 2020 financial report shows that Qingke Apartment’s net income was 1.208 billion yuan, down 2.1% year-on-year; the net loss reached 1.534 billion yuan, an increase of 208% year-on-year. From 2017 to 2019, the net losses of Qingke Apartment were 245 million yuan, 499 million yuan, and 498 million yuan; the asset-liability ratio was 137.17%, 143.82%, and 145.02%, respectively. As of September 30, 2020, the cumulative loss of Qingke Apartment reached 3.81 billion yuan.
As of September 30, 2020, Qingke Apartment’s total assets were 851 million yuan, a year-on-year decrease of 52.73%, while total liabilities rose to 2.845 billion yuan, a year-on-year increase of 9%.
Qingke Apartment has also repeatedly encountered a large number of complaints from landlords and tenants, claiming that the platform has defaulted on rent, refused tenants to check out, and customer service negotiations have failed. There are more than tens of thousands of complaints involving Qingke Apartments on the Black Cat Complaint Platform, and nearly 80% of the information has not been resolved.
In the secondary market, its stock price has also been declining. As of the close of US stocks on February 27, Qingke Apartment’s share price was US$2.59, and its market value was only about US$124 million. At the beginning of the listing in November 2019, the stock price was as high as $20.43, and the market value on the day of listing was $837 million. The stock price fell more than 80% in one year, and the market value shrank by about 82%.
The dilemma faced by Qingke Apartments is also a common problem in the current long-term rental apartment industry. Capital cooling has led to tight corporate capital chains and superimposed on the new crown epidemic. 2020 will be a difficult year for the long-term rental apartment industry. A reporter from the Yangtze River Commercial Daily found that in 2020 alone, nearly 30 apartment rental companies went bankrupt due to poor operation and management, and the capital chain was broken.
Rapid expansion performance losses are rising year by year
Established in 2012, Qingke Apartment is a public rental housing provider in China. It has received more than 100 million yuan in financing in 7 years. In 2019, its housing volume was nearly 100,000, and its business scope covered cities such as Shanghai and Hangzhou.
Since 2013, the long-term rental apartment market has become hot, and Qingke Apartments has begun to expand “crazy”. The prospectus shows that in 2012, the number of apartments was more than 900, and by the end of 2018 it had soared to 91,200, with a compound annual growth rate of 114%, covering 6 cities.
However, this barbaric growth relies on the “blood transfusion” of investment institutions. Public information shows that in 2012, Qingke Apartment received angel investment from Newcom Ventures in the year it was established; two years later, Fortune invested US$10 million in Series A; in 2015, SAIF and Newcom jointly invested RMB 180 million in Series B; In 2018, a private equity fund managed by Morgan Stanley and Kaixin Capital jointly led the C round of tens of millions of dollars. So far, Qingke Apartment’s equity financing has exceeded 100 million US dollars.
The fast-paced Qingke Apartments did not make a profit. According to the IPO documents, the average pre-tax monthly rent of Qingke Apartment is only 1,149 yuan, the average staying time is 8.5 months, the renewal rate is low, and it has not achieved profitability and is facing continuous losses.
The 2020 financial report shows that Qingke Apartment’s net loss reached 1.534 billion yuan, an increase of 208% year-on-year. Prior to this, Qingke’s net losses for the 2017, 2018, and 2019 fiscal years were 245 million yuan, 499 million yuan, and 498 million yuan respectively. As of September 30, 2020, Qingke Apartment had a cumulative loss of 3.81 billion yuan.
In addition, in fiscal year 2020, Qingke Apartment realized a net income of 1.208 billion yuan, a year-on-year decrease of 2.1%. As of September 30, 2020, Qingke Apartment’s total assets were 851 million yuan, a year-on-year decrease of 52.73%, while total liabilities rose to 2.845 billion yuan, a year-on-year increase of 9%. Financial data shows that the company’s shareholders’ equity has been in deficit for three consecutive years and has become insolvent.
At the same time, due to the continued poor performance relative to the expected operating results, Qingke Apartment accrued a long-term asset impairment of approximately 847 million yuan, an increase of 1732.7% from the 46.2 million yuan in fiscal year 2019.
Regarding the reason for the loss, Qingke Apartment pointed out in its financial report that the new crown epidemic has adversely affected the company’s operating performance. Especially in the first quarter, it led to a large loss of tenants, a drop in occupancy rates and a drop in the average rent of houses, which in turn led to a decrease in income.
The performance has been losing money year after year, but the pace of expansion of Qingke Apartment has continued. In July last year, Qingke Apartment planned to acquire 72,200 apartments for USD 130 million. Prior to this, he also acquired Tianjin No. 1 apartment brand enterprise in December 2019, and subsequently acquired the assets of Sichuan’s leading apartment brand in Chengdu and Chongqing. After the completion of this merger, the company has acquired approximately 121,000 leasing units through mergers and acquisitions.
Negative news such as performance loss and capital chain crisis followed one after another. In June 2020, Qingke responded to “rumors of bankruptcy” and stated that the company is currently experiencing financial difficulties but is still operating normally.
Decline in rent-to-loan ratio, deep in litigation whirlpool
For Qingke Apartments, the rental income prepaid by tenants, including prepayments such as rental loans, is the main way to supplement cash flow. In fiscal year 2019, the cash inflow from Qingke’s financing activities was mainly rent loans, and the interest on installment payments was as high as 540 million yuan.
According to the “Opinions on Rectifying and Regulating the Order of the Housing Leasing Market” at the end of 2019, the proportion of “rent loans” in the rental income of housing leasing companies shall not exceed 30%. In the same period of 2019, Qingke Apartment used rental loans to pay 65.4%.
Since 2018, many long-term rental companies involving rental loans, such as Hangzhou Dingjia and Shanghai Yujian, have been subject to strict policy supervision after a thunderstorm. Starting in May 2020, Qingke began to pay off “rental loans”, and financial institutions have suspended providing new installment loans to tenants. As of September 30, 2020, only 11.9% of rental housing provided by Qingke is provided by “rental loans”.
However, as of September 30, 2020, Qingke Apartment has also cooperated with 7 financial institutions to provide “rental loans” with an annual interest rate of between 4.35% and 8.6%, and the outstanding principal balance is 54.5 million yuan. In fiscal year 2020, , About 12.4% of tenants defaulted on rent or “rental loans”.
As of September 30, 2020, Qingke Apartment’s cash and cash equivalents are 22.9 million yuan, and restricted cash is 8.9 million yuan. During the same period, its outstanding bank loans were 533.2 million yuan.
The industry believes that “rental loans” is a “double-edged sword”. Properly used can support enterprises to withdraw funds and expand their scale; if they are used improperly, they will also bring risks. Once the platform’s funds are broken and it is impossible to cover the loan for the surrendered tenants, banks will also have bad debt risks.
In addition to the rental loan issue, Qingke Apartment has been complaining constantly. There are more than tens of thousands of complaints involving Qingke Apartment on the Black Cat Complaint Platform, and nearly 80% of the information has not been resolved. This includes the landlord being owed rent by Qingke Apartment, or being asked to reduce rent during the epidemic.
It is difficult for the industry to make a profit and seek a breakthrough in light asset operations
The dilemma faced by Qingke Apartments is also a common problem in the current long-term rental apartment industry. Capital cooling has led to tight capital chains and superimposed epidemics. 2020 will be a difficult year for long-term rental apartments.
A reporter from the Yangtze River Commercial Daily found that in 2020 alone, nearly 30 apartment-renting companies went bankrupt, and eggshells had a capital chain crisis.
The research report recently released by the Shell Research Institute also pointed out that in 2020, more than 40 parents renting apartments will be caught in business disputes or the financial chain is broken.
This predicament is mainly due to the fact that the industry generally faces the problems of high input costs and difficult profitability. Crane research data shows that in 2020, more than 72% of long-term rental apartments will be affected by the epidemic, and more than 97% of companies whose revenue has decreased compared with last year, and even 37.19% of the companies surveyed have almost no funds during the epidemic.
According to the analysis of Huatong International High-tech Industry Research Institute, the cost of long-term rental apartment mainly includes housing cost, customer acquisition cost, decoration amortization, manpower expenditure, etc. The pre-interest and tax profit rate is only about 10%. Based on this, the average investment recovery period is estimated. In 4-5 years.
Regarding how long-term rental apartments can change their development thinking and reverse the decline, China Index Research Institute pointed out that it is possible to choose asset-light custody mode to expand housing and reduce early-stage development costs, which will help increase the speed of projects entering the market and expand brand influence. In addition, real estate companies can launch long-term rental apartment products that combine long-term and short-term rentals to further reduce the vacancy rate and maximize benefits. On the basis of understanding the needs of different groups of people, launch products suitable for target customer groups.
Reprint indicated source：Spark Global Limited information