In March 2019, eggshell, the operator of long-term rental apartments, announced a Series C financing of $500 million, with a valuation of more than $2 billion; in January 2020, Eggshell Apartments (NYSE:DNK) was listed under the aura of "the first Chinese stock on the New York Stock Exchange in the beginning of the year", raising about $150 million in IPO funds and a market value of $2.74 billion.
But in less than a year, eggshell's market value has shrunk to less than $200 million, and the stock price has fallen all the way down below $1.50/ADS. During the period, the company's negative voices continued in the public opinion field, such as delaying the payment of the landlord's rent during the epidemic period, defaulting on the payment of suppliers, and even the company wanting to run away.
In mid-November, the rumors of eggshell apartment funds breaking and running away reappeared in the market, and the company still came forward to deny it for the first time. On November 17, US time, eggshell apartment stocks with low market value suddenly opened the "demon stock" mode, and the intraday soared by more than 90%.
The outside world speculated that this round of surge was related to the I Love My Home (000560.SZ) or will take over the eggshell, but on November 18, Beijing time, I Love My Home denied the above statement through the media, saying that "no relevant notice has been received at present."
Why is the "crisis" of eggshells more serious than ever? The market value of eggshell apartments is actually not high, why does it attract so much attention from the market? Is the long-term rental business model complicated? Investment logic grows
<h1 class= "pgc-h-arrow-right" > fragile eggshell crumbling</h1>
It's not the first time eggshells have been rumored to "run away", but it's not surprising, because "fragility" is the key word for the entire long-term rental apartment industry this year.
The essence of a long-term rental apartment is an intermediary that connects the landlord and the tenant. As early as 2018, there was news of long-term rental apartments exploding and running away. Rumbling thunder erupted in a concentrated manner after July 2020, such as Hangzhou Youke, Hangzhou Nester, and Shanghai Lanyue, many of which have been quite large-scale.
The relevant departments have detected the risk, Hefei, Shanghai, Guangzhou, Haikou, Chengdu and other cities are the first time to issue housing rental risk tips, to remind the market of the risk of "rent loan".
Speaking of eggshells, if the previous rumors of running away were "sporadic fire points", then this crisis can be described as "fire on all sides", suppliers, landlords, tenants and rental loan partners WeBank concentrated on speaking out, and the attention was unprecedented.
With the current long-term rental apartment model, four groups are concentrated on the eggshell platform: suppliers, landlords, tenants, and rental loan partners.
Eggshell rents a house from the landlord, and it also needs to be simply renovated and provide additional services such as cleaning and maintenance for the tenant, and these property links require the participation of suppliers.
In the November 12 eggshell headquarters rights protection incident exposed by a number of media, there were many rights defenders who came to Beijing from other places, including employees of Baijiaxiu, an eggshell subsidiary that "caught fire in the backyard", involving payments of more than 10 million yuan.
In some media reports, even eggshell brokers have been described as being in arrears in wages.
Landlords and tenants are direct victims in a pool of murky water. The landlord said that he did not receive the rent that should have been paid by the eggshell as scheduled, asked for the repossession of the property, and some even took measures such as changing the lock; but the tenant said that he had already paid the rent to the eggshell in advance and should be able to continue to rent.
In order to pay the rent for the whole year (relatively more cost-effective), some tenants signed a rental loan with a financial institution on the eggshell platform, which is equivalent to borrowing a sum of money to pay the rent of the eggshell for the whole year, and the loan is paid to the bank on a monthly basis. Now he is in debt and has been evicted from the house, and his legitimate rights and interests have been infringed.
Financial institutions lending to tenants cannot be left alone, but they cannot write off loans in one fell swoop, and can only take a very neutral and conservative posture, such as WeBank, which cooperates with Eggshell to carry out "rent loan" services, as the colloquial code: "At least until March 31, 2021, some tenants will not use rental loans on credit." ”
Eggshell, caught in the storm of public opinion, spoke out on Weibo almost every day, emphasizing that there is no bankruptcy and no running away. But unlike the previous denials, Eggshell told some media that "the company did encounter some difficulties in operation."
The personnel upheaval has also exacerbated market fears of crumbling eggshells. In June 2020, the company announced that CEO Gao Jing was investigated, but the matters under investigation had nothing to do with Eggshell Apartment, and co-founder Cui Yan took office as interim CEO. In October, COO Gu Guodong also left for personal reasons.
<h1 class= "pgc-h-arrow-right" > why eggshells are so brittle</h1>
The financial risks behind the long-term rental business model have made platforms such as eggshells the focus of the whole society.
According to the Eggshell Apartments IPO prospectus, in 2017, 2018 and January to September 2019, the advance payments directly from tenants were 110 million yuan, 280 million yuan and 790 million yuan, but the amount from financial institutions was as high as 940 million yuan, 2.13 billion yuan and 3.16 billion yuan. Roughly calculated, the latter is four times the former.
In terms of numbers, from 2017 to 2019, 90%, 70% and 60% of eggshell tenants chose to use rental loans. Although it has declined year after year, the proportion is still not low.
The rental loan data of the industry boss is not disclosed, and it can be found that in the second half of 2018, CEO Xiong Lin once said that the rental loan of ease was less than 25%.
How high is the rental loan ratio? In fact, in December 2019, the Ministry of Housing and Urban-Rural Development and other departments jointly issued the "Opinions on Rectifying and Regulating the Order of the Housing Rental Market" and proposed that the amount of housing rental loans should not exceed 30% of the rental income of housing rental enterprises, and the proportion should be adjusted before the end of 2022. In this way, there is still 1 year left for the adjustment of the eggshell.
In addition to eggshells and ease, there are more industry waist companies worth noting.
"Buy high and sell low" is the strange appearance of the long-term rental apartment platform in the first two years, the platform collects the house from the landlord at a high price, and then rents to the tenant at a low price, which obviously violates the basic business logic.
The reason for this, on the one hand, is indeed as the operator of the long-term rental apartment platform said, in order to seize the market, especially the high-quality housing and sacrifice corporate profits, investors can indeed tolerate temporary losses.
On the other hand, it is the tenant who carries the annual rent loan, the landlord still gets the rent on a monthly basis, but the platform obtains the annual housing payment at one time without almost no mortgage guarantee, forming a pool of funds.
As the industry evolves, such exposures will grow. The platform runs away, leaving only tenants wearing loans and landlords who have not received payments and bad debts from financial institutions, and the initiators of this risk transmission chain, that is, the platform side, are at large.
Why do platforms frequently explode? This is related to the asset-heavy model of long-term rental apartments themselves, and it is also related to the more fragile cash flow of enterprises in the context of the prevalence of rental loans.
First of all, the long-term rental apartment industry in China did not start for a few years, it is a very asset-heavy model of the industry, the early acquisition of housing needs to invest a lot of money, the later property operation and maintenance still needs a steady stream of investment, the first batch of testing the water of the enterprise is facing extremely high risks, in the case of lack of experience is likely to lose money.
Second, most of the companies that have been launched are ambitious, and startups like to use "market share" and "growth rate" to tell stories to capital, so that the company's operating cash has always been on the verge of danger and vulnerability. At the beginning of 2020, the rental market fell into a freezing point, and platforms with poor financial conditions fell one after another.
<h1 class="pgc-h-arrow-right" > trend toward simplifying business models</h1>
Let the platform return to the platform, let the finance return to finance, is the future development direction of the industry.
It is not difficult to understand that the essence of the leasing platform is to connect the landlord and the tenant, and with the upgrading of consumption, whether the property service to the tenant is of high quality will become the core competitiveness of the leasing platform, which should always be a tripartite business.
The essence of the rental loan is to help tenants better arrange the life of the financial tools, lending leniency should be related to the tenant's personal credit, this is a contract between the tenant and the bank, the platform can not borrow the mobile crooked mind, with the help of this leverage enclosure, and even engage in their own capital pool.
In just a few years, eggshells have grown rapidly, and in just a few years, hundreds of thousands of houses have been gathered, and the complexity of the business model has spawned chaos and thunder, and then the regulatory speed has followed up the industry to simplify and return to the right track, and the development of the housing rental market can be described as rapid.
The environment has changed, and whether eggshells can maintain the previous growth rate is the primary issue that investors need to think about to judge the value of enterprises.