Text | Chen Shuya
Edit | Fang Ting
Because of the sudden outbreak of the epidemic, the newly listed eggshell apartment is in an unprecedented crisis.
Since the end of January, some owners have claimed to have received phone calls from eggshell business personnel, unilaterally notifying landlords to waive rent for one month on the grounds of "force majeure" of the epidemic. However, on the tenant side, Eggshell has a different set of implementation standards for the epidemic - for tenants who cannot return to Wuhan because of the epidemic, Eggshell normally charges the related fees incurred during the period.
The eggshells that were questioned as "eating at both ends" caused strong dissatisfaction, and many owners have set up rights protection groups to launch collective complaints. On February 3, Eggshell issued a subsidy policy to tenants, refunding one month's rent to tenants who cannot return to Wuhan due to the epidemic, and other regions will subsidize according to the situation, and the subsidy will be returned to the wallet of Eggshell App after March 2. On February 17, Eggshell released a long article "Truth to the Majority of Landlords", saying that there are indeed problems in communication between some employees and landlords, and after efforts, the situation has improved, and the current response rate of Eggshell 400 calls has reached 95%.
The turmoil did not stop there. There are still some tenants on Weibo and other social channels that there are landlords who have not received eggshell rent to ask for housing, and eggshell has begun to force rent withdrawal for tenants who have paid rent, limiting them to move out within the specified time, even if tenants who have not returned to their place of residence because of the epidemic are also in the ranks of being forced to withdraw their rent. On the evening of February 18, Eggshell responded on Weibo, saying that eggshell would assist individual owners in recovering their homes in the near future, but promised that "tenants will never be driven away without reason", and tenants who have problems can log in to the Eggshell App to create demand forms.
The long-term rental apartment, which has been struggling in the tight cash flow and the fragile balance between the owner and the tenant, once again exposes its weakness. In this industry-wide shock, Eggshell is not the only long-term rental apartment facing a storm, nor will it be the last.
<h3>The dilemma of the platform</h3>
As the first echelon player of decentralized long-term rental apartments, the scale of more than 400,000 houses in Eggshell is the envy of peers, but it also bears huge pressure: before the Spring Festival, it is the off-season for renting, and the vacancy rate of the apartment industry is generally above 20%. At a 20% vacancy rate, 100,000 rooms that are left vacant for a month or more can cost enough cash flow to crush a camel.
Long-term rental apartments are asset-heavy "two landlord models", the business model is to first collect the house from the landlord in the form of charter, and then collect a rent premium by providing quality products and standardized services at the tenant's end.
This model itself has a small profit, the gross profit of the charter in the early years can reach more than 20%, and after several years of "outlet period", each family competes for housing to lead to an increase in the cost of taking the house, and now the gross profit of the industry is compressed to about 10%, that is to say, the profit of renting 10 rooms can offset the loss caused by 1 vacant house. An entrepreneur once told 36Kr that if the occupancy rate is less than 90%, most apartments are loss-making.
Although Eggshell just landed on the New York Stock Exchange on January 17, the $149 million raised is not much for a long-term rental apartment that accounts for cash flow. To make matters worse, Eggshell was already in a state of huge losses – its prospectus showed a net loss of 2.51 billion yuan in the first three quarters of 2019.
At the same time, eggshells rely heavily on rental loans. According to the prospectus, in the first three quarters of 2019, the rental advance payment obtained through the rental loan model accounted for 80% of the rental income of eggshell. Under the rental loan model, the financial institution will pay one year's rent to the apartment party at one time, that is to say, the annual rent eggshell generated by this part of the contract has been incomeed in advance, and the only way to obtain cash flow is to rely on the new signature. Therefore, under the crisis, eggshell became the fastest response of all apartments and the fastest to trigger a rebound.
In recent years, small and medium-sized apartment operators have been living more and more difficult, according to incomplete statistics in the industry, there have been 25 long-term rental apartments in the country in 2019. Many of the apartments were already crumbling, and the sudden outbreak of the epidemic made it worse.
Every Year in December is the weakest off-season in the field of long-term rental, a large part of the tenants want to go home for the holiday, but after the Spring Festival will usher in a peak season, so the apartment practitioners will go home early years ago, and come back early to start renting after the New Year. There are even many small apartments that have an unwritten rule when renting out a house: when signing a rental contract, the expiration date will be deliberately avoided in December, and if it does not happen to extend the rental period to 13 or 14 months.
However, due to the impact of the epidemic, the rental of all vacant properties almost came to a standstill in February this year. For many small and medium-sized apartments, a month's vacancy means that the business of the past year has been "in vain", but losing profits is not the worst case, the most dangerous thing is that cash flow may be broken. The consequences of the breakdown of cash flow and the "explosion" of the apartment will lead to greater social problems - the landlord wants to get the rent back, the tenant is worried about being evicted, and eventually the conflict between the two victims may be further intensified.
Behind the eggshell, there is a long list of long-term rental apartments that are even more difficult. It is difficult for them to raise funds through multiple channels such as secondary markets and bank loans like eggshells, and they can only rely on their own cash flow to support them.
"It can only last three months with existing funds." Liu Xiang, founder of Ucommune Yijia, told 36Kr. Ucommune currently operates nearly 40,000 rooms in Four Cities: Chengdu, Wuhan, Beijing and Hangzhou, and the occupancy rate has now dropped to 86%. Liu Xiang said that if the epidemic prevention and control measures are not alleviated, the rental rate is expected to continue to decline at a rate of 10% per month.
According to the data of various urban counterparts surveyed by Ucommune Yijia, the current number of new signings in apartments is less than 20% complete compared with the plan formulated years ago. On the one hand, there is a decrease in new contracts, while on the other hand, there is a large number of tenants who have to cancel the lease – because the rework time is not determined, the tenant has to default and stop the loss. One end can't come in, one end has to exit, and the vacancy rate has increased significantly.
Not to mention, Wuhan's apartment market has been almost paralyzed. The return to work is far away, tenants default on a large area of rent, Wuhan Home Apartment founder Bian Yaguang told 36Kr, now more than half of the tenants who can't come back have defaulted. Apartment owners who return to their hometowns for the New Year cannot return to Wuhan, and even if they go back, the possibility of taking a look at the rent is close to 0.
Relatively fortunately, Ucommune began to turn assets light last year, handing over the Wuhan market to a cooperative company with capital to join, which used the Ucommune Yijia brand to operate long-term rental apartments in Wuhan and share the financial pressure of operating in the Wuhan market. Now the franchisee manages 10,000 listings in Wuhan, but due to the impact of the epidemic, it is completely unable to carry out normal operations, most of the employees cannot return to work, and some tenants living in it are not willing to pay rent, and the company's life is hanging in the balance.
Other local apartment operators in Wuhan have suffered the same thing. E Wei, the head of the Wuhan market in Yuxiao Er, told 36Kr that there is a large-scale long-term rental apartment in Wuhan, with more than 10,000 houses, and the apartment has been living hard before the epidemic, the boss often tells people that he can't last this year, and the result is a sudden epidemic, and now the boss can only take out his personal house as collateral to maintain the company's operation.
Some apartment brands simply gave up their business in Wuhan: there is an apartment owner from Inner Mongolia, after returning to his hometown to see the epidemic gradually worsen, he simply did not plan to come back, and now he has done other businesses in his hometown in Inner Mongolia, leaving tenants and landlords to negotiate and solve the rent problem.
<h3>Who should be exempt from rent?? </h3>
For apartments, the stop-loss measure that can be done now is to open source and reduce expenditure, and it is the most direct and effective way to fight for rent-free periods from landlords. However, from the perspective of the landlord, some landlords believe that the relationship with the platform party is one prosperity and one loss, but some landlords believe that the reduction is not an obligation, and their monthly mortgages and car loans will not disappear because of the rent reduction.
Zeng Qiao, the owner of Eggshell in Hangzhou, told 36Kr that he received a call from eggshell staff in early February to "inform" that the rent for January was not paid to him. Zeng Qiao directly refused at the moment, and the other party replied, "Okay, I will register it." Zeng Qiao believes that eggshells have been left vacant for one month every year, although the epidemic has an impact, but when signing the charter contract, the two sides have already played a game of interests and made concessions to each other.
"We are not in a hurry to contact the landlord rent-free area, and it is very unwise to do this when the impact of the epidemic is not so certain." An apartment practitioner told 36Kr that the eggshell practice is indeed not good enough, and the "notice" attitude is difficult to get the landlord's understanding. When negotiating the rent-free period with the landlord, you should sincerely inform the apartment of the difficulty of operation, in order to prevent more serious social incidents, move to understand the reason, of course, in the rent-free negotiation, the landlord does not agree and should not be forced.
Apartments with fewer units are more likely to succeed in their rent-free period because the owner can spend more effort negotiating directly with the landlord. But for large long-term rental apartments, such as eggshells, through the negotiation of salesmen and the use of a unified template, it is easy for landlords to lose trust in the brand.
The above-mentioned apartment practitioner told 36Kr that the company communicated with hundreds of landlords, 20% of the landlords expressed support, the team thanked them very much, but in fact, they did not want to directly disclose this number to the outside world, because this will make the landlord who does not have rent-free feel that he is morally kidnapped.
This is only part of the reason, but there is actually an unspeakable bitterness behind it: this is completely the rent-free relief support that the apartment pleads with the landlord based on blood loss and self-help, not to give tenants rent-free. However, once the information on rent-free access to some landlords is released, many tenants will certainly not understand, saying that it is difficult to eat at both ends of the apartment and make money in the country.
"But how to say, the tenant is a mild patient, I am a critically ill patient, if the blood transfusion does not come to me, I will die." The condominium practitioner said.
A landlord in a third-tier city in Guangdong told 36Kr that the Guangzhou Real Estate Rental Association launched an initiative in early February to provide rent-free periods, and as a result, many individual tenants took this agreement to the landlord to ask for rent reduction, including his tenants. Many people don't understand what it means for an apartment to fight for a rent-free period from the owner.
Under special circumstances, neither party can bear it, and in the coming months, the best solution may be for the owner and the apartment to bear some losses together. "It's time for everyone to get through this together. If the condominium does not get rent-free or delayed rent payment, it will be difficult to survive. Yu Xiao'er CEO Huang Guanwen said.
Yu Xiao'er is an apartment SaaS system solution provider, and now they are also helping the apartments to get out of the house, opening some services for free during the epidemic, providing tenant information registration and return visits of small programs, etc., but these are still limited for the apartment: even if the system service fee is free for one year, compared with the rent loss, it is a drop in the bucket.
The apartment that survives can still strive for relief, but it really can't stand it, so it can only cancel the lease to the landlord. Some apartments have begun to centralize tenant arrangements, negotiating that they can live together as much as possible, and the remaining vacant listings have been disposed of.
<h3>Difficult to achieve the same right to rent and sell</h3>
In addition to the intractable vacancy rate, under the epidemic, the daily operation of long-term rental apartments has encountered some unexpected troubles in some cities, which ultimately points to the frustrated experience of tenants. Taking Ucommune Yijia as an example, on February 9, a tenant of Ucommune Yijia returned from Hunan to a community in Chengdu, and the community asked the apartment party to issue a letter of guarantee, and the tenant was responsible for any epidemic or infection in the 14 days of self-isolation in the community.
Xiaonan, the housekeeper of YoukeyiJia, told 36Kr that after issuing the letter of guarantee, the community staff said that it was not enough and that the consent of all owners needed to be obtained. The community worker asked the leader for instructions, but eventually refused to allow the tenant to enter, on the grounds that the shared house did not have the conditions to allow the tenant to completely self-isolate. The tenant was unable to enter the community, spent the night in the car on the 9th, and drove more than ten hours back to his hometown in Hunan the next day.
"It is true that the public area is public, but the official documents issued by the government do not say that shared housing is not allowed to enter." Xiaonan said that the Chengdu government issued a "No. 5 official document", the fourth of which pointed out that the landlord and the intermediary should bear the main responsibility for the rental tenant during the residence period, and the guarantee letter required by the community evolved from this article. However, the government has only issued very general documents, so the regulations of each community are different, resulting in troublesome docking.
The community that directly refuses to allow tenants to enter is an example, and after the general apartment issues a letter of guarantee, the tenant can return to the residence. However, even if you can return to the community, the daily entry and exit of the tenants of the shared house is not very convenient. According to Xiaonan, the residential property will send 2 outgoing notes to each household, but the number of occupants of the shared house will generally exceed 2 people. In addition, the community can also issue a separate exit note for individuals according to the certificate of resumption of work, but some communities can only open it to the owner and refuse to issue it to the tenant.
The final turning point came from the policy side, after a week of contradictions between the community and tenants and apartments, on February 15, the Chengdu government issued the latest notice, proposing that if the returnee holds the health certificate required by the notice, he must not refuse to return to work, refuse to rent, and cannot refuse to enter his residential area.
Similar things are happening a lot. A centralized apartment told 36Kr that stores in Shanghai, Nanjing, Hangzhou, Shenzhen, Suzhou and other cities have received community notices that they are not allowed to accept return tenants from other places, and even some streets require the apartment to clear and return tenants. In the end, the apartment staff can only persuade some tenants to return, and the remaining tenants arrange isolation at nearby hotels according to government requirements.
Urban development depends on foreign population, which is why cities have introduced policies to introduce talents in recent years. In recent years, the state has also encouraged rent and sale at the same time, in 2015, the State Council issued a document, characterizing the apartment as a living service industry, announcing that it will give policy support in taxation, financing and other aspects, which is also an important driving force for the rapid development of long-term rental apartments in recent years.
Urban youth are not easy to rent, from the beginning of the search for a house with the intermediary to wrestle with the courage, the contract expired price increase, the landlord temporarily notified the move situation also occurs from time to time. The long-term rental apartment is shouting the slogan of "making the rental more dignified", because of the real listing information, transparent pricing, and the service of the professional apartment housekeeper, it has gradually become the choice of young tenants.
However, in the special period, the ideal meets the reality, the different rights of rent and sale are beaten back to their original form, and the contradiction between long-term rental apartments and tenants and landlords is gradually intensifying. If the contradiction continues to ferment, it will be a relationship of loss to tenants, landlords, long-term rental apartments, and even the city.
<h3>Wait for the dawn</h3>
The management team of Ucommune Yijia organized an emergency work meeting on the first day of the Chinese New Year, and made a series of deployments for the personal safety of tenants and employees, as well as the safety of enterprise operation and cash flow. At the business level, the general rent increase plan in the small peak season after the holiday set a few years ago was stopped, and for the tenants who could not return due to the control during the epidemic period, the policy of water and gas fee reduction and rent refund without liquidated damages was introduced; for new tenants, a number of housing listings were launched for new tenants to enjoy half the price of the first three months of rent.
For Wuhan apartment operators, the landlord's rent-free period is in talk, but there is no heart to win tenants. The apartment has basically stopped the business of leaving the house, and everyone knows that even if you try to rent, it is difficult to have effective feedback.
Bian Yaguang, a resident apartment, is now organizing a volunteer activity of "medical care station", simply opening up idle listings to Wuhan medical staff and people stranded in Wuhan but have no place to stay. The campaign began on the day of the lockdown in Wuhan, the apartment opened 30 vacant listings, realizing that it could not meet the demand on its own, Bian Yaguang called on other local apartment operators to join, and now there are thousands of rooms, and the tenants who stay for free include a whole department of Wuchang Hospital, the first designated hospital in Wuhan.
In addition to considering their own survival, many apartment founders choose to take the initiative to assume social responsibility in special periods, but back to the essence, long-term rental apartments are always a business that needs to be calculated.
36Kr has judged that the reshuffle of the long-term rental apartment industry will continue in 2020, and the sudden epidemic has undoubtedly accelerated this process. A large number of small and medium-sized apartments will not be able to withstand the collapse, and the surviving practitioners will be more rational about the scale expansion - although scale is the imagination of long-term rental apartments in the past, after several years of development, everyone has gradually realized that it is too difficult to become big in this industry, and investment institutions have almost stopped investing in decentralized long-term rental apartments.
Long-term rental apartments have completely returned from the "outlet" to the cooling off period, the industry is gradually maturing, and charter 1.0 will also accelerate the transformation to the hosting model of 2.0. The advantage of the hosting model is that the role of taking systemic risk is tens of millions of landlords, and the pressure on the apartment operator will be less. However, the asset-light custody model has been shouted in the long-term rental industry for many years, and the proportion of custody is still very small today.
Yu Xiao'er Huang Guanwen believes that it is more difficult for the hosting operator to get the listing than the charter, because the owner prefers the definite income. However, due to the large capital investment and market risk of chartering, more institutions in China may explore the custody model.
From the supply point of view, many apartment listings will return to the hands of individual landlords, while the short-term rental market has been impacted, and some listings have returned to the long-term rental market, so in the long run, the rental price may be reduced.
Bian Yaguang said that this year originally planned to double the expansion of the housing, but the decentralized should be no longer played, and some centralized properties will be collected in the second half of the year, after all, "life in the past of the epidemic will continue."
Wuhan local apartment practitioners set up a communication group of nearly 500 people, although the business could not be carried out, but everyone launched a donation in the group, bought more than 10,000 masks to send to the local front-line medical staff and public security police.
Many nurses in Hankou ask Bian Yaguang every day whether there is still a source of housing available. Now he broadcasts live on Douyin at 8 p.m. every night, hoping to get more landlords and apartments to participate. He said that if the landlord has concerns about safety, he can also pay for someone to disinfect it. "It's easy to do a good thing, but it's hard to stick to it, and we can only do what we can." Bian Yaguang said.
(At the request of the interviewee, Xiaonan and Zeng Qiao are pseudonyms)