The winter is approaching, but there is still a sporadic fire.
Editor’s note: This article is from WeChat public account “Shell Institute” (ID: gh_44da0ccc8400), the author Yu Yin.
In the second half of 2015, the capital market entered a cold winter, but not all long-term rental apartment companies are cold. On the contrary, in this cold winter, the strong players are contested, and these strong people are highly sought after by capital.
The best time for equity financing of small and medium-sized apartments has passed
Before 2015, the capital market was widely invested in the long-rental apartment track. During this period, most enterprises were in the early stage of entrepreneurship, and the financing amount was relatively small. The total financing amount was about 3.25 billion yuan. In 2015, equity financing broke out, and the financing incident reached 23 in that year. After 2015, long-term rental apartment companies generally feel that financing is difficult. After two years of immersed in market share, the equity financing of leading enterprises broke out in 2018. In 2018, the equity financing of the market reached 7.4 billion yuan, 3.6 times that of 2017. In 2019, the amount of equity financing in September was as high as 11.4 billion yuan. What lies behind this is the huge financing of leading enterprises such as Freedom, Eggshell, Rubik’s Cube, and City House. The two rounds of financing are about 7.35 billion yuan, the eggshell three rounds of financing is 670 million US dollars (about 4.5 billion yuan), and the Rubik’s Cube financing 3.5. One hundred million US dollars (about 2.345 billion yuan), the city’s round of financing of 300 million US dollars (about 2.13 billion yuan). In the past two years, there have been very few small initial equity financings, even though the Angel Wheel financing of Qingdao Weijia Apartment has reached 50 million yuan this year.
Picture: The trend of the number and amount of public equity financing in the long-term apartment market in 2012-2019
Data Source: Public News and Official Website September 2012-2019
Capital prefers first-tier cities. From the distribution of the headquarters of these apartment companies, companies in Beijing and Shanghai have obtained the majority of equity financing in the market. Among them, Beijing’s enterprises received the highest amount of financing, reaching 12.3 billion yuan, followed by Shanghai’s enterprises, which reached 12.2 billion yuan. The large apartment companies in these two cities are basically national chain operations, expanding their outlets in cities with strong rental demand. Apartment companies in Nanjing, Guangzhou, Hangzhou, Chengdu, Shenzhen, Qingdao, Wuhan and other cities have stronger localized operation features, and they are more difficult to enter the Beijing or Shanghai market, such as the future domain of Nanjing, Youke Yajia of Chengdu, and Hangzhou. Fall in love with rent (has been acquired by eggshell). Therefore, if you want to enter the long-term rental apartment market, especially the first-tier cities, then you should consider your own financial strength and operational capabilities, otherwise it may be too late.
Picture: Total public equity financing of long-term rental apartments by headquarters city (RMB 10,000)
Capital continues to bless outstanding companies
The leading companies have absorbed the vast majority of equity financing
Since 2012, according to the incomplete statistics of 30 long-term rental apartment brands monitored by the Shell Research Institute, there have been 76 public equity financings totaling approximately RMB 26.6 billion. According to the operation mode of the apartment company, the total amount of financing for the decentralized apartments (represented by freely and eggshells) that operate scattered houses is about RMB 14.28 billion. The centralized apartments that operate single-family properties (represented by Rubik’s Cube and City House) The total financing amounted to approximately RMB 12.34 billion, and the amount of decentralized apartment financing was slightly higher than that of centralized apartments. From the total financing amount of each brand apartment in these years, leading enterprises such as Freedom, Rubik’s Cube, Eggshell, City, V-Land, and Gulfstream have absorbed most of the equity financing. According to the total financing amount, the top five apartment companies received about 21.4 billion yuan of equity financing, accounting for 80% of the total equity financing of 30 apartments.
Picture: Long-term rental apartment public equity financingAmount (RMB 10,000)
Data Source: Public News and Official Website September 2012-2019
Shell Institute Sorting
As with most market segments, the market development of long-term rental apartments also takes time to breed, and there are many phenomena in the early morning. Many of the early-funded companies did not develop into giants, such as you+ and charterers. On the contrary, the leading companies are mostly established in 2015 or the first time to get financing, such as free, eggshell, city homes are getting financing in 2015 and later, the Rubik’s Cube entered the market early, established in 2010, first in 2013 It has publicly obtained the equity financing of Huaping Investment and 400 million RMB of Detong Capital. Capital is determined according to the strengths and weaknesses of the development of the enterprise and the market. So far, except for the free public financing of only two rounds (but the financing amount is huge), most head enterprises have basically raised more than 3 rounds. For example, eggshells and Anzhen apartments have been publicly financed for 6 rounds, and Rubik’s Cube has 4 rounds. 3 rounds. Qingke, which wants to be listed in the US, was established in Shanghai in 2012. It has been publicly funded for 4 rounds, of which two rounds of financing are US dollar funds.
Figure: Long-rent apartment public equity financing rounds
Data Source: Public News and Official Website September 2012-2019
Shell Institute Sorting
Asset securitization and issuance of bonds
Only for developers and large startups
In June 2016, the State Council issued the “Several Opinions on Accelerating the Cultivation and Development of the Housing Leasing Market”, proposing “supporting eligible housing leasing companies to issue bonds and real estate securitization products.” However, companies that can enjoy such exchange financing channels generally require a credit rating of AA+. Long-rental apartment startups operate mostly in light assets and do not hold property rights. There are very few companies that have achieved asset securitization and corporate bond qualifications. At the same time, a large number of developers have entered the long-term rental apartment market, such as Vanke’s parking, Longhu’s Crown, Langshi, and Xuhui, and their assets are more likely to meet the qualifications for issuing securities and bonds. As of September 2019, the issuance of long-rent apartment assets securitization is only Rubik’s Cube, free, eggshell three long-term rental apartment companies, new apartment apartments and developers with real estate property rights, and only the developers who issued special housing leases.
Under the policy tilt, although the earliest release of ABS was the Rubik’s Cube, free and new apartment in 2017, the largest number of long-rental apartment/housing lease ABS is the developer. Free to issue the total size of ABS for the fourth phase of 1.36 billion yuan, because the issuer needs to hold a certain proportion of subordinated securities, the actual financing priority scale is 1,120.8 million yuan; the Rubik’s side issued the first phase ABS scale of 350 million yuan, the actual financing of 315 million yuan; The scale of ABS issued in the first phase is 203.5 million yuan, and the actual financing is 185 million yuan. The new APA apartment has a phase ABS of 270 million yuan and an actual financing of 130 million yuan. 15 developers including China Merchants Shekou, Poly, Country Garden, Xuhui, Taihe, Sunshine City and Langshi have issued 18 ABS with a total scale of 15.375 billion yuan, of which the actual financing priority scale is 13.661 billion yuan.
Picture: Comparison of long-rental apartment/housing lease ABS by company type
Source: Shanghai Stock Exchange, Shenzhen Stock Exchange, Public News
Shell Institute Sorting
ABS financing channels tightened, but interest rates fell. 2After the issuance of long-rental apartment ABS in 017, with the regulation of the real estate market, developer financing was blocked in 2018. Many developers seized the government’s financing support for long-term rental apartments and housing leases to apply for the issuance of ABS. It also rose sharply, with an average priority financing rate of 6.1%. In 2019, the state’s regulation of the real estate market continued unabated, and a large number of developers’ long-rental apartment concept ABS was rejected at the application stage of the exchange. The long-rental apartment ABS circulation has been reduced. The total size of long-rental apartment/housing lease ABS issued in September 2019 was 4.889 billion yuan, only 42% of the annual circulation in 2018, and both are developers and no entrepreneurial apartments. The company issues ABS. Affected by the country’s lower corporate financing costs, the financing interest rate of 2019 senior rental apartment/housing lease ABS priority decreased, with an average interest rate of 5.68%.
Picture: ABS issuance of long-term rental apartments and housing leases by year
Source: Shanghai Stock Exchange, Shenzhen Stock Exchange, Public News
Shell Institute Sorting
Only developers issue special leases for housing leases. In 2018, developers began to issue special leases on housing leases on the exchange. Compared with ABS, corporate bonds have a larger single-stage financing and lower interest rates. Ten developers including Vanke, Longhu and Greentown issued a total of 17 special leases for housing leases, with a total financing scale of 22.035 billion yuan. Like ABS, corporate bond issuance has shrunk in 2019 and interest rates have fallen. In 2018, the total size of the issuance was 15.628 billion yuan, with an average interest rate of 5.5%. In 2019, the total size of the issue as of September was 6.407 billion yuan, with an average interest rate of 4.4%. Among them, Vanke has issued a total of 5.5 billion yuan for the three phases, Longhu has issued a total of 5 billion yuan for the second phase, Greentown has issued a total of 2 billion yuan for the second phase, and other developers have a scale of about 1.0-20 billion yuan.
Picture: Issuance of special corporate bonds by year housing lease
Source: Shanghai Stock Exchange, Shenzhen Stock Exchange, Public News
Shell Institute Sorting
In summary, in the context of market competition, the development of capital and enterprises is showing a positive cycle. Early capital can help the development of long-rent apartment companies, and the development of enterprises can attract more capital. Even if you invest in a cautious capital winter, good companies can still get financing, and the financing amount may be larger and the financing cost is lower. The financing ideas of long-term rental apartment companies should be transformed from the past pursuit of quick money to a down-to-earth business operation.