Long term rental apartments in real estate enterprises: slow down of expansion

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Reporter Huang Yu
“It seems that many long-term rental apartments have disappeared. From 2019 to 2020, our industry basically relies on the hot search on negative news, either running or thundering.” A senior executive of a brand long-term rental apartment has no choice but to say that even his family asks if what he is doing is “hurtful”.
The long-term rental apartment industry, which used to be a “wind outlet”, has been labeled with such negative labels as “Thunderbolt” and “broken capital chain”. However, according to the interface news reporter, most of the long-term rental apartments in these thunderstorms are decentralized, while centralized apartments are relatively safe.
Real estate enterprises are one of the main participants of centralized long-term rental apartments. Under the shadow of the industry, even the long-term rental apartment brands of real estate enterprises with strong financial strength have obviously slowed down the pace of expansion.
“Lightning rod”
Covid-19, the long distance rental apartment’s capital chain problem has been sharply enlarged, and has entered the acceleration period of thunder and run away.
According to the incomplete statistics of Shell Research Institute, since 2017, more than 100 long-term rental apartments have been trapped in capital chain rupture, business disputes and runaway, 40% of which occurred in 2020.
Last year, July, August and September were the peak periods of thunderstorms in long-term rental apartments. A total of 22 apartments were listed in the abnormal list in July, 17 in August and 10 in September, from Pincheng Youju and youkeyi to Youke apartment, lanyue apartment and woke apartment.
It is not difficult to find that most of the long-term rental apartments in Baolei adopt the decentralized “second landlord” mode, that is, to obtain the decentralized housing supply by leasing or trusteeship. Under normal circumstances, they earn the rent difference by “low income and high rent”. Some of them violate the commercial logic and obtain short-term cash flow by “high income and low income” and “long income and short payment”.
In addition, in order to quickly collect funds to continue to expand the market scale or maintain the company’s cash flow, many decentralized long-term rental apartment brands also use “rent loan”. However, “rent loan” can help enterprises recover one year’s rent directly from financial institutions, but it also has hidden risks.
A large number of cases have proved that if the “rent loan” is used, once the capital chain of long-term rental apartment breaks in the rapid expansion, not only the landlord can not receive the rent, but also the tenant will face the double risks of being driven out and need to continue to repay the loan to the third-party financial institutions.
Different from the decentralized long-term rental apartment, the centralized long-term rental apartment is born with a golden spoon. The centralized long-term rental apartment, which renovates and rents the whole property, is superior to the decentralized long-term rental apartment in terms of project quality, overall tonality and risk control ability.
Liu Haiwen, vice president of woqu development and general manager of investment and finance department, a centralized long-term rental apartment brand owned by platinum Tao Hotel, said that the reason why there are fewer thunderstorms in centralized long-term rental apartments is that they have larger investment, higher threshold and safer rent difference brought by product and service premium, which is not easy to be mixed up by some “leather bag Companies” as decentralized ones.
Secondly, centralized housing supply is easier to be supervised than decentralized apartments, and the information between tenants is equal and intercommunicate, so it is easy to be detected quickly once problems occur; in addition, centralized long-term rental apartments are mostly owned by enterprises or chartered, and they have a close relationship with the landlord, so it is not easy to run away.
At the same time, Zuo Guizhen, deputy director of Investment Department of Chengjia apartment development center, a centralized long-term rental apartment brand of Huazhu hotel group, believes that centralized and decentralized modes are different in the bottom profit model. They have higher rent premium and are easier to make profits, which are mainly reflected in poor leasing, wholesale and retail, product premium and operation premium, which also makes centralized mode more difficult Thunderbolt.
In terms of rent difference, centralized long-term apartments rent from big owners or institutional owners for a long period of time, mostly in 15-20 years. Under the influence of long-term inflation, the rent difference between centralized long-term apartments and decentralized long-term apartments will be enlarged. In addition, decentralized long-term apartments can only be rented by one owner, which is equivalent to retail, while centralized apartments are equivalent to wholesale, which is easy to get a lower discount.
Although the operation risk is smaller than that of decentralized long-term rental apartments, there are too few thunderstorms in centralized long-term rental apartments. Last year, the independent brand apartment Gulfstream international sharing community and panda apartment of pomegranate group were unable to continue normal operation due to the problem of capital rupture.
The road is blocked and long
Under the double benefits of policy and market, a large number of institutional landlords entered the housing rental market around 2015.
The centralized long-term rental apartment is regarded as the main driving force for the long-term rental apartment industry to move towards institutionalization and orderliness. The main participants are real estate enterprises, hotels, intermediaries and start-up companies.
Compared with other institutional landlords, the real estate enterprises with deep experience in the relevant industrial chain and strong financial resources have certain advantages in the field of long-term rental apartments, and set ambitious scale targets in the early stage.
Taking Vanke, a pioneer in the long-term apartment industry, as an example, it launched the centralized long-term rental apartment brand “Park apartment” in 2016, and set the goal: to expand the supply of houses to 450000 in 2018, with a long-term planning of 1 million.
In 2017, country garden, which has always been the sales champion of real estate enterprises, launched the long-term rental apartment brand “big + Bijia international community”, proposing a three-year target of 1 million units; in the same year, Longhu launched “Guanyu”, which plans to open at least 50000 units by the end of 2018, and enter the top three of the industry in 2020, with a revenue of more than 3 billion yuan.
To seize the market by scale has become the consensus of real estate enterprises in the early layout of long-term rental apartments. However, due to the large investment and long return cycle of centralized long-term rental apartments, and the background that the real estate industry has entered the downward cycle in recent two years, real estate enterprises have gradually slowed down the pace of expansion of long-term rental apartments.
According to the 2020 long-term rental apartment operation scale list of real estate enterprises released by Kerry, the top ten are Vanke Park apartment, Longhu Guanyu, Xuhui Lingyu, Longshi apartment, country garden Bijia international community, merchants apartment, real estate City, jiazhaoye Jiayu, Hejing Taifu and Jindi strawberry community, but they are almost far away from the original goal.

According to Kerry’s data, as of the end of last year, Vanke Park Apartments had about 143000 open houses and 190000 expanded houses, which is far away from the long-term planning of 1 million houses, even half of the target of 450000 houses in 2018, but it still keeps the first place in the scale of long-term rental Apartments of real estate enterprises.
In fact, in order to achieve the scale target, Vanke launched the “Wancun plan” in 2017, and then suspended in disputes such as “institutional landlords scrambling for housing supply at high prices” and “capital pushing up rental prices”. Due to the withdrawal of Vanke from some urban village reconstruction projects in Guangzhou and Shenzhen, the number of expansion houses of Vanke Park began to decline from the peak of 230000 at the end of 2019.
By the end of 2020, country garden Bijia international community will expand 60000 houses, even one tenth of the million houses have not been realized, and the actual opening houses are only about 17000. Country garden told the interface news that in the future, it will focus on the combination of light and heavy development, including the use of urban collective land, and the ratio of light and heavy will reach 50:50.
Longhu Guanyu is one of the few brands of long-term rental apartments for real estate enterprises to achieve the opening goal according to the plan. In 2018, more than 53000 apartments will be opened. In 2020, the number of open houses of Longhu Guanyu will reach 80000, and the number of expanded houses will reach 110000, second only to Vanke.
However, under the rapid expansion, the revenue of Longhu Guanyu did not keep the same pace. According to the annual report data of Longhu group over the years, the revenue of Longhu Guanyu is 1.17 billion yuan in 2019 and about 700 million yuan in the first half of 2020. It is difficult to achieve the revenue target of 3 billion yuan in the whole year.
In fact, the centralized long-term rental apartment has been facing the problem of profit. After the accumulated loss in 2017 and 2018 exceeded 234 million yuan, Landsea divested its Landsea apartment from the listing platform in 2019; in the same year, COSCO sold the insolvent bangsheyu with “1 yuan in name”.
At the media exchange meeting at the end of 2019, Yu Liang, chairman of Vanke, also said that it is very difficult for long-term rental apartments to operate at present. It is very good to ensure stable income, and can not make a lot of money.
Yihan think tank pointed out that for enterprises to develop long-term apartment business, they need to be prepared for long-term capital investment. Without sufficient resources and funds, the development of long-term apartment business will encounter more challenges and tests. No matter what consideration is taken into the field of long-term rental apartments at first, the current focus is how to do a good job in business operation and expansion.