Warburg Pincus, VLinker to Take the Stage After Opening 8,000 Apartments in April

China’s housing market has faced a historic slide over the past year, but a major US private equity firm is set to take the stage in Hong Kong next week to reveal how it is achieving yields as high as 8 percent on a Shanghai rental housing venture which it expects to grow to 100,000 rooms.

In an exclusive interview at the Mingtiandi Hong Kong Forum on 14 May, Warburg Pincus managing director Qiqi Zhang, together with Craig To, a vice president with Shanghai-based rental housing developer and operator VLinker, will discuss how the two companies have built the city’s largest rental operator and the returns they have achieved.

Since acquiring its first property in 2021, VLinker now has 10 rental housing projects representing 40,000 rooms either completed or in the pipeline in Shanghai, catering to young professionals migrating to China’s commercial hub.

The two executives are appearing as part of the full-day event at the Ritz-Carlton Hotel in Kowloon, which is sponsored by Yardi, with more than 200 industry executives expected to attend.

The programme, which also features interviews with Link REIT chief executive George Hongchoy and industry veteran Benjamin Cha, who recently founded culture-driven developer Serakai, will also be streamed on Mingtiandi’s MTD TV video platform.

Opportunity Out of Crisis

For VLinker, China’s housing crisis has been a source of new customers, with the company having brought online 8,000 new units last month as China’s middle class begins to reconsider the economics of home ownership.

Home sales by China’s 100 largest developers were down 45 percent in April from the same month a year earlier, according to property data provider China Real Estate Information Corporation. The slide in new home purchases came as average home prices in 70 Chinese cities fell 2.7 percent in March compared to the same month in 2023 in their 11th straight month of declines, according to China’s National Bureau of Statistics.

That slide has shattered the long-held consumer belief that housing prices would always go up and boosts the appeal of rental housing.

Aiming at recent graduates and other young professionals projects like VLinker’s Pujiang Center Community offer units running from 11 to 24 square metres (118 to 258 square feet) at prices starting at RMB 2,600 ($368) per month.

Policy Boost

Despite the recent decline in prices, housing in China’s largest cities remains among the least affordable in the world with a study published by the Urban Land Institute last year estimating that that the median home price in Shanghai is equivalent to 24.1 times the median annual household income.

That compares to median apartment prices in Sydney standing at 6.4 times the median household income, per the same survey.

To help ensure adequate housing for residents in its largest city, authorities in Beijing have been rolling out measures to encourage development of rental homes, including sales of land designated exclusively for rental residential development, with VLinker among the first non-state-owned investors to acquire a project through this initiative.

The government has also encouraged lending for rental housing projects with financing available at rates as low as 3 percent, according to players active in the market. These low rates have helped VLinker’s projects achieve reported yields of 7 to 8 percent.

Warburg Pincus has previously referred to China’s pilot REIT regime as a “game-changer” for its mainland real estate platforms, with VLinker potentially aligned with the government’s recent push to list affordable housing trusts on local bourses. The first affordable housing REITs were listed on the Shanghai and Shenzhen exchanges in 2022 and Warburg-backed DNE Group listed a logistics real estate trust in Shanghai that same year.

Up Close With Asia’s Biggest Investors

In addition to working with VLinker, Warburg Pincus’ Zhang is a director of regional apartment rental operator Weave Living as well as Shanghai-based Mofang Apartments. VLinker’s To worked with investment firm M3 Capital Partners in Hong Kong for several years before taking on his current role in 2022.

The discussion will close out the program at the Mingtiandi Hong Kong Forum at 4:40 PM on the 14th.

The interview with Link REIT’s Hongchoy at 10:00 AM will dive into the “Link 3.0” strategy which sees Asia’s largest real estate investment trust expanding into new geographies at the same time that it moves into managing third-party capital.

At 2:00 PM, Benjamin Cha will be sharing with the audience how his new venture is pursuing culturally driven projects in Asia to redefine placemaking and create value for tenants.

In total 28 speakers will be appearing at the Hong Kong Forum, and tickets are still available at the link above.