Vlinker, an apartment operator backed by Warburg Pincus, has built Shanghai’s largest portfolio of rental housing while achieving attractive risk-adjusted returns, executives from the two companies revealed at Mingtiandi’s Hong Kong Forum on Tuesday. Watch the full recording>>
Since acquiring its first property in 2021, Shanghai-based Vlinker now has 10 rental housing projects representing 40,000 rooms either completed or in the pipeline to cater to the young professionals migrating to China’s commercial hub.
Qiqi Zhang, managing director at Warburg Pincus, told the audience at the Ritz-Carlton at the ICC that rental apartments have become “the most-discussed asset class in town” in Shanghai, where he’s based and where the US private equity major and Vlinker have built the megacity’s largest rental operator.
“About six or seven years ago we came across Vlinker, and we started a new platform three years ago focusing on affordable housing, so the sub-sector within rental housing has been doing very well,” Zhang said.
Tenant Demand Rising
At the all-day event sponsored by Yardi, Zhang was joined on stage by Craig To, vice president and head of capital raising at Vlinker, who talked about how his company is building projects to help light the way out of China’s housing crisis.
Craig To of Vlinker speaking at Mingtiandi’s Hong Kong Forum
Average home prices in 70 Chinese cities fell 2.7 percent in March compared with 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.
“I think definitely the wealth effect of owning apartments in China is basically gone,” To said. “We are definitely seeing there is a surge in demand for institutional, centralised apartments in China, especially in Shanghai, where there are still a lot of job opportunities.”
To address those needs, Vlinker is developing “super communities” like the six-building, 3,100-room Pujiang Center in Minhang district. The company had acquired a set of previously vacant factory dormitories in 2021 and quickly transformed them into one of the largest rental communities in Shanghai.
The scalable business model and lower operating expense per unit make Vlinker a standout among its peers in the local multi-family business, Zhang said.
“Most of the developers in the market have an average size somewhere around 200 to 500 rooms per community,” he said. “Vlinker’s sizes are from 1,000 to 5,000 homes per community. So that’s how they are able to scale that fast in the past three years from zero to now over 40,000 rooms.”
In addition to the platform in China, Warburg Pincus plans to expand its rental housing market presence in Japan, Korea, Singapore and potentially other markets, according to Zhang.
Singapore in September
With the Hong Kong Forum now in the history books after welcoming over 200 industry executives to the event in Kowloon, Mingtiandi looks forward to hosting its third annual Singapore forum in September.
The Lion City event will bring together top limited and general partners in the region for discussions on the commercial, industrial and lodging sectors, as well as in-depth sessions on Singapore as a global capital hub and the future of the office.
With Japan moving to the top of investor preferences, Mingtiandi will close out 2024 with its inaugural event in Tokyo. The full-day forum will present a series of exclusive spotlight interviews and panel discussions on the role of global capital in Japanese markets.
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