China’s property innovators are hitting the headlines again this month as a property marketing and management platform tied to one of the country’s biggest investment conglomerates is reported to have defaulted on its financial commitments.
A long-term rental housing business operated by Guoan Family, an affiliate of state-linked CITIC Guoan Group, has been accused by landlords of not paying rent on the apartment that it leases to tenants, according to an account by the local media.
The Beijing-based firm’s financial fail comes less than two months after its parent company, CITIC Guoan Group, in late April missed a bond payment as a flurry of asset seizures stymied its liquidity.
Aiming to Innovate on China’s Traditional Real Estate Industry
Established in 2017, Guoan Family operates as an online-to-offline property marketing provider and manager, leasing individual apartments from home owners and sub-letting those homes to tenants through its online platform and network of agents.
The company touts the big data capabilities of its operation and has proclaimed the goal of disrupting China’s traditional property industry.
According to its website, Guoan Family is currently marketing seven new developments across China in the provinces of Guangxi, Liaoning, Hebei, Sichuan and the municipality of Tianjian, with prices ranging from RMB 5,500 per square metre to RMB 21,000 per square metre.
The website also lists 359 properties for rent, all of which are located in Beijing. Earlier in May, a number of tenants reported to the Beijing News that they were forced to move by their landlords because the rental housing operator had failed to pay its rent on time.
Tenants Disrupted by Eviction Notice
A Beijing tenant named Zhang Yajing told the local media that from the beginning of 2019 she had rented a single room through Guoan Family’s mobile app paying RMB 3,170 per month, according to a local media account. In May, however, Zhang, along with another tenant who shared the multi-room apartment, were given notice by the property owner, Zheng Li, to vacate the premises by the end of the week due to Guoan Family’s failure to pay the previous month’s rent.
The landlord reported that she had been leasing the apartment through Guoan Family for three years without incident until recently. Zheng said she was told by a customer service representative that the company is short of capital and many employees have already left.
After receiving their eviction notice Zheng’s tenants agreed to vacate the apartment on the condition that Guoan guarantee a full refund of their RMB 15,000 in rental deposits. Guoan, however, failed to honour that promise, with Zheng later joining a more than 30-person group chat on WeChat made up of tenants complaining of losing their rental deposits to Guoan, according to media reports.
CITIC Guoan Defaults on Bond
Guoan Family is a unit of CITIC Guoan, which is 20 percent-owned by China CITIC Group. In late April, CITIC Guoan missed a coupon payment on a RMB 3 billion bond, according to a report by Bloomberg. The firm said in a filing that the missed payment constituted a default.
The delinquency came after CITIC Guoan had seen many of its assets tied up by debt burdens as this year its holdings in three listed companies had all either been pledge against other liabilities or frozen due to payment disputes with creditors, China Lianhe Credit Rating said in a report on April 26. The company, whose businesses range from financial investment to real estate, has at least RMB 15 billion of onshore bonds outstanding and accumulated total liabilities of RMB 178.3 billion as of September 30, 2019, according to its latest financial results.
Rental Housing Market Continues Bumpy Ride
Misadventures in China’s long-term rental housing market have been in the headlines for nearly one year with angry tenants and landlords occupying the Beijing office of Haoyuan Hengye Long Term Rental Apartment in one incident last November. The move against the rental housing operator was due to allegations that rental payments by tenants for their Haoyuan Hengye apartments had gone missing, with landlords reporting that the four year-old Beijing-based company had failed to meet its own rental obligations for use of their assets.
The ruckus at the rental housing company came less than one month after Yujian Apartment, a rental housing company backed by Xiaomi founder Lei Jun, was warned by a major bank after allegedly failing to meet its financial obligations to tenants and landlords, while a number of other rental housing firms have come under stress or closed down in recent months.