Morgan Stanley is entering China’s rental housing market for the first time by engaging in a $100 million fundraising round for a Chinese rental apartment operator. The investment by the 83-year-old US investment bank follows similar deals by compatriots including Warburg Pincus, as well as by local heavyweight Ping An, as institutions look for opportunities to profit from the Chinese government’s policy directives to build a multi-family sector.
Morgan Stanley Private Equity Asia and Singapore private equity firm Crescent Point led the $100 million Series C financing round for QingKe (青客), a Shanghai-based rental apartment operator, according to a statement Monday.
Morgan Stanley’s Maiden Investment in Rental Housing
“QingKe is the first investment by a fund managed by Morgan Stanley Private Equity Asia in China’s long-term rental apartment market,” said Ryan Law, Managing Director at Morgan Stanley Private Equity Asia in the statement. “We are optimistic about this trillion-yuan market segment and are confident in QingKe’s leadership team and the company’s highly automated operational platform. We believe that QingKe will remain a high-growth industry leader domestically and expand its footprint overseas.”
The deal comes just a month after the central government stressed it would press ahead with the development of the long-term rental housing market in a bid to tame property prices. In March, Minister of Housing and Urban-Rural Development Wang Menghui said the government would implement more measures to stabilize housing prices and boost the rental apartment markets. “China will continue its efforts to build an effective price control mechanism to ensure the healthy development of the real estate market,” Wang said on the sidelines in the 13th National People’s Congress. “We will encourage the rental market and speed up the transformation of shanty towns.”
The government support, as well as the growing demand for housing in China’s major cities, has led a number of property developers and finance firms into ventures similar to Morgan Stanley’s in recent months. Last month, China Construction Bank teamed with rental housing management firm China Young Professionals Apartment Management Ltd (CYPA) to set up a new RMB 2 billion ($315 million) fund aimed at developing new long-term residential rental projects
Investment Bank’s Partner Has a Political Pedigree
Morgan Stanley’s six-year-old local partner also is eager to point out the potential of China’s multi-family sector.
“Benefiting from the favourable policies by Chinese government, the long-term rental apartment industry is experiencing an upgrading journey,” said Jin Guangjie, founder of QingKe. “From day one, QingKe has been continuously improving our efficiency, operations and services by leveraging information and Internet technologies, in an effort to provide convenient residential services at best price to young people living in big cities.”
Founded in Shanghai in 2012 under the auspices of the Shanghai Youth Federation, an organisation under the Communist Party, QingKe manages over 70,000 rental units at present. The company, which targets young individuals, says its facilities in Shanghai, Beijing, Hangzhou and Jiaxing in eastern province Zhejiang, Nanjing and Suzhou in Jiangsu province and Wuhan in Hubei average an occupancy rate at 95 percent.
Investors Tapping Into Rental Housing Boom
QingKe is one of a growing number of multi-family operators and developers that are rapidly gaining support from institutional investors in the region. At the beginning of the year, Ping An Real Estate, a subsidiary of Shenzhen-based Ping An Group, joined with developer Landsea Green Properties to launch their own $1.5 billion fund that will back the development of rental apartment projects in major cities across China.
In the same month, rental housing provider Ziroom also raised RMB 4 billion ($621 million) in new funding from investors including Warburg Pincus, Sequoia Capital China, and mainland tech giant Tencent.