Mainland China rental housing platform Danke Apartment announced on Friday that it has closed a $500 million funding round, co-led by existing investor Tiger Global Management and new backer Ant Financial — the e-payment and asset management giant controlled by Alibaba’s Jack Ma.
While not yet calling itself a duo-corn, the series C round values Danke at $2 billion as it stacks up cash to fuel its mission of providing c0-living facilities to China’s increasingly mobile white collar crowd.
After spending $200 million in January to acquire a competing rental platform, Danke founder Gao Jing says that the company will focus the proceeds of this latest funding round on improving its big data-powered rental transaction system and to expand into providing housing for blue collar workers.
Primavera, Gaorong and CMC Also Join C Round
Gao Jing, founder and CEO of Ziwutong Beijing Asset Management, the Beijing-based company behind Danke, the four-year-old platform will also be putting its new cash to work to boost operational efficiency, cut costs, improve quality of apartment amenities and upgrade tenant experiences.
Joining Tiger and Ant Financial in the funding round are Gaorong Capital, Primavera Capital, Joy Capital and CMC Capital. The latest funding comes after Danke closed a $70 million Series B+ round in June 2018, just four months after it secured a $100 million Series B round.
In January of this year, Danke spent $200 million to acquire Whale Capital-backed housing asset management platform iShangzu. That transaction brought the number of listings on Danke’s online rental platform to around 400,000 homes across China.
Sub-Dividing Apartments to Multiply Returns
Founded in 2015, Danke (which means eggshell in Chinese) takes a dorm-like approach to housing by slicing up fully furnished apartments to provide homes for multiple young professionals. The average rent for a single room on the platform is RMB 2,600 a month and Danke says it currently has listings in 10 mainland cities including Beijing, Shenzhen, Shanghai and Hangzhou.
Ji Gang, vice president and head of strategic investment at Ant Financial said the investment in Danke signifies the online asset manager’s ability to bring technology into an industry which had previously conducted most of its business offline. Ji indicated that Ant Financial sees Danke as part of a strategy to modernise China’s rental housing industry which he says currently suffers from mismatched information, low quality listings and frequently fractious landlord-tenant relationships.
Ant Financial believes that its fintech innovation tools, combined with Danke’s big-data driven internet-powered operation, will make it possible to bring better rental products and experiences to China’s young urbanites.
Rental Housing Stays Hot in China
China will eventually have 300 million renters, who will together create a RMB 5 trillion rental housing market, according to a report compiled by Tencent-backed Lianjia, China’s largest real estate brokerage.
Danke and its competitors currently enjoy the benefits of being aligned with one of China’s top policy objectives as the country races to build rental housing in major urban centre. In the official Report on Government Work published by China’s State Council in April last year, the nation’s leaders set out the development of the rental housing market as one of the main objectives for the central and local authorities.
The prospect of growth has lured many players. There are already some 1,000 dedicated operators competing for a slice of the rental market, plus 30 property developers and 10 real estate agencies, as well as about 20 hotel brands that are diversifying into rental apartment buildings, according to Chinese tech media 36kr.
Last May, Singaporean sovereign wealth fund GIC made its first foray into China’s rental housing market by establishing a joint venture with Warburg Pincus-backed rental housing startup Nova. The new entity aims to invest up to RMB 4.3 billion ($675 million) in acquiring, renovating and operating rental apartment projects in core locations in China’s first tier cities.
A Few Hiccups on the Way to Co-Living Utopia
But, China’s rental housing sector has also provided a number of controversies in the past year. In September last year, Ziroom, a Lianjia subsidiary and China’s largest rental housing unicorn, was caught in the center of a formaldehyde-driven media storm. Ziroom and other multifamily operators were also accused of ramping up rental prices by engaging in a bidding war to lock up supply of available homes in Beijing.
The sector’s fast growth has also attracted the usual selection of shaky players. In late October, angry tenants and landlords occupied the Beijing office of Haoyuan Hengye Long Term Rental Apartment to mount their own extra-legal detention of the housing company’s management as the Beijing-based company failed to pay the home-owners, despite collecting rent from the tenants.
The ruckus 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.