The eggshell apartment, which had been shaky for a long time, fell into the “bankruptcy door” again. Although Eggshell Apartments quickly retorted that there was “no bankruptcy and no runaways”, thousands of landlords and tenants were already in a whirlpool, and rights protection incidents occurred in many places across the country. Eggshell Apartments once relied on “rental loans” for cash flow expansion, and this operating model has been questioned. Faced with the problem of tenant repayment, the eggshell partner WeBank issued an announcement stating that before March 31, 2021, it will protect customer credit from being affected.
However, how the severely ischemic eggshell can fill the funding gap remains to be solved. Landlords, tenants, cooperative banks and even eggshell employees have become the direct bearers of the loss. The savage growth of the long-term rental apartment market requires more complete regulatory measures.
Eggshell Shenzhen has been defended by hundreds of people, and conflicts among the landlord, tenants, and platforms are highlighted
On November 9, the Beijing headquarters of Eggshell Apartments revealed that hundreds of people gathered to defend their rights. At the same time, its Shenzhen-based operator Shenzhen Eggshell Apartment Management Co., Ltd. (hereinafter referred to as Eggshell Shenzhen) also suffered a rent payment disturbance.
On the morning of November 17, a reporter from the Securities Times went to the Eggshell Shenzhen office in Jinsong Building, Futian District, Shenzhen. A large number of landlords and tenants had gathered downstairs. There were dozens of police officers and Futian District volunteers to maintain order. Landlords and tenants can register their numbers and go upstairs to negotiate a solution with the eggshell staff. By the time the reporter arrived at about nine o’clock, he had already queued to more than one hundred. According to on-site volunteers, 700 or 800 people came to negotiate yesterday.
(Downstairs in Jinsong Building, hundreds of landlords and tenants are waiting in the queue to negotiate with Eggshell Apartments. Photo by Mao Kexin/)
(Futian District dispatched legal volunteers to provide consulting services on site/photo by Mao Kexin)
(Photo by Mao Kexin, the crowd waiting to go upstairs for negotiation)
Li Ze was one of the tenants rushing to the scene. In July last year, Li Ze rented an apartment in Nanshan District, and signed a one-year contract with Eggshell, with a monthly rent of 2,560 yuan. At the same time, there is a personal loan contract with WeBank, which is equivalent to Li Ze paying the annual rent to the eggshell through the loan, and the monthly payment is the loan repayment amount. The loan contracts provided by multiple tenants show that the loan funds are directly issued to the account of Eggshell Shenzhen, and the annual interest rate of the loan is 9.5%.
“When you sign the contract, you can choose to pay monthly, quarterly, annual or rent loans. Rent loans can save three or four thousand yuan a year, so I chose this method.” Li Ze told the Securities Times reporter. The reporter learned from many tenants that Eggshells often use preferential prices to guide tenants to use “rental loans” when promoting apartments, either by reducing deposits or giving interest rebates. There are many special offers for fresh graduates. .
On the other side, Eggshell paid the landlord a higher rent. Li Ze discovered that the monthly rent for the apartment he shared was 10,000 yuan, but the landlord received 13,000 yuan from the eggshell. At present, Li Ze’s landlord can still receive the rent paid by the eggshell, but Li Ze has heard the news of other landlords breaking off the rent and the tenants being driven out, so he plans to terminate the contract as soon as possible.
A reporter from the Securities Times learned on the spot that some landlords have not received the rent paid by Eggshell since last month, some of this month’s rent has been delayed for several days, and some can still be received. The situation varies from one household to another. .
Tian Nuo is a less fortunate owner. He has three houses in Longhua District, all of which have been signed and entrusted to Eggshell Apartments. They signed the Asset Entrusted Management Service Contract. The contract will last for three years and will expire in the middle of next year. However, he has not received any rent since October. The monthly rent for the three houses adds up to 30,000 yuan. “Those who have houses are worried,” he lamented.
Now, Tian Nuo does not intend to retire the tenant for the time being. He understands that the tenant has already paid the rent and the responsibility lies with the eggshell apartment. He hopes that the tenant can cooperate with the landlord to ask for money back from Eggshell Apartment, repay the loan to WeBank, and then directly discuss the renewal with the tenant.
However, it is still doubtful whether the payment can be recovered, and some landlords want to collect the house as soon as possible. Landlords and tenants have become victims at the same time, and the risk of eggshell management has triggered a confrontation between the two. A reporter from the Securities Times observed in multiple rights protection groups that the landlord had cut off water and electricity in many places in Shenzhen, and even came to drive away tenants.
WeBank provides credit protection, and the solution of the parties is still under negotiation
The business model of Eggshell Apartments is not unique. In recent years, the market for long-term rental apartments has often seen “high in and low out” (the rent paid to the owner of the house is higher than the rent charged to the tenant), “long income and short payment” (collecting rent The rent cycle is longer than the rent paid to housing rights holders). Coupled with the “rent loan”, the apartment management company can realize capital turnover, use cash flow for purchasing and storage housing, renovation and other expenses, and achieve rapid expansion.
However, this brutal growth model is also risky. Once the capital chain is broken, it will harm the interests of landlords, tenants and even employees.
A reporter from the Securities Times came to Eggshell Shenzhen Office as a tenant to inquire about the solution. An Eggshell staff member said: “The landlord did not receive our money. This is our breach of contract, but the landlord cannot force the house to be closed. What are the problems? Let the landlord come to us, and you will still live as much as possible.”
“To put it bluntly, the eggshell means that there is no money. There is a problem with the operation, and we are still thinking of a solution. If it goes bankrupt, the bank will give priority to repaying the money. I don’t know if it will be enough. Now we can only wait, and our salary is also I have been in arrears for a month.” The staff member said frankly.
As a partner of the “rental loan” of Eggshell Apartment, WeBank issued an announcement on November 16th that it has paid attention to the situation of Eggshell Apartment. The bank stated that the client has signed the “House Agency Lease Contract” with Eggshell Apartment, has prepaid rent, and enjoys legal residency rights. It is recommended that customers continue to live during the paid period to protect their legal rights.
WeBank stated that if customers’ legitimate rights and interests are infringed (such as forced withdrawals, water cuts, power cuts, etc.), it is recommended to protect their legitimate rights through legal channels. If the customer has been forced to move out, they can log in to the “WeBank Rental Consumer Loan” official account to register. The bank will make appropriate arrangements to protect customer rights as much as possible. At least until March 31, 2021, credit reporting will not be affected .
“This is equivalent to giving a breathing time. My roommate successfully terminated the contract with Eggshell last week, and also cancelled the loan agreement at the same time. As long as the operation is on the App, it will not work this week. If Eggshell can be used next year If the blood continues before March, then we still have a little hope, otherwise we will eventually have to pay the money.” Li Ze felt helpless.
On November 16, under the coordination of the Futian Branch of the Shenzhen Municipal Public Security Bureau, some progress was made in the negotiation of the incident. The Securities Times reporter learned that the results of the negotiations generally include the following points: the tenant’s lease loan still needs to be repaid, and the support provided by WeBank is only a limited time credit protection; the government will coordinate and communicate to encourage the tenant to continue to live. In the original apartment, the police will come forward to stop the landlord from forcing the house to take the house; the public security department has opened a case for the malicious arrears of eggshells, but it will take some time.
However, different landlords and tenants have different situations and different demands. The parties have not yet reached a unified solution. Some landlords and tenants said they will continue to negotiate with eggshells.
Long-term rental apartments grow wildly, industry supervision urgently needs to be regulated
Eggshell Apartment is a leading player in the field of long-term rental apartments. It was established in Beijing in January 2015, and its operating entity is Ziwutong (Beijing) Asset Management Co., Ltd. Eggshell has now entered 13 markets across the country, including Beijing, Guangzhou, Shenzhen, Hangzhou, Tianjin, Wuhan, Nanjing, Chengdu, Suzhou, Wuxi, Chongqing, and Xi’an. The company’s official website shows that the number of houses managed by Eggshell has exceeded 400,000. The total number of users exceeds 1 million.
The rush of Eggshell Apartments was followed by capital. Since its establishment, Eggshell Apartments has completed 8 rounds of financing. Investors have shining stars, including Joy Capital, Tiger Global, Ant Financial, Chunhua Capital, Gaorong Capital and other investors. A rare large-scale financing event in the apartment rental industry.
On January 17, 2020, Eggshell Apartments (DNK.N) struck the bell on the New York Stock Exchange and issued a total of 9.6 million American Depositary Shares (ADS). Each ADS is equivalent to 10 Class A ordinary shares. The issue price is ADS is $13.5 per share. However, Eggshell Apartments broke on the first day of listing. Since the beginning of this year, the stock price has been declining. As of the latest close, the ADS per share of Eggshell Apartments has fallen by 90%, leaving only $1.37, with a total market value of $250 million.
Eggshell Apartments has not yet shaken off its losses. The latest financial report shows that Eggshell Apartment lost 1.23 billion yuan in the first quarter of this year. As of March 31, 2020, it had cash of 826 million yuan and restricted cash of 1.384 billion yuan.
The “rental loan” operating model of Eggshell Apartments has been criticized. Eggshell Apartments once stated frankly in the prospectus: “The rent prepaid by tenants is an important source of our operating cash inflows. We also cooperate with financial institutions to provide rent financing for tenants and prepay us. These financing activities constitute our cash inflow support Important source.”
The prospectus disclosed that the number of tenants who paid rent by rent loan far exceeded the number of tenants who paid rent directly. In 2017, 2018 and the first nine months of 2019, the proportion of tenants using “rental loans” was 91.3%, 75.8% and 67.9%, respectively. In the first nine months of 2019, Eggshell Apartments received an advance payment of 790 million yuan from tenants through the “rental loan” model, accounting for 80% of the rental income of Eggshell Apartments. This ratio was also as high in 2017 and 2018. 90% and 88%.
Eggshell Apartments stated in the prospectus that if the tenant terminates the lease early, Eggshell may be required to return the prepaid rent to the relevant financial institution or tenant. “However, we expect to be able to rent out vacant units to new tenants in a relatively short period of time and collect new advance payments from new tenants or financial institutions. Therefore, we do not think there is a significant liquidity risk.”
But the reality is not as expected by Eggshell. Since the beginning of this year, Eggshell Apartments have experienced frequent crises in many parts of the country.
According to multiple media reports, in February this year, the Shenzhen Municipal Commission of Political Science and Law issued a “Notice on Carrying out Related Investigations” to the Municipal Financial Supervision Bureau and the Banking and Insurance Regulatory Bureau, stating that there has been an incident in Shenzhen recently that the owners of Eggshell Apartments gather to defend their rights. It was discovered that there was a “rental loan” in Eggshell Apartments. Due to the large stability-related risks of rent loans, the Financial Supervision Bureau and the Banking and Insurance Regulatory Bureau were required to attach great importance to it and carry out investigation work as soon as possible. The “Notice” shows that 11,000 contracted owners of Eggshell Apartments in Shenzhen, 11,000 houses, and 31,500 tenants.
Eggshell apartment is not a solitary case. In recent years, many parents rented apartments across the country, such as Youke, Lanyue, and Kitty Hunting, have exploded. Regulators have also paid attention to this type of leasing model.
In December 2019, the Ministry of Housing and Urban-Rural Development, the National Development and Reform Commission, the Ministry of Public Security, the State Administration of Market Supervision, the China Banking Regulatory Commission, and the State Cyberspace Administration of China issued the “Opinions on Rectifying and Regulating the Order of the Housing Leasing Market”, targeting the leasing finance business Put forward regulatory requirements.
The “Opinions” stated that housing leasing companies shall not require tenants to use housing rental consumption loans by means of concealment, deception, coercion, etc., and shall not induce tenants to use housing rental consumption loans in the name of rent installment, rent concessions, etc.; strengthen post-loan management and strict Review the use of loans to prevent housing leasing companies from forming capital pools and increasing leverage.
In addition, in response to the business model of “high input, low output” and “long income, short payment”, the “Opinions” proposed that the Ministry of Housing and Urban-Rural Development and other departments should strengthen supervision, and housing rental loans should not exceed 30% of the rental income of housing leasing companies. Those exceeding the proportion should be adjusted in place before the end of 2022.
In September of this year, the Ministry of Housing and Urban-Rural Development issued the “Regulations on Housing Leasing (Draft for Comment)”, which clearly regulates the qualifications, behavior, supervision mechanism and legal responsibilities of housing leasing companies. This regulation is the first regulatory and normative document in the field of housing leasing in my country. In addition, Chengdu, Xi’an, Chongqing and other cities have also issued documents requesting the establishment of the only rental fund supervision account, and including rents of more than three months into the scope of supervision, which will help plug the loopholes in the supervision of long-term rental apartments.
(Li Ze and Tian Nuo are pseudonyms in the text)