Beijing-based online long-term property rental platform Danke Apartment has filed with the US Securities and Exchange Commission for an initial public offering (IPO) in the United States on Monday, according to its prospectus.
The company said the proposed maximum aggregate offering price would be USD 100 million, adding that this is estimated solely for the purpose of determining the amount of registration fee. The pricing and the number of shares to be offered has not been determined.
The company, which was founded in 2015 and had Ant Financial among its investors, said the new funds will be used to expand its scale by sourcing and renovating additional apartment units, as well as to enhance its technological capabilities. The fresh cash will be also used for general corporate purposes, including branding, marketing, and potential acquisitions and investments.
Danke sources and leases apartments from individual property owners on a long-term basis. The firm renovates and furnishes such apartments in a standardized manner and then rent them out to individual residents, either as an entire apartment or private rooms within a residence, the company stated in the prospectus.
This business model is similar to that of Shanghai-based Q&K, which filed for an IPO earlier this month.
Danke had been operating 406,746 apartment units in 13 cities in China as of September 30, a 166-fold increase over less than four years. The company emphasized in the prospectus that it has no brick-and-mortar storefronts, indicating it reaches both property owners and individual renters only via its online portals.
However, behind this fast expansion, there are also billions of net loss. The company incurred net losses of nearly RMB 1.4 billion (USD 191.6 million) in 2018 and RMB 2.5 billion (USD 352 million) during the nine months ended September 30, 2019, respectively.
Q&K, which had operated 97,000 apartment units in 6 cities by the end of June, booked net losses of RMB 373.2 million (USD 54.4 million) in the nine months ended June 30, 2019.
China’s residential rental market size reached RMB 1.8 trillion in 2018 and is expected to grow to RMB 3 trillion in 2023, Danke said in the prospectus, citing data from iResearch.
Although the market is huge, the risks are large too, as more than 25 long-term rental companies have gone bust since 2018 under strained cash flows, leaving thousands of individuals homeless even after paying their rents in advance, according to Chinese media outlet Jiemian.com.
Xiong Lin, CEO of Ziroom, another major player in the long-term rental sector, said earlier this month on its eight-year anniversary that the company was in no hurry for an IPO, betokening that the sector has passed the expansion era to enter a “refined operation” time, in which companies need to focus more on creating values for users.
