Danke Apartment, a Chinese online residential rental marketplace backed by Ant Financial, has filed for an initial public offering (IPO) with the Securities and Exchange Commission (SEC) on Tuesday to raise up to $100 million – a placeholder amount likely to change.
The prospectus, which was filed by Beijing-based Phoenix Tree Holdings, the operator of Danke Apartment on Monday, did not disclose the pricing terms of the listing. The company plans to go public on the New York stock exchange under the symbol “DNK.”
The prospectus disclosed that Danke Apartment recently secured $190 million in a Series D round of financing from Shanghai-based investment company China Media Capital and China’s Primavera Capital. The fresh capital will help Danke Apartment develop more detailed operations, and provide better products and services.
The Beijing-based online residential rental marketplace filed for the IPO as its homegrown counterparts are also eyeing to go public in the United States. Fangdd Network Group, a software as a service (SaaS)-enabled online real estate marketplace, set the terms to raise up to $105 million, while long-term apartment rental brand Q&K International Group targeted a $93.6 million listing.
These companies are tapping into an enormous opportunity within the Chinese residential rental market, which is highly fragmented and inefficient and awaited to be improved by tech-driven “new rental” business model.
China’s residential rental market is projected to nearly double its size from 1.8 trillion yuan ($255 billion) in 2018 to reach 3 trillion yuan ($425 billion) in 2023, according to iResearch cited in the prospectus. Driving forces include China’s continued urbanization, high housing prices, changes in young people’s consumption habits and lifestyle, as well as favourable policies.
Danke Apartment was started in early 2015 to provide young people with residential rental services. The brand has grown into one of the largest co-living platforms in China, operating 406,746 apartment units across 13 cities in China as of late September.
The platform sources and leases apartments from individual property owners on a long-term basis. It then designs, renovates and furnishes apartments in a standardised and stylish manner and rents them out to individual residents.
Phoenix Tree Holdings introduced a new brand, “Dream Apartment,” in November 2018 to target the large yet underserved blue-collar apartment segment. The brand leases entire buildings or floors in a building, transforms them into dormitory-style apartments, and rents them to corporate clients for employee accommodation.
The company currently generates revenues from rents and services fees. Its revenues increased by 307.3% from 656.8 million yuan in 2017 to 2.67 billion yuan ($374.3 million) in 2018, according to the prospectus. The firm booked 4.99 billion yuan ($699.5 million) in revenues in the nine months ended September 30, 2019, with a net loss of 2.51 billion yuan ($350 million) in the same period.
Ant Financial, the fintech spinoff of Alibaba, holds a 7.8 per cent stake through an affiliate, while Tiger Global Management’s investment vehicle has 20 per cent shares.
Phoenix Tree Holdings plans to use the proceeds to enhance technological capabilities and expand its scale by sourcing and renovating additional apartment units. The firm will also use the money for other general corporate purposes, including branding and marketing, as well as potential acquisitions and investments.
Citi, Credit Suisse, and J.P. Morgan are the joint bookrunners on the deal.