Chinese Apartment Rental Operator Q&K Sets Terms For $93.6m US IPO

Q&K International Group, a Chinese branded long-term apartment rental operator, has set the terms for its initial public offering (IPO) on the US stock market, with plans to raise $93.6 million at the midpoint of its proposed price range.

According to its latest filing, the Shanghai-based company said it will offer 5.2 million American depositary shares (ADSs) at a price range of $17 to $19. It plans to float its shares on Nasdaq under the symbol QK.

Q&K, founded in 2007 and based in Shanghai, leases apartments from landlords and transforms these mostly from bare-bones conditions into standardized furnished rooms for young people seeking affordable residence in cities.

Driven by the rapid urbanization, rising housing prices, millennial mindsets of sharing economy, and supportive government policies, branded long-term apartment rental service is an underpenetrated, fast-growing industry in China, the company said.

“An increasing number of young people in China move to cities for education or work and seek affordable long-term rental apartments,” Q&K stressed.

Compared to developed countries such as the US, where the branded long-term apartment rental penetration rate was 46 per cent in 2018, China’s penetration rate was only 1.8 per cent in 2018, and is expected to reach 11.2 per cent by 2024, according to China Insights Consultancy.

According to data cited by the company, the Chinese long-term apartment rental market, which reached 1.5 trillion yuan ($211.5 billion) in 2018, is expected to reach 3 trillion yuan ($429.29 billion) in 2024.

Q&K has grown its network from 40 rental units in Shanghai as of December 31, 2012 – the year it started substantial operations – to 91,234 units across six cities in China as of December 31, 2018, according to its prospectus.

The company incurred net losses in the fiscal year of 2017, 2018, and the nine months ended June 30, 2019, of 245.4 million yuan ($34.7 million), 499.9 million yuan ($72.8 million), and 373.2 million yuan ($54.4 million), respectively, the prospectus indicated.

Based on its prospectus, Q&K plans to use the IPO proceeds to expand its apartment network, including the related capital expenditure and sales and marketing activities. It will also invest some proceeds into technology systems and infrastructure, as well as general corporate purposes.

Q&K has officially joined the race to become the first long-term rental apartment operator in China to go public overseas. Among the contenders is Beijing-based rival Danke Apartment, which is said to be targeting to raise between $500 million and $700 million in a US IPO this year, according to sources cited by Chinese publication Xueqiu Finance.

The company closed $500 million in a Series C round from Ant Financial and Tiger Global Management in March this year.

Another Chinese long-term rental housing company, Ziroom, which is backed by Warburg Pincus, Tencent and Sequoia Capital China, is aiming to go public in the United States to raise $500 million to $1 billion, IFR Asia reported, citing sources.