Danke and Beike, a tale of two similarly named NYSE-listed companies with vastly different business models and fortunes

By Pearl Liu / SCMP | December 15, 2020 9:01 AM SGT
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SINGAPORE (EDGEPROP) - What's in a name? As it happens, a lot. At least for two similarly named New York-listed mainland Chinese companies with property-related businesses.
Danke, which means eggshells in the Chinese language, is one of them. The other is online property portal Beike, or shell. The two companies have the character "ke" in their Chinese names, which means hard outer covering in Chinese and is often used as a metaphor for homes in Chinese culture.
However, this is where the similarity ends. The duo have starkly different fortunes spanning the two ends of the spectrum.
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Danke, an online home rental platform that is facing a liquidity crunch, cannot seem to shrug off the negative publicity hounding it. The platform, operated by Phoenix Tree Holdings, was back in the news when a 20-year-old graduate died on December 3 after falling from an 18th floor flat he had rented in Guangzhou in southern Guangdong province. Local media reports described it as a suicide.
Zhong Chunyuan, one of numerous tenants worried about being evicted by landlords who ended their contracts with Danke after the company missed payments, chose to end his life in the shoebox-sized flat after setting it on fire.
It is not clear whether the death is directly linked to Danke's cashflow problems, but the tragedy came as the company bears the brunt of authorities' and investors' ire. Shares of Phoenix Tree have fallen about 75 per cent since they were listed on the New York Stock Exchange on January 17 after a US$130 million offering.
Founded in 2015, the Beijing-based company operates a business model akin to shared-office space provider WeWork, but for residential property. Danke rents flats from individual landlords on a long-term basis, refurbishes and sub-divides them before leasing them out to tenants.
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It dubbed itself as one of the country's largest co-living platforms in its IPO prospectus, mainly serving young professionals who cannot afford to buy expensive homes or pay large deposits because of a lack of savings.
Danke's operating model relied on taking a year's rent upfront from customers while paying landlords on a monthly or quarterly basis. The company even arranged loans for its tenants through its partner banks like Tencent-backed WeBank, who then repay the borrowings on a monthly basis.
The company used the excess cash to fund its expansion, growing its portfolio from 2,434 units in 2015 to 415,000 flats as of March this year. Landlords, who have not been paid since the company's cashflow problems became apparent, have evicted hundreds of tenants who are still repaying loans.
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Danke reported a net loss of 1.2 billion yuan (US$183.3 million) during the first quarter of this year, widening 51 per cent from a year earlier, according to its latest quarterly report. Its net loss for the whole of 2019 stood at 3.4 billion yuan.
Meanwhile, Beike is the mainland's biggest online real estate transaction platform, earning revenues primarily from commission fees.
The platform is operated by KE Holdings whose stock has more than tripled to US$62.19 as of December 8 since its US$2.12 billion initial public offering and listing on August 13.
Zuo Hui, its controlling shareholder, formed the company in 2018. He earlier founded Beijing Homelink Real Estate in 2001, that has grown to become one of the country's largest offline property brokerages. Zuo then consolidated the company as Beijing Lianjia with other agencies including Century 21 China Real Estate and Zhonghuan Real Estate, into Beike.
Beike has facilitated over 2.2 million transactions on the platform in 2019, according to its IPO prospectus, and on average it collected average commissions of 2 to 2.5 per cent on existing home sales and 2.5 to 3 per cent on new home sales.
The company's adjusted net profit more than tripled to 1.86 billion yuan in the third quarter ended September, according to its first post-listing quarterly report card.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

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