Chengdu-based apartment rental company Uoko has raised US$22 million in its round B funding from investors including Matrix Partners China, SIG China，Legend Capital and China Renaissance, bringing the startup’s estimated valuation up to US$80 million, CEO Xiang Liu confirmed. In September 2013 Uoko raised RMB3 million angel investment and an additional US$4 million from Legend Capital in its Series A financing.
In the face of rising demand from young people in the major and second-tier cities and dissatisfactory service from traditional property agents, long-term rental solutions targeting young people are springing up. Some of the popular rentals services are: YOU+ Youth Apartments, an offline community concept project in Guangzhou that received a RMB100 million investment from cellphone maker Leiju, Ziroom Apartment, a high-end rental subsidiary of a traditional property agency chain in Beijing, and Mogoroom in Shanghai, also operating on a model that incorporates trustee housing with standardized interior and after-rental service.
Uoko’s market is in second-tier cities Chengdu and Wuhan. Commenting on the market conditions in Chengdu, Mr. Liu said: “Looking at the city’s housing demand, 150,000 students graduate in Chengdu every year with a third of them staying on in the city, adding to an incoming population of 50,000-80,000. The average length of rental for this market of around 200,000 people is 3-4 years. As for the city’s housing supply, the rental market has already become a “buyers’ market” with 70,000-90,000 apartments going on the market every year and around one half of new apartments remaining unused after sale. Unlike major cities, many second-tier cities like Chengdu still have plenty of new condominiums in main districts. The vacancy rate of these properties is around 26% in Chengdu.”
Uoko has created a one-stop standard service that includes trustee hosting, interior design, renovation, room rental, after-rental management and maintenance. “We offer real estate agent and management service to property owners and a quality rental experience to tenants. We seek to further develop our product standardization, service branding and the social communities in the properties,” Mr Liu said.
Some 99% of Uoko’s Chengdu properties are “bare properties” left unfurnished and unused by owners. Uoko uses property agents, developers and real estate companies to connect with owners and obtains five-year leasing rights to the properties that they then remodel for rental. The company’s property managers take care of property viewing, maintenance and utilities for the properties, in the hope that potential tenants wouldn’t mind paying more for an enhanced rental experience. The average rent is RMB700-800 per month for a room, 10%-20% higher than the market average. The rental income is shared with the owners in the form of a minimum guarantee or shared revenues.
Uoko has a selection process with a 60% pass rate assessing factors such as education and lifestyle of potential tenants and a second screening by the property managers to ensure the quality of tenants.
Uoko was established in 2012. Its Chengdu team currently has 180 staff and is managing 3,000 properties with around 95% occupancy. About 40% of the new customers are from referrals. In the beginning of this year it began operations in Wuhan with a team of 80 staff. “We chose Wuhan firstly because we have staff on our team with experience in similar operations in Wuhan, and secondly the market conditions there are similar to Chengdu with twice the number of graduates per year than Chengdu and we also see a lot of potential in housing supply. The funds from this financing round will be used to consolidate our bases in these two cities,” Mr. Liu explained.(Translation by David)