Chinese Apartment Rental Service Provider Ziroom Raises $622M Series A Round Led By Warburg Pincus, Tencent And Sequoia China

Chinese apartment rental service provider Ziroom has raised a RMB4 billion (US$622 million) series A round led by Warburg Pincus, Tencent and Sequoia Capital China, according to its WeChat official account. 

Equity investment firm General Atlantic,  Chinese venture capital firm Source Code Capital, private equity firm Strait Capital and Huasheng Capital, Chinese property developer Sunac and Chinese agribusiness firm New Hope Group also participated in the round.

The company claims this is the biggest financing round ever raised by a long-term rental firm in China. The fund raising gives the company a RMB20 billion (US$3 billion) valuation, according to local media.

Founded in 2011, Beijing-based Ziroom leases apartment units, renovates them and subleases them to long-term tenants. It manages 500,000 rooms and serves 1.2 million tenants in nine cities around China. It also operates eight service apartment buildings.

"Ziroom is China’s biggest professional asset management firm, and has advantages in customer acquisition, big data application and rental management," said Julian Cheng, managing director and co-head of China at Warburg Pincus. "After interviewing hundreds of tenants, we found Ziroom’s reputation is higher than the industry average."

He also noted that with China’s rapid urbanization, about 70% of the newcomer to large and medium cities prefer rental over owning a property.

Proceeds from the funding will be used to expand the company’s existing businesses in Beijing, Shanghai and Shenzhen, as well as adding new operations in cities such as Hangzhou, Wuhan and Guangzhou. It will also upgrade its services to include maintenance and house moving as well as invest in technologies such as smart furniture and big data, according to its CEO Xiong Lin.

The Chinese government has been pushing the development of the home rental market to address housing demand from urban newcomer. Last August, 12 major cities in China introduced pilot programs that allows tenants of rental properties to enjoy the same access to public services as property owners.

With government backing, the sector is attracted increased investments. Last September, Warburg Pincus committed a US$183 million follow-on investment into Nova Property Investment Co. Ltd, a Chinese rental apartment operator and asset manager. Last July, IDG Capital and Chinese hotel management company Huazhu Hotels Group Ltd. led a US$50 million pre-A round in Chengjia Apartment, an apartment rental start-up.