Recently, Mofang Apartment has been embroiled in a crisis due to unpaid rents to landlords and forced evictions of tenants across multiple locations.
Reports indicate that tenants in Mofang Apartment branches in Shanghai, Guangzhou, Wuhan, Xi'an, and other cities have been abruptly evicted. Some tenants reported having their water and electricity cut off by property management, severely disrupting their daily lives. Others stated that despite having prepaid deposits and three months' rent, Mofang Apartment only promised refunds within "15 to 30 working days" without offering any compensation plan. In Guangzhou, some branches have been taken over by new operators who assumed tenant contracts, while tenants claimed Mofang Apartment staff were entirely absent during the transition. Meanwhile, other branches continue normal operations, though tenants express growing concerns.
Notices posted by property management at multiple locations reveal that Mofang Apartment owes hundreds of thousands to millions of yuan in unpaid rent and utility fees, including properties under Country Garden's management.
Industry analysts note that Mofang Apartment aggressively bid for rental properties at high prices during 2016-2017, and current cash flow constraints have made its "high acquisition, low rental" model unsustainable. Previously, Mofang Living Services Group, the parent company, attempted two unsuccessful listings on the Hong Kong Stock Exchange. Its prospectus showed a debt-to-asset ratio reaching 85% in 2022, with continuously narrowing cash flow.
Tenants recently took to social media, reporting sudden notices from property management stating that rental contracts would be terminated early due to Mofang Apartment's prolonged rent defaults, demanding immediate evacuation. The eviction wave has affected Mofang Apartment branches in Shanghai, Guangzhou, Wuhan, Xi'an, and other cities.
Additionally, some tenants experienced utility cuts during evictions, with power only restored after mediation by local authorities, significantly impacting their daily routines.
One tenant disclosed signing an electronic lease agreement with Mofang Apartment in July, valid until August next year, with regular rent payments. However, on December 5, the tenant group chat was unilaterally dissolved by apartment managers, followed by a sudden phone call the next day demanding immediate contract termination. Tenants were told to sign new contracts with property management or face forced evacuation by December 16.
"I've prepaid rent from October this year to January next year. After deducting the occupied period, I overpaid approximately 5,000 yuan in rent, plus a 2,231 yuan deposit and utility fees—totaling 7,500 yuan held by Mofang Apartment," the tenant stated.
Mofang Apartment indicated refunds would take 15-30 working days, but tenants doubt successful reimbursement. No compensation has been offered for the abrupt evictions. Tenants highlight contractual imbalances: while tenants face penalties for early termination, the contract lacks specific clauses for apartment-initiated breaches.
Following rumors of Mofang Apartment's crisis, investigations at Guangzhou branches revealed that the Mofang Apartment Lakeside Space branch had rebranded to Mumian Apartment. Some tenants signed tripartite agreements and new contracts with Mumian Apartment, transferring remaining lease terms and fees without rent changes.
Tenants admitted that some residents moved out before re-signing. The transition was managed solely by Mumian Apartment staff, with Mofang Apartment personnel absent since late November. At Mofang Apartment's Guangzhi branch, operations remain normal, though tenants express concerns given other locations' issues.
The crisis stems from Mofang Apartment's cash flow problems. Legal notices posted at multiple branches cite rent arrears exceeding 30 days as fundamental breaches, with debts ranging from hundreds of thousands to millions of yuan. Creditors include both private landlords and Country Garden's properties.
As a pioneer in China's centralized long-term rental apartment sector, Mofang Apartment operates on a "lease-rent" model—acting as a intermediary landlord by leasing entire buildings, renovating them, and subdividing units for individual tenants, profiting from rent differentials and service fees.
However, the industry faces challenges like long operational cycles, low rental returns, and high costs. Market downturns or operational inefficiencies reducing occupancy rates strain cash flow, as fixed rental payments to landlords remain unchanged.
Many affected Mofang Apartment branches signed 10-year leases in 2016-2017, with most locations operating at a loss. An industry insider noted that during 2016-2017, capital influx drove companies to aggressively outbid rivals for properties, often using "high acquisition, low rental" strategies, including upfront payments to pressure landlords.
Mofang Living Services Group did not respond to inquiries, while customer service advised tenants to follow branch-specific notices, promising full refunds if disputes with property management arise. This isn't Mofang Apartment's first crisis; similar issues occurred in Shenzhen in August 2024 and with its acquired Weike Youth Apartment in 2017.
Established in 2009, Mofang Living is chaired by 7 Days Inn founder Zheng Nanyan, with former Hanting Hotels executive Liu Jia as CEO. The company secured four funding rounds from investors like Warburg Pincus, DT Capital, AVIC Trust, and CDPQ, reaching a valuation over $1 billion post-Series C, though its last funding round was in March 2019.
To address financial needs, Mofang Living filed for Hong Kong IPOs in September 2022 and April 2023, both unsuccessful. Revenue grew from 950 million yuan in 2020 to 1.71 billion yuan in 2022, with growth slowing from 55% (2020-2021) to 16.5% (2021-2022).
Net profit fluctuated sharply: a 302 million yuan profit in 2021 contrasted with losses of 230 million yuan (2020) and 247 million yuan (2022). Revenue growth was primarily driven by acquisitions, including 21 project companies from Maker Space Operation Management Group in 2021, followed by purchases of Shanghai Yin Chen, Shanghai Jing Hong, and others, expanding managed apartments from 39,000 (2020) to 76,000 (2022).
Acquisitions escalated debt and strained cash flow. By end-2022, the debt-to-asset ratio hit 85%, while operating cash flow growth slowed to 13.3% (1.19 billion yuan) in 2022 from 59% in 2021. Debt primarily comprised lease liabilities (over 70% of total debt) and interest-bearing bank loans (over 10%).
Mofang Apartment's predicament reflects broader industry challenges in balancing expansion with financial stability, raising urgent questions about tenant and landlord rights protection and the sustainability of high-debt models.
Comments