Phoenix Tree Holdings Ltd. (NYSE: DNK) announced Tuesday that it is teaming up with Asian Alliance for the food and beverage industry to provide an accommodation rent discount plan to help employees in the catering sector find affordable apartments.
The firm, also known as Danke, is expected to jointly with Asian Alliance provide rent discounts of over 5 billion yuan ($716,250) to catering operators in Shanghai, Shenzhen, and Beijing. In addition to rent discounts, the deal provides help to catering employees including short-term rental services, deposit waivers, and free cancellation services.
The collaboration will be managed by Danke’s Dream Apartment, which was established in 2018 to lease full buildings or several floors and turn them into “well-renovated and fully furnished dormitory-style apartments”. The company operated 11 Dream Apartment facilities in Beijing, Shanghai, and Shenzhen with 11,000 beds, as of July 15.
“The catering industry has been severely hit by the COVID-19 pandemic. It is common practice for most catering businesses in China to provide employee accommodations on top of salaries, to maintain employee welfare,” Danke said in a statement today.
It added, “Companies are often required to pay multiple months of rent and the deposit up-front, putting more pressure on firms already facing cash flow challenges due to the pandemic.”
A pandemic wasn’t something Danke had in mind when it made its trading debut earlier this year, raising $129.6 million. However, things in the real estate sector in China have started to rebound, as property sales by floor area soared 9.7% in May, which was the fastest pace since July 2018, according to Reuters.
Meanwhile, multiple law firms have launched class-action suits against Danke for “violations of the federal securities laws”. One of the latest to do so was The Schall Law Firm, which said the company made false and misleading statements to the market.
“Phoenix Tree misrepresented the number and nature of renter complaints before its IPO. The Company also misrepresented its exposure to adverse effects on the rental market in China due to the Wuhan coronavirus,” the California-based law firm said in late June.
It continued, “Following its IPO, reports exposed that Phoenix Tree experienced significant financial problems based on the coronavirus outbreak.”
The company, which claims its one of the largest co-living platforms in China, reported that its revenues in the three months through March hit $273.9 million, up 63% year-over-year. However, its net loss widened 51% to $174.3 million compared with the same period in 2019.
Intraday, the stock in Danke was trading 1% higher at $9.25 per American depositary share. Shares of Danke have plunged 31% from its IPO pricing of $13.50 apiece.