Tencent, Sequoia invest $244m in property manager Shimao
Shimao Services, the property management arm of Hong Kong-listed Shimao Property, has raised $244 million from Tencent Holdings and Sequoia Capital China.
Tencent and Sequoia contributed $114 million and $130 million, respectively. Shimao Property announced last month that it was considering spinning out Shimao Services through a Hong Kong listing. As such, the investment has been interpreted as a pre-IPO round.
The capital will support a digital upgrade and an integration of online and offline operations. Shimao Services is present in about 70 Chinese cities, serving nearly 2.4 million property owners and users. As of December 2019, the contracted gross floor area (CFA) exceeded 100 million square meters. Shimao's latest annual report emphasizes the importance of "smart" property management services to improving user experience and realizing operational efficiencies.
Shimao generated RMB2.7 billion ($380 million) from property management and other negligible income sources in 2019, up from RMB1.6 billion a year earlier. The vast majority of its RMB111.5 billion in revenue came from property sales, with smaller amounts from operating hotels and commercial properties.
Yao Xia, a managing director at Tencent Investment, said that digitization was an inevitable trend for enterprises, especially in light of COVID-19, and that property management, as an important offline industry, will have great potential for growth. Tencent will use its technology, customer-to-business (C2B) knowhow, and enterprise service capabilities to help Shimao Services accelerate this process.
China’s fragmented property management space is seen as being in the early stages of consolidation. Tencent expects the market to be worth RMB700 billion ($99 billion) this year, according to a statement. The investor added that the market share of the top 20 companies would increase from 15% currently to more than 50%, although it did not specify a timeframe.
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