Boyu pursues listed Chinese property manager
Boyu Capital is seeking full control of Chinese property management business Jinke Smart Services Group through a cash offer that values the Hong Kong-listed company at HKD 7.83bn (USD 998m).
The GP acquired a 22% interest in Jinke Smart Services last December, becoming the second-largest shareholder after the company’s parent, Jinke Property, which holds 30.33%. It is now offering to buy all outstanding shares for HKD 12.00 apiece, according to a filing. This represents a 33% premium to the September 7 closing price, after which trading was suspended.
Jinke Smart Services stock resumed trading on September 27 and leapt 12.9% to close on HKD 11.92, giving the company a market capitalisation of around HKD 7.77bn.
The move comes as Chinese property developers continue to be challenged by pandemic-related restrictions that have limited construction and sales as well as reduced access to bank financing. In May, Jinke Property said it was unable to make payments on a CNY 1.25bn (USD 188m) onshore bond and secured a deadline extension to avert a default.
The Chonqing-headquartered developer had an additional CNY 6.9bn in onshore bonds due by year-end, with CNY 1.6bn scheduled to mature in July. Jinke Property posted heavy losses in the first quarter of 2022 and – amid concerns about its solvency – the company was asked by the Shenzhen Stock Exchange to explain a sharp drop in profitability in 2021 even though revenue increased.
Founded in 2000, Jinke Smart Services manages nearly 1,400 projects across 184 cities with a contracted gross floor area of nearly 360 million square metres as of December 2021.
In addition to property management services – which range from housekeeping to maintenance to security patrols – the company looks after properties for non-resident owners and provides services to other developers during pre-sale and sale processes. It also offers smart technology solutions, utilising big data and the internet of things in building, community, and park management.
Jinke Smart Services generated CNY 5.97bn in revenue in 2021, up from CNY 3.37bn a year earlier, while net profit rose from CNY 632.2m to CNY 1.08bn. However, for the six months ended June 2022, revenue retracted slightly to CNY 2.56bn and net profit dropped to CNY 372.3m from CNY 536.3m.
The company blamed the challenging global economic environment, new outbreaks of COVID-19, and sluggish domestic real estate demand for its eroding profitability.
Boyu is currently deploying its fifth China fund, which closed on USD 6.3bn in the first quarter of 2021. It comprises a flagship fund and a smaller growth vehicle.
Other significant investments in China’s property management space include a USD 6bn round last year for Wanda Commercial Management Group, a shopping mall operator. PAG was the lead investor, contributing USD 2.8bn in what represents its largest-ever private equity commitment.
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