Tencent, Warburg Pincus Said Investing $1.5B in China’s Lianjia

Chinese Internet giant Tencent is planning to invest $1 billion into Lianjia, as part of a $2 billion financing round in preparation for a future IPO by China’s largest real estate brokerage, according to a report in the Wall Street Journal.

In addition to Tencent, American private equity firm Warburg Pincus LLC is also planning to bet $500 million on the Chinese brokerage, according to the Journal report. Inquiries from Mingtiandi to Warburg Pincus representatives went unanswered at the time of publication.

Lianjia, which is China’s largest real estate brokerage, provides sales and marketing of new and secondary-market homes, leasing and other advisory work through its network of more than 8,000 branches across the mainland. The company is also developing online-to-offline tools to assist property owners in marketing their assets directly on the Internet and has been rapidly expanding online ventures through its Ke.com online listing platform and Ziroom rental apartment network.

Raising Funds to Ramp Up Online Presence

According to the Journal report, the newly-raised funds are ear-marked for further development of real estate brokerage website Ke.com, (also known as 贝壳找房), which offers new houses, second-hand houses, and rental houses in more than 500 cities across China enhanced by high-tech touches such as VR site visits. Should the private fundraising be successful, the valuation of Beijing-based Lianjia is expected to reach about $13 billion.

Lianjia is also discussing an IPO in either Hong Kong or the US in the coming years. In April 2016, Lianjia completed a B round financing which valued the company at RMB 36.85 billion. That cash infusion came after the Beijing-based real estate brokerage last year carried out a round of strategic financing, which included raising RMB 2.6 billion from Sun Hongbin’s Sunac China and RMB 3 billion from Vanke.

Tencent’s Invasion into Real Estate

The latest bet on Lianjia is not Tencent’s first move into the real estate market.

In January of this year, Ziroom, a long-term rental apartment platform wholly-owned by Lianjia, raised RMB 4 billion ($585 million) in a series A round of financing led by Warburg Pincus LLC and Tencent.

According to China’s official Xinhua News Agency, Tencent signed an agreement with Lianjia last December whereby the WeChat-maker agreed to provide Lianjia with access to its big data and AI systems. The Shenzhen Housing Department also announced last December announced that it has launched an online rental housing platform jointly with Tencent to help promote transparency and reduce costs.

Lianjia Grows into 8,000 Locations Nationwide

According to Lianjia’s official website, the agency’s 8,000 locations employ nearly 150,000 brokers in 28 cities in China, including Beijing, Shanghai, Guangzhou, Shenzhen, Tianjin, Chengdu, Qingdao, Chongqing, and Dalian.

Since being founded in 2001, Lianjia has grown quickly to become the leader in the industry. In 2015, Lianjia bought Shanghai-based real estate brokerage Deyou and rebranded it into Dooioo, which opened over 500 shops nationwide in 10 cities from January to May this year.

Apart from its fundamental real estate broker business, Lianjia has also branched out into other real estate-related services such as long-term rental apartment development, real estate financing, and decoration.

According to Chinese data searching platform Tianyancha, Lianjia has 51 controlling or shareholding subsidiaries in China, most of which were acquired by Lianjia during its expansion. Among the 51 subsidiaries, over half operate as traditional real estate brokerages. Others units of the company are involved in information consultancy, financial guaranty insurance, advertising planning, sales consulting, and Internet operations.

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