Mingtiandi

Asia real estate and outbound investment news

  • Facebook
  • LinkedIn
  • RSS
  • Twitter
Sign Up / Login Logout

Lost your password?
Register
Forgotten Password
Cancel

Register For This Site

A password will be e-mailed to you.

  • Capital Markets
  • Events
    • Mingtiandi 2023 Event Calendar
    • Mingtiandi APAC Residential Forum 2023
    • Mingtiandi Asia Logistics Forum 2023
    • Mingtiandi Hong Kong Focus Forum 2023
    • Mingtiandi APAC Data Centre Forum 2023
    • Mingtiandi Asia Office Strategies Forum 2023
    • Mingtiandi Singapore Focus Forum 2023
    • More Events
  • MTD TV
  • People
  • Logistics
  • Data Centres
  • Asia Outbound
  • Retail
  • Research & Policy
  • Advertise

Alibaba Invests HK$1.86B in E-House to Launch Online Real Estate Platform

2020/08/03 by Diana Li Leave a Comment

leju nyse

Leju had listed on the NYSE in 2014

Internet giant Alibaba is making its latest attempt to port its e-commerce dominance into China’s real estate market as the Hangzhou-based firm ups its stake in one of the mainland’s largest real estate agencies.

E-House (China) Enterprise Holdings Limited (02048.HK), a Chinese real estate services company, announced on 31 July that it will allocate 118.3 million shares to Alibaba (NYSE: BABA) for a total consideration of HK$828.1 million ($107 million), increasing the tech titan’s stake in the Shanghai-based agency from 1.97 percent to approximately 8.32 percent.

The share purchase is part of a two-tranche investment by Alibaba in E-House, and is linked to separate transaction through which E-House will buy back control of Leju.com by purchasing a 56 percent stake in the NYSE-listed property listings website, making it once again a subsidiary of the property agency.

Stocks and Bonds

Alongside the stock purchase, Alibaba will invest HK$1.03 billion to purchase three-year convertible notes issued by E-House at a price of HK$10.37 per share. E-House shares were priced at HK$11.20 per share when the market closed on Friday — the day that the deal was announced.

Zhou Xin E-House

E-House chairman Zhou Xin has some new friends with deep pockets

Should Alibaba convert all of the financial instruments in addition to its recent share price, it would hold a 13.26 percent stake in E-House, making it the second largest shareholder in the company after founder and chairman Zhou Xin.

As part of the agreement, Alibaba and E-House plan to cooperate in launching a joint venture real estate marketing and online transaction platform with E-House taking responsibility for online deals, and the company’s Leju unit driving digital marketing efforts. The two companies are set to invest RMB 5 billion in the web service provider with Alibaba holding an 85 percent stake and E-House the remaining 15 percent of the JV, according to local media reports. 

Buying Back Listings Platform

Separately, E-House will also acquire an aggregate 56.19 percent stake in Leju (NYSE:LEJU), making the mainland property listings and marketing platform once again a unit of the real estate agency.

“The cooperation between E-House and Alibaba is not only a key milestone in E-House’s and Leju’s development, but also a significant event in China’s real estate service industry,” said Leju and E-House chairman Zhou Xin in a press release. ”In the process of collaborating with E-House and Alibaba to build an online real estate marketing and transaction platform, Leju will leverage its experience in online marketing and transaction service and become the service provider for digital marketing and operation on the platform,” he added.

Zhou also said that he expects the joint effort with Alibaba to improve Leju’s  competitiveness, with the site have long ranked as an also-ran among mainland real estate media.

Under the terms of the all-stock deal E-House will purchase 49.7 million ordinary shares and 2,2 million ADSs (each representing one ordinary share) of Leju from entities related to Zhou Xin in return for 167 million shares in E-House.

E-House will also be purchasing 24.4 million ordinary shares and 36,687 ADSs in the listings website from entities controlled by Chinese Internet giant Sina in return for 78.7 million E-House shares.

In its 2019 annual report Leju indicated that Zhou Xin owned 52.1 million shares in Leju, equivalent to 38.3 percent of the company’s equity, while Sina had 42.1 million shares to maintain a 31.0 percent holding.

At the end of 2019 E-House held a 35.2 percent stake in Leju, which barring other trades by company would now give the agency a 91.39 percent holding in the property listings platform, making it once again a subsidiary after E-House had spun the company off through an NYSE IPO in 2014.

Online Giants Fight Offline Battle

One of the country’s biggest real estate services firms with a market capitalization of HK$16.18 billion, E-House has been developing a relationship with Alibaba since the e-commerce firm took a cornerstone stake in the agency’s Hong Kong IPO two years ago.

The recent online-offline alliance between two companies came only a week after Tencent-backed Beike submitted its IPO application to the New York Stock Exchange and attempted a $1 billion IPO, aiming for what would be the largest US listing of a Chinese company in more than two years.

According to Beike’s prospectus, Tencent, which is Alibaba’s biggest competitor in China’s Internet sector, holds 12.3 percent of the company’s equity and ranks as the real estate listings platform’s second largest shareholder after founder and chairman Mr. Zuo Hui. The parent company of WeChat also held a 15.6 percent stake in Leju at the end of 2019.

The mainland Internet giant in real estate is seen as springing from the sector’s outsized role in China, where it is estimated to account for 25 percent of GDP, and the low current level of tech adoption in the industry.

“Alibaba and Tencent are huge in scale, and they must continue to get involved in new businesses to fill the gap and maintain high-speed growth,” said Meng Shen, a director at boutique Beijing investment bank Chanson & Co. “After receiving their respective financial support, Alibaba-backed E-House and Tencent-backed Beike will directly compete in the field of real estate transaction services.”

Beike commenced operations in 2001 through Beijing Lianjia, a Beijing-based real estate brokerage which operates over 42,000 agency locations across 103 mainland cities. In 2019,  it recorded 2.2 million transactions and about 39 million mobile monthly active users allowing it to handle a gross transaction value of approximately RMB 2.1 trillion ($300 billion).

The coincidence of China’s two largest Internet firms announcing real estate platform initiatives within a few weeks time is also seen as symbolising the limited options available for cashed-up companies to invest in high growth opportunities on the mainland.

“Alibaba’s reported partnership with E-house illustrates that Chinese investment capital may still be chasing a paucity of innovative investment themes and ideas, said Brock Silvers, CIO of Adamas Asset Management in Hong Kong, “Although if the Beike IPO isn’t completed for any reason, perhaps that opens the field somewhat for another presumably deep-pocketed player like Alibaba and E-house.”

Alibaba Chases Real Estate

Amid weaker economic growth and tighter market controls in China, Chanson & Co’s Meng anticipates growing opportunities for companies to profit by facilitating property deals. “As the industry leader of Internet services, Alibaba could empower E-House with its financial strength while E-House could leverage its expertise so as to strengthen Alibaba’s muscles in the real estate sector and upgrade its Internet business, which could be a win-win game,” Meng said.

According to its annual report, E-House’s revenue amounted to RMB 977.7 million in 2019, representing a year-to-year increase of 26.4 percent, while profit totalled RMB 231.7 million — up 7.8 percent from 2018.

But Alibaba also has reason to be cautious as it continues to look for ways to leverage its online power and cash resources in offline commerce.

Last May Jack Ma’s innovation giant paid just less than HK$2.7 billion to take control of China’s second-largest commercial developer, Red Star Macalline from Warburg Pincus. The  e-commerce giant also purchased RMB 4.36 billion of convertible bonds issued by Red Star Macalline Holding Group Company in an effort build up the home furniture mall operator’s business.

By June of this year Red Star Macalline was selling RMB 4 billion in new shares after having built up RMB 12.93 billion in short term debts against available cash of RMB 8.06 billion.

In April, Fitch downgraded Red Star Macalline to BB+, which reflects the American credit ratings agency’s prediction that Red Star’s financial profile will deteriorate in response to disruption from the coronavirus outbreak and uncertainties surrounding recovery of China’s economy.

Share this now

  • LinkedIn
  • Share
  • Tweet
  • Email

Filed Under: Finance Tagged With: Alibaba Group, daily-sp, e-house, Featured, weekly-sp

Leave a Reply

Your email address will not be published. Required fields are marked *

Get Mingtiandi Delivered

MTD TV

Link REIT Spotlight Session 2022-07-19
Link REIT CEO Still in Buying Mode as Downturn Sparks Opportunity: MTD TV
MTD TV Value ADd
Tech, Green Loans Grab Spotlight in Final Session of MTD TV Value-Add Forum

More MTD TV Videos>>

People in the News

Kevin Bong AIMCo
Canadian Pension Manager AIMCo Sets Up in Singapore with Hire of GIC Exec
Jae Choi joins ICG from ESR
European Investment Giant ICG Expands APAC Team with Hire of ARA Veteran Jae Choi
Gerald Yong CDL
Asia Real Estate People in the News 2023-06-05
Li Congrui (Getty Images)
China Jinmao Chairman Resigns After One Month on the Job

More Industry Professionals>>

People in the News

Canadian Pension Manager AIMCo Sets Up in Singapore with Hire of GIC Exec

Kevin Bong AIMCo

Canadian pension fund manager Alberta Investment Management Corp (AIMCo) has hired former GIC veteran Kevin Bong to … Read More>>

European Investment Giant ICG Expands APAC Team with Hire of ARA Veteran Jae Choi

Jae Choi joins ICG from ESR

Just one year after setting up operation in Asia Pacific, London-based fund manager ICG is adding to its senior … Read More>>

Asia Real Estate People in the News 2023-06-05

Gerald Yong CDL

Singapore’s largest non-state-backed developer leads this week’s set of staffing changes from around Asia’s real estate … Read More>>

China Jinmao Chairman Resigns After One Month on the Job

Li Congrui (Getty Images)

The recently appointed chairman of China Jinmao Holdings has walked out the door after just 33 days in the role, to be … Read More>>

More Industry Professionals>>

Latest Stories

Chindata CEO Huapeng Wu
Bain Bids to Take Chindata Private at 33% Premium
George Hongchoy, Executive Director & Chief Executive Officer, Link REIT
Link REIT CEO George Hongchoy to Speak at Mingtiandi Forum in Hong Kong
Wang Jianlin of Dalian Wanda Group
Mainland Regulators Query Wanda Group Over Hong Kong IPO Application

Sponsored Features

Could Real Estate Ecosystems Be Your New Edge?
Data centers: Empowering a Data-Driven World
Singapore skyline
Asia Pacific Capital Markets: 2023 Insights and Priorities

More Sponsored Features>>

Connect with Mingtiandi

  • Facebook
  • LinkedIn
  • RSS
  • Twitter

Real Estate News

  • Capital Markets
  • 2022 Event Calendar
  • MTD TV Archives
  • People
  • Logistics
  • Data Centres
  • Asia Outbound
  • Retail

More Mingtiandi

  • About Mingtiandi
  • Contact Mingtiandi
  • Mingtiandi Membership
  • Newsletter Subscription
  • Advertise
  • Terms of Use
  • Privacy
  • Join the Mingtiandi Team


© 2007-2023 China Advertising Media Ltd (Samoa). All rights reserved.

  • This field is for validation purposes and should be left unchanged.