Boss of China Minsheng Real Estate Unit Out After China Jinmao Raided by HK Anti-Graft Body

The chairman of a Hong Kong-listed developer controlled by China’s largest privately owned investment group abruptly stepped down this week, on the same day that the executive’s former employer revealed that it had been raided by Hong Kong’s anti-graft body.

In a statement this week to the Hong Kong stock exchange, SRE Group disclosed that its chairman He Binwu had resigned from his directorship of the company and left the board.

He had been with the real estate subsidiary of China Minsheng Investment for less than two years, after joining from China Jinmao Holdings, a Shanghai-based developer which revealed this week that its CFO had been called into the offices of Hong Kong’s Independent Commission Against Corruption, following an earlier search of its offices in the city.

Jinmao Questioned Under Bribery Law

In its statement to the stock exchange, China Jinmao, which developed the Jinmao Tower in Shanghai when it was still known as Franshion Properties, said that the ICAC investigation pertains to section 9 of Hong Kong’s Prevention of Bribery Ordinance. That statute covers corrupt transactions with “agents,” and Jinmao indicated that it is providing the investigators with documents and records.

Charges from Hong Kong’s ICAC earlier had resulted in former SHK Properties boss Thomas Kwok being sentenced to five years in jail on corruption charges.

Jinmao, which is the real estate arm of state-owned Sinochem Corporation, asserted that neither Jinmao nor any of its subsidiaries were a subject of the ICAC probe. Authorities reportedly announced in July that Sinochem president Cai Xiyou, who had also served as chairman of Jinmao, would be prosecuted for suspected bribery offenses.

SRE Group and China Minsheng’s Global Ambitions

He Binwu’s departure is a setback for SRE Group, which China Minsheng had been relying on to make real estate investments in the US and Europe.

This past May, SRE bought an 80 percent interest in a luxury residential site in San Francisco, where it will build a 120-unit condo project with US partners. The developer paid about $100 million for its stake in the fully entitled waterfront site, according to media reports.

Prior to that US foray, SRE made its first acquisition in Britain by purchasing the central London headquarters of Société Générale for £84.5 million ($112.8 million) in September 2016. In its most recent interim report, SRE said it planned to acquire high-quality assets in core overseas markets such as Sydney, London and San Francisco.

SRE Group said that He resigned from his positions as an executive director of the company and chairman of the board “because he would like to focus on other affairs,” according to the Tuesday announcement on Tuesday. “Mr. He has confirmed that he has no disagreement with the Board,” the statement added.

Peng Xinkuang, formerly chief executive of the group, will take over as chairman, while another executive, Liu Feng, will take his place as CEO, effective immediately. It is not yet clear what motivated this week’s abrupt leadership change at SRE, which saw its contracted sales plunge by 49 percent year-over-year in the first half of 2017.

Before joining SRE in December 2015, He had served as an executive director and vice president at Franshion Properties from 2004 to 2015.

Potential Hiccup for Mainland Investment Giant

China Minsheng Investment acquired a controlling stake in SRE Group in 2015. The private equity firm has spent at least $3 billion on overseas deals since it was launched in 2014 by the former chairman of China Minsheng Banking Corporation with $8 billion of capital.

Backed by 59 private enterprises, China Minsheng Investment said last October that it was targetting a valuation of RMB 1 trillion ($147.81 billion) by 2019, mainly fuelled by acquisitions.

The privately owned firm, which is sometimes compared to sovereign wealth fund China Investment Corporation (CIC), has trumpeted its intentions to scoop up billions of dollars in further overseas assets ranging from aviation to senior care companies.

However, the fund’s prospects for an overseas shopping spree have been clouded by the Chinese government’s ongoing clampdown on outbound investment, which intensified with a new set of strictures issued by the State Council in August.