China’s real estate crash sends billionaires headed for the exit

China’s real estate crash sends billionaires headed for the exit

While Wu’s resignation shocked the market, the 58-year-old said she had been preparing her succession for three years, inspired by He Xiangjian, the billionaire founder of home appliance maker Midea Group Co., who handed over the reins to a group . of professional managers a decade ago.

In a call over the weekend, Wu told investors he has been suffering from diabetes and thyroid disease for years and initially planned to announce his departure after Longfor’s most recent earnings report in August, state media reported. . He decided to postpone after the company bought some land in September.

China's housing recession has hit its economy.

China’s housing recession has hit its economy.Credit:Bloomberg

Chen Xuping, CEO of Longfor since March, succeeded Wu as chairman and two more new directors were appointed to the board on Friday. Wu promised to stay on as a strategic development consultant to help with the business model and look for growth opportunities, the state media report said.

“The liquidation reflects the market’s doubts about the successor’s ability and whether the company can maintain its development plans in the future,” said Metaverse Securities’ Lam.

Known as one of China’s top self-made businesswomen, Wu lost her title as the country’s richest woman after divorcing Cai Kui in 2012 and transferring more than a third of their joint Longfor shares to him. The following year, she created her own family office, Wu Capital, to diversify her investments in private equity and technology.

In 2018, Wu transferred his entire stake in Longfor to a discretionary trust established by his daughter, Cai Xinyi, citing “family wealth and succession planning.” She put her in charge of the family office two years later, though Wu still holds Longfor’s voting rights from the trust.

Wu’s rise is an example of China’s massive wealth creation in recent decades. Born into a humble family in the southwestern city of Chongqing, she studied thermal power torpedo equipment design at Xi’an Northwestern Polytechnic University and was assigned to a state-owned factory after graduating in 1984. Inspired by the unleashed economic growth Because of the opening of the country, she quit her steady job to become a real estate reporter.

“The golden age of Chinese property is over, and they probably don’t see much they can do to help.”

Kakei Lam, Fund Investment Officer at Metaverse Securities in Hong Kong

Wu decided to start her own real estate company after buying her first apartment in her hometown, an experience that left her disappointed after the delivery was delayed and she discovered when she moved there that elevator service was spotty. She founded Longfor’s predecessor in 1993 to meet the demand for newer, better quality homes. The company sold its first residential project four years later, and the business soon expanded to other major Chinese cities.

Longfor went public in Hong Kong in 2009 and has been considered a healthy developer as it complies with the “three red lines” – the debt restrictions that China imposed as part of its anti-leveraging campaign. The company remains one of the rare builders in the country to post net income growth in the first half of this year and pay a cash dividend.

Charging

But China’s fading economic outlook amid its punishing Covid policies and limited funding channels are hampering confidence in Longfor’s growth. And Wu’s resignation isn’t helping.

“We are concerned that the resignation may impact confidence among Longfor’s stakeholders, for example suppliers, home buyers and financial institutions,” analysts at UBS Group AG, including John Lam, wrote in a note on Monday. That could put pressure on the company’s liquidity, they added.

Bloomberg

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