US-Based Warburg Pincus Reportedly Scraps Plan To Invest $500M In Chinese Real Estate Brokerages Lianjia

The US private equity firm Warburg Pincus has reportedly dropped its plan to invest US$500 million in Chinese real estate brokerages Lianjia, according to Chinese media

Warburg has scrapped its plan due to concerns over Lianjia’s valuation being too high and cooling of Chinese tech financing environment.

Warburg and Tencent did not respond to China Money Network’s email seeking for comments.

In July, Chinese Internet giant Tencent Holdings Ltd. had planned to invest US$1 billion into Lianjia, as part of a US$2 billion financing round in preparation for a future IPO. The US private-equity firm Warburg Pincus LLC had to add US$500 million in the round.

The private fundraising round was likely to push Lianjia’s valuation to nearly US$13 billion, according to The Wall Street Journal’s report citing people familiar with the matter.

Founded in 2001, Lianjia, previously known as Homelink Real Estate Agency Co., operates a website and mobile app that allows Chinese home buyers and renters to look for new and secondhand properties. Lianjia also offers financial services, such as real-estate financing, house decoration and property management. The company has branches in Beijing, Shanghai and many Chinese cities.

In September 2018, a rental branch of Lianjia, named Ziroom, was found to have higher concentration of formaldehyde, a detrimental chemical usually found in inferior decoration materials, in some of its houses in Beijing, causing some tenants to have headaches, coughs, dry throat and itching.

The company was also involved in hidden camera scandal in October 2018. Some hidden cameras with wifi connection and night vision were found in the houses operated by Ziroom, according to Chinese media’s report.

Lianjia has completed seven rounds of financing and attracted investments from Tencent and Baidu, with existing backers such as Matrix Partners China, Hillhouse Capital, CDH Investments and Sunac China Holdings Limited.

In April 2017, Lianjia had raised RMB3 billion (US$439 million) in series D funding round led by China Vanke.

In April 2016, Lianjia had secured RMB6 billion (US$926 million) in series B financing round from Huasheng Capital, Baidu Inc. and Tencent Holdings Ltd. Since 2014, Lianjia has been a strategic partner with Vanke for property sales and online marketing work.

China Money Network Subscription