Vanke, China's largest residential property developer by market value, plans to spend 3 billion yuan ($441 million) on purchasing shares of Homelink, as the developer is bullish about the Beijing-headquartered real estate agency's development prospects.
Analysts said the two parties are likely to jointly explore a new model to meet demand amid fast growing pre-owned home transactions and tap more segmented markets along the value chain of real estate development and maintenance, such as decoration, property dealing, property management and residential community services.
Vanke will buy shares in Homelink at a cost of 3 billion yuan as stated in the agreement reached between the two parties, according to Vanke.
The deal, if completed, follows Hong Kong-listed developer Sunac's purchase of a 6.25 percent stake in Homelink for 2.6 billion yuan.
Vanke and Homelink did not disclose how many shares Vanke will own in the real estate agency after the deal.
The two parties have already cooperated in the home decoration sector, as they are both bullish about post-purchase market demand.
In 2015, Vanke and Homelink jointly established the business-to-consumer home decor joint venture, Vanke Lianjia, with Vanke Vice-President Liu Xiao appointed president of the company.
Vanke holds 60 percent of the company, while Homelink holds 40 percent.
Homelink owns shares in more than 50 subsidiaries with a wide range of businesses serving the real estate market. Besides its core real estate agency business, the group has tapped into markets along the real estate value chain, including financing, consultancy, advertising and marketing.
The agency has a more than 50 percent share of Beijing's pre-owned home transactions, and is also expanding fast in other key cities such as Shanghai and Shenzhen.
"Vanke's acquisition of Homelink shares is actually the acquisition of market share in the pre-owned home market, which is expanding fast and even exceeding the new home market in many cities with limited land supply growth for residential property development," said Wang Ji, a Shanghai-based private equity investment analyst with Huafang Business Consultancy.
In Beijing, around 268,000 pre-owned homes were sold in 2016, about 90 percent of all homes transacted in the year.
According to Gong Yan, a professor of Management Practice at the China Europe International Business School in Shanghai, developers in China are exploring business models beyond develop-and-sell, eyeing opportunities emerging among those who have already purchased properties.
"Selling an apartment is low-frequency deal. A homebuyer is likely to buy one or more times from a developer and then the interaction is over. But a developer also offers services for decoration, maintenance, leasing, day care centers for babies and the elderly, refurbishment and even reselling. As a result, the business scope and frequency will be significantly increased," said Gong.
Vanke's Shenzhen-listed shares rose 0.49 percent on Thursday to 20.63 yuan each, with a total market value of 227.7 billion yuan.
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