China’s property crash sends billionaires heading to exits

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

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

Chen Xuping, Longfor’s chief executive officer since March, succeeded Wu as chair and two other new directors were appointed to the board on Friday. Wu vowed to remain as a strategic development consultant to help with the business model and look for growth opportunities, the state media report said.

“The selloff reflects the market doubts on the ability of the successor and whether the firm can maintain its development plans in the future,” Metaverse Securities’ Lam said.

Known as one of the top self-made female entrepreneurs in China, Wu lost her title as the country’s richest woman after divorcing Cai Kui in 2012 and transferring to him more than one-third of the Longfor shares they held together. The following year, she set up her own family office, Wu Capital, to diversify her investments into private equity and technology.

In 2018, Wu conveyed all her Longfor stake to a discretionary trust established by her 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 the Longfor voting rights from the trust.

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

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

Kakei Lam, fund investment officer at Metaverse Securities in Hong Kong

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

Longfor started trading publicly in Hong Kong in 2009 and has been considered a healthy developer as it meets the “three red lines” – the debt restrictions China imposed as part of its crackdown on leverage. The firm remains one of the rare builders in the nation that managed to post net income growth in the first half of this year and hand out cash dividends.

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But China’s dimming economic outlook amid its punishing Covid policies and limited financing channels are hampering confidence in Longfor’s growth. And Wu’s stepping down isn’t helping.

“We are concerned the resignation may have an impact on confidence among Longfor’s stakeholders, e.g. suppliers, homebuyers and financial institutions,” UBS Group AG analysts including John Lam wrote in a note Monday. That could bring pressure on the company’s liquidity, they added.

Bloomberg