China Vanke spin-off seeks $780mn in Hong Kong’s biggest IPO

China Vanke plans to raise up to $784mn in Hong Kong from the spin-off of its property management unit, which is set to test global investor appetite for real estate-related listings after a string of high-profile defaults in the sector this year.

Onewo, a subsidiary of Vanke, said it would raise up to HK$6.2bn ($784mn) from an initial public offering of about 117mn shares priced at a range of HK$47.10 to HK$52.70 each, according to a filing with the Hong Kong exchange.

The decision to list Onewo comes as Chinese authorities step up measures to support the country’s beleaguered property sector, which accounts for about a third of total economic output, as growth in the world’s second-largest economy slows.

Demand for housing in China has crumbled after a series of defaults by developers stoked a crisis of confidence among homebuyers. Last week, state banks cut deposit rates for the first time since 2015 in a bid to boost flagging growth.

The share offer marks the largest IPO from a company in Hong Kong this year, with only a handful of listings having brought in more than $1bn. Secondary listings by Tianqi Lithium and China Tourism Duty Free — both of which were already listed on mainland exchanges — raised $1.7bn and $2.1bn, respectively.

Onewo managed about 785mn sq m of residential and commercial space as of the end of 2021, and brought in annual profits of Rmb1.7bn ($243mn), up about 13 per cent year on year. Vanke owns about 63 per cent of the company and accounted for about 16 per cent of revenues at Onewo last year.

Brokers said that Vanke was also under pressure to go ahead with the share sale or it would be forced to update Onewo’s prospectus since its application to the Hong Kong exchange was approaching the six-month limit.

“They cannot change the listing timing, otherwise they’ll have to use a new set of accounting data, which would take time and money,” said Louis Tse, managing director of Wealthy Securities in Hong Kong.

“They want to realise whatever money they can still get from the market,” Tse said. “If there’s a sponsor willing to do the deal plus a bunch of underwriters, they might as well go now.”

Onewo has substantial support from six cornerstone investors, among them China’s government-controlled Mixed Ownership Reform Fund, which together have subscribed for up to $280mn worth of shares.

The move to pursue the listing came as economists at UBS downgraded the growth forecast for China’s economic growth on Monday, citing a “lacklustre third-quarter recovery and ongoing property downturn”.

Onewo expects to price its shares on Thursday and list them on September 29. Citic Securities, Citigroup and Goldman Sachs are joint sponsors for the IPO.