Kong Wan Sing has bounced back from a brush with entrepreneurial oblivion. Early last year, he walked away from a merger he needed to keep his Singapore-based coworking space operator, JustCo, from being gobbled up by the likes of giant rival WeWork. The deal would have combined JustCo, Southeast Asia’s largest operator, with WeWork’s closest rival in China, Shanghai-based Naked Hub, creating a combined entity valued at roughly $600 million. But as the two companies were conducting their due diligence, Kong started to see cracks forming in the relationship.
Rather than try to paper over the differences, Kong rejected the advice of shareholders and made the fateful decision to go it alone. “It was painful to kill the merger because I had no clue how to grow the business anymore,” says the Malaysia-born Kong, 42. “If I don’t merge to get bigger, I get consolidated or I get killed off.”
But JustCo wasn’t killed off. On the contrary, the company Kong founded in 2011 is on track to triple its regional footprint by the end of the year, to more than 140,000 square meters of office space in eight cities in Australia, Greater China and Southeast Asia. And Kong is busy raising $500 million in new funding, a deal he expects to close by year-end that will bring the total raised to more than $700 million.
Asia’s larger landlords and developers are also jumping into this game. In Hong Kong, Swire Properties in 2015 opened its own flex space, Blueprint, while Hongkong Land is set to launch its own coworking space this year. In Singapore, Capita Land is installing flexible workspaces in two of its prime office buildings.
JustCo offers larger spaces than most of its competitors for less than WeWork; a desk at JustCo starts at below $300 a month, compared with $400 and up at WeWork. WeWork declined to comment for this article.
Entrepreneurship is in Kong’s blood. His father ran a textile business in Malaysia, Sing Long Group, supplying the likes of Adidas, Nike and Reebok. After earning a bachelor’s degree in finance and information systems at NYU Stern School of Business in 1998, Kong turned down an offer to work at Goldman Sachs. Instead, he moved to Boston at the height of the dot-com era to develop an equity research website with a classmate. Within six months, his firm folded and Kong took a job at Ernst & Young in New York.
Back home in Malaysia, Kong’s father, facing a shift in manufacturing to China, sold Sing Long’s factory and invested the cash in property. Not wanting to rely on outsiders to develop the land, Kong’s father phoned his son, who eagerly ditched his job in accounting to come home. By 2007, Kong had built six residential and commercial buildings and, all the property sold, retired from development to perfect his golf game, even considering turning pro. His mother talked him out of it. “My mom told me, ‘Hey, you got to stop this,’” Kong recalls. “She said, ‘Go get a job in Singapore. Learn from big firms.’”
So he did. Kong landed a job at Mapletree Investments, the property arm of Singapore’s sovereign fund, Temasek. It was there he first saw business center operators such as Luxembourg-based Regus capitalizing on the shift to flexible workplaces. “I felt they were lacking something, the human touch,” he says. With $5 million in seed financing from his family, Kong in 2011 started JustOffice and launched his first serviced office in downtown Singapore. Within two months, JustOffice had leased out its space, so Kong rented another floor in the same building, then another floor in the office tower next door. Six months later, the space was filled and Kong rented another floor.
By 2015, JustOffice could boast that it was the biggest coworking space operator in downtown Singapore and began turning its gaze to the rest of Asia. Funding to expand rolled in. In 2015, Kong raised $8 million for an undisclosed stake from Singapore’s Pinetree Capital and Paris-based Tikehau Capital Partners. In October 2017, the company—now renamed JustCo—raised another $12 million for a 7% stake from Thai property developer Sansiri International, which JustCo says valued it at $200 million.
But JustCo wasn’t the only coworking company expanding: in mid-2017, SoftBank and Beijing-based Hony Capital pumped $500 million into New York-based WeWork to fund its own Asian expansion. WeWork then bought Space-mob, a smaller coworking space operator in Singapore and started snapping up space across Southeast Asia. Kong knew even as the Sansiri deal was closing that he was outgunned.
It was then he sought out Grant Horsfield. Horsfield, a South African entrepreneur who moved to Shanghai in 2007 and started Naked Group. By 2017, he had built his Naked Hub into China’s biggest coworking space operator, with 21 locations. Kong flew to Shanghai to meet Horsfield. Over a steak dinner, they bonded over their shared vision. A merger between JustCo and Naked Hub seemed a foolproof way to fend off WeWork, Kong says: “He’d look after China, and I’d look after outside China,” Kong says, “and conquer Asia together.”
Kong also started talking to Singapore’s sovereign wealth fund GIC in 2016 about an investment into JustCo. Those talks got more serious, Kong says, when he told GIC it might soon be able to invest in a pan-Asian workspace operator with exposure to China.
As the merger talks ground on, though, Kong began to have doubts. “The DNA of how he runs the company and how I run the company are very different,” says Kong. The two entrepreneurs tussled over management, he says, and their external communications began to reflect different interpretations of the deal. It became apparent to Kong that Naked Hub saw JustCo as the junior partner.
Horsfield agrees somewhat. “I think from our perspective the partnership just didn’t make sense once all JustCo’s demands were considered. Very possibly a different DNA,” he says. “For us it was a very lucky miss.”
Kong’s shareholders were still gung-ho for a merger, though. “They all kept telling me to swallow whatever ego you have,” says Kong. Late one night the following January, however, he called with his decision: the merger was off. Kong then told GIC the news, he says, and suggested they might want to consider investing in Naked Hub alone.
But GIC had a different reaction. A week later, Kong says, it told him it would prefer to invest in JustCo and fund its expansion into Naked Hub’s China turf. Shortly thereafter, Kong says he got a call from the CIO of Singapore-based, Thai-owned Frasers Property, Uten Lohachitpitaks, asking Kong to visit. “The next day I was meeting with Panote Sirivadhanabhakdi,” Kong recalls, Frasers’ CEO and the son of Thai billionaire Charoen Sirivadhanabhakdi. Frasers wanted in, too. “JustCo’s platform as a service approach is aligned with Frasers Property’s commitment to deliver enriching and memorable experiences for our customers,” says Panote, in an emailed comment.
In May 2018, Kong reached a deal for JustCo to issue new shares and sell 70% of the company to GIC, Frasers and Kong for $177 million. Kong retained roughly a third of the company after the deal, according to JustCo, while its remaining shareholders were diluted down to a 30% stake.
Around the same time, Horsfield sold Naked Hub to WeWork for $400 million and JustCo opened its first space abroad, in Bangkok. That was the start of a rapid Asian expansion that has now taken JustCo into Australia, Greater China and South Korea. Less than a year after Kong walked from the merger with Naked Hub, JustCo had surpassed the size of their combined entity. By the end of this year, JustCo aims to have 40 locations and is eyeing India and Japan.
It’s also moving beyond leasing its own properties and instead running someone else’s. Singapore’s GuocoLand, for example, has appointed JustCo to manage three floors in one of its downtown office towers. “The design of JustCo’s latest coworking concept will further enhance our building’s vibrancy,” says Valerie Wong, general manager of commercial for GuocoLand Singapore, in an emailed comment. Kong says he’s pursuing similar partnerships with top property developers in Hong Kong, Jakarta, Manila and Taipei. With his deal to close $500 million in new funds ostensibly near, Kong wants more than money. “I want strategic partnerships rather than a financial investor,” he says. – Pamela Ambler (Forbes Asia)