(Yicai) Jan. 21 -- Shares of Zhenro Properties Group plunged after the struggling Chinese real estate developer’s actual controller was detained by police on suspicion of illegal activities.

Zhenro Properties [HKG: 6158] closed 6.8 percent down at 5.5 Hong Kong cents (0.8 US cents) today.

Authorities implemented coercive measures against Ou Zongrong for suspected violations of the law and other crimes, Fujian province-based Zhenro Properties announced yesterday.

Ou’s detention is related to a land auction that is unrelated to the company, a source familiar with the matter told Yicai, adding that the incident will have a limited impact on Zhenro Properties because Ou has not worked there for a long time. The auction took place in Fuzhou over 10 years ago and involved several private real estate firms.

Ou founded Zhenro Group in 1998 and served as its chairman until the end of 2022. In 2015, Zhenro Group established Zhenro Properties Holdings to specialize in real estate development and commercial property management.

Ou holds a 43 percent indirect stake in Zhenro Properties through his wholly-owned company RoYue. Therefore, he is not directly responsible for the management of Zhenro Properties.

Zhenro Properties ranked among China’s top 20 real estate firms in 2017. At the end of February 2022, it defaulted on a USD200 million debt and began debt restructuring. As of June 30 last year, it had a total debt of nearly CNY60 billion (USD8.2 billion), of which about CNY53.6 billion had to be repaid within a year.

Editor: Futura Costaglione