A mainland property developer controlled by a nephew of the founder of Agile Property Holdings has filed for an IPO on the Hong Kong exchange, as the family behind the top 30 mainland developer expands its Guangdong-based real estate empire.
JY Grandmark Holdings, founded by Michael Chen, the 30-year-old son of Chinese real estate giant Agile Property’ vice chairperson Chen Zhuoxian, and nephew of Agile founder Chen Zhoulin, aims to raise up to HK$200 million from the IPO, according to an account by GlobalCapital citing a source close to the deal.
As of 31 March, six-year-old JY Grandmark had a portfolio of six completed property projects in Hainan and Guangdong provinces, with another six pre-sold projects under construction and some 18 additional developments in its pipeline.
JY Grandmark Benefits From Family Ties
JY Grandmark, which promotes itself as an eco-minded and people-friendly developer of residential properties, has built a footprint of 3 million square metres (32.3 million square feet), according to the prospectus filed for the IPO with the Hong Kong stock exchange.
In the preliminary filing the company has yet to specify pricing, the quantity of shares to be issued or details of timing for the offering, for which Singapore’s DBS is acting as the sole sponsor.
Since it was established in 2013, two years after Michael Chen finished his bachelor’s degree at Australia’s Griffith University, JY Grandmark has been financed with the support of Michael Chen’s family resources, according to the IPO documentation, with further signs of family support evident in JY Grandmark’s history.
One year after the developer was founded, JY Grandmark completed its first residential property project, JY Lychee Town in Guangzhou, after the developer had paid RMB 138.5 million to purchase the site for the 170,000 square metre project from a pair of Michael Chen’s relatives.
In June 2016, JY Grandmark expanded into the hotel business in Agile’s home town of Guangzhou by acquiring the 10,182 square metre Agile Hotel at the Agile Garden development in Panyu district, which it has since renamed the Guangzhou Just Stay Hotel.
The developer has also had opportunities to sell property to companies within the clan, including JY’s sale one year ago of a site on Hong Kong’s Peng Chau Island to Chengbang Development, a company wholly-owned by Michael Chan’s father Chan Cheuk Yin, for HK$600 million. JY executive director and chairman Michael Chan had originally acquired the site via public tender for HK$21 million in March 2014.
JY also leans heavily on Agile Holdings for its leadership, with more than half of the six executive directors on the company’s board coming from Agile Holdings.
Company Revenues Doubled in 2018
In its IPO, JY is offering investors the opportunity to invest in a company that generated RMB 381.8 million in profit in 2018.
For the fiscal years from 2016 to 2018, JY Grandmark’s revenue generated from property development more than doubled from RMB 624.7 million to RMB 1.25 billion, with the biggest jump coming in the most recent year, when development revenue jumped 38 percent from 2017’s 783.4 million performance. During the period, property development contributed more than 90 percent of JY’s revenue, profits and assets.
During the most recent two years the developer’s gross profit margin nearly doubled from 26 percent in financial year 2016 to 40.4 percent in 2018.
Among the major contributors to the surge in performance, sales of JY Clearwater Bay No 3 Phase III an area of Hainan province where Agile has built 10 million square metres of projects, and JY Lychee Town Phase I in Guangzhou are the biggest drivers of the company’s performance.
From 2016 to 2018, at JY Clearwater Bay No.3 Phase III, JY Grandmark sold 62,311 square metres of homes for RMB 1.07 billion, while it brought in RMB 672 million selling 84,025 square metres of housing at JY Lychee Town Phase I.
In addition to its projects in Hainan and Guangdong, JY Grandmark said in that prospectus that it plans to expand its business into Yunnan and Hunan provinces.
Next Chen Generation Sets Up New Businesses
The potential IPO for JY would be the latest landmark transaction for the younger generation of Agile’s Chen family.
Atlas a flexible office startup founded by Michael Chan’s cousin and son of Chen Zhoulin, Ron Chen, won financial backing from US investment bank Goldman Sachs and Hong Kong private equity firm PAG in January of 2018 and a subsequent funding round in October last year valued the company at $871 million.
Atlas’ official website states that it has a portfolio of nearly 2 million square metres across mainland China and Vietnam, with some of those projects occupying buildings developed by Agile.