CDL, Alibaba Take Cornerstone Stakes in $727M E-House IPO

Singaporean property developer City Developments Ltd is joining mainland tech giant Alibaba as investors taking cornerstone stakes in the initial public offering of E-House (China) Enterprise Holdings Ltd, a Shanghai-based real estate services provider with more than RMB 4.6 billion a year in revenues, according to a statement today by CDL.

Singapore’s largest home builder will invest HK$237.81 million ($30.3 million) in the Hong Kong IPO, which is expected to formally launch on the exchange on July 20^th.

A unit of Alibaba Group agreed to take a stake worth at least HK$392 million, while state-owned mainland developer Overseas Chinese Town and a company owned by Henderson Land vice chairman Peter Lee Ka-kit also joined the cornerstone round.

E-House is offering 322.8 million shares at a price expected to be between HK$14.38 and HK$17.68 apiece, according an account in Bloomberg. The retail book for the IPO, which could bring in as much as $727 million, opened today.

Adding Real Estate Services Bet to Development Deals

“In 2010, we saw great potential in China’s real estate market and earmarked the country as one of our key overseas markets, acquiring several projects in a short span of time,” Sherman Kwek, CDL Group Chief Executive Officer, said in a statement explaining the company’s rationale for pursuing the E-House opportunity. “Aside from investing in residential, commercial and mixed-use projects in Shanghai, Suzhou and Chongqing, the next logical step was to invest in the nation’s top sales agency with an extensive network of agents and a deep, robust database for purposes of research and analytics.”

Kwek highlighted E-House’s ability to assist Chinese home buyers and investors looking for overseas opportunities as key to the company’s appeal.

CDL was the only Singaporean entity invited to take a cornerstone stake in the IPO, with mainland developers China Evergrande, China Vanke. and Country Garden Holdings each already owning 15 percent of the company prior to the IPO, according to the prospectus. In total, some 26 Chinese developers held stakes in E-House before the IPO.

Brokerage Network Keeps Revenue Flowing

E-House, which fields 17,000 brokers across 186 cities in China also operates the CRIC real estate data service and brokerage network provider Fangyou. The agency’s primary business of marketing residential projects generated revenue of RMB 3.9 billion in 2017, while overall group revenues totalled some RMB 4.6 billion.

Henderson’s Peter Lee Ka-kit subscribed for HK$300 million in shares, while Overseas Chinese Town has reportedly signed up for HK$1.1 billion in E-House equity. China International Capital Corp and Credit Suisse Group AG served as joint sponsors for the offering.

Mainland Listings Remain Elusive

E-House was listed on the New York Stock Exchange until August 2016, when it de-listed in a venture-backed deal which valued the company at $1.2 billion.

While more than a dozen Chinese firms de-listed from overseas exchanges in 2015 and 2016, companies such as Wang Jianlin’s Dalian Wanda Commercial Properties (now Dalian Wanda Commercial Management Group) have found themselves unable to take advantage of the mainland’s generous valuations after the Beijing government tightened approvals for new stock listings.