Property developers often have to bear with lumpy earnings quarter over quarter as sales from their multi-year developments are recognised as revenue either progressively as they are being constructed, or upon delivery of the units to homeowners. China-based, Singapore Exchange-listed Yanlord Land Group is no exception.
Yanlord’s earnings growth varied during the evaluation period (2017–2019) but the company was able to generate a return over equity that set it significantly apart from other major developers, demonstrating that under the leadership of chairman and CEO Zhong Sheng Jian, the company has given shareholders the most bang for the buck.
“We would like to thank The Edge Singapore for the recognition. We will continue to create value to our stakeholders,” says Zhong, on winning the highest weighted return on equity in the real estate sector at this year’s Billion Dollar Club. Indeed, Yanlord has been a consistent winner in the Billion Dollar Club. It was the fastest-growing company and best in sector in 2019, as well as best-performing stock and best in sector in both 2018 and 2017.
Between FY2017 and FY2019, Yanlord’s adjusted return on equity (ROE), based on The Edge Singapore’s calculations, ranged from 14.69% to 14.84% to 12.58%, giving the company a weighted ROE of over 13.68% in this period. In contrast, the ROE of other major Singapore listed developers are in single digits.
To be sure, there are some occasional fluctuations due to the project development cycle but Yanlord’s sales numbers are trending up. This is even amid the Covid-19 pandemic that has hurt many economies, markets and businesses.
This year, Yanlord only saw a slight 2.6% y-o-y drop in presales in the month of March due to lockdown measures implemented in China in February. However, the rest of the months saw y-o-y growth, with May showing the highest sales growth of 245.7%, possibly due to pent-up demand and more new presales being launched.
“We saw stronger customer demand for high-quality residences with premium property management services especially following the gradual opening up after the Covid-19 outbreak and the government’s introduction of a series of policies to stimulate the economy,” says Zhong, adding that Yanlord’s first 10 months of this year recorded a 70% rise in total property presales to about RMB62.5 billion ($12.7 billion), exceeding full-year pre-sales achieved in 2019.
Zhong says this was mainly due to the ramping up of construction of the landbank Yanlord had acquired in previous years. Along with strong pre-sale momentum, the group managed to achieve substantial property proceeds and cash inflow from these investments.
Shanghai Yanlord Gardens, which was built in 1998, is still a leading high-quality residential project in Shanghai
As of June 30, the unrecognised accumulated contracted presales of Yanlord together with its joint ventures and associates came up to about RMB75.8 billion, almost 9.5 times more than the RMB8 billion property sales recognised in 1HFY2020, with a gross floor area (GFA) about 2.4 million sqm sold.
According to Yanlord’s monthly sales report, from July to October, the new accumulated contracted pre-sales of Yanlord together with joint ventures and associates stood at RMB32.7 billion, bringing Yanlord’s total unrecognised contracted pre-sales to RMB108.5 billion.
China focus
Yanlord has one significant difference compared to other Singaporelisted developers: The company’s main businesses are in China where strong economic growth has helped raise income levels across all levels of society and increased demand for better quality housing. More critically, the demand comes not just from toptier cities but also from the second- and third-tier cities.
Since 1993, Yanlord has been China’s leading developer when it comes to building fully-fitted apartments in move-in condition. The company has also built its reputation in developing premium and upscale developments.
“We have been developing properties in China for over 27 years. We will continue to focus on product innovation and develop new customer bases to grow our business,” says Zhong, adding that the group’s success is mainly due to its ability to decide and focus on which market segment or geography they want to be in, as China is a large disparate market and different locations have different characteristics.
On that note, Yanlord focuses on high-growth tier-1 and tier2 cities backed by strong demand from urbanisation.
“We look into long-term fundamental economic growth of the cities we invest in, its economic structures, as well as the local town planning and policies that attract talent and try to bring value to the developments. “Currently, we have projects in six major economic regions of China, in 18 cities with multiple projects under different phases of development. With diversified projects in different districts and cities, we are more flexible and can plan pre-sales launches throughout the year,” says Zhong.
This year alone, Yanlord has launched several new projects, including the Shanghai Jingan Century, Hangzhou Bay, Nanjing Yanlord Hub City, Yancheng Yanlord Riverside Gardens and Shenzhen Yanlord Four Seasons Gardens Phase Two. Most of them saw billions of RMB in pre-sales and some were sold out on the day of launch.
On the outlook, Yanlord has several project launches coming up. One of which is the Yanlord Arcadia project in Shanghai.
“We are very excited about the Yanlord Arcadia project, an urban renewal project in Jiangjiabang of Yangpu District (located within the inner ring road) in Shanghai. We acquired the urban renewal project in 2017 and completed the site clearance in September. The development has a total GFA of 180,000 sqm. We held the ground-breaking in late-September and expect for pre-sales starting 2021,” says Zhong.
Currently, Shanghai’s high-end residences, especially in the neighbourhoods inside the inner ring road, are able to fetch premium prices of around RMB120,000 to RMB140,000 per sqm. And with Yanlord Arcadia coming in at a total GFA of 180,000 sqm, it is expected to chalk up over RMB20 billion in sales from this project.
In addition, Yanlord has been developing high-quality commercial and integrated properties in China for long-term investment and recurring rental income since 2003. Currently, Yanlord holds around 590,000 sqm GFA of core completed investment properties and hotels in Chengdu, Tianjin, Zhuhai and Nanjing, and has been developing a new portfolio of commercial integrated properties in Shanghai, Shenzhen, Suzhou, Nanning and Shenyang.
Expansion in Singapore
When Yanlord first listed in Singapore, its key focus was in China. But that has changed recently, especially after the company completed the acquisition of United Engineers (UE) in February, which was privatised and integrated into the parent group.
The acquisition of the UE gave Yanlord an additional property portfolio of around 3 million sq ft of GFA in Singapore, a property portfolio of around 430,000 sqm of GFA in China, as well as some non-property businesses.
“We are building up our recurring rental income and strengthening our asset base in Singapore. UE’s property portfolio adds new recurring rental income to the group,” explains Zhong.
“The closure of borders in Singapore under the pandemic inevitably had an impact on short-term operations, but in the long run, properties in good locations in Singapore are still in short supply. We may also consider redeveloping some UE properties to create value for the shareholders and will continue to look for investment opportunities in Singapore,” Zhong adds.
Yanlord is developing around 1 million sq ft GFA of residential developments in Singapore and one of them is Leedon Green.
Located in the prime and upscale town area of District 10, Leedon Green is nestled at the fringe of an exclusive Good Class Bungalow area. The development spans over 3ha and comprises 638 units. Although Singapore’s “circuit breaker” may have delayed sales for Leedon Green, its sales centre, which reopened in June, is gaining much attention from potential buyers. Leedon Green is expected to receive its Temporary Occupation Permit (TOP) in 2024.
Although market uncertainties still loom, Zhong is positive about the group’s prospects. Just like how Zhong has been quick to identify the right trends in China’s property markets through the ups and downs over the past 27 years, he is confident that he is able to steer Yanlord towards the forefront of the ever-changing and highly competitive market.
“The market has been changing with challenges and uncertainties. We have to proactively and quickly adjust ourselves to stay ahead of these changes. We will continue to focus on product innovation and develop new customer bases to grow our businesses in both China and Singapore,” adds Zhong.
