Chapter 28: Fixed Assets

The new home at Golden Capital Garden.

Chen Bingwen stood on the balcony, gazing at the distant skyline, greedily breathing in the fresh morning air. Having a space and a bed that were truly his own made even his sleep feel exceptionally peaceful and sweet.

Returning inside, breakfast prepared by Wang Qiaozhen was already set on the dining table—steaming white porridge accompanied by a few side dishes, simple yet radiating the warmth of home.

"Dad, Mom," Chen Bingwen said, sitting down and picking up his chopsticks. "I have an important decision to discuss with you."

Chen Guofu and Wang Qiaozhen paused and looked at their son.

"I plan to officially consolidate all of Chen’s businesses and register a company: Chen’s Food Co., Ltd."

"A company?" Chen Guofu set down his bowl, his eyes filled with a trace of doubt and curiosity. "Like those big trading firms on television?"

"Yes, but not exactly the same," Chen Bingwen explained, using language his parents could understand. "We aren't one of those old-fashioned conglomerates. Forming a company means gathering everything we have now—the food factories in Cheung Sha Wan and Kwun Tong, the mobile food carts in Kowloon, the standard storefronts in Mong Kok and Central, our family’s dessert recipes, and the 'Chen’s' brand—all under one formal banner."

He paused, looking at his parents. "From now on, when signing contracts, borrowing money from banks, or even hiring staff, we will use the name of Chen’s Food Co., Ltd. The benefit is that our operations will be more standardized and credible; others will take us more seriously. In the long run, the company's brand will be worth far more than individual dessert shops or factories."

Wang Qiaozhen looked worried. "Ah Wen, starting a company... it sounds very complicated. Are there many procedures? Will it cost a lot of money?"

"Mom, there will definitely be trouble, and it will cost money—things like registration fees and lawyer fees," Chen Bingwen explained patiently. "But this money is worth it! It’s the stepping stone for Chen’s to transform from a small, amateur operation into a formal, large-scale enterprise. With this corporate status, it will be much easier to apply for bank loans to expand production or negotiate partnerships with large shopping malls. People will be more willing to trust us. This investment will surely be earned back tenfold or a hundredfold in the future, taking Chen’s to the next level!"

Chen Guofu looked at the familiar determination in his son’s eyes and nodded. "If you say it’s worth it, then it must make sense. Go ahead and do it; your dad supports you!"

Though Wang Qiaozhen didn't fully grasp the details, she sighed in relief and smiled. "Mom doesn't understand these things. As long as you make the decisions, just don't overwork yourself."

After breakfast, Chen Bingwen called Gao Zhenhai and headed to a well-regarded accounting firm in Central, Dexin Accounting Firm. They were received by a senior accountant named Fang Wenshan, a man of about fifty with his hair meticulously combed back, looking sharp and capable.

"Mr. Chen, Mr. Gao, I have long admired your work. The reports in the *Hong Kong Commercial Daily* were excellent," Fang Wenshan said with polite formality, gesturing for them to sit. "Mr. Chen mentioned on the phone that you want to establish a food company. With a significant scale of assets, you will need professional valuation and structural design. Please explain in detail."

Chen Bingwen handed over a prepared list. "Mr. Fang, this is a list of all current operating assets of Chen’s, including two food factories, thirty standardized mobile food carts, five standard Chen’s Dessert storefronts, core dessert recipes, the 'Chen’s' trademark, and the value of the exclusive distribution contract with Shunda Logistics. Please have your team conduct a professional valuation and assist with the company registration process."

Fang Wenshan browsed the list, a flash of surprise crossing his eyes. He had expected a nascent dessert brand, not such solid assets with a clear and scalable business model.

"Mr. Chen, your planning is very comprehensive. Regarding the corporate structure, I suggest a local limited company registered in Hong Kong, with the founder holding the shares to facilitate future strategic investment or a potential IPO. Also, I suggest licensing the core recipes to the company as trade secrets, protected by strict non-disclosure agreements. Trademark registration must be initiated immediately, covering all categories, especially food and beverages, to prevent others from preemptively registering them."

"That aligns with my thoughts," Chen Bingwen nodded. "Please handle the trademark and patent applications as well. The 'Chen’s' brand name and our logo design must be registered. As for core recipes—like the improved tangerine peel red bean soup, black sesame paste, and the upcoming coconut sago and mango pomelo sago—we should apply for process or design patents wherever possible. These are our core competencies and must be protected by legal weapons."

"No problem, Mr. Chen is very farsighted," Fang Wenshan praised. "We will organize all the filing documents. Regarding the name 'Chen’s Food Co., Ltd.,' if you confirm it is correct, we will start the name search and registration process today."

"Confirmed. Thank you, Mr. Fang. The sooner, the better," Chen Bingwen knew that time was money.

Fang Wenshan nodded with a smile. "Mr. Chen, if I may be blunt, looking at this preliminary asset structure, your company has a critical hidden risk regarding long-term development and capital market recognition."

"A hidden risk? Please speak frankly, Mr. Fang." Chen Bingwen leaned forward, focused.

Fang Wenshan took the documents back. "Your two largest assets—the production sites in Cheung Sha Wan and Kwun Tong—are leased, not owned. This means that on your financial statements, the value of these core facilities that support your actual operations will be significantly discounted."

He looked up at Chen Bingwen with a professional rigor. "Mr. Chen, if your goal is long-term development or even an IPO, capital market investors—especially institutions that value industrial foundations—will weigh your 'net fixed assets' heavily when evaluating a food manufacturing enterprise. That means the land, factory buildings, and key equipment that are tangible and truly belong to the company. These are hard indicators for risk mitigation and proof of long-term operational capability."

Fang Wenshan paused for a few seconds, his expression turning grave. "Mr. Chen, this means that on the balance sheet of the soon-to-be-formed 'Chen’s Food Co., Ltd.,' the land, buildings, and equipment that form the basis of your production will mostly appear as leased 'right-of-use' assets, rather than fixed assets available for mortgage financing!"

Before Chen Bingwen could answer, Fang Wenshan took a pen and drew several vertical lines on a blank sheet of paper. "What is the core of what potential investors evaluate in an industrial company? Net assets! Collateral! If your factory and equipment are rented, your core production assets are essentially hanging in mid-air!"

Without hard assets like land and factories, Chen’s Food would be like a castle built on sand—its valuation would be bloated and unable to withstand the storms of the capital market.

"Therefore, Mr. Chen," he suggested, "if your goal is for Chen’s Food Co., Ltd. to receive full recognition and high valuation from the capital market, I strongly recommend that you prioritize solving this problem by converting at least one core production base from leased to owned. Even if you only start by buying the smaller factory in Cheung Sha Wan, it is a crucial step toward solidifying the company's asset base and enhancing future financing capability and market confidence."

Having had extensive investment banking experience, how could Chen Bingwen not know this?

"Mr. Fang, you see it clearly," Chen Bingwen said with a knowing smile. "Leased assets on a financial statement are, after all, just usage rights—a cost item. They do not generate asset appreciation, nor can they serve as core collateral to leverage bank credit support."

He tapped his fingers lightly on the desk. "Owned factory land is a solid fixed asset, the ballast for the company’s net assets. Not only does it significantly improve the balance sheet structure, making banks and capital more willing to lend us money for expansion, but more importantly, it sends a signal to the market: Chen’s Food is rooted in the industry and intends to operate for the long term. In the eyes of investors, this signal of being 'rooted' is directly related to the valuation multiples they are willing to offer."

Listening to Chen Bingwen’s logical and core-focused analysis, a hint of subtle surprise flashed in Fang Wenshan’s eyes. He had originally thought this young boss might be better at market expansion, not realizing his understanding of capital operations and financial structure was so profound.

"Since we are going to buy," Chen Bingwen said decisively, "then we should do it properly. I intend to buy both the Cheung Sha Wan and Kwun Tong food factories and inject them directly into the new company as core fixed assets. Only then will the foundation be stable enough."

The smile on Fang Wenshan’s face deepened, with the ease of someone who had encountered a peer. "Mr. Chen is very thorough. With this approach, whether it's for future financing or an IPO, the foundation will be much more solid. I have no further concerns."

Leaving the accounting firm, Chen Bingwen and Gao Zhenhai walked through the bustling streets of Central. Skyscrapers stood tall, financial elites walked with purpose, and the air was filled with the scent of capital. Chen Bingwen’s heart surged; he knew that the stage for Chen’s would gradually extend from the streets of Sham Shui Po to this place.

"Brother Wen, establishing a company and registering all these things—it feels like everything has become so formal, but the burden on our shoulders is heavier too," Gao Zhenhai remarked.

"Ah Hai, this is just the beginning," Chen Bingwen patted his shoulder. "The company is just the shell; the ability lies in making what’s inside increasingly valuable. New product development and the bottling project are the gold we are putting inside."

Thinking of Fang Wenshan’s emphasis on the importance of fixed assets, Chen Bingwen knew that buying the factories was the first step to solidifying their foundation. He quickly locked onto the easiest target: Uncle Zhong, the original owner of the Cheung Sha Wan food factory. Because his son had emigrated to Canada, he was desperate to cash out, as evidenced by the short-term lease agreement they had previously signed. Now was the best time to take ownership.

Without delay, Chen Bingwen met Uncle Zhong again that afternoon in a quiet private room at a teahouse in Sham Shui Po. Compared to his previous anxiety, Uncle Zhong was much more composed, clearly having made progress with his immigration plans.

"Uncle Zhong, congratulations on your upcoming reunion with your family," Chen Bingwen offered a sincere smile. "Thank you for your help last time; the short-term lease saved me from a crisis. I’ve taken the liberty of asking you out today because I want to discuss... permanently resolving the issue of this factory."

Uncle Zhong sipped his tea calmly. "Oh? Ah Wen, your business is booming, and you want a long-term lease? We can talk, but the market is good now, so the rent..."

"No, Uncle Zhong," Chen Bingwen interrupted, his tone carrying undeniable determination. "I want to buy it. I want to buy the factory and the equipment inside as a package."

Uncle Zhong’s hand holding the teacup froze, a flash of surprise in his eyes. "Buy it? Ah Wen, while this factory isn't in a top-tier location, it’s practical and the size is sufficient. Last year, when the market was bad, I asked for thirty thousand in annual rent because I needed cash. Now..." He drew out the tone, "...factory plus equipment, one price: three hundred and fifty thousand."

Three hundred and fifty thousand! Chen Bingwen sneered inwardly. This price was far beyond the actual value, nearly equivalent to a premium for a newly built factory in a prime location. The equipment was second-hand and had been used for years, with a very low valuation. Uncle Zhong was clearly betting on his urgent need for a stable production site.

Chen Bingwen didn’t counter-offer immediately; instead, he pushed a document forward. "Uncle Zhong, this is a five-year long-term lease I just signed for a warehouse next to my new Kwun Tong factory. The annual rent is thirty-five thousand, with a three-month deposit." He pointed to the clear terms and amounts on the lease. "I originally planned to gradually move production from the Cheung Sha Wan factory to consolidate it there; it has more space and more convenient logistics. Buying your place is more out of a sense of goodwill and a consideration for stability, as the workers are familiar with the environment. But if the price is far beyond the cost of building new, it would be more cost-effective for me to consolidate and move, even if it’s a temporary hassle."

Chen Bingwen knew that what Uncle Zhong needed most was a quick exit to leave Hong Kong. Dragging it out would not be in his favor. By showing the Kwun Tong lease as a "retreat," he was telling Uncle Zhong: I have options; I don't need you.

Uncle Zhong looked at the lease carefully, his face changing slightly. He really couldn't afford to waste time; his son had urged him many times to come over and help with the grandchildren. If he didn't go and angered his son and daughter-in-law, he might end up without support in his old age.

After a moment of contemplation, Uncle Zhong tentatively asked, "So, Ah Wen, what do you think is fair?"

"The equipment has depreciated significantly and can basically be ignored," Chen Bingwen went straight to the point. "As for the factory itself, based on current actual transaction prices in the Cheung Sha Wan industrial area, for 1,200 square feet, a reasonable price should be around 250,000. Considering our pleasant cooperation, I am willing to offer 260,000, paid in full at once. This will save you all the trouble of future rent collection and management. You take the money and leave to enjoy life with your son. How about it?"

Chen Bingwen hit the nail on the head regarding Uncle Zhong’s core need: a quick, clean exit. Although 260,000 was lower than what he had hoped for, it was far higher than the desperate price he couldn't get a buyer for last year, and it was a clean, one-time payment. Compared to the risks of rent fluctuations, maintenance, or vacancy, this price became acceptable given his urge to leave.

The moment the contract was signed, a weight fell from Chen Bingwen’s heart. The Cheung Sha Wan factory, the starting point for Chen’s, officially became the first cornerstone of Chen’s Desserts.

After resolving the Cheung Sha Wan situation, Chen Bingwen moved on to Kwun Tong without pause. The landlord of the Kwun Tong food factory was a local industrialist, Mr. Lin, who owned many properties. This factory was just one of many rental properties for him, so he was relatively relaxed.

In a high-end restaurant in Kwun Tong, Chen Bingwen met Mr. Lin. He went straight to the point: "Mr. Lin, thank you for renting the factory to me. The Kwun Tong plant is running smoothly, and I am very satisfied with the site and location. For long-term development and to ensure production stability, I hope to buy this factory along with the warehouse I just rented for the R&D center next door."

Mr. Lin was a shrewd businessman, slowly cutting his steak. "Mr. Chen is a formidable young man, and your business is thriving. Buying the factory? Certainly, we can talk. However, the Kwun Tong industrial zone has great potential, and this factory has a prime location. Plus, you’ve set up an R&D center next door, which increases its value. Including the warehouse next door, one price: one million."

This price was clearly inflated. The Kwun Tong factory was indeed larger than the one in Cheung Sha Wan, about 2,000 square feet, but it wasn't in a core location. The R&D warehouse had only been rented recently, and Mr. Lin’s ownership rights were clear, but the premium space was limited. However, Chen Bingwen was prepared; he had asked his lawyer to check the transaction data for industrial land and factories in the Kwun Tong area. He knew very well that the actual transaction price for similar locations and sizes in Kwun Tong averaged between 230 and 250 HKD per square foot. His factory was about 2,000 square feet, which at the top end would be no more than 500,000. The warehouse next door was about 1,100 square feet, and based on the rent-to-sale ratio for industrial storage, its value did not exceed 250,000. Mr. Lin’s quote was indeed inflated.

"Mr. Lin," Chen Bingwen’s tone was calm but sharp, "I love industry, but I am no fool. I can accept a reasonable premium. Based on fair market value, I am willing to offer 680,000 for the factory and warehouse as a package."

With his exorbitant demand punctured, and the other party having provided a reasonable and sincere price, Mr. Lin weighed the options for a moment and proposed that the transaction price could not be less than 700,000 HKD. Seeing this, Chen Bingwen didn't hesitate and agreed.

The ownership of the Kwun Tong food factory and the adjacent R&D warehouse was officially transferred to Chen’s.

The transfer procedures for the Cheung Sha Wan and Kwun Tong food factories progressed efficiently at the law firm. Signatures, stamps, and check deliveries were handled without delay. When the 700,000 HKD cashier’s check bearing the Wing Lung Bank logo was handed to Mr. Lin, the composure on his face was finally replaced by a trace of subtle astonishment. Seven hundred thousand was not a small amount in this era; how could a young man selling desserts produce it so cleanly?

"Mr. Chen, you are indeed a formidable young man." Mr. Lin put away the check, his smile becoming more sincere. "I wish you a prosperous business." With that, he waved his hand and left.

At Dexin Accounting Firm, when Fang Wenshan received the two property documents still smelling of fresh ink—the ownership certificates for the Cheung Sha Wan factory, the Kwun Tong plant, and the R&D warehouse—the look in his eyes when he gazed at Chen Bingwen carried a hint of subtle admiration.

"Mr. Chen, these two documents are the most solid ballast for Chen’s Food Co., Ltd.! Factories and land—these are the roots of an industrial company! With these, the net asset value of Chen’s Food will achieve a qualitative leap! It is no longer a castle in the air. Your bank credit limit and future financing bargaining power will be worlds apart!"

Chen Bingwen sat calmly opposite him. "I leave the final valuation to your team, Mr. Fang. Please ensure all assets are legally and compliantly injected into the new company. As for the registration process, please speed it up."

"It is my duty!" Fang Wenshan nodded solemnly. "With the property transfer procedures complete, by the day after tomorrow at the latest, the full asset valuation report and company registration documents will be submitted to the Registry!"