Real Estate Investment and Development

The Real Estate Investment and Development division was established in February 2010 and is focused on creating a portfolio of PRC property and development assets with good upside potential and manageable risk.

1 - Changzhou City, Fujian Province, PRC

On 31 May 2010, Prosperity entered into a 50:50 joint venture agreement to develop a combined recreational, commercial and residential project in Changzhou City, Fujian Province, in the southern PRC.

Following an internal group restructuring of our JV partner, Xiamen Yangguang Shiji Property Development Company  Limited  transferred  its  50  per  cent  interest  in  the  project  to  Xinke  Group  Holdings  Limited  in December 2010. There is no impact on our interest and rights in the project which remain at 50 per cent.

The development is located 39 kilometres from Xiamen City, which is classed as a special economic zone in the PRC. Xiamen is the economic and financial centre of Fujian Province and the largest city in the Province. A new highway is being built between Xiamen airport and Changzhou City and travelling time between these two cities will be reduced to only 20 minutes once completed.

The development will offer high-end accommodation and hot spring resort facilities on a land area of 4,953 Mu (approximately 3,302,000 square metres), of which 1,600 Mu (approximately 1,066,667 square metres) will be used for development.

Under  the  joint  venture  agreement,  Prosperity’s  maximum  investment  is  RMB 480  million.

Construction of the first phase, including 50 low rise residential units and the clubhouse, has commenced and pre-sale of the first phase is planned for the end of calendar year 2011.

2 - Guangzhou City, Guangdong Province, PRC

On  31  August  2010,  the  Company  completed  the  purchase  of  Bliss  Hero  for  a  consideration  of  HK$836 million (approximately $107 million). Bliss Hero holds interests in an existing commercial building and a new commercial and residential development, both located in downtown Guangzhou City, Guangdong Province, in the southern PRC.

Guangzhou City is the largest city in southern China and the third largest in China (after Beijing and Shanghai). It has a population in excess of 12 million people and is located in the Pearl River Delta, the foremost economic zone in the south.

a - Silver Bay Plaza

Silver Bay Plaza was completed in 2004 and has a total gross floor area of approximately 19,900 square metres, comprising 26 floors and 2 underground floors.

Bliss Hero owns approximately 11,472 square metres of office and commercial space in SilverBay Plaza which was completed in 2004. As at 31 March 2011, SilverBay Plaza had 97.2 per cent occupancy.

b - Dongfang Wende Plaza

Bliss Hero also holds a 55 per cent interest in a commercial and residential development project known as Dongfang Wende Plaza which is currently under construction and is expected to be completed towards the end of calendar 2012. The other 45 per cent interest is held by Guangzhou Sendao Shiye Limited.

Dongfang Wende Plaza is located in downtown Guangzhou City within a few minutes’ walking distance from Beijing Road, a popular pedestrianised shopping street. The Dongfang Wende Plaza development comprises a four floor shopping arcade with four basement floors (one of which is to be part of the shopping arcade and the other three will form a car park) on top of which is being constructed three residential buildings with 35 floors, one residential building with 29 floors and one commercial building with 26 floors. The aggregate floor area will be approximately 165,519 square metres.

We plan to commence pre-sale of the first phase of residential units in October or November 2011.

The management team is confident about both the prospects for the Dongfang Wende Plaza project and property prices in Guangzhou generally.

3 - Hangzhou City, Zhejiang Province, PRC

On 28 February 2011, Prosperity acquired the rights for use of land on a site in Hangzhou City, the capital of Zhejiang Province in the eastern PRC, which is held in a 50:50 joint venture company.

The  other  50  per  cent  is  held  by  Hangzhou  Sanjiang  Mining  Industry  Group  Co.,  Ltd  (40  per  cent)  and Hangzhou Sanjiang Materials Trading Co., Ltd (10 per cent).

Hangzhou City is situated in the Yangtze River Delta, the foremost and most affluent economic region in the Country. It is only a 45 minute train journey from Shanghai and one of the most popular tourist destinations in the PRC. The development is located in the scenic West Lake District, 30 to 40 minutes from Hangzhou International Airport and close to the Song Dynasty Village, a popular tourist area.

The site comprises a total area of 55,589 square metres with a developable gross area of 111,200 square metres.

The land cost of RMB 392 million (approximately $60 million) is payable in three phases. The first 50 per cent was paid in early April 2011, with the next 20 per cent and the remaining balance to be settled on or before 20 September 2011 and 6 March 2012 respectively.

Subject  to  approval  of  the  construction  plans  from  the  local  government,  the  site  is  to  be  developed  into a  commercial  property  primarily  comprising  office  and  retail  space.  A  development  plan  is  currently  being formulated and, as such, total construction cost and investment are not yet finalised.

Construction is expected to commence in mid 2012 and pre-sale of the properties is planned for 2013.