Real Estate Investment and Development
On 1 February 2010, Prosperity established a real estate investment and development division and hired a general manager with the relevant experience and expertise to run the new division. The division was formed to investigate possible real estate investment and development opportunities in the PRC.
On 1 June 2010, Prosperity announced that it had entered into a number of conditional agreements for the acquisition of property interests in the PRC. These agreements comprised the following investment and development projects.
1 - The Fujian Joint Venture Agreement
On 31 May 2010, Prosperity entered into a conditional agreement with Xiamen Jangguang Shiji Property Development Company Limited ("Xiamen Yangguang") in which the parties agreed to establish a 50-50 joint venture company (the "Fujian JV Company") for the purpose of executing real estate development projects on adjacent sites in Changtai County, Zhangzhou, Fujian Province.
The two developments form part of a comprehensive resort and residential development project, with a focus on hot spring resort facilities and ancillary high-end residential, commercial and recreational facilities.
Prosperity will make an aggregate initial investment of RMB195 million (approximately GBP19.7 million). The maximum investment is RMB480 million (approximately GBP48.6 million) which includes the aforementioned RMB195 million.
a - The Fujian Hot Spring and Resort Project
The Fijian Hot Spring and Resort Project is primarily a hot spring and resort development project. The project site consists of a planning area of not less than 4,653 mu, of which 2,668 mu have been requisitioned and leased. As at the date of the joint venture agreement, the Fujian JV Company has paid (i) the land grant premium for the acquisition of the land use rights of 65 mu of the project site; and (ii) the rents for 2,603 mu of the project site.
The Fujian Hot Spring and Resort Project will consist of three phases which upon completion will comprise a commercial area, high-end residential units and clubhouses.
b - Fujian Residential Project
The Fujian Residential Project is primarily a residential and ancillary facilities development project situated next to the Funjian Hot Spring and Resort Project. The project site currently has an area of 300 mu that is already requisitioned and leased.
2 - The Guangzhou Properties Agreement
On 31 May 2010, Prosperity entered into a conditional agreement with Cheong Sing Merchandise Agency Limited ("Cheong Sing") and Splendid City Limited ("Splendid City") pursuant to which Prosperity conditionally agreed to acquire the entire equity interest in Bliss Hero Investment Limited ("Bliss Hero HK") which holds certain property interests in Guangzhou City, Guangdong Province.
Mr. David Ben Koon Wong ("Mr. Wong"), Chairman of both the Company and Prosperity International Holdings (H.K.) Limited ("PIHL"), and his associates are together interested in 30% or more of the issued share capital of Splendid City and Cheong Sing and hence each of Splendid City and Cheong Sing is regarded as a connected person of the Company. PIHL is the Company's controlling shareholder. Mr. Wong and persons acting in concert with him form the controlling shareholder of PIHL and therefore the indirect controlling shareholder of the Company.
Accordingly, completion of this related party transaction requires approval of the Independent Directors, having first consulted the Company’s Nominated Advisor, Daniel Stewart & Company plc, as to whether or not the terms of the acquisition are fair and reasonable insofar as the Company’s shareholders are concerned. PIHL’s shareholders must also approve this transaction and so the transaction is therefore expected to complete by 31 August 2010, once PIHL’s shareholders have voted at a special general meeting of PIHL.
The consideration for the Guangzhou Properties Acquisition is the sum of (i) the consideration payable for the assignment of all of the amounts advanced by Mr. Wong and/or his associate(s) to the Bliss Hero HK Group Companies, which are outstanding as at the completion date of the Guanzhou Properties Agreement; and (ii) the net asset value (after deducting minority interests) of Bliss Hero HK as at 31 March 2010 after taking into consideration a property revaluation to be carried out as at 31 March 2010 by an independent property valuer to be appointed by the Company and PIHL.
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. Through its wholly-owned subsidiary, Bliss Hero GZ, Bliss Hero HK owns approximately 11,472 square metres of office and commercial space in Silver Bay Plaza. As at 1 June 2010, the office and commercial space owned by Bliss Hero HK has a 90% occupancy rate.
b - Dongfang Wende Plaza
Through Bliss Hero GZ, Bliss Hero HK also holds a 55% interest in Guangzhou Fuchun Dongfang Real Estate Investment Co., Ltd ("Fuchun Dongfang"). Fuchun Dongfang is the owner of the land use rights in respect of two land parcels situated at Datang Street Section, Wende Road North, Wenming Road Northward and Wende Road Eastward with an aggregate site area of 13,814 square metres.A development project known as Dongfang Wende Plaza is currently under construction on this site. The Dongfang Wende Plaza development comprises a 4 floor shopping arcade with 4 basement floors (one of which is to be part of the shopping arcade and the other 3 will form a car park) on top of which will be constructed 3 buildings with 35 floors, one building with 29 floors and one building with 25 floors. The aggregate floor area will be approximately 164,307 square metres. Construction work for Dongfang Wende Plaza has commenced and it is anticipated that the development will be completed by mid 2011 with pre-sale of two of the residential buildings scheduled for September 2010.
