Stock Code: 000055, 200055 Stock ID: Fangda Group, Fangda B Announcement No. 2014-04
China Fangda Group Co., Ltd.
Announcement on Fangda Town Renovation Project
Investment
The members of the Board and the Company guarantee that the announcement is free from any false information, misleading statement or material omission and are jointly and severally liable for theinformation’s truthfulness, accuracy and integrity.
1. About the investment
1. The Nanshan Taoyuan Fangda Town Renovation Plan submitted by the Company has been reviewed and approved by the Architectural and Environmental Art Committee of the Urban Planning Board of Shenzhen. The Company plans to invest about RMB2.5 billion on the Fangda Town Renovation Project through its fully-owned subsidiary Shenzhen Fangda Property Development Co., Ltd.
The details related to the government's approval on the renovation project are published on China Securities Journal, Shanghai Securities Daily, Securities Times, HKCD (English) and http://www.cninfo.com.cn. on the following dates:
(1) Announcement on the Company's Application for the Urban Renovation Project 2012-03 published on February 3, 2012;
(2) Announcement on the Progress of Company's Application for the Urban Renovation Project 2012-17 published on April 11, 2012;
(3) Announcement on the Company's Fangda Town Renovation Project 2013-15 published on June 25, 2013;
(4) Announcement on the Progress of Company's Fangda Town Renovation Project 2013-30 published on November 6, 2013;
2. The proposal of investing on Fangda Town renovation project was reviewed and approved at the
27th
meeting of the
6th
term of Board of Directors with 7 votes in favor, 0 objection and 0 waive. The proposal needs to be reviewed at the first provisional shareholders' meeting in 2014.
3. This investment constitutes no related transaction or material assets reorganization.
2. Basic information about the investment
1. Details of the project
Owned by the Company, the project land is located in Taoyuan, Nanshan, Shenzhen, in the north of OCT, reaches Beihuan Road in the south and Guangzhou-Shenzhen Expressway in the north, Longzhu Si Road in the west and Hi-tech Park in the east.
The project is designed to provideR&D and supporting business service facilities for
headquarters of companies in hi-tech and high-end emerging industries. The project will built into a landmark complex that integrates eco-office, business and recreational functions in the north area of OCT.
The construction area is 35,397.9
m2
with a plot ratio of 6 and greening rate of35%. The construction area counted in the plot ratio is 212,400
m2
(excluding the underground parking lot), including 187,680
m2
of industrialR&D buildings, 4,720
m2
of public facilities, 20,000
m2
of commercial buildings and 2,000 parking places, which are not counted in the plot ratio.
2. Investment period
The project will start in 2014 and complete in late 2016.
3. Estimated investment
The investment totals about RMB2.5 billion, including the land cost, preliminary
engineering costs, development costs, management costs, financial costs and development
taxes.
4. Funding
The construction fund comes from the Company's capital and band loans. The project has secured a loan of RMB1.5 billion from Shenzhen CCB.
5. Market outlook
(1) Regional development outlook
Sitting on the intersection of Shenzhen Dashahe Innovation Corridor and OCT Cultural Innovation Ring, the project will build a tie connecting Futian CBD and Qianhai center, thus enjoying outstanding industry and business sources; moreover, it enjoys privileged ecological resources with Mount Tanglangshan in the north, Shenzhen Bay in the south and Dashahe Park in the west.
(2) Market opportunities
(1) Regional urban renovation brings fresh development opportunities
As a key part of the Dashahe Innovation Corridor construction project, the project enjoys a series of preferential policies.
A massive array of new and renovated office properties will be supplied in Nanshan over the next five years. The strong demand and supply will bring a gold opportunity for development of various industries and intensify competitions between projects.
(2) The project is designed to fulfill Shenzhen's urban renovation and industry development needs
Based on the study on industry development, traffic and municipal engineering performed by Shenzhen China Development Institute, the project has taken the current development background, city and industry development trends and regional characteristics into consideration. The project is applied for as a renovation project aiming to boost industry development and to seek coincidence with the government's urban and industry plans, thus wining the government's support.
(3) Competitiveness of the project
The project has engaged World Union as the consultant to provide suggestion on the project positioning and development based on the development status and demands of Shenzhen's office property market and has developed different standards for business, high-end and environmental-oriented office buildings to elevate the competitiveness.
6. Policy
(1) Rent and sales ratio
According to the Shenzhen People's Municipal Government's Opinions on Optimizing Space Resource Allocation to Promote Industry Transformation and Upgrade recently issued(1+6 document), urban renovation projects are no longer limited by the rent and sales ratio of50%. The project's ownership can be registered by buildings, floors and rooms and ownership certificates can be traded.
(2) Facilities
Commercial facilities can be sold after the land premium is paid based on the land evaluation. 7. Project implementation and HR feasibility
The project will be constructed by theCompany’s fully-owned subsidiary Shenzhen Fangda Property Development Co., Ltd., which has an experience professional team under the direct functional management. Professional personnel will facilitate the implementation of the project.
8. Benefits
In addition to the industry rooms for the Company's use, about 100,000
m2
of industry rooms will be sold and another 20,000
m2
of commercial facilities and 20,000
m2
of industry rooms will be rented. The sales will start in the fourth quarter of 2015 and complete in 2017.
According to state and Shenzhen's prevailing laws and policies and the Feasibility Study Report, the sales will generate an income of about RMB4.413 billion. The leased part will generate an income of RMB147 million annually. The after-tax internal financial rate of return is107.45%. The static and dynamic recovery period is 3.25 and 3.41 years respectively.
9 Feasibility evaluation
The Company attaches great importance and invests heavy resources to the project, which is the first project of the Company. According to the macro-economic environment andShenzhen’s office market condition, the Company has made scientific and reasonable planning, positioning and customer analyzing for the product to ensure its market outlook. The in-depth analyzing of theproject’s economic benefit indicates that the project enjoys a high internal rate of return and is able to create substantial returns. Therefore, the project coincides with theCompany’s development
strategy and is feasible.
3. Purpose, risks and impacts of the project
1. Purpose
The project meetsShenzhen’s strategy of urban and industry transformation and blazes a new trial in exploring low-cost urban renovation. Amid the continuous and innovative urban and
regional development and with the support of the Shenzhen government, the project is set to
become a landmark in Nanshan and an industry community to polishFangda’s brand equity. The
project will upgrade the regional functions and boost land value of the region. Moreover, it will
create substantial commercial opportunities, boost theCompany’s value and help improve the
Company’s financial condition and operation result.
2. Risks
(1) Market risks
The area of offices in construction over the next five year in the same region will top 3 million
m2,
intensifying the market competition.
The Company seeks to elevate theproject’s competitiveness by integrating its unique ecological and industrial resources.
(2) Management and implementation risks
As the first project of the Company, the company faces a lack of management and implementation experience. The Company has recruited a highly experienced and professional team and adopted an internal controlling system to facilitate the management and implementation of the project.
3. Impacts
The project will boost theCompany’s net and total assets, create numerous cash flows and fund theCompany’s future development while providing a stable rental income for the Company. The implementation of the project will also elevateFangda’s brand equity, stimulate theCompany’s curtain wall system and material businesses, and create a new driving force for the Company, thus boosting the long-term growth.
4. Reference
Resolution of the meeting of the Board of Directors
China Fangda Group Co., Ltd.
Board of Directors
January 9, 2014