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Real Estate Development and Sales

 For many years, the Group has always been actively participating in large-scale quality residential and commercial development projects in the Greater Bay Area, particularly focusing on the development of projects in Shenzhen, through which it has established a renowned brand name and enjoyed a leading position. In 2020, the Group was again awarded the honour of “Trustworthy (Quality) Enterprises in Shenzhen’s Real Estate Development Industry” by Shenzhen Real Estate Association and has ranked as the “Top 10 Shenzhen Real Estate Development Enterprises in terms of Comprehensive Strength” for ten years in a row; And its property management sector was awarded “2019 Excellent Enterprise of Shenzhen Property Management Association”.

The Group is one of the pioneers in the field of urban renewal and has accumulated over 20 years of experience in urban rehabilitation and urban renewal. By adopting the strategy of dual-core layout of “Focusing on Core Cities and Core Areas”, the Group’s major development projects are all situated in the core areas of the core cities in Greater Bay Area, like Shenzhen, Hong Kong, Zhuhai and Dongguan. As the government accelerates the planning and development of city cluster in the Guangdong-Hong Kong-Macao Greater Bay Area with an aim to rank the top among global bay areas in 2030 and emulate into the bay area with the highest total GDP in the world, the Group is confident that it will be able to maintain the rapid growth and risk tolerance of its businesses.

The Group adopted a two-way expansion model for land acquisition, i.e., public auction and urban renewal. Moreover, the Group has successfully developed a set of comprehensive and standardised land-acquisition models which will at the same time continuously provide the Group with abundant land supply that is able to deliver high gross profit and sustainable growth at low cost through the cooperation with the parent company. In addition, the Group adopted various refined cost control measures, with a view to achieve effective cost reduction through whole-process management with control before, during and after the implementation of process, which will in turn enable the Group to maintain a relatively high gross profit margin and profitability in the future.

Real estate development and sales were the core businesses of the Group. Its selling, under development and held for future development projects are LVGEM Mangrove Bay No. 1, LVGEM Amazing Plaze, LVGEM Liguang Project, LVGEM Baishizhou Project, LVGEM Joyful Town, LVGEM Dongqiao Project, LVGEM International Garden, LVGEM Mansion 1898, LVGEM Business Plaza, and the Lau Fau Shan development project located in Hong Kong, expecting the total gross floor area to be over 6 million square meters. In terms of land reserve, other than the above projects, through cooperation with the Group’s parent company is also a major source of the Group’s land reserves. The Group has participated in a number of urban renewal projects in Greater Bay Area, involving an estimated development area of over 8 million square meters. At present, several urban renewal projects are on track and the Group’s parent company plans to inject land resources into the Group in the future, which will be sufficient to support the Group’s continuing development needs over the coming few years.

As one of the pioneers in Shenzhen’s urban redevelopment sector, the Group have prepared and planned for Baishizhou Urban Renewal Project for years. Baishizhou Urban Renewal Project, the so-called “Grand Urban Renewal Project” in the industry in Shenzhen, is located on Shennan Avenue, Nanshan District, Shenzhen City and in proximity to Science Park and the sub-district of Overseas Chinese Town, which is a prestigious geographical location. With a capacity area of approximately 3.58 million square meters, the above project is a mega-large complex development project in the core areas of Shenzhen, which is fast growing with scarcity of land resources. Its development is in 3 phases according to the project plan. The entire project development is scheduled to complete in coming 8 to 10 years. On 28 October 2019 and 25 August 2020, the Group acquired totaled approximately 80% equity interests in Baishizhou Urban Renewal Project through two share subscription of the target companies, which will foster a huge growth potential of the Group by then.

LVGEM Mangrove Bay No. 1 is the most iconic urban renewal project of the Group in recent years. The project comprises three quality residential buildings and a high quality complex of Grade A offices, hotels and apartments. The project is located in the southeast corner of the intersection of Shazui Road and Jindiyi Road in the central business district of Futian District, Shenzhen. Having easy access to public transport and strategically located in the proximity to Futian Port, Huanggang Port, Beijing-Hong Kong-Macao Expressway and Metro Lines 3, 4 and 7, Phase I of the project occupies a site area of 24,424 square meters and a planned total gross floor area of 305,450 square meters, among which, the residential portion has a gross floor area of approximately 119,400 square meters. The project was launched for sale for the first time in October 2018. In April 2019, the first batch of completed residential units of Tower B recorded hot sale.

LVGEM Amazing Plaza is another urban upgrade and redevelopment project of the Group, which is strategically located in the sub-district of Overseas Chinese Town with rich scenic resources. As an integrated modelling zone for new mixed-use industrial town, this project will be mainly used for industrial research and development, as well as apartment and commercial purposes. The project is located at the north of Qiaoxiang Road, south of Beihuan Road, east of the intersection of Qiaoxiang Road and Beihuan Road as well as west of Qiaochengfang in Shenzhen. The project occupies a site area of 10,862 square meters and a total gross floor area of 97,214 square meters. The project was launched for the first time in September 2019. The brand-new show-flats were further launched with hot sale in April 2020 and the first batch of flats was occupied in June.

LVGEM Liguang Project is another urban renewal project of the Group in Shenzhen, which is a residential, commercial and industrial high-end industrial park complex. The project is located in Liguang Village, Guanlan Town, Lunghua District, Shenzhen City and adjacent to the Mid Valley Clubhouse of the Mission Hills Golf Club, and possesses prestigious scenic view of the natural environment. This project occupies a site area of approximately 85,333 square meters and a total gross floor area of approximately 382,139 square meters. Taking into consideration the surrounding environment and the living needs of the community, the project plan includes the development of a special commercial district at the west side of the region, as well as the Liguang Ecological Park at the east side which is covered with grassland. The project is currently at the preliminary stage of preparation ahead of construction.

Zhuhai Dongqiao Urban Renewal Project is a strategic project of urban renewal for this round among the first batch of projects that have officially commenced construction in Zhuhai City. On 12 July 2019, the Group has officially become the operating entity of the renewal project for the old village in Dongqiaocheng and obtained all necessary administrative approvals. This project marks an important milestone of the Group in terms of the urban renewal development and operation in Zhuhai. On 12 January 2020, the groundbreaking ceremony for commencement of construction of the project was held in Dongqiao Village, Zhuhai. The project is currently under construction and is expected to be launched in the second half of 2021. Located in the sub-district of Nanwan, Zhuhai City, the project is in a well-established area where traditional luxury residences and street-level commercial region are located. It is positioned as the No. 1 bay-area cultural and arts community in Zhuhai, comprising high-end residences, featured hotels, street-level cultural regions and other industrial functions. The project occupies a total site area of approximately 207,550 square meters with a planned total gross floor area of approximately 743,767 square meters, which is intended to be developed into Dongqiao Smart City and District adopting an IOC (Integrated operation and control centre) to real-time manage and control all the dynamic situations of the entire district. The development involves 27 construction projects of up to level 3 standard, comprising a total of 106 applied scenarios. It will provide overall solutions and services for multi-scenario and multi-dimension, safe and intelligent urban management under the Dongqiao Project.

LVGEM Joyful Town (formerly known as “Kaiwei” Project) is located in the former Dongda Kaiwei Science Park, which is west of Mingzhu Station of the urban railway on Mingzhu North Road in Xiangzhou District, Zhuhai City. With a total gross floor area of 445,292 square meters, the project is positioned to comprise an international grade A office building, apartment (hotel-serviced offices), residential and commercial complex. The project was launched for sale for the first time in September 2019. The online sales department was established in early February 2020, while two rounds of re-launch were held in April and June with hot sale.

LVGEM International Garden is located in Huazhou, Maoming, Guangdong Province. Situated in a well-developed core district’s residential area with rich natural resources, it is in proximity to the Juzhou Park and embraced by Xihu of 232 mu. It is well-served by a public transport network and is only approximately 20-minutes’ drive from Yuexi International Airport. The project occupies a site area of approximately 729,420 square meters and a planned total gross floor area of approximately 2,248,298 square meters. The gross floor area held for future development remained approximately 1.075 million square meters and it is estimated that the project will be launched at a value of approximately RMB1 billion each year in the future.

Hong Kong Lau Fau Shan Project is the Group’s first real estate development project in Hong Kong, which marks a new milestone of the internationalisation of the “LVGEM” brand. The project is located at Deep Bay Road, Lau Fau Shan, Hong Kong. It occupies a site area of approximately 82,400 square meters, comprising approximately 116 low density waterfront villas, each of which has a gross floor area of approximately 2,000 to 3,000 square feet. Embracing prime sea view and overlooking Deep Bay, the project is geographically prestigious and adjacent to Shenzhen with easy access to and from mainland China. Further, it is located at the vicinity of Hung Shui Kiu development area.

Commercial Properties Investment and Operation

 The “two-pronged” business model of “residential + commercial” is an integral part of the Group’s development pattern. As at 30 June 2020, the Group holds 28 quality commercial property projects comprising a total gross floor area of approximately 678,285 square meters, mainly represented by two commercial brands, namely “NEO” and “Zoll”, including Shenzhen NEO Urban Commercial Complex, Hong Kong LVGEM NEO, LVGEM Zoll Chanson Shopping Mall, LVGEM 1866 Zoll Shopping Mall, LVGEM Zoll Hongwan Shopping Mall, LVGEM Zoll Mangrove Bay No.1 Shopping Mall, LVGEM Zoll International Garden Shopping Mall, LVGEM Zoll Jinhua Shopping Mall, LVGEM Zoll Yuexi Shopping Mall, Dongguan LVGEM Zoll Shopping Mall and other shops and investment properties. The Group’s commercial property development projects are mainly independent commercial projects as well as complex projects that comprise commercial features. Among them, the ancillary services of commercial properties under complex projects significantly increase the overall value of individual residential projects among the real estate development business.

NEO Urban Commercial Complex is elected as “one of the ten major landmarks of Shenzhen”. It is strategically located in the western region of central Futian District of the core central business district in Shenzhen. It is a key urban and commercial landmark in Shenzhen. It has easy access to public transport locating at the intersection of four Metro Lines 1, 7, 9 and 11. NEO Urban Commercial Complex has a total gross floor area of approximately 252,539 square meters and a total lettable area of approximately 121,236 square meters. The high-quality corporate tenants of Grade A office building comprise offices and branches of various Fortune Global 500 companies, banks, telecommunication corporations and other state-owned enterprises.

Hong Kong LVGEM NEO is located in “Kowloon East CBD 2”, the new central business district in Hong Kong, occupying a site area of approximately 4,500 square meters and a planned total gross floor area of approximately 55,390 square meters. As a smart city operator proactively developing the business layout over the Greater Bay Area, the Group acquired 8 Bay East, the full seaview grade-A commercial building located in 123 Hoi Bun Road, Kwun Tong for HK$9 billion at the end of 2017, and renaming it as the “NEO”. It is positioned as a financial and technological centre which integrates health, green, humanity and scenarios. In July 2019, the handover of Hong Kong LVGEM NEO was completed and the operation officially commenced on 8 November 2019. As of 30 June 2020, the occupancy rate of the property was close to 50%. Anchor tenants include insurance groups, financial or innovation and technological enterprises and virtual bank, thereby aligning with its positioning as a “full seaview smart financial centre in Kowloon East”. Highlighted the strategic significance of the project to tapping into Hong Kong property market by the Group, the project will facilitate consolidation of the leading position of LVGEM (China) in commercial property market as well as its market position and brand influence in the Greater Bay Area.

Zoll Shopping Mall is a famous fashion and comprehensive shopping centre. As of 30 June 2020, the Group owns and operates LVGEM Zoll Chanson Shopping Mall, LVGEM 1866 Zoll Shopping Mall, LVGEM Zoll Hongwan Shopping Mall, LVGEM Zoll International Garden Shopping Mall, LVGEM Zoll Jinhua Shopping Mall and LVGEM Zoll Yuexi Shopping Mall. As at 30 June 2020, the overall occupancy rate was about 94%. In the second half of the year, B4 zone of LVGEM Zoll International Garden Shopping Mall is planned to launch its opening, while Dongguan LVGEM Zoll Shopping Mall will commence operation upon obtaining necessary government approvals, which is expected to contribute increasing rental revenue to the Group.

Comprehensive Services

 The Group provides comprehensive services to customers and tenants of its residential and commercial properties. These comprehensive services include property management services, hotel operations and others.

The Group’s comprehensive property management service includes security services, property maintenance and management of ancillary facilities, property brokerage business, online platform and e-shops for lifestyle services, which comprise a total gross floor area of approximately 2.6 million square meters. “Meilin flagship shop”, the real estate agency business, provided new property agency, entrusted property management, property banking and other businesses. “Ordinary living” app, our online platform for lifestyle services, launched cleaning of air-conditioners and other businesses and gained wide recognition from property owners. Shenzhen LVGEM Property Management Co., Ltd. obtained the ISO9001:2008 certification for its quality system of property management services and the level A property management qualification. As the property management services and value-added services become more mature, it is expected that the property management company will contribute sustainable revenue growth for the Group in the future.

In respect of hotel operations, the Group operates and manages two hotels in Shenzhen and the United States. These hotels are the LVGEM Hotel which is located in the central business district of Futian District, Shenzhen, and the Vanllee Hotel in Covina, California, the United States which was acquired in 2017. LVGEM Hotel has a total gross floor area of 25,751 square meters with over 330 rooms, 2 multi-functional meeting rooms, 1 banquet hall and video conference room. lt proactively explored new directions for marketing during the period, attempting to develop a two-pronged strategy for growth in both room occupancy and dining services, thereby obtaining new growth points by expanding new businesses and sales channels. Such efforts led to improving results month by month and the occupancy rate in June resumed to 64%. Vanllee Hotel occupies a site area of 22,652 square meters and its renovation was completed in 2019.

The Group operates and manages the LVGEM Jinjiang Hotel, which is located in the central business district of Futian district, Shenzhen. The In the first half of 2017, its average occupancy rate was approximately 76%.

 Financing

 The Group adopted diverse financing channels at home and abroad in their highest and best use. It seized the capital market windows to successfully complete the refinancing in the short to medium term by actively managing its debts. In February and March 2020, the Group launched and completed the complex and well-structured US dollar bond exchange and issuance scheme successively as a preparation of fund for the US$50 million private bond due to expire in June 2020 and the US$400 million public bond due to expire in August 2020.

In June 2020, the Group agreed with the bondholder to make amendments to the terms and conditions of the guaranteed convertible bonds (“Convertible Bonds”) originally due in 2023 with an interest rate of 4.00% per annum. The principal amount of the Convertible Bonds remained at US$100 million. With reference to the capital market environment, the parties agreed to extend the put option date to 17 May 2022 or after (originally on 17 May 2020).

With effective and active debt management, the overall finance cost remained at a healthy level of 6.9% in the first half of 2020.

Prospects

 Having engaged in the real estate market for over twenty years, the Group has always upheld the development strategy of “Focusing on Core Cities and Core Areas” and cherished “sincerely and constantly improving the city life” as its corporate mission. With a strong presence across various cities, our brand image is already deeply rooted in people’s minds, and our high-quality projects are highly recognised by all sectors of the society. Despite the current uncertainties associated with economic growth and the real estate market in the PRC, the Group is confident in the prospects of the real estate market in the Mainland China and the tremendous development potential of the Greater Bay Area.

Looking forward, the Group will continue to grasp various opportunities in the market, align with the national development policy and continuously enhance its competitiveness to cater to the demands of the market and customers. Meanwhile, the Group will strive for the vision and goal of “being the most respected city value-creator in China” with an aim to further strengthen its market position in and brand influence over the development of the Greater Bay Area and build a better future.

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