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Real Estate Development and Sales

Being the core business, the real estate development and sales projects of the Group are mainly located in the core areas of core cities of the Greater Bay Area. For the six months ended 30 June 2021, the real estate development and sales of the Group generated revenue of approximately RMB1,556.0 million (six months ended 30 June 2020: RMB2,030.7 million), representing a decrease of approximately 23.4% year-on-year.

During the reporting period, the carried-forward revenue was mainly generated from the projects of LVGEM Amazing Plaza, Joyful Town in

Zhuhai and LVGEM International Garden, while the launch of new property projects this year will mostly take place in the second half of the

year. Contracted sales amounted to approximately RMB2,141.4 million (six months ended 30 June 2020: RMB2,463.0 million), representing a

decrease of approximately 13.1% year-on-year.

 

During the reporting period, the Group continued to develop urban renewal projects with high potential, including Baishizhou Project in Shenzhen, LVGEM Liguang Project in Shenzhen, Zhuhai Dongqiao Urban Renewal Project, LVGEM International Garden Project and Phase II Project of Shenzhen LVGEM Mangrove Bay No. 1. Such projects have all been progressing smoothly. Among which, 深圳市綠景天盛實業有限公司(Shenzhen LVGEM Tiansheng Industry Company Limited*) has been confirmed to be the operating entity of the Phase I of Shenzhen Baishizhou Urban Renewal Project and Phase II of Shenzhen LVGEM Mangrove Bay No.1. The progress for the contracting of the LVGEM Liguang Project in Shenzhen was satisfactory. The pre-sale of Zhuhai Dongqiao Urban Renewal Project, which has officially been renamed as LVGEM Royal Bay, is expected to commence in the fourth quarter of this year following its satisfactory progress. LVGEM International Garden in Huazhou has launched D3 zone of Bolin Mansion and Block 3 in C1 zone of Yuehu Mansion in February and during Labor Day Golden Week, respectively. Both were exceptionally welcomed by the market, which was indicated by the fact that they have continuously been the benchmark in the local market of Huazhou. In the future, the Group will continue to focus on the development in the Greater Bay Area and strive for excellence in developing new benchmark smart cities by implementing the “technology + property” strategy, in order to empower and

add values to cities and develop an upgraded and excellent residential and living community with unique and quality design, thereby driving the continued steady growth of cost-effectiveness and business scale of the Group.

 

Baishizhou Urban Renewal Project, the so-called “Grand Urban Renewal Project” in the industry in Shenzhen, is located in 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 an area of approximately 3.58 million square meters, among which the gross floor area of Phase I reached 675,780 square meters, the project is a mega-large complex development project in the core areas of Shenzhen as a fast-growing city with scarce land resources. Its development is in 4 phases according to the project plan. The project development is scheduled to complete in the coming 8 to 10 years. On 28 October 2019 and 25 August 2020, the Group indirectly acquired approximately 80% equity interests in total in Baishizhou Urban Renewal Project. On 15 April 2021, 深圳市綠景天盛實業有限公司(Shenzhen LVGEM Tiansheng Industry Company Limited*), a subsidiary of the Group, has been confirmed to be the operating entity of Phase I of the project and has obtained the construction commencement permit for earth-and-stone and foundation pit support works in July. The Group has commenced and has been making every effort to prepare for its

construction. The commencement of project will undoubtedly become a huge growth driver for boosting the results of the Group.

 

LVGEM Mangrove Bay No. 1 Project is the most iconic urban renewal project of the Group in recent years. Phase I Project of LVGEM Mangrove Bay No. 1 is a high-quality complex comprising three quality residential buildings and a Grade A office, hotels and apartments, which 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 convenient 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, 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 Phase I Project of LVGEM Mangrove Bay No. 1 was launched for sale for the first time in October 2018 and had generated a tremendous revenue for the Company, contributing contracted sales of approximately RMB65 million and recognised sales of approximately RMB130 million during the period. In June 2021, the Group officially became the operating entity of Phase II of Mangrove Bay No. 1, which comprises 5 quality seaview residential buildings that occupy a site area of approximately 22,000 square meters and a planned total gross floor area of 139,666 square meters. The Phase II Project of Mangrove Bay No. 1 will integrate the community and commercial clusters with various ancillary public resources, in a bid to create an ideal living environment.

 

LVGEM Amazing Plaza is another urban upgrade and redevelopment project of the Group in Shenzhen City, 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 towns, this project will be mainly used for industrial research and development, as well as apartments 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. The project contributed contracted sales of approximately RMB670 million and recognised sales revenue of approximately RMB663 million during the period.

 

LVGEM Liguang Project 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 a prestigious scenic view of the natural environment. This project occupies a site area of 85,333 square meters and a total gross floor area of 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. In January 2020, the Group and Liguang Company (黎光股份公司) entered into the Cooperation Agreement regarding the Guanlan Liguang Land Development Project in Lunghua District, Shenzhen City (《深圳市龍華區觀瀾黎光土地開發項目合作協定書》) for the redevelopment project of old villages in Liguang and the land consolidation project in Liguang in joint efforts. During the reporting

period, due to the satisfactory contracting progress, the project is also currently at the preparation stage ahead of construction.

 

Zhuhai Dongqiao Urban Renewal Project, officially renamed as LVGEM Royal Bay, is a strategic project of urban renewal in Zhuhai City for this round and among the first batch of projects that have officially commenced construction. On 12 July 2019, the Group has officially become the operating entity of the renewal project for the old village in Dongqiao 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 the commencement of construction of the project was held in Dongqiao Village, Zhuhai. Located in the subdistrict 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 764,920 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-dimensional, safe and intelligent urban management under the Dongqiao Project. As the current progress of the project is satisfactory, it is expected that the pre-sale will commence in the fourth quarter of 2021.

 

LVGEM Joyful Town 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 several rounds of re-launch were held during the year with hot sale. The concentrated delivery of the southern part of the project was completed in December. For the six months ended 30 June 2021, the project contributed contracted sales of approximately RMB506 million and recognised sales of approximately RMB423 million during the period.

 

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 public transport network and is only an approximately 20-minute drive from Yuexi International Airport. The project occupies a site area of approximately 835,800 square meters and a planned total gross floor area of approximately 2,248,298 square meters. Leveraging on the advantages such as excellent geographical location, ecological environment, established brand reputation and ancillary educational facilities, D3 zone of Bolin Mansion and Block 3 in C1 zone of Yuehu Mansion were launched in February and during Labor Day Golden Week in 2021, respectively. Both were exceptionally welcomed by the market, which was indicated by the fact that they have continuously been the benchmark in the local market of Huazhou. For the six months ended 30 June 2021, the total contracted sales of LVGEM International Garden amounted to RMB654 million and recognised sales revenue was approximately RMB172 million. The gross floor area pending development of the project remained approximately

1.25 million square meters and it is estimated that the project will be launched at a value of approximately RMB1 billion annually 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. Further, it is located at the vicinity of Hung Shui Kiu development area.

Commercial Property Investment and Operations

The “two-pronged” business model of “residential + commercial” is an integral part of the Group’s development pattern. As at 30 June 2021, the Group held over 25 quality commercial property projects comprising a total gross floor area of approximately 831,326 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.

 

For the six months ended 30 June 2021, the Group’s revenue from the commercial properties investments and operation was approximately

RMB331.2 million (six months ended 30 June 2020: RMB317.4 million), representing an increase of approximately 4.4% year-on-year.

 

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. During the reporting period, LVGEM NEO team in Shenzhen has conducted in-depth point-topoint communication on the customers’ needs, aiming at making targeted adjustment to the original business. With reference to the feedback and demands received from some of the customers, the team has introduced high-end and well-known brands to our customers following several rounds of negotiation. Leveraging the best operational soft power out of the commercial renewal, the complex can remain in an advantageous position and even make a breakthrough amid the fierce market competition.

 

For the six months ended 30 June 2021, the average occupancy rate of NEO Urban Commercial Complex was about 87% (as of June 2020: 83%).

 

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 new 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. The project received overwhelming responses since its launch for leasing. As at 30 June 2021, the occupancy rate of the property was close to 60%. 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”. Following the commencement of Tuen Ma Line Phase 1 in late June 2021, leveraging the support of various ancillary facilities, it is expected that the growth in asset value of the projects will significantly increase in the future, thus bringing stable rental income and

long-term return on capital for the Group at the same time. Highlighted by 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 at 30 June 2021, 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. For the six months ended 30 June 2021, the overall occupancy rate was about 92%.

 

Comprehensive Services

The Group provided comprehensive services to customers and tenants of its residential and commercial properties, including property management

services, hotel operations and others. For the six months ended 30 June 2021, the comprehensive services of the Group generated revenue of

RMB143.1 million (six months ended 30 June 2020: RMB114.2 million), representing an increase of approximately 25.3% year-on-year. The hotel industry was directly impacted by the knock-on effect brought by the pandemic in the corresponding period last year, however, the operating

revenue of the hotels in Shenzhen basically returned to normal and the hotel business in the United States has been gradually improving during

the period.

 

The Group provided comprehensive property management services for most of its property development projects, including security services, property maintenance and management of ancillary facilities, which comprised a total gross floor area of approximately 3.23 million square meters. 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. Attributable to the recovery of the economy, the average occupancy rate of LVGEM Hotel was approximately 67% as at 30 June 2021 (as at 30 June 2020: 45%). On 24 June 2021, LVGEM Hotel and ATLAS (寰圖) entered into a strategic cooperation agreement to formulate customized redevelopment and operation solution in order to effectively increase the value of sales per unit area with a flexible mode of “Work + Life”, thereby achieving the goal of upgrade and redevelopment. Vanllee Hotel occupies a site area of 22,652 square meters and its renovation was completed in 2019. Due to further economic revival in the United States thanks to the increase of COVID-19 vaccination rate, the occupancy rate of Vanllee Hotel was approximately 13% as at 30 June 2021. The operation of Vanllee Hotel is the milestone project of LVGEM (China), which marks the further expansion of the international business of the Group and plans to bring a stable hotel operating

revenue to the Group.

 

Financing

During the reporting period, attributable to the effective pandemic prevention and control and satisfactory progress in terms of COVID-19 vaccination rate in the PRC, the economy has remained at a stage of continued recovery. Despite this, the macro-economy continued to face challenges, while the real estate industry tended to be under more strict adjustment and control. The Group adopted diverse domestic and overseas financing means in their highest and best use and actively prepared for the refinancing schemes to secure sufficient capital for the Group’s development. The Group actively improved its financial structure and adapted itself to the national regulatory requirements of the “three red lines” for real estate enterprises. The liabilities to assets ratio after excluding receipts in advance and net gearing ratio was 62.4% and 77.6%, respectively, which were within the target levels. Under the effective and active debt management, the overall finance cost maintained at a healthy level of 6.5% in the first half of 2021, representing a slight decrease of 0.4 percentage point from 6.9% for the six months ended 30 June 2020.

 

Future Prospects

During the first half of 2021, the global COVID-19 pandemic situation was diverse. Contrary to the more severe viral spread overseas, China saw its continued and steady economic recovery and continued the turnaround of the real estate industry due to its outstanding containment measures and boosted rate of vaccination against COVID-19. At the macro level, China adopted proactive and flexible quantitative easing policy on the real economy on one hand, and continued to tighten the adjustment and control policy for the real estate market on the other hand. The real estate financing has tended to be strained accordingly. Under the strong adjustment and control policy, it represents a valuable opportunity to the Group which has high capital adequacy and focuses on the development of the Guangdong-Hong Kong-Macao Greater Bay Area. During the reporting period, the construction of the Guangdong-Hong Kong-Macao Greater Bay Area continued its progress. On 20 February 2021, the Shenzhen government has formulated the “2021 Key Tasks of Shenzhen City on Promoting the Construction of the Guangdong-Hong Kong-Macao Greater Bay Area” (《深圳市推進粵港澳大灣區建設2021年工作要點》) to push forward the construction of the Guangdong-Hong

Kong-Macao Greater Bay Area. As a pioneer in the field of urban renewal, the Group has focused on the development of key areas in core cites of the Greater Bay Area for years. It is expected that the Group will continue to benefit from the construction and development of the Greater Bay Area in the future.

 

During the first half of 2021, on the back of dedicated efforts of all employees of the Group, we remained resilient to attempt to beat all challenges despite the hard-time. Looking forward to the second half of the year, the Group will continue to adopt a prudent approach by closely monitoring the changes in the macro environment and adjusting its specific business development strategies. Adhering to the strategic guideline of “focusing on urban renewal in the Greater Bay Area and developing a brand new smart city”, the Group will focus on its development in the key areas of core cities of the Greater Bay Area. In terms of facilitating the urban renewal projects in the Greater Bay Area, the Group will continue to follow the national strategic plans, with a focus on facilitating various large-scale urban renewal projects held by the Group and its controlling shareholder. In particular, the Group will put more resources into the priority Shenzhen Baishizhou Urban Renewal Project to

ensure the orderly progress of the project. While devoting committed efforts in urban renewal, the Group will step up its endeavors in creating an outstanding business operation model, aiming to create higher brand value for the Group, bring better life experience to the residents, infuse vitality to the city’s renewal and development and deliver substantial returns to the investors.

 

In the future, the Group will continue to develop quality projects in the key areas of core cities, develop industrial properties and operate smart commercial cities. With the unique positioning and brand-new perspective, the Group will develop “unique properties, resources-linked properties and smart properties”. To develop the smart city benchmark, the Group will push ahead the collaboration with Huawei, China Unicom and Tuya Smart in the area of smart technology in full swing. In September last year, China has set its steadfast goal to strive to reach the peak of carbon dioxide emissions by 2030 and achieve caron neutral by 2060. It implies that China has already accelerated the progress of the carbon reduction plan on the foundation of making continuous contributions for mitigating the impacts of climate change. In view of the national strategy of reaching carbon peak and carbon neutral, the Group has partnered with Huawei to jointly explore the standard for the construction of low to zero carbon smart cities as well as the replication, promotion and introduction of sustainability concept for other subsequent projects, thus making contributions for the people and environment. At the same time, the Group will also enhance the collaboration with Wanda Group

to develop commercial complexes in joint efforts, increase the operational efficiency of the joint projects and accelerate its pace of upgrade by

creation of city value.

 

Looking forward, the Guangdong-Hong Kong-Macao Greater Bay Area will act as the key driver of the economic development of the nation. The Group will seize the tremendous opportunities arising from the construction and development of the Greater Bay Area, striving to develop the Company into a new smart city developer and operator dedicated to the construction of the Guangdong-Hong Kong-Macao Greater Bay Area. During the second half of 2021, upholding the spirit of remaining creative and motivated and adhering to the corporate mission of “continuously enhancing the value of cities”, the Group will put efforts in striving for the vision and goal of “being the most respected city value-creator in the PRC”.

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