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Baishizhou Project Receives a Capital Injection of RMB2.3 billion from Vanke, LVGEM China Surges 43.7% on First Day after Announcement Author: CHINA LVGEM

On the evening of 7 June 2022, LVGEM (China) Real Estate (00095.HK) announced that ICDL (an indirect non-wholly owned subsidiary of the Company), the Target Company (Shenzhen Sida Industrial Development Co., Ltd. (深圳市四達實業發展有限公司)) and the Investor (Shenzhen Shenquan Real Estate Development Co., Ltd. (深圳市深全房地產開發有限公司)) entered into the Subscription Agreement, pursuant to which the Investor conditionally agreed to inject approximately RMB2.3 billion into the Target Company, of which approximately RMB171.3 million will be contributed to the registered capital of the Target Company, which accounts for approximately 8% of the enlarged equity interest in the Target Company, and the balance of approximately RMB2.1 billion will be accounted as capital reserve of the Target Company.

After completion of the Subscription, Shenquan Real Estate, a subsidiary of Vanke, will be interested in approximately 8% of equity interest in Sida Industrial, and the equity interest held by ICDL, controlled by LVGEM China will be diluted from 100% to 92% in Sida Industrial, which holds the Baishizhou urban redevelopment project in Nanshan District, Shenzhen. The announcement indicated that the proceeds from the introduction of Vanke would be fully applied to Phases III and IV of the Project.


As of the closing on June 8, LVGEM (China) Real Estate (00095.HK) surged 43.68% to HK$1.25, with a turnover of HK$154 million and a total market cap of HK$6.37 billion.


A strong alliance for a stable future


With the tightening of real estate policies on both the financing and demand sides starting in 2021, the entire real estate industry has taken a great hit. A large number of real estate companies have been plagued due to liquidity, and market confidence has collapsed. The strong alliance between LVGEM China and Vanke through the introduction of equity financing is a wise decision to take precautions and a win-win move.


Vanke was originally the cornerstone shareholder of LVGEM, and this injection is a further step to cooperate on specific project, without affecting the position of LVGEM China as a majority shareholder of Baishizhou project. This has further enhanced the security of the Baishizhou project, effectively resisted the uncertain risks brought by the macro environment, and reinforced the safety cushion for the development and capital liquidity of the Group。


As a leader in the industry, the strategic investment of Vanke implies the industry’s firm confidence in the prospects of the Baishizhou project and high recognition of the project value, and also has a great demonstration effect on the investment market. By introducing the strategic shareholder into the project, the Company believes that it would enhance the investors’ confidence in LVGEM China, and it is expected to reduce financing costs and expand financing channels.


At the same time, the joint development of the Baishizhou project by the two parties is a testament from the side to the fact that the finance of LVGEM China remains sound on the whole, and that the development, operation and management experience of Vanke can be brought into the Baishizhou project to combine with the mature experience of urban redevelopment project from LVGEM China, so as to create a new benchmark for urban renewal projects in Shenzhen.


According to industry analysis, Vanke’s decision to enter the Baishizhou project at this time is not only a major benefit to LVGEM China and Baishizhou project, supporting the project multi-dimensionally in terms of financing, management, resources and experience, but also of far-reaching significance to boost market confidence of the real estate industry currently in a bind.


Steady progress of the Baishizhou Urban Redevelopment Project, with a grander prospect


The Baishizhou urban redevelopment project, a key urban renewal project in Shenzhen widely watched by the market, is located in Shahe Street, Nanshan District, Shenzhen, the PRC, in proximity to Science Park and Overseas Chinese Town, and is honoured as “Grand Urban Renewal Project in Shenzhen”, with a gross capacity area of 3.58 million square meters. The development of the project is in 4 phases, and has now entered the substantive development stage.


In 2021, the Group was confirmed as the main construction entity of Phase I of Baishizhou (“LVGEM BAISHIZHOU JADE COURTYARD (綠景白石洲·璟庭)”) and obtained the construction permit for the project to commence. The Phase I of the project is planned to have 5 towers, which consist of 2 commercial apartment buildings and 3 super high-rise residential buildings. LVGEM BAISHIZHOU JADE COURTYARD is planned to come onto the market in 2023.

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