Tung Kok Tau in Shenzhen
The Group holds 49% interests in a joint venture, which holds a piece of land located in Tung Kok Tau, Nanshan District, Shenzhen. The joint venture has ceased business operations and proceeded to liquidation since the expiry of its operation period in January 2014.
During the six months ended 31 December 2021, Shenzhen Zhen Wah Harbour Enterprises Ltd. ("Zhen Wah", a joint venture in which the Company holds 49%), which holds interests in a piece of land located in Tung Kok Tau, Nanshan District, Shenzhen (the "Existing Land"), continued its proceedings of compulsory liquidation (the "Compulsory Liquidation") commencing in July 2016 under supervision of Shenzhen Intermediate People’s Court of Guangdong Province (廣東省深圳市中級人民法院) (the "Court") and management of a liquidation committee (the "Liquidation Committee") as appointed by the Court.
In the period, the Group continued to closely monitor the Compulsory Liquidation with the assistance of its legal advisers. Meanwhile, the Group worked actively with the Liquidation Committee, relevant official authorities and Chinese joint venture partner regarding the Compulsory Liquidation, re-zoning, reclamation and outstanding issues of the Existing Land for swap of the land (the "Land Swap") by virtue of the official agreement for the Land Swap (the "Agreement") previously entered into between 深圳市規劃和自然資源局南山管理局 (Nanshan Administration of Shenzhen Municipal Bureau of Planning and Natural Resources) (the "Bureau") and Zhen Wah in 2019 in accordance with the relevant laws and regulations. In the period, Zhen Wah has entered into the supplemental agreement to the Agreement with the Bureau to conclude the outstanding issues including but not limited to reclamation issue and charges for the Land Swap, in return for signing the land use right transfer agreement for the New Land to Zhen Wah.
Pursuant to the Agreement and its supplemental agreement, Zhen Wah and the Bureau agreed to the Land Swap such that the Existing Land was surrendered to the Bureau (the "Surrender Land") in return for a new piece of land situated in Tung Kok Tau, Nanshan District, Shenzhen (the "New Land"), to be granted by the Bureau to Zhen Wah without additional land premium payable subject to the terms and conditions as set out therein.
In the period, the Group kept on working closely with the relevant parties for various appropriate applications and approvals as required for the Land Swap in accordance with the Agreement after delivery of vacant possession of the Surrender Land, and in alignment with city planning near the New Land including but not limited to an opera house project and metro lines and station nearby. The New Land comprises two adjoining plots of land with total site area of approximately 109,000 square metres and land usage as residential, commercial including office and supporting ancillary facilities, of which the total developable gross floor area is approximately 395,000 square metres for multi-purpose development.
As disclosed in the last annual report, an agreement with the relevant official authorities was concluded for demolition, relocation and compensation of those buildings, erections and equipment on the Surrender Land (the “Relocation Compensation Agreement”) subject to, among others, settlement of any economic disputes between Zhen Wah with ex-tenant(s) or any third party(ies) arising therefrom in accordance with the relevant applicable laws, regulations and rules of the People’s Republic of China (the “PRC”). In May 2021, an ex-tenant had lodged an administrative proceeding with the Court against the relevant official authorities concerning with the Surrender Land as defendants and joining Zhen Wah as a third party, opposing the Relocation Compensation Agreement and claiming for compensation. In the period, the said administrative proceeding was subsequently subdivided by several separate new administrative proceedings in accordance with the relevant administrative procedure law by the ex-tenant as the plaintiff, each of which Zhen Wah was named as a third party. The reasons for claiming for compensation remained unchanged. As advised by the Liquidation Committee and the Group’s PRC legal adviser, Zhen Wah has defence to the claims under the administrative proceedings on the basis that the claims are lacking in factual and legal basis. The Liquidation Committee together with the Group and the Chinese partner of Zhen Wah will closely monitor the development of the administrative proceedings and take appropriate actions as and when necessary, based on the advice of its PRC legal adviser.
As further announced on 19 January 2022, the Court accepted the application lodged by the Liquidation Committee to further extend the period of Compulsory Liquidation of Zhen Wah for six months up to July 2022.
The metropolis Shenzhen, being the official Shenzhen Demonstration Pilot Zone and high-tech hub with recent unveiled reform for greater economic autonomy across finance, data, transport, medicine and health, education and culture, is expected to pioneer as a world-class center of cutting-edge innovation, entrepreneurship and advanced technology with high-quality development under official support, and act as the core engine for the development of Guangdong-Hong Kong-Macao Greater Bay Area. Meanwhile, the Shenzhen government implemented a series tightening policies on property market to soften market sentiment, with a long-term mechanism for the smooth functioning and healthy development of the property market. Overall, the outlook for Shenzhen’s property market is expected to remain positive, supported by the strong economic and demographics fundamentals. This will enhance the sustainable development value of the New Land in Tung Kok Tau, Nanshan District, Shenzhen. The Group will continue to act proactively for safeguarding the best interests of the Company in relation to Zhen Wah and its assets. It will keep on adopting the best available measures and take expedient action with a view to protecting the Company’s best interests in the context of the Compulsory Liquidation. The Group will closely monitor the development of the Compulsory Liquidation and continue to seek PRC legal advice and to further strive for the best interest of the Group in Zhen Wah and its assets.
Meanwhile, the Group will continue to work with the relevant parties to monitor and procure the progress of Land Swap and to optimise city planning of the New Land in line with the projects of opera house and infrastructure nearby. However, there is no assurance that the Land Swap can be completed without further significant delay and impediments, or that the execution of the relevant land contract will not arise.
Based on the PRC legal advice received by the Group, assets of Zhen Wah will eventually be sold by way of public auction or disposed of by other applicable means subject to endorsement of the PRC court upon receipt of proposal of the Liquidation Committee in accordance with the PRC laws, and any surplus (after settlement of all relevant liabilities including taxation) will be distributed to the joint venture partners in accordance with their equity contributions. However, the issues involved in the Compulsory Liquidation are complex and sophisticated, involving not only the PRC court but also various government authorities. There is no assurance that the Compulsory Liquidation will not be subject to significant delay, oppositions, obstructions and further dispute or litigation with respect to the matters of Zhen Wah and/or its assets.
Further details can refer to the interim report of the Company for the six months ended 31 December 2021.