- Jul 23, 2015
- China New Town Invests in Luzhou Shanty-town Reformation Project_To Secure a 48.7% Investment Return
(Hong Kong and Singapore, 20 July 2015) ― China New Town Development Company Limited – the future blueprint planner and leading developer of integrated new towns in China (the “Company”, “CNTD”, the “Group”; HKSE: 1278.HK; SGX: D4N.SI), is pleased to announce that Luzhou Jiangnan New District Qiancao Area Shanty-town Reformation Project (瀘州市江南新區茜草片棚戶區改造項目, the “Project”), the first project was promptly launched within one month of entering into the CDB (Beijing) New-Type Urbanization Development Fund agreement (the “Development Fund” or the “Partnership” ).
The Partnership intends to contribute RMB 300 million of capital to Luzhou Jiangnan Construction Development Company Limited (the “Project Company”) for a period of four years. China New Town, as the junior-tranche limited partner, proportionally contributes 1.5% of the total amount, equivalent to RMB4,500,000 for the investment in the Project. Luzhou has achieved a GDP of RMB 126 billion in 2014, the third year in a row of over RMB 100 billion with growth economic indicators ranking among the highest in Sichuan Province. This project is the major shanty town reformation projects, and has been included in the 10-million-unit national shanty town reformation plan. Luzhou Jiangnan Construction and Investment Company (“Jiangnan Company”) has been designated as the entity to implement the Project. The Partnership, amounting to RMB 10 billion initiated by China Development Bank Corporation (“CDBC”), focuses on old town reformation, shanty town reformation, primary land development and integrated land and property development. It will also explore investment opportunities in municipal facilities, such as water supply, waste disposal, environment protection, public utilities, etc.
Jiangnan Company is required to make a payment of investment return at 12.4% per annum to the Partnership in each fiscal year, and purchase the equity interest in the Project Company held by the Partnership at the expiry date of the four-year term. The cash outlay in relation to the guaranteed investment return and equity purchase arrangements will be included in the Luzhou City’s fiscal budget, and Luzhou Municipal Finance Bureau and will pledge its holding in the Jiangnan Company and the Luzhou Municipal Government will provide an irrevocable and unlimited responsibility guarantee respectively, and Jiangnan Company will provide assets or land-use rights as collaterals. With such multiple layers of credit enhancement, the Project no doubt features excellent risk-reward profile.
Commenting on the investment in Luzhou Shanty-town Reformation Project, the spokesperson of China New Town Development says, “The Project is the first shanty-town reformation project of the Partnership since establishment. The prompt project launch fully reflects the project resources and investment experience of the Company’s controlling shareholder, CDBC, in the field of national urbanization. The Project is expected to generate an annual return of 48.7% to the Company with its features of low risk and high investment return.
As more projects come in place with the Partnership’s investment, CNTD is expected to participate in more diversified urbanization projects nationwide with relatively low investment amount. While enjoying a high return on investments, the Group will have access to explore other downstream business, solidifying its investment model and enhancing the project diversification and economy of scale. As PRC’s leading investment institute in urbanization, CDBC, China New Town’s controlling shareholder, is fully committed to supporting China New Town in fast expansion of its project network and business scale so as to accelerate China New Town’s value creation to shareholders.”