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The following is the text of a letter, summary of values and valuation certificates prepared for the purpose of incorporation in this document received from Asia-Pacific Consulting and Appraisal Limited, an independent property valuer, in connection with its valuation as at February 28, 2019 of the selected property interests of the Group.
Asia-Pacific Consulting and Appraisal Limited Room 1907, 19/F, Lee Garden One 33 Hysan Avenue, Causeway Bay, Hong Kong
[REDACTED]
The Board of Directors JH Educational Technology INC. No 618 Liu Weng Road Liu Shi Town Yueqing City Zhejiang Province The People’s Republic of China
Dear Sirs,
Instructions, Purpose and Date of Valuation
In accordance with your instructions to value the selected property interests held by JH Educational Technology INC. (the “Company”) and its subsidiaries (hereinafter together referred to as the “Group”) in the People’s Republic of China (the “PRC”). We confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion on the market values of the selected property interests as at February 28, 2019 (the “valuation date”).
For the purpose of this report, “property activities” mean holding (directly or indirectly) and/or development of properties for letting or retention as investments, or the purchase or development of properties for subsequent sale, or for subsequent letting or retention as investments. Any other property interest is classified as “non-property activities”. The selected properties in this report refer to a property interest that forms part of the Group’s non-property activities has a carrying amount of 15% or more of the Group’s total assets. Except for the property interests in the report, the Group has no any property interest that forms part of the Group’s property activities. Furthermore, we have adopted the below guidance on what constitutes a property interest:-
(a) one or more units in the same building or complex;
(b) one or more properties located at the same address or lot number;
(c) one or more properties comprising an integrated facility;
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(d) one or more properties, structures or facilities comprising a property development project (even if there are different phases);
(e) (one or more properties held for investment within one complex;
(f) one or more properties, structures or facilities located contiguously teach other or located on adjoining lots and used for the same or similar operational/ business purposes; or
(g) a project or phases of development presented to the public as one whole project or forming a single operating entity.
Basis of Valuation
Our valuation was carried out on a market value basis. Market value is defined as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently, and without compulsion”.
Methods of Valuation
We have valued the property no. 4 by the comparison approach assuming sale of the property interest in its existing states with the benefit of immediate vacant possession and by making reference to comparable sales transactions as available in the market. This approach rests on the wide acceptance of the market transactions as the best indicator and pre-supposes that evidence of relevant transactions in the market place can be extrapolated to similar properties, subject to allowances for variable factors.
Where, due to the nature of the buildings and structures of property nos. 1, 2 and 3 and the particular location in which they are situated, there are unlikely to be relevant market comparable sales comparables readily available, the buildings and structures of the properties have been valued by the cost approach with reference to their depreciated replacement costs.
Depreciated replacement cost is defined as “the current cost of replacing an asset with its modern equivalent asset less deductions for physical deterioration and all relevant forms of obsolescence and optimization.” It is based on an estimate of the market value for the existing use of the land, plus the current cost of replacement of the improvements, less deduction for physical deterioration and all relevant forms of obsolescence and optimization. In arriving at the value of the land portion, reference has been made to the sales evidence as available in the locality. The depreciated replacement cost of the property interest is subject to adequate potential profitability of the concerned business. In our valuation, it applies to the whole of the complex or development as a unique interest, and no piecemeal transaction of the complex or development is assumed.
In valuing the property interest held under development as at the valuation date, we have assumed that it will be developed and completed in accordance with the latest development proposals provided to us by the Group. In arriving at our opinion of value,
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Valuation Assumptions
Our valuation has been made on the assumption that the seller sells the property interests in the market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which could serve to affect the values of the property interests.
No allowance has been made in our report for any charge, mortgage or amount owing on any of the property interests valued nor for any expense or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their values.
Valuation Standards
In valuing the property interests, we have complied with all requirements contained in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited; the RICS Valuation – Professional Standards published by the Royal Institution of Chartered Surveyors; the HKIS Valuation Standards published by the Hong Kong Institute of Surveyors, and the International Valuation Standards issued by the International Valuation Standards Council.
Source of Information
We have relied to a very considerable extent on the information given by the Group and have accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements, particulars of occupancy, lettings, and all other relevant matters.
We have had no reason to doubt the truth and accuracy of the information provided to us by the Group. We have also sought confirmation from the Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to arrive an informed view, and we have no reason to suspect that any material information has been withheld.
Document and Title Investigation
We have been shown copies of various title documents including State-owned Land Use Rights Certificates, Building Ownership Certificates and other official permits relating to the property interests and have made relevant enquiries. Where possible, we have examined the original documents to verify the existing title to the property interests in the PRC and any material encumbrance that might be attached to the property interests or any tenancy amendment. We have relied considerably on the advice given by the Company’s PRC legal adviser – Jingtian & Gongcheng Law Offices, concerning the validity of the property interests in the PRC.
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Area Measurement and Inspection
We have not carried out detailed measurements to verify the correctness of the areas in respect of the properties but have assumed that the areas shown on the title documents and official site plans handed to us are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurement has been taken.
We have inspected the exterior and, where possible, the interior of the properties. However, we have not carried out investigation to determine the suitability of the ground conditions and services for any development thereon. Our valuation has been prepared on the assumption that these aspects are satisfactory and that no unexpected cost and delay will be incurred during construction. Moreover, no structural survey has been made, but in the course of our inspection, we did not note any serious defect. We are not, however, able to report whether the properties are free of rot, infestation or any other structural defect. No tests were carried out on any of the services.
The site inspection was carried out on June 14, 2018 by Ms. Sophia Xi who has 3 years’ experience in the property valuation in the PRC; Ms. Maggie Wang who has one year’s experience in the property valuation in the PRC and Ms. Ivy Liu who has one year’s experience in the property valuation in the PRC.
Currency
All monetary figures stated in this report are in Renminbi (RMB).
Our summary of values and valuation certificates are attached below for your attention.
Yours faithfully, for and on behalf of Asia-Pacific Consulting and Appraisal Limited David G. D. Cheng MRICS Executive Director
Note: David G. D. Cheng is a Chartered Surveyor who has 19 years’ experience in the valuation of assets in the PRC, Hong Kong and the Asia-Pacific region.
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– III-5 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX III PROPERTY VALUATION REPORT state as at The total market value in existing the valuation date Market state as at value in existing the valuation date — — [No commercial value] Market state as at value in existing the valuation date (4) RMB RMB RMB RMB Market Group I: Group II: Group III: Total of the property: state as at value in existing the valuation date [No commercial value] 18 residential units on Levelsand 15, 22 17, of 19 a 23-storeythe building eastern located side at of Fengqingthe Road northern and side of SandunGongshu Road District Hangzhou City Zhejiang Province The PRC Property Total: 351,941,000 [Nil] [Nil] 351,941,000 4. No.
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Notes:
(1) For the portions without proper title certificates or erected on the allocated land, we have not attributed commercial value to them. However, for reference purpose, we are of the opinion that the depreciated replacement cost of them (excluding land element) as at the valuation date would be RMB271,946,000 assuming all relevant title certificates have been obtained and they could be freely transferred.
(2) For the portions without proper title certificates or erected on the allocated land, we have not attributed commercial value to them. However, for reference purpose, we are of the opinion that the depreciated replacement cost of them (excluding land element) as at the valuation date would be RMB541,018,000 assuming all relevant title certificates have been obtained and they could be freely transferred.
(3) As the Group has not obtained proper title certificates to the property, we have not attributed commercial value to them. However, for reference purpose, we are of the opinion that the depreciated replacement cost of them (excluding land element) as at the valuation date would be RMB6,388,000 assuming all relevant title certificates have been obtained and they could be freely transferred.
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VALUATION CERTIFICATE Market value in existing Particulars of state as at No. Property Description and tenure occupancy the valuation date RMB
1. 2 parcels of land, The property comprises The property is 351,941,000 56 buildings and 2 parcels of land with a currently occupied various structures total site area of by the Group for located at the approximately 510,826.28 education and northern side of sq. m., 56 buildings and ancillary purposes Shuanghu Avenue various structures erected except for portions and the western side thereon which were of the property with of Zhengxin Road completed in various a total gross floor Longhu Town stages between 2006 and area of Shuanghu District 2017. approximately Zhengzhou City 2,769.6 sq. m. which Henan Province The 56 buildings have a were leased to The PRC total gross floor area of various tenants for approximately 288,095.61 supermarket, sq. m., mainly include canteen and retail teaching buildings, purposes. training center, dormitories, teacher apartments, dining halls, a library, a sport center, a gymnasium and an administrative building.
The structures mainly include stadium, plane attendant training center.
The land use rights of one parcel of land have been granted to the Group for a term expiring in June 2054 for industrial use. The land use rights of the other parcel of land have been allocated to the Group for science and education uses.
Notes:
1. Pursuant to a State-owned Land Use Rights Certificate – Xin Tu Guo Yong (2013) Di No.106, the land use rights of a parcel of land with a site area of approximately 301,483.16 sq. m. have been granted to Zhongyuan University of Technology College of Information & Business (中原工學院資訊商務學院,“ZCIB”) for a term expiring in June 2054 for industrial use.
2. Pursuant to a State-owned Land Use Rights Certificate – Xin Tu Guo Yong (2011) Di No.157, the land use rights of a parcel of land with a site area of approximately 209,343.12 sq. m. have been allocated to ZCIB for science and education uses.
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3. Pursuant to 39 Building Ownership Certificates – Xin Fang Quan Zheng Zi Di Nos. 1001002801 to 1001002813 and Xin Zheng Fang Quan Zheng Zi Di Nos. 1501004638 to 1501004645, 1401006717 to 1401006725 and 1201002688 to 1201002696, 39 buildings with a total gross floor area of approximately 241,691.43 sq. m. are owned by ZCIB. The details are set out as follows:
No. Certificate No. Gross Floor Area (sq. m.)
1. Xin Fang Quan Zheng Zi Di No. 1001002806 7,957.90 2. Xin Fang Quan Zheng Zi Di No. 1001002810 4,905.36 3. Xin Fang Quan Zheng Zi Di No. 1001002809 4,905.36 4. Xin Fang Quan Zheng Zi Di No. 1001002808 4,905.36 5. Xin Fang Quan Zheng Zi Di No. 1001002807 4,905.36 6. Xin Fang Quan Zheng Zi Di No. 1001002803 9,163.89 7. Xin Fang Quan Zheng Zi Di No. 1001002802 11,142.42 8. Xin Fang Quan Zheng Zi Di No. 1001002805 14,152.50 9. Xin Fang Quan Zheng Zi Di No. 1001002804 11,142.42 10. Xin Fang Quan Zheng Zi Di No. 1001002801 10,050.46 11. Xin Zheng Fang Quan Zheng Zi Di No. 1201002688 5,288.55 12. Xin Zheng Fang Quan Zheng Zi Di No. 1201002696 4,840.32 13. Xin Zheng Fang Quan Zheng Zi Di No. 1201002695 4,840.32 14. Xin Zheng Fang Quan Zheng Zi Di No. 1201002694 4,840.32 15. Xin Zheng Fang Quan Zheng Zi Di No. 1201002693 4,840.32 16. Xin Zheng Fang Quan Zheng Zi Di No. 1201002692 4,004.75 17. Xin Zheng Fang Quan Zheng Zi Di No. 1201002691 4,622.70 18. Xin Zheng Fang Quan Zheng Zi Di No. 1201002690 4,931.70 19. Xin Zheng Fang Quan Zheng Zi Di No. 1201002689 4,931.70 20. Xin Fang Quan Zheng Zi Di No. 1001002813 6,039.22 21. Xin Fang Quan Zheng Zi Di No. 1001002812 6,039.22 22. Xin Fang Quan Zheng Zi Di No. 1001002811 3,734.93 23. Xin Zheng Fang Quan Zheng Zi Di No. 1401006723 4,703.56 24. Xin Zheng Fang Quan Zheng Zi Di No. 1401006724 4,703.56 25. Xin Zheng Fang Quan Zheng Zi Di No. 1401006717 6,872.50 26. Xin Zheng Fang Quan Zheng Zi Di No. 1401006725 4,703.56 27. Xin Zheng Fang Quan Zheng Zi Di No. 1501004638 4,703.56 28. Xin Zheng Fang Quan Zheng Zi Di No. 1501004645 4,703.56 29. Xin Zheng Fang Quan Zheng Zi Di No. 1501004639 4,703.56 30. Xin Zheng Fang Quan Zheng Zi Di No. 1501004640 4,703.56 31. Xin Zheng Fang Quan Zheng Zi Di No. 1501004644 4,703.56 32. Xin Zheng Fang Quan Zheng Zi Di No. 1501004641 4,703.56 33. Xin Zheng Fang Quan Zheng Zi Di No. 1401006718 8,077.75 34. Xin Zheng Fang Quan Zheng Zi Di No. 1501004642 4,703.56 35. Xin Zheng Fang Quan Zheng Zi Di No. 1401006719 8,688.34 36. Xin Zheng Fang Quan Zheng Zi Di No. 1401006720 7,859.36 37. Xin Zheng Fang Quan Zheng Zi Di No. 1401006721 7,859.36 38. Xin Zheng Fang Quan Zheng Zi Di No. 1501004643 7,907.16 39. Xin Zheng Fang Quan Zheng Zi Di No. 1401006722 5,206.28
Total: 241,691.43
4. For the remaining 17 buildings with a total gross floor area of approximately 46,404.18 sq. m.:-
a. pursuant to 2 Construction Work Planning Permits – Jian Zi Di No. 410184201700006108104 and [410184201200032108104] in favor of ZCIB, 10 out of the 17 buildings (comprising a west commercial street, a western restaurant, a new restaurant, a gymnasium, two teacher apartments, one power distribution room and three student dormitories) with a total gross floor area of approximately 40,524.03 sq. m. have been approved for construction. As advised by the Group, ZCIB is in process of applying for the relevant title certificates for these 10 buildings.
b. for 7 out of the 17 buildings with a total gross floor area of approximately 5,880.15 sq. m., we have not been provided with any title certificates or construction permits to them.
5. Pursuant to 24 Tenancy Agreements, portions of the property with a total gross floor area of approximately 2,769.6 sq.m were leased to various tenants for supermarket, canteen and other retail purposes for various terms with the latest expiry date on [July 10, 2019]. The total annual rental receivable in 2019 is approximately RMB1,173,500, exclusive management fee.
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6. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following:
a. for the land mentioned in note 1, (i) ZCIB legally and effectively owns the land use rights of the land. Before the expiry date stipulated in the State-owned Land Use Rights Certificate, ZCIB is the sole land-use-rights holder of the land and has the right to legally use the land according to the legal usage of the land. [(ii) the legal usage of the land is for industrial but its actual usage is for education. ZCIB has obtained a confirmation letter from the local authorities pursuant to which ZCIB can continue to use the land for educational activities and the local authorities will not repossess the land use rights or impose any punishment on ZCIB. Therefore, the possibility that ZCIB may be penalized by the local authorities due to the use of industrial land for educational activities is low.] (ii) as the usage of the land is for education, the land use rights of the land cannot be mortgaged under the PRC laws. In addition to the foregoing legal restrictions, there are no other laws and regulations to restrict ZCIB to transfer, lease, donate or use by permission the land use rights to third parties.
b. for the land mentioned in note 2, (i) ZCIB is the sole land-use-rights holder of the land and has the right to legally use the land according to the legal usage of the land. (ii) due to the allocated nature of the land, ZCIB shall not transfer, lease or mortgage the land use rights to the third parties unless the approval from the local authorities has been obtained by ZCIB.
c. for nos. 1 to 22 of the buildings mentioned in note 3, (i) ZCIB is the sole owner and has the right to legally use these buildings according to the legal usage of the buildings. (ii) as the usage of the buildings is for education, the buildings cannot be mortgaged under the PRC laws. In addition to the foregoing legal restrictions, there are no other laws and regulations to restrict ZCIB to transfer, lease, donate or use by permission the buildings to third parties.
d. for nos. 23 to 39 of the buildings mentioned in note 3, (i) ZCIB is the sole owner and has the right to legally use these buildings according to the legal usage of the buildings and is entitled to legally use the buildings. (ii) as these buildings are erected the allocated land, ZCIB shall not transfer, lease or mortgage these buildings to the third parties unless the approval from the local authorities has been obtained by ZCIB.
e. for the buildings mentioned in note 4a, [(i) ZCIB may be penalized by the local authorities due to lack of construction permits or title certificates]. (ii) ZCIB will be entitled to transfer these buildings upon obtaining the proper title certificates.
f. for the buildings mentioned in note 4b, (i) ZCIB may be penalized by the local authorities due to lack of construction permits or title certificates. (ii) as confirmed by ZCIB, these buildings have fallen into disuse before the date of this report.
7. In the course of valuation, we have made reference to sales prices of land within the localities which have the similar characteristics comparable to the property. The prices of these comparable land sites range from about RMB[336] to RMB[347] per sq. m. on site area basis. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at our assumed unit rate.
8. In the valuation of this property, we have relied on the aforesaid legal opinion and attributed no commercial value to the 17 buildings of the property mentioned in note 4 which have not been obtained any proper title certificates and nos. 23 to 39 of the buildings mentioned in note 3 which are erected on the allocate land. However, for reference purpose, we are of the opinion that the depreciated replacement cost of them (excluding land element) as at the valuation date would be RMB271,946,000 assuming all relevant title certificates have been obtained and they could be freely transferred.
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9. For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the market value of each group as at the valuation date in its existing state is set out as below:
Market value in existing state as at Group the valuation date (RMB)
Group I – held for owner occupation by the Group 351,941,000 Group II – held under development by the Group — Group III – occupied by the Group under a cooperation agreement —
Grand-total: 351,941,000
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VALUATION CERTIFICATE
Market value in existing Particulars of state as at No. Property Description and tenure occupancy the valuation date RMB
2. 17 buildings The property comprises The property is [No commercial value] No. 41 Zhongyuan 17 buildings with a total currently occupied (notes 5 and 6) Xi Road gross floor area of by the Group for Zhongyuan District approximately 60,427.73 education and Zhengzhou City sq. m., mainly include ancillary purposes. Henan Province 9 dormitories, 2 teaching The PRC buildings, a dining hall, a library and 4 ancillary buildings.
Notes:
1. Pursuant to a State-owned Land Use Rights Certificate – Zheng Guo Yong (2013) Di No. 0305, the land use rights of a parcel of land with a site area of approximately 96,480.87 sq. m. have been allocated to Zhongyuan University of Technology (中原工學院) for science and education uses.
2. Pursuant to 17 Building Ownership Certificates, 17 buildings of the property with a total gross floor area of approximately 60,427.73 sq. m. are owned by Zhongyuan University of Technology (中原工學院). The details are set out as follows:
No. Certificate No. Gross Floor Area (sq. m.)
1. Zheng Fang Quan Zheng Zi Di No. 1301047232 1,327.93 2. Zheng Fang Quan Zheng Zi Di No. 1301047234 79.22 3. Zheng Fang Quan Zheng Zi Di No. 1301047269 79.22 4. Zheng Fang Quan Zheng Zi Di No. 1301047270 773.07 5. Zheng Fang Quan Zheng Zi Di No. 1301047272 11,995.98 6. Zheng Fang Quan Zheng Zi Di No. 1301047273 34.51 7. Zheng Fang Quan Zheng Zi Di No. 1301047275 6,523.66 8. Zheng Fang Quan Zheng Zi Di No. 1301047276 3,901.07 9. Zheng Fang Quan Zheng Zi Di No. 1301047278 7,046.05 10. Zheng Fang Quan Zheng Zi Di No. 1301047279 4,838.34 11. Zheng Fang Quan Zheng Zi Di No. 1301047282 2,814.67 12. Zheng Fang Quan Zheng Zi Di No. 1301047283 970.52 13. Zheng Fang Quan Zheng Zi Di No. 1301047285 7,361.87 14. Qiu (Di) No. 1642100008 5,760.72 15. Qiu (Di) No. 1642100009 5,371.08 16. Qiu (Di) No. 1642100007 650.88 17. Qiu (Di) No. 1642100037 898.94
Total: 60,427.73
3. Pursuant to a Cooperation and Reorganization Agreement between the Company and Zhongyuan University of Technology (中原工學院), for cooperative education purpose, Zhongyuan University of Technology (中原工學院) agreed that the property can be occupied by Zhongyuan University of Technology College of Information & Business (中原工學院資訊商務學院,“ZCIB”) as North Campus for a term of 50 years from October 18, 2006 to October 17, 2056.
4. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following:
a. as the property is erected the allocated land and Zhongyuan University of Technology (中原工學院) agreed that the property can be used by ZCIB by way of cooperative education without approval from the local
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authorities, there is a risk that Zhongyuan University of Technology (中原工學院) may be imposed fines or confiscated illicit earning by the local authorities.
b. [ZCIB has obtained a confirmation letter from the local authorities pursuant to which ZCIB can continue to use the property for educational activities and the local authorities will not repossess the property or impose any punishment on Zhongyuan University of Technology (中原工學院)]. Therefore, the possibility that ZCIB may be forced to relocate from the property is low.
5. In the valuation of this property, we have attributed no commercial value to the property due to lack of proper title certificated under the name of ZCIB.
6. For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the market value of each group as at the valuation date in its existing state is set out as below:
Market value in existing state as at Group the valuation date (RMB)
Group I – held for owner occupation by the Group — Group II – held under development by the Group — Group III – occupied by the Group under a cooperation agreement [No commercial value]
Grand-total: [No commercial value]
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VALUATION CERTIFICATE
Market value in existing Particulars of state as at No. Property Description and tenure occupancy the valuation date RMB
3. 2 parcels of land, The property comprises two Part A is currently [No commercial value] 16 completed parts: occupied by the (notes 9 and 10) buildings and 3 Group for buildings under Part A: education and construction Part A comprises a parcel of ancillary purposes No. 525 Liuhe land with a site area of except for Road approximately 234,419 sq. m. portions of Part A Xiaoheshan High and 16 buildings erected with a total gross Education Park thereon which were completed floor area of Xihu District in 2012. approximately Hangzhou City 8,469.43 sq. m. Zhejiang Province The 16 buildings of Part A which were The PRC have a total gross floor area of leased to various approximately 178,482.07 sq. tenants for m., mainly include teaching supermarket and buildings, training buildings, canteen dormitories, dining halls, a purposes. library and ancillary buildings. Part B is currently The land use rights of Part A under have been allocated to the construction. Group for science and education uses.
Part B: The property comprises a parcel of land with a site area of approximately 105,329 sq. m. and 3 buildings which were being constructed thereon as at the valuation date.
As advised by the Group, Part B is scheduled to be completed in September 2019. Upon completion, the buildings of Part B will have a total gross floor area of approximately 26,986.71sq. m. The total construction cost of Part B is estimated to be approximately RMB50,000,000, of which RMB26,389,885.75 had been paid up to the date of valuation.
The land use rights of Part B have been allocated to the Group for science and education uses.
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Notes:
Part A
1. Pursuant to a State-owned Land Use Rights Certificate – Hang Xi Guo Yong (2004) Zi Di No. 000211 with a site area of approximately 234,419 sq. m. have been allocated to Zhejiang Changzheng Vocational & Technical College (浙江長征職業技術學院,“ZCVTC”) for science and education uses.
2. Pursuant to 12 Building Ownership Certificates – Hang Fang Quan Zheng Xi Zi Di Nos. 10287564 to 10287567, 16358977 to 16358979, 14714706, 16358999, 16359000, 1635902 and 16359029, 12 buildings with a total gross floor area of approximately 121,971.81 sq. m. are owned by ZCVTC. The details are set out as follows:
No. Certificate No. Gross Floor Area (sq. m.)
1. Hang Fang Quan Zheng Xi Zi Di No. 16358979 3,882.39 2. Hang Fang Quan Zheng Xi Zi Di No. 16358978 8,766.00 3. Hang Fang Quan Zheng Xi Zi Di No. 16358977 8,766.00 4. Hang Fang Quan Zheng Xi Zi Di No. 14714706 24,099.29 5. Hang Fang Quan Zheng Xi Zi Di No. 16359000 10,801.26 6. Hang Fang Quan Zheng Xi Zi Di No. 16358999 6,274.86 7. Hang Fang Quan Zheng Xi Zi Di No. 16359029 7,898.81 8. Hang Fang Quan Zheng Xi Zi Di No. 16359028 7,915.81 9. Hang Fang Quan Zheng Xi Zi Di No. 10287567 11,968.69 10. Hang Fang Quan Zheng Xi Zi Di No. 10287566 11,551.56 11. Hang Fang Quan Zheng Xi Zi Di No. 10287565 11,551.56 12. Hang Fang Quan Zheng Xi Zi Di No. 10287564 8,495.58
Total: 121,971.81
3. For the remaining 4 buildings with a total gross floor area of approximately 56,510.26 sq. m.:-.
a. pursuant to 2 Construction Work Planning Permits – (2004) Nian Zhe Gui Jian Zheng Nos. 0100188 and 01000336, various buildings with a total gross floor area of approximately 55,353 sq. m. have been approved for construction; and pursuant to 2 Construction Work Commencement Permits – Nos. 330100200404260301 and 330100200406100501, permission by the relevant local authority has been given to commence the construction of various buildings with a total gross floor area of approximately 55,353 sq. m. As advised by the Group, ZCVTC is in process of applying for the relevant title certificates for these buildings.
b. for 2 out of the 4 buildings with a total gross floor area of approximately 1,157.26 sq. m., we have not been provided with any title certificates or construction permits to them.
4. Pursuant to 33 Tenancy Agreement, portions of the property with a total gross floor area of approximately 8,469.43 sq.m were leased to various tenants for supermarket, canteen and other retail purposes for various terms with the latest expiry date on June 30, 2019. The total annual rent receivable in 2019 approximately RMB2,093,289, exclusive management fee.
Part B
5. Pursuant to a State-owned Land Use Rights Certificate – Hang Xi Guo Yong (2013) Zi Di No. 100118, the land use rights of a parcel of land with a site area of approximately 105,329.00 sq. m. have been allocated to ZCVTC for science and education uses.
6. Pursuant to a Construction Work Planning Permit – Jian Zi Di No. 330100201700107 in favor of ZCVTC, Part B with a total gross floor area of approximately 26,986.71 sq. m. has been approved for construction.
7. Pursuant to a Construction Work Commencement Permit – No. 330106201712180101 in favor of ZCVTC, permission by the relevant local authority was given to commence the construction work of Part B with a total gross floor area of approximately 26,986.71 sq. m.
– III-15 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX III PROPERTY VALUATION REPORT
8. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following:
a. for the land mentioned in notes 1 and 5, (i) ZCVTC is the sole land-use-rights holder of the land and has the right to legally use the land according to the legal usage of the land. (ii) due to the allocated nature of the land, ZCVTC shall not transfer, lease or mortgage the land use rights to the third parties unless the approval from the local authorities has been obtained by ZCVTC.
b. for the buildings mentioned in note 2, (i) ZCVTC is the sole owner and has the right to legally use these buildings according to the legal usage of the buildings and is entitled to legally use the buildings. (ii) as these buildings are erected the allocated land, ZCVTC shall not transfer, lease or mortgage these buildings to the third parties unless the approval from the local authorities has been obtained by ZCVTC.
c. for the buildings mentioned in note 3a, (i) ZCVTC will be entitled to transfer these buildings upon obtaining the proper title certificates.
d. for the buildings mentioned in note 3b, (i) ZCVTC may be penalized by the local authorities due to lack of construction permits or title certificates. (ii) as confirmed by ZCVTC, these buildings have fallen into disuse before the date of this report.
e. ZCVTC has obtained all requisite approvals in respect of the construction of Part B.
9. In the valuation of this property, we have relied on the aforesaid legal opinion and attributed no commercial value to the property which is erected on the allocated land. However, for reference purpose, we are of the opinion that the depreciated replacement cost of the property (excluding land element) as at the valuation date would be RMB541,018,000 assuming all relevant title certificates have been obtained and they could be freely transferred.
10. For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the market value of each group as at the valuation date in its existing state is set out as below:
Market value in existing state as at Group the valuation date (RMB)
Group I – held for owner occupation by the Group [No commercial value] Group II – held under development by the Group [No commercial value] Group III – occupied by the Group under a cooperation agreement —
Grand-total: [No commercial value]
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VALUATION CERTIFICATE
Market value in existing Particulars of state as at No. Property Description and tenure occupancy the valuation date RMB
4. 18 residential units on The property comprises The property is [No commercial value] Levels 15, 17, 19 and 18 residential units on currently occupied (notes 4 and 5) 22 of a 23-storey Levels 15, 17, 19 and by the Group for building located at the 22 of a 23-storey residential purpose. eastern side of building which was Fengqing Road and completed in 2015. the northern side of Sandun Road The units have a total Gongshu District gross floor area of Hangzhou City approximately 1,080 sq. Zhejiang Province m. The PRC
Notes:
1. Pursuant to a Joint Construction Agreement of Xiangfuqiao High-school Talents Public Lease Housing Project (祥 符橋省高校人才公共租賃房專案聯建協議), (i) Zhejiang Province Education Development Center (浙江省教育發展中心), as developer on behalf of 13 entities (the 13 entities include Zhejiang Changzheng Vocational & Technical College (浙江長征職業技術學院,“ZCVTC”)), will develop a residential project (comprising 3 residential buildings) with a total gross floor area of approximately 28,908.6 sq. m. (ii) the construction cost of the project will be shared by the 13 entities, and each entity will obtain some units according to the proportion of investment after completion of the project.
Pursuant to a Construction Work Planning Permit – Jian Zi Di No. 330100201300237 in favor of Zhejiang Province Education Development Center (浙江省教育發展中心), the aforesaid project with a total gross floor area of approximately 28,908.6 sq. m. has been approved for construction.
Pursuant to a Construction Work Commencement Permit – No. 330100201308300101 in favor of Zhejiang Province Education Development Center (浙江省教育發展中心), permission by the relevant local authority has been given to commence the construction of the aforesaid project with a total gross floor area of approximately 28,908.6 sq. m.
Pursuant to a Construction Work Completion and Inspection Recordation – 330105201701130101, the aforesaid project with a total gross floor area of approximately 28,908.6 sq. m. has been completed and passed the acceptance inspection.
2. As confirmed by the Group, Zhejiang Province Education Development Center (浙江省教育發展中心) has delivered to ZCVTC 18 residential units with a total gross floor area of approximately 1,080 sq. m.
3. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following:
a. Zhejiang Province Education Development Center (浙江省教育發展中心) has obtained all requisite approvals in respect of the construction of the project mentioned in note 1 and has the rights to deliver the corresponding portion of the project to ZCVTC.
b. as the property is erected the allocated land, ZCVTC or Zhejiang Province Education Development Center (浙江省教育發展中心) shall not transfer, lease or mortgage the property to the third parties unless the approval from the local authorities has been obtained.
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4. In the valuation of this property, we have relied on the aforesaid legal opinion and attributed no commercial value to the property without any proper title certificates. However, for reference purpose, we are of the opinion that the depreciated replacement cost of them (excluding land element) as at the valuation date would be RMB6,388,000 assuming all relevant title certificates have been obtained and they could be freely transferred.
5. For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the market value of each group as at the valuation date in its existing state is set out as below:
Market value in existing state as at Group the valuation date (RMB)
Group I – held for owner occupation by the Group No commercial value Group II – held under development by the Group — Group III – occupied by the Group under a cooperation agreement —
Grand-total: [No commercial value]
– III-18 –