Appendix Iii Property Valuation Report
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APPENDIX III PROPERTY VALUATION REPORT The following is the text of a letter, a summary of values and valuation certificates, prepared for the purpose of incorporation in this prospectus received from Greater China Appraisal Limited, an independent valuer, in connection with its valuation as at 30 September 2014 of the real property interests of the Group. Room 2703 Shui On Centre 6-8 Harbour Road Wanchai Hong Kong 31 December 2014 The Board of Directors Zhejiang Chang’an Renheng Technology Co., Ltd. 4/F, 5/F & 1602, Central Tower 28 Queen’s Road Central Hong Kong Dear Sirs, In accordance with the instructions from Zhejiang Chang’an Renheng Technology Co., Ltd. (the “Company”) for us to value the real property interests which are held by or leased to the Company or its subsidiaries (together referred to as the “Group”) in the People’s Republic of China (“PRC”), we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing the Company with our opinion of the market value of the real property interests as at 30 September 2014 (referred to as the “valuation date”) for inclusion in a Public Offering Document. This letter which forms part of our valuation report explains the basis and methodology of valuation, and clarifies our assumptions made, title investigations of the real properties and the limiting conditions. BASIS OF VALUATION The valuation is our opinion of the market value which we would define as intended to mean “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”. Market value is understood as the value of an asset or liability estimated without regard to costs of sale or purchase (or transaction) and without offset for any associated taxes or potential taxes. - III-1 - APPENDIX III PROPERTY VALUATION REPORT VALUATION METHODOLOGY In valuing the real property Nos. 1 to 5 in Group I, due to the nature of buildings and structures of the real property interests, there is no readily identifiable market comparable to them. We have applied the cost method in valuing the real property interests on the basis of its depreciated replacement cost. 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 replacing the improvements, less deductions for physical deterioration and all relevant forms of obsolescence and optimization. The reported market value only applies to the whole of the complex or development as a unique interest, and no piecemeal transaction of the complex or development is assumed. The depreciated replacement cost of the real property interest is subject to adequate potential profitability of the concerned business. We have valued the real property No. 6 in Group I by the direct comparison approach assuming sale of such real property in its existing state with the benefit of immediate vacant possession and by making reference to comparable sale transactions as available in the relevant market. In valuing the real property No. 7 in Group I, we have attributed no commercial value to the real property as the land use rights of the real property is allocated in nature and the transferability of such real property is restricted. In valuing the real property in Group II, which is leased by the Group, we have attributed no commercial value to such property interest due either to the prohibition against assignments or sub-letting or otherwise due to lack of substantial profit rents. ASSUMPTIONS Our valuation has been made on the assumption that the owner sells the real property Nos. 1-6 on the open market in their existing states without the benefit of any deferred terms contracts, leaseback, joint ventures, management agreements or any similar arrangement which would serve to increase or reduce the value of the real property interests. For the real property Nos. 1-6 which are held under long term land use rights, we have assumed that the owner of the real property interests has free and uninterrupted rights to use, transfer or lease the real property interests for the whole of the unexpired term of the respective land use rights. In our valuation, we have assumed that the real property interests can be freely disposed of, transferred and leased to third parties on the open market without any additional payment to the relevant government authorities. All applicable zoning and use regulations and restrictions have been complied with unless nonconformity has been stated, defined, and considered in the valuation report. - III-2 - APPENDIX III PROPERTY VALUATION REPORT No environmental impact study has been ordered or made. Full compliance with applicable local, provincial and national environmental regulations and law is assumed. In addition, it is assumed that all required licences, consents or other legislative or administrative authorisation from any local, provincial or national government or private entity or organisation either have been or can be obtained or renewed for any use which the report covers. Other specific assumptions of the valuation, if any, have been stated out in the footnotes of the valuation certificates. TITLESHIP INVESTIGATION We have been provided with copies of legal documents regarding the title of the real properties in Group I. However, due to the current registration system of PRC, we are unable to conduct any search or investigations regarding the legal title or any liabilities attached to the real properties. In the course of our valuation, we have relied upon the legal opinion provided by the Company’s PRC legal adviser – Shanghai AllBright Law Offices (上海市錦天城律師事務所) in relation to the legal title of the real properties. All legal documents disclosed in this report are for reference only and no responsibility is assumed for any legal matters concerning the legal title to the real properties set out in this report. LIMITING CONDITIONS We have inspected the exterior and, where possible, the interior of the real properties. However, no structural survey has been made and we are therefore unable to report as to whether the real properties are free from rot, infestation or any other structural defects. No tests were carried out on any of the services. We have not carried out detailed site measurements to verify the correctness of the areas in respect of the real properties but have assumed that the areas shown on the legal documents and the information provided to us are correct. Based on our experience of valuation of similar real properties, we consider the assumptions so made to be reasonable. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No soil investigations have been carried out to determine the suitability of the ground conditions or the services for any property development. 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. Having examined all relevant documentation, we have relied to a very considerable extent on the information provided by the Company and have accepted advice given to us by it on such matters as planning approvals, statutory notices, easements, tenures, lettings, rentals, occupations, site and floor areas and in the identification of the real properties. We were also advised by the Company that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and have no reason to suspect that any material information has been withheld. - III-3 - APPENDIX III PROPERTY VALUATION REPORT No allowance has been made in our valuation for any charges, mortgages or amounts owing on the real properties valued nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the real property interests are free of encumbrances, restrictions and outgoings of an onerous nature which could affect their values. Since the real properties are located in a relatively developing market, PRC, those assumptions are often based on imperfect market evidence. A range of values may be attributable to the real property interests depending upon the assumptions made. While we have exercised our professional judgments in arriving at the value, report readers are urged to consider carefully the nature of such assumptions which are disclosed in the valuation report and should exercise caution in interpreting the valuation report. OPINION OF VALUE Our opinion of the market value of the real property interests is shown in the attached summary of values and valuation certificates. REMARKS Our valuation has been prepared in accordance with generally accepted valuation procedures and in compliance with the requirements contained in Chapter 8 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited. In valuing the real property interests, we have complied with the requirements contained in the HKIS Valuation Standards (2012 Edition) published by the Hong Kong Institute of Surveyors. Site inspections of the real properties were conducted in May 2014 by Mr. Daniel W. H. Tang who is a Chartered Surveyor, Mr. C.P. Fan who is a cost engineer and Mr. Wesley Z. W. Li (MSc). The buildings of the real properties were maintained in a reasonable condition commensurate with its respective ages and uses and equipped with normal building services.