business - hkexnews · development but had not, as at march 31, 2006,obtained land use right...

OVERVIEW

We are a large-scale developer of high quality real estate projects in China, specializing

in high-end developments in prime locations. We have a track record of successfully bringing

real estate projects in Shanghai, Beijing, Harbin, Nanjing, Fuzhou and other fast growing

cities in China to market. For example, one of our residential projects, Shanghai Shimao

Riviera Garden, had the highest aggregate sales proceeds in Shanghai for four consecutive

years between 2001 and 2004. We believe that this track record, together with the strong

recognition of our ‘‘Shimao’’ brand, positions us well to expand to other cities in China.

We have 15 projects at various stages of development located in Shanghai, Beijing,

Harbin, Wuhan, Nanjing, Fuzhou, Kunshan, Changshu, Shaoxing and Wuhu. Of these

projects, as at March 31, 2006 we had completed the development of a total GFA of

approximately 955,095 sq.m., were in the process of developing a total planned GFA of

approximately 2,555,081 sq.m., and were holding for future development land with a planned

total GFA of approximately 2,019,068 sq.m., for which we hold land use right certificates. We

have also obtained, through tender, bid or auction processes, interests in land with a total

planned GFA of approximately 6,417,153 sq.m.), which we intend to use for future

development but had not, as at March 31, 2006, obtained land use right certificates.

Subsequent to March 31, 2006, we successfully tendered for a plot of land in Shaoxing with a

planned GFA of approximately 1,299,700 sq.m. on May 11, 2006, and we signed the land

grant contract for a plot of land in Wuhu with a planned GFA of approximately 609,000 sq.m.

on May 18, 2006. Therefore, as at the Latest Practicable Date, the land intended for future

development for which land use right certificates have not yet been obtained amounted to a

total planned GFA of approximately 8,325,853 sq.m..

Our business portfolio comprises the development of residential properties, retail

properties, offices and hotels. For the year ended December 31, 2005, we generated

98.5% of our turnover from the sale of residential properties and 1.5% of our turnover from

our hotel investments and the lease of our retail properties.

We believe that our success has in part been based on our well-developed

understanding of the socio-economic policies and development trends in a number of key

cities in China. We have been able to identify relatively high growth markets such as

Shanghai, Beijing, Nanjing, Fuzhou, Kunshan and Changshu and have entered these markets

in a timely manner. We believe that this has, in turn, allowed us to obtain land in prime

locations (or locations that we expect will later become prime) at a reasonable cost.

We are a Cayman Islands incorporated company. Our corporate headquarters are

located in Hong Kong, and all of our projects are located in the PRC.

For the three years ended December 31, 2003, 2004 and 2005, the audited turnover of

our Group was RMB1,358.0 million, RMB1,699.2 million and RMB2,500.4 million respectively,

and the audited profit attributable to shareholders of our Company was RMB266.3 million,

RMB184.5 million and RMB908.0 million, respectively.

BUSINESS

— 73 —

OUR STRENGTHS

Valuable and well-recognized brand name associated with high quality real estate

projects

We believe that our Group has established a strong brand name in the PRC property

market through our track record of bringing large-scale, high quality real estate projects in

various cities in the PRC to market.

Our philosophy is to develop properties that are high quality in terms of both their design

and construction. To achieve high quality in design, we engage internationally-known

architects and designers to create innovative and differentiated properties. To achieve high

quality in construction, we use premium materials and fittings in the construction and

furnishing of our properties, and closely scrutinise the work of our chosen contractors. We

believe our focus on quality has enabled us not only to differentiate our properties and

achieve favorable pricing, but more importantly to associate the ‘‘Shimao’’ brand with prestige

and high quality in the market.

Over the years, the strength of our brand has evidenced itself not only in sales referrals

from our existing customers, but also in the many awards we have won. Our acclaimed

flagship project, Shanghai Shimao Riviera Garden, ranked first in terms of sale proceeds

among residential developments in Shanghai for four consecutive years, from 2001 to 2004.

We also received the ‘‘Elite Residence Technology Award 2004 : Gold Interior Design Award

for Boutique’’ ( ), which was jointly awarded by

authorities including the PRC State Construction Department. In addition, our ‘‘Shimao’’ brand

won a ‘‘China Super Brand’’ ( ) award in 2004, and a ‘‘Respected Real Estate

Enterprise in Shanghai’’ ( ) award in 2005. We believe our ‘‘Shimao’’

brand is of tremendous value to our Group as we expand our business and geographic reach

in cities and regions throughout the PRC.

Large-scale development projects

We take a large-scale integrated approach to property development, creating not only

residential buildings but also commercial and leisure facilities and landscape gardens that are

not only valuable in themselves but also enhance the development of their overall localities

through a positive physical transformation. We believe that as a result, this large-scale,

integrated approach helps us significantly in our discussions with local government as regards

land acquisition, basic infrastructure support and preferential policies for our projects. The

large-scale nature of most of our projects enables us to develop a substantial amount of

retail, hotel and office properties. By being able to develop both residential and non-

residential properties in one location, we help create new urban centers.

As many of our projects have a planned GFA of over 1 million sq.m. as at March 31,

2006, we believe that fewer developers in the PRC have the resources and experience to

develop large parcels of land, therefore giving us a strong negotiating position when dealing

with contractors and materials suppliers. Finally, developing large-scale projects also enables

us to better leverage our highly experienced project management team.

BUSINESS

— 74 —

Significant land reserves providing long-term development and growth opportunities

We have successfully accumulated large areas of land for future development. As at

March 31, 2006, our Group had approximately 2.6 million sq.m. of total planned GFA under

development, and had also obtained all relevant land use certificates for land with an

additional total planned GFA of approximately 2.0 million sq.m. held for future development.

Furthermore, we have successfully obtained interests in various plots of land throughout the

PRC with a future development potential of approximately 8.3 million sq.m. of total planned

GFA, for which we expect to obtain (but have not yet formally received) land use right

certificates.

We believe that our market foresight and in-depth understanding of the property market

dynamics, arising out of the collective experience of our management team, have enabled us

to seek and capitalize on land acquisition opportunities at relatively early stages of their long-

term appreciation potential. We believe this allows us to achieve attractive unit land costs

relative to the current market values for our property projects.

Most of the land we have acquired is centrally located in commercial areas, or offer

attractive waterfront views. As such, we believe these land reserves provide our Group with

an attractive project development pipeline in the coming years.

Seasoned management team with strong track record

Our Chairman, Mr. Hui, has over 16 years of experience in property development and

investment throughout the PRC, and is a respected leading figure within a number of real

estate industry bodies. Our management team consists of experienced professionals, some of

whom have received internationally recognized qualifications, and have extensive experience

in the development, sales and management of real estate not only in major Chinese cities

such as Shanghai and Beijing but also in overseas cities.

We believe that by employing and retaining individuals from domestic as well as

overseas backgrounds, we have been able to capitalize on their collective expertise in both

the local and international property markets, and selectively apply different ideas, concepts

and practices such that we can develop and sell properties that appeal to both domestic as

well as overseas customers.

We adopt a flat management structure, which enables our management team to make

decisions quickly and efficiently. This in turn leads to effective project management which

enables us to shorten the project development timeframe and improve capital efficiency while

maintaining consistent project quality at the same time.

Broad product range and growing long-term investment portfolio

We believe that accurate product selection and positioning are crucial to our success.

Recently, we have carefully expanded our business model beyond residential properties to

include hotels, retail and office properties. By diversifying our product portfolio in this manner,

we aim to capitalize on different market growth trends and the continuing development of

different property sectors. In addition, we believe we can enhance the stability of our future

revenue streams by retaining a portion of our property developments for investment

purposes.

BUSINESS

— 75 —

To date, we have completed and commenced operations of our Shanghai Le Meridien

Sheshan and Phase 1 of our retail development in Shanghai Shimao International Plaza in

Shanghai. We aim to complete Phase 2 of our retail development and Le Royal Meridien

Shanghai, along with Shanghai Hyatt on the Bund, by early 2007. In addition, we are also in

the process of developing, or plan to develop, investment properties in Shanghai, Nanjing,

Wuhan, Kunshan, Changshu, Shaoxing and Wuhu between now and 2012.

Strong sales and marketing capabilities

We have strong global marketing capabilities. Domestically, we have a dedicated sales

and marketing team of over 100 employees and we adopt effective approaches to maximize

our sales, including advertising campaigns, real estate exhibitions and customer loyalty clubs.

To market our properties outside of China, we have formed alliances with leading

international real estate agent companies such as Remax Palos Verdes Realty in the

United States, L.J. Hooker Kingsford in Australia, Centaline (China) Property Consultants Ltd.

( ) in Hong Kong, VANTAGE Properties & Management Ltd in the

United Kingdom and Pacific Rehouse Services (Shanghai) Co. Ltd ( ) in Taiwan.

These marketing alliances complement our internal sales and marketing teams, which have

developed an expertise in selling to our domestic customer base. Our collaboration with the

international real estate companies has enabled us to tap into demand for our properties from

customers worldwide, including the United States, Europe, Australia, Hong Kong, Taiwan,

Japan and Southeast Asia. As at December 31, 2005, approximately 45% of the properties in

Shanghai Shimao Riviera Garden had been sold to overseas customers. We believe this

demonstrates the effectiveness of our global marketing network in securing significant

incremental demand for our properties.

Strong relationships with international business partners and Financial Investors

We have established strong working relationships with different suppliers and

consultants, including RMJM Hong Kong Limited, Levett & Bailey Quantity Surveyors

Limited ( ), Parsons Brinckerhoff China ( ), Earthasia

(International) Ltd ( ), Widnell Ltd ( ), L&A Urban

Planning and Landscape Design (Canada) Ltd, Davis Langdon & Seah China Limited, Atkins

China, Valode & Pistre Architectes and Wang & Tung International Limited ( ).

We believe our collaboration with such suppliers and international architectural and design

consultants have enabled us to attain a consistent standard of high quality in the design and

construction of our property projects.

We have also entered into long term management agreements with the Hyatt and

Starwood groups for three of our hotel projects in Shanghai and our hotel project in Nanjing.

We believe the management of our hotels by such internationally-known hotel groups

significantly enhances the profile and prospects of our hotel properties among international

and domestic travellers who are our target customers.

Since January 2006, we have brought in affiliates of well-known financial and investing

institutions such as Morgan Stanley, Standard Chartered Bank and China Construction Bank

Corporation as our financial investors. We believe that with the support and contribution of

our Financial Investors, we will further enhance our financial and operational management

capabilities and practices, and strengthen our overall risk control and management systems.

BUSINESS

— 76 —

We believe that having stable, long-term collaborative relationships with these partners

enhances not only the attractiveness of our property developments and investments, but also

our long-term prospects as we continue to develop and expand our business and our

‘‘Shimao’’ brand in the PRC.

OUR STRATEGIES

We aim to continue to grow and expand our Company as a leading property developer

and investor with a national presence in China’s key cities and economic regions. We have

developed the following business strategies to pursue our growth objectives:

Continue to enhance our ‘‘Shimao’’ brand name by delivering value to our customers

We intend to continue to promote the ‘‘Shimao’’ brand. We will do so by continuing to

focus on quality and innovation in our property projects, and providing strong after-sales

support and property management services. We believe that delivering value to our

customers and enhancing their overall satisfaction with our products will enable us to

strengthen our ‘‘Shimao’’ brand further, and reinforce its association with prestige and quality.

At the same time, we intend to continue to build market recognition of the ‘‘Shimao’’ brand

through marketing initiatives such as advertising campaigns, participation in international

property exhibitions and the establishment of customer loyalty clubs that aim to generate

incremental sales through customer referrals.

Continue to create innovative products and develop market-leading projects

We intend to leverage our strong brand name and extensive experience to continue

developing high quality properties in our chosen markets in China. We will continue our

strategy of conducting in-depth market research and analysis with the aim of identifying

property trends and potential development opportunities as early as possible in a given

locality’s potential development cycle. We will also continue to implement our current

business practices, which involve utilizing our economies of scale in order to strengthen our

negotiating position for land acquisitions and construction contracts, as well as collaborating

with international architects and designers to create market-leading projects.

Furthermore, we will continue to pursue innovation within each of the residential, hotel,

retail and office property sectors. For example, we plan to develop hotels and shopping

complexes with themed gardens, low-density commercial zones and office buildings in a

landscaped environment, as well as scenic residential, leisure and tourism zones. We believe

that innovation will provide our Company with a competitive advantage by differentiating our

products and services from those of our competitors, and by providing a unique experience to

our customers.

Continue to pursue property diversification and increase our proportion of investment

properties to achieve a balanced revenue profile

We intend to continue to expand into the hotel, retail and office property sectors in the

PRC to achieve greater balance in our future revenues. At the same time, we aim to continue

to increase our proportion of properties held for investment, so as to achieve greater revenue

stability through recurrent rental income. We believe that such diversification measures will

BUSINESS

— 77 —

increase the breadth and stability of our revenue streams by reducing our overall exposures

to volatility within any one property sector, and to the relatively more volatile nature of

residential property sales revenue.

In relation to hotels, we plan to focus on developing luxury hotels to be operated by

renowned international hotel management groups. We have already entered into management

contracts with the Hyatt and Starwood groups with respect to three hotels in Shanghai and

one hotel in Nanjing. We plan to enter into similar management contracts for the other hotels

that we plan to develop in Kunshan, Changshu, Wuhan, Shaoxing and Wuhu.

In relation to our retail and commercial properties, we intend to focus on high quality

properties that are located in central commercial areas of major cities. Due to the continuing

economic growth in China, rental prices for retail and commercial properties have increased

significantly in recent years and we believe this trend will continue. We intend to enter into

long-term tenancy agreements with reputable anchor tenants for those retail and commercial

properties that we hold for investment purposes, to secure stable and recurring rental income

streams.

Continue to expand land bank in a disciplined manner

We intend to continue to adopt a disciplined approach to land acquisition. We will make

decisions based on thorough research and analysis of a given project’s expected returns in

the context of future property and economic trends in China’s cities.

In addition, we intend to continue leveraging our strong brand name and financial track

record to obtain attractive financing and refinancing opportunities, while maintaining a

relatively low gearing ratio. We intend to continue to develop large-scale projects to take

advantage of economies of scale in terms of unit land acquisition and construction costs, and

in doing so, to maximize our profitability and returns to our Shareholders.

BUSINESS

— 78 —

OUR BUSINESS

Overview of Our Projects

Our current portfolio of property development projects consists of 15 projects under

various stages of development in Shanghai, Beijing, Harbin, Wuhan, Nanjing, Fuzhou,

Kunshan, Changshu, Shaoxing and Wuhu. The following table sets forth details of the

location and planned use of, as well as our interest in, our 15 property development projects:

Project Location Planned Use(1)

Total

Planned

GFA(1)(2)

Our Interest

in the

Project

Estimated

Completion

Date for

Whole

Project

(sq.m.)

Shanghai Shimao

Riviera Garden . . . .

Shanghai Residential, Retail, Office 921,871 100% 12/2008

Shanghai Shimao

International Plaza . .

Shanghai Hotel, Retail 170,935 100% 01/2007

Shanghai Shimao

Sheshan . . . . . . . .

Shanghai Residential, Hotel 146,514 100% 12/2007

Shanghai Hyatt on the

Bund . . . . . . . . . .

Shanghai Hotel 100,972 100% 12/2006

Shanghai Shimao

Wonderland . . . . . .

Shanghai Residential, Retail, Hotel 551,000 100% 12/2010

Beijing Shimao Olive

Garden . . . . . . . . .

Beijing Residential, Retail 288,457 100% 12/2007

Kunshan Shimao

Butterfly Bay . . . . .

Kunshan Residential, Retail, Hotel 1,225,018 100% 12/2010

Kunshan Shimao

International City . . .

Kunshan Residential, Retail, Office 1,329,184 100% 06/2012

Changshu Shimao The

Center . . . . . . . . .

Changshu Residential, Retail, Office,

Hotel

1,975,008 100% 12/2010

Harbin Shimao Riviera

New City . . . . . . . .

Harbin Residential, Retail 1,694,805 100% 12/2009

Wuhan Shimao Splendid

River . . . . . . . . . .

Wuhan Residential, Retail, Office,

Hotel

1,816,000 100% 12/2010

Shaoxing Shimao . . . . Shaoxing Residential, Retail, Office,

Hotel

1,299,700 100% 12/2012

Wuhu Shimao . . . . . . . Wuhu Residential, Retail, Hotel 609,000 100% 12/2010

Nanjing Shimao Riviera

New City(3). . . . . . .

Nanjing Residential, Retail, Hotel 1,438,916 50% 12/2010

Fuzhou Shimao Bund

Garden(3) . . . . . . . .

Fuzhou Residential, Retail 287,717 50% 12/2006

13,855,097

Notes:

1. The planned use and total planned GFA of each of the above projects include land for which we do not

have land use rights certificates as at March 31, 2006, and include Shaoxing Shimao for which we

successfully tendered for on May 11, 2006 and Wuhu Shimao for which we signed the land grant contract

on May 18, 2006. Please refer to the paragraph headed ‘‘— Status of Our Projects’’ below for details of

the land use rights for each project.

2. The total planned GFA of each of the above projects includes the GFA which (i) has been completed; (ii)

is under development and (iii) is planned for future development as at March 31, 2006, and includes

Shaoxing Shimao for which we successfully tendered on May 11, 2006 and Wuhu Shimao for which we

signed the land grant contract on May 18, 2006.

3. We do not have a controlling interest in the project companies of Nanjing Shimao Riviera New City and

Fuzhou Shimao Bund Garden and do not consolidate the results of these projects into our accounts.

BUSINESS

— 79 —

We set out below certain key information relating to our business segments in terms of

GFA(1):

For Future Development

Completed(2)(3)

Under

Development(3)

Land use

right

certificate

Obtained

Land use

right

certificate

Not Yet

Obtained

GFA (sq.m.) GFA (sq.m.) GFA (sq.m.) GFA (sq.m.)

Properties for Sale andInvestmentResidential. . . . . . . . . 811,411 2,024,042 693,421 6,803,583Retail . . . . . . . . . . . . 74,356 330,371 1,061,718 1,017,270Hotel . . . . . . . . . . . . 69,328 200,668 148,029 215,000Office . . . . . . . . . . . . — — 115,900 290,000

Total . . . . . . . . . . . . . 955,095 2,555,081 2,019,068 8,325,853

Attributable GFA(sq.m.)(4) . . . . . . . . . 876,282 2,425,904 1,845,068 7,844,527

Notes:

1. The above are key information relating to our business segments as at March 31, 2006 in terms of GFA,

and Shaoxing Shimao for which we successfully tendered on May 11, 2006 and Wuhu Shimao for which

we signed the land grant contract on May 18, 2006.

2. Of the total completed GFA, 822,471 sq.m. is saleable/rentable GFA of which 224,973 sq.m. remained

unsold as of March 31, 2006 based on our internal records.

3. We have obtained the relevant land use right certificates for the properties that are completed or under

development.

4. The attributable GFA represents the portion of the total GFA which is attributable to us, based on our

interest in the relevant project. Our interests in the relevant projects are set out in the property valuation

report in Appendix IV. For the properties that are completed or under development, these figures include

the GFA of units which have been pre-sold and sold.

In general, land use rights in the PRC are granted for a term of 70 years for residential

properties, 40 years for commercial properties and 50 years for comprehensive use

properties. The relevant authorities will not issue a formal land use rights certificate in

respect of a piece of land until the construction land use approval and the land planning

permit have been obtained by the developer and the land premium has been paid in full and

the resettlement process completed. As a result, according to the pace of development, the

land for a property development may be divided into one or more parcels for which multiple

land use rights certificates were granted at different stages of development.

The site area information for an entire project is based on either the relevant land use

right certificates, land grant contracts or tender documents, depending on which documents

are available. The aggregate GFA of a project includes saleable and non-saleable GFA, car

parking spaces as well as rentable and hotel GFA. ‘‘Saleable GFA’’ represents the GFA of a

property which we intend to sell and which does not exceed the multiple of the site area and

the maximum permissible plot ratio as specified in the relevant land grant contracts or other

BUSINESS

— 80 —

approval documents from the local governments relating to the project. ‘‘Non-saleable GFA’’

represents the GFA of a property which is not for sale and largely includes ancillary facilities

such as clubhouses and schools. ‘‘Rentable GFA’’ refers to GFA that is available for rental

proposes and ‘‘hotel GFA’’ refers to the total GFA of the relevant hotel.

The figures for completed GFA that appear in this prospectus are based on figures

provided in the relevant government documents. The following information that appear in this

prospectus are based on our internal records and estimates: (a) figures for GFA under

development, GFA for future development, GFA sold, GFA pre-sold, saleable GFA, non-

saleable GFA, rentable GFA and hotel GFA, and (b) information regarding total development

costs (including land costs, construction costs and capitalized finance costs), planned

construction period, number of units, number of units pre-sold and selling price. The

information setting out the construction period for the completed blocks or phases of our

projects in this prospectus is based on relevant government documents or our own internal

records.

Properties are sold when the purchase contract with a customer has been executed and

the properties have been delivered to the customer. Properties are pre-sold when the

purchase contract has been executed but the properties have not yet been delivered to the

customer.

We include in this prospectus the project names which we have used, or intend to use,

to market our properties. Some of the names for our property developments are pending

approvals by the relevant government authorities and may be subject to change.

BUSINESS

— 81 —

Geographic Locations of Our Projects

The following map shows the geographic locations of our 15 property development

projects:

Status of Our Projects

As at March 31, 2006, we held the land use rights to land with an aggregate planned

GFA of 4,799,122 sq.m. and a total attributable capital value of RMB34,907.5 million as set

out in the property valuation report in Appendix IV. We also had interests in land with a total

site area of approximately 3,226,184 sq.m. and a total planned GFA of approximately

8,325,853 sq.m. for which we had yet to obtain land use right certificates as at March 31,

2006, which includes Shaoxing Shimao for which we successfully tendered for on May 11,

2006 and Wuhu Shimao for which we signed the land grant contract on May 18, 2006. Had

we obtained all the relevant land use right certificates, the total capital value attributable to

our interests in the relevant properties would have been appraised at RMB17,278.0 million.

BUSINESS

— 82 —

The table below details our projects as at March 31, 2006 for which we have obtained

the relevant land use right certificates and which (i) have been completed, (ii) are under

development or (iii) are held for future development:

COMPLETED UNDER DEVELOPMENT

FUTURE

DEVELOPMENT

Project

GFA

completed(1)

Total GFA

saleable/

rentable/

Hotel

Of which

remaining

unsold/held

for

investment

GFA under

development(1)

Total GFA

saleable/

rentable/

Hotel

Of which

was pre-sold Planned GFA(1)

Our interest

in the project

Our

attributable

capital

value(2)

(sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (RMB’ m)

(1) Shanghai Shimao

Riviera Garden

434,520 398,596 1,170 404,551 303,582 178,088 43,000 100% 8,389.0

Residential 434,520 398,596 1,170 404,551 303,582 178,088 —

Retail — — — — — — 25,500

Office — — — — — — 17,500

(2) Shanghai Shimao

International Plaza

38,819 38,819 38,819 132,116 132,116 — — 100% 8,533.0

Hotel — — — 99,696 99,696 — —

Retail 38,819 38,819 38,819 32,420 32,420 — —

(3) Shanghai Shimao

Sheshan

69,328 69,328 69,328 49,128 49,128 2,498 28,058 100% 3,519.0

Residential — — — 49,128 49,128 2,498 28,058

Hotel 69,328 69,328 69,328 — — — —

(4) Shanghai Hyatt on the

Bund

Hotel — — — 100,972 100,972 — — 100% 3,622.0

(5) Shanghai Shimao

Wonderland

— — — — — — 551,000 100% 350.0

Entertainment/Retail

complex

— — — — — — 440,000

Hotels — — — — — — 73,000

Service apartment — — — — — — 38,000

(6) Beijing Shimao Olive

Garden

— — — 288,457 238,864 39,126 — 100% 1,879.0

Residential — — — 281,975 232,382 39,126 —

Retail — — — 6,482 6,482 — —

(7) Kunshan Shimao

Butterfly Bay

— — — 567,058 498,750 50,200 657,960 100% 2,516.0

Residential — — — 386,136 317,828 50,200 359,925

Hotel — — — — — — 15,019

Retail — — — 180,922 180,922 — 283,016

(8) Kunshan Shimao

International City

202,400 100% 606.0

Retail 104,000

Office 98,400

(9) Changshu Shimao

The Center

— — — 263,680 228,843 29,892 188,650 100% 1,102.0

Residential — — — 246,623 211,786 27,926 41,300

Retail — — — 17,057 17,057 1,966 147,350

(10) Harbin Shimao Riviera

New City Phase 1

254,802 216,731 95,796 490,765 432,435 23,165 — 100% 2,140.0

Residential 237,318 199,247 95,796 403,969 345,639 23,165 —

Retail 17,484 17,484 — 86,796 86,796 — —

(11) Nanjing Shimao

Riviera New City

Phase 1(3)

7,134 7,134 7,134 121,129 121,129 68,702 348,000 50% 1,667.0

Residential — — — 121,129 121,129 68,702 226,138

Hotel — — — — — — 60,010

Retail 7,134 7,134 7,134 — — — 61,852

(12) Fuzhou Shimao Bund

Garden(3)

150,492 91,863 12,726 137,225 116,866 67,600 — 50% 584.5

Residential 139,573 80,944 3,675 130,531 110,172 67,600 —

Retail 10,919 10,919 9,051 6,694 6,694 — —

Total 955,095 822,471 224,973 2,555,081 2,222,685 459,271 2,019,068 34,907.5

Attributable GFA(sq.m.) 876,282 772,973 215,043 2,425,904 2,103,688 391,120 1,845,068

BUSINESS

— 83 —

Notes:

1. The GFA figures shown in these columns include saleable GFA, non-saleable GFA and car parking

spaces, as well as rentable GFA and hotel GFA, as applicable.

2. The attributable capital value of a property interest is its appraised open market value which is

attributable to us, as defined in the property valuation report set out in Appendix IV. For the properties

that are completed or under development, these figures include the value of units which have been pre-

sold and sold.

3. We do not have a controlling interest in the project companies of Nanjing Shimao Riviera New City and

Fuzhou Shimao Bund Garden and do not consolidate the results of these projects into our accounts.

BUSINESS

— 84 —

We also have interests in parcels of land for which we have not yet obtained land use

right certificates, which are set out in the table below. Our PRC legal counsel has advised us

that, after paying any outstanding land premiums, there will be no material impediments to

obtaining land use right certificates for these parcels of land. As these projects are at their

planning stage, the details of development plans reflect our current design and expectation

only, and are subject to change and government approvals.

Project

Estimated date of

obtaining land use

right certificate(1)Total Site

Area

Estimated

Total

GFA(2)

Our Interest in

the Project

Assumed

Attributable

Capital Value(3)

(sq.m.) (sq.m.) (RMB million)

Shanghai Shimao Riviera

Garden

Phase 2 of shopping mall . . June 2007 49,637 39,800 100% 709.0

Kunshan Shimao International

City . . . . . . . . . . . . . . . . December 2007 640,731 1,126,784 100% 585.0

Changshu Shimao The Center December 2006 450,685 1,522,678 100% 4,995.0

Harbin Shimao Riviera New

City

Phase 3. . . . . . . . . . . . . . January 2007 526,466 949,238 100% 1,163.0

Wuhan Shimao Splendid

River(4) . . . . . . . . . . . . . . December 2007 572,093 1,816,000 100% 5,039.0

Shaoxing Shimao . . . . . . . . . December 2007 497,346 1,299,700 100% 1,631.0

Wuhu Shimao . . . . . . . . . . . December 2007 187,556 609,000 100% 401.0

Nanjing Shimao Riviera New

City

Phase 2. . . . . . . . . . . . . . December 2007 301,670 962,653 50% 2,755.0

Total . . . . . . . . . . . . . . . . . 3,226,184 8,325,853 17,278.0

Total Attributable . . . . . . . . . 3,075,349 7,844,527

Notes:

1. Dates are based solely on our internal estimates.

2. The GFA figures shown in these columns are calculated based on our internal records, include saleable

GFA, non-saleable GFA and car parking spaces, as well as rentable GFA and hotel GFA, as applicable.

3. We have not obtained the land use rights for the land listed above and no value has been assigned to

such properties in the property valuation report in Appendix IV. Had we obtained all the relevant land use

right certificates, the amounts shown would have been the capital value which DTZ would have attributed

to our interest in the projects as at March 31, 2006, and Shaoxing Shimao for which we successfully

tendered for on May 11, 2006 and Wuhu Shimao for which we signed the land grant contract on May 18,

2006.

4. We expect to obtain the land use right certificate in respect of 56,500 sq.m. of the total site area before

July 2006.

BUSINESS

— 85 —

OUR PROPERTY DEVELOPMENT PROJECTS

Shanghai Shimao Riviera Garden

Shanghai Shimao Riviera Garden is a large-

scale, high quality residential and retail

development in Lujiazui, Pudong District,

Shanghai ( ), which is a

financial center of Shanghai. Shanghai

Shimao Riviera Garden was ranked number

one by Shanghai Real Estate Trading Center

( ) among Shanghai

residential projects in terms of aggregate

sales proceeds in 2001, 2002, 2003 and

2004. The total site area of Shanghai Shimao

Riviera Garden is approximately 270,305 sq.m.

and the total planned GFA is approximately

921,871 sq.m, of which approximately 784,978

sq.m. is planned saleable GFA. We plan that,

upon completion, the development will include

approximately 3,215 apartment units within

seven residential blocks of 49 to 55 floors,

3,133 car parking spaces and a shopping mall

(Phases 1 and 2). All the residential units, the

shopping mall and the car parking spaces

have been, or are being developed for sale.

Most of the apartments will have a view of the

Huangpu River ( ) at the time of

completion. We offer a wide range of lifestyle

amenities to our Shanghai Shimao Riviera Garden residents. Over 70% of the site area of

Shanghai Shimao Riviera Garden will be green area. Based on our current plans, the project

will have six themed gardens and four clubhouses. The entire project is scheduled to be

completed by December 2008.

We have completed Blocks 2, 3, 1 and 8 of the residential units in December 2002,

December 2003, December 2004 and September 2005, respectively. We have sold

approximately 99% of the units in Blocks 2, 3, 1 and 8. Based on our internal records,

over 82% of the units in Block 1, 89% of the units in Block 2, 90% of the units in Block 3 and

80% of the units in Block 8 were pre-sold within five months of obtaining the relevant pre-sale

permits. We were able to offer units in Block 8 at an average premium of RMB2,055 per

sq.m. over the price of units in Block 1, units in Block 1 at an average premium of RMB348

per sq.m. over the price of units in Block 3 and the units in Block 3 at an average premium of

RMB1,240 per sq.m. over the price of units in Block 2. Details of these properties as at March

31, 2006 were as follows:

Block 2 Block 3 Block 1 Block 8

Construction period . . . . . . . . . . . . . 2000/09–2002/12

2001/11–2003/12

2002/03–2004/12

2002/11–2005/09

Date of pre-sale permit . . . . . . . . . . . 2001/09 2002/08 2003/06 2003/12Total saleable GFA (sq.m.) . . . . . . . . 99,505 96,852 96,635 105,604Number of units . . . . . . . . . . . . . . . 469 398 400 500Number of units sold . . . . . . . . . . . . 468 398 400 496Average unit size (sq.m.) . . . . . . . . . 212 243 242 211Average selling price per sq.m. (RMB) . 14,656 15,896 16,244 18,299

BUSINESS

— 86 —

As at March 31, 2006, we were developing Blocks 5, 6 and 7 of the residential units. We

began the pre-sale of the units in Block 7 in August 2004 and Block 6 in October 2004,

respectively, and, based on our internal records, over 89% of the units in Block 7 and over

74% of the units in Block 6 were pre-sold within five months of obtaining the relevant pre-sale

permits. We pre-sold the units in Block 7 at an average premium of RMB1,830 per sq.m. over

the price of the units in Block 8 and pre-sold the units in Block 6 at an average premium of

RMB1,083 sq.m. over the price of the units in Block 7. Pre-sales of the units in Block 5 are

expected to commence at the end of 2006. Details of these properties as at March 31, 2006

were as follows:

Block 7 Block 6 Block 5

Planned construction period . . . . . . . . . . . . 2003/07–

2006/05

2003/10–

2006/07

2005/06–

2007/12

Date of pre-sale permit . . . . . . . . . . . . . . . 2004/08 2004/10 —

Estimated total saleable GFA (sq.m.) . . . . . . 105,490 93,037 105,055

Estimated number of units . . . . . . . . . . . . . 504 444 500

Number of units pre-sold. . . . . . . . . . . . . . 497 362 —

Estimated average unit size (sq.m.) . . . . . . . 209 210 210

Average pre-sale price per sq.m. (RMB) . . . . 20,129 21,212 —

As at March 31, 2006, 327 car parking spaces had been sold at an average selling price

of RMB190,000 per car parking space.

Construction on Phase 1 of the shopping mall in Shanghai Shimao Riviera Garden is

expected to commence in July 2006. Details of the property as at March 31, 2006 were as

follows:

Phase 1 of the

shopping mall

Planned construction period . . . . . . . . . . . . . . . . . . . . . . . . . 2006/07–2008/12

Estimated total saleable/rentable GFA (sq.m.) . . . . . . . . . . . . . 43,000

Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail/Office

We are in the process of applying for the land use right certificate for a plot of land to be

used for the construction of Phase 2 of the shopping mall. We have fully paid the land

premium and expect to obtain the land use right certificate in June 2007 once we complete

the resettlement work. Details of our plans for this property as at March 31, 2006 were as

follows:

Phase 2 of the

shopping mall


Estimated saleable/rentable GFA (sq.m.). . . . . . . . . . . . . . . . . 39,800

Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail

A total capital value of RMB8,389 million was attributable to Shanghai Shimao Riviera

Garden as at March 31, 2006 in the property valuation report in Appendix IV. As we have not

obtained the land use right certificate for Phase 2 of the shopping mall, no commercial value

BUSINESS

— 87 —

has been attributed to it in the property valuation report in Appendix IV. Had we obtained the

land use right certificate, DTZ would have assigned a capital value attributable to our interest

in this plot of land at RMB709 million as at March 31, 2006.

Based on our internal estimates or records, the total development costs (including land

costs, construction costs and capitalized finance costs) incurred for this project as at March

31, 2006, were approximately RMB5,264 million. We currently estimate that an additional

RMB2,163 million will be required to complete this project.

We hold a 100% interest in Shanghai Shimao Riviera Garden through our wholly-owned

subsidiaries, Peak Castle as to a 75% equity interest and Vicking as to a 25% equity interest.

Shanghai Shimao International Plaza

Shanghai Shimao International Plaza is a hotel

and retail development in Nanjing East Road,

Puxi, Shanghai ( ) and is the

tallest building in Puxi according to Xinhua

news report. It is located at the beginning of

the Shopping Pedestrian Area on Nanjing East

Road ( ) which, according to

statistics published by the Shanghai Municipal

Huangpu District Economic and Trade

Commission ( ),

receives up to 800,000 visitors on weekdays

and up to 1 to 1.2 million visitors per day on

weekends and holidays. The total site area of

Shanghai Shimao International Plaza is

approximately 13,025 sq.m., and the total

planned GFA is approximately 170,935 sq.m.

We plan that, upon completion, the

development will include a five-star hotel, Le

Royal Meridien Shanghai, with approximately

770 rooms, a shopping mall and approximately

292 car parking spaces, all of which are to be

held for investment purposes. We have

engaged a number of internationally

recognized designers and engineers to assist us in developing Shanghai Shimao

International Plaza. The hotel is scheduled to be completed by August 2006. Based on our

current design plans, upon completion, Le Royal Meridien Shanghai will be approximately 333

meters in height.

BUSINESS

— 88 —

The development of the retail section is divided into two phases. We completed the

development of Phase 1 of the shopping mall of Shanghai Shimao International Plaza in

December 2004. On November 21, 2003, we entered into a long-term tenancy agreement to

lease certain parts of Phase 1 and Phase 2 of the shopping mall to Shanghai Brilliance

(Group) Co., Ltd ( ), an independent third party with respect to our

Group, as the head tenant for a term of 20 years from November 1, 2004 to October 31,

2024, in the case of Phase 1, and from a date to be agreed to October 31, 2024, in the case

of Phase 2. Under the agreement, we charge the head tenant a fixed monthly rental or a

monthly rental based on a percentage of the total turnover of the head tenant and its retail

tenants, whichever is higher. Details of the completed property as at March 31, 2006 were as

follows:

Phase 1 Retail

Construction period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2002/07–2004/12

Total rentable GFA (sq.m.) . . . . . . . . . . . . . . . . . . . . . . . . . . 38,819

Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail

Number of units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A (Note)

Rental status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%

Note: The retail section was leased/pre-leased as a whole without being divided into units.

As at March 31, 2006, we were developing the hotel and Phase 2 of the shopping mall of

Shanghai Shimao International Plaza. We entered into a long-term management contract with

the Le Meridien group on February 25, 2002 to manage the hotel for a term of 10 years

starting from the formal opening of the hotel, which is currently scheduled for September

2006. The Le Meridien Group was subsequently acquired by the Starwood Group. Phase 2 of

the shopping mall is scheduled to be completed in January 2007. Details of these properties

as at March 31, 2006 were as follows:

Hotel Phase 2 Retail

Planned construction period . . . . . . . . . . . . . 2002/09–2006/08 2004/04–2007/01

Estimated total rentable/hotel GFA (sq.m.) . . . 99,696 32,420

Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hotel Retail

Estimated number of rooms/units . . . . . . . . . 770 N/A

Rental status . . . . . . . . . . . . . . . . . . . . . . N/A 100%

Estimated average unit size (sq.m.) . . . . . . . . 40 N/A

A total capital value of RMB8,533 million was attributable to Shanghai Shimao

International Plaza as at March 31, 2006 in the property valuation report in Appendix IV,

all of which was attributable to our interest in the project.




RMB446 million will be required to complete this project.

We hold a 100% interest in Shanghai Shimao International Plaza through our wholly-

owned subsidiaries, Best Empire as to a 81.625% equity interest and Shimao Jianshe as to a

18.375% equity interest.

BUSINESS

— 89 —

Shanghai Shimao Sheshan

Shanghai Le Meridien Sheshan

Upon completion, Shanghai

Shimao Sheshan will be a

hotel resort and residential

development in Sheshan

resort area, an attractive

location in Songjiang District

( ), Shanghai. The

project overlooks Yuehu

Lake ( ) to its north, and

Mount Sheshan ( ) to its

south. The total site area of

Shanghai Shimao Sheshan is

approximately 579,685 sq.m.

and the total planned GFA

will be approximately

146,514 sq.m. We plan that,

upon completion, the development will include a low-density residential development with

approximately 72 villas as well as a hotel resort with (i) a five-star hotel, Shanghai Le

Meridien Sheshan, with 327 rooms, (ii) an international convention center with a total GFA of

approximately 2,100 sq.m. and (iii) approximately 80 car parking spaces. The hotel resort,

which provides conference and banqueting facilities as well as a multi-function room with a

seating capacity of approximately 500, was completed in November 2005 and is held by us

for investment purposes. The villas in the residential development, which are developed for

sale, have site areas ranging from approximately 2,300 sq.m. to 20,000 sq.m., and are

scheduled to be completed in December 2007.

We have completed the development of the hotel resort. We entered into a long-term

management contract with the Le Meridien group on December 5, 2003 to manage the hotel

and the convention center for a term of 10 years starting from November 1, 2005. The Le

Meridien group was subsequently acquired by the Starwood Group. Details of these

properties as at March 31, 2006 were as follows:

Hotel Resort

Construction period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2004/07–2005/11

Total hotel GFA (sq.m.) . . . . . . . . . . . . . . . . . . . . . . . . . . 69,328

Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hotel and

conference facilities

Number of rooms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327

Average unit size (sq.m.) . . . . . . . . . . . . . . . . . . . . . . . . . 50

BUSINESS

— 90 —

As at March 31, 2006, we were developing the residential villas. We began the pre-sale

of the villas in October 2005. We pre-sold three of the villas at an average selling price of

RMB38,104 per sq.m. as at March 31, 2006. Details of these properties as at March 31, 2006

were as follows:

Villas

Planned construction period . . . . . . . . . . . . . . . . . . . . . . . . . . 2004/12–2007/12

Date of pre-sale permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2005/10

Estimated total saleable GFA (sq.m.) . . . . . . . . . . . . . . . . . . . . 77,186

Total saleable GFA under pre-sale permit (sq.m.) . . . . . . . . . . . . 13,873

Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Residential

Estimated number of units . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Number of units pre-sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Estimated average unit size (sq.m.) . . . . . . . . . . . . . . . . . . . . . 1,072

Average pre-sale price per sq.m. (RMB) . . . . . . . . . . . . . . . . . . 38,104

A total capital value of RMB3,519 million was attributable to Shanghai Shimao Sheshan

as at March 31, 2006 in the property valuation report in Appendix IV, all of which was

attributable to our interest in the project.





We hold a 100% interest in Shanghai Shimao Sheshan through our wholly-owned

subsidiaries, Year Grant and Shimao Jianshe, each of which holds a 50% equity interest in

Shanghai Sheshan Project Co.

BUSINESS

— 91 —

Shanghai Hyatt on the Bund

Shanghai Hyatt on the Bund is a hotel development in Hongkou District, Shanghai

( ), which is a business and commercial center of Shanghai and has extensive

transportation coverage. Shanghai Hyatt on the Bund is adjacent to the Huangpu River,

facing the Oriental Pearl TV Tower in Pudong and overlooking the Bund and Lujiazui ( ).

The total site area of Shanghai Hyatt on the Bund is approximately 13,671 sq.m., and the

total planned GFA is approximately 100,972 sq.m. We plan that, upon completion, the

development will be a five-star hotel, Hyatt on the Bund, with approximately 618 rooms and

approximately 227 car parking spaces. The hotel and car parking spaces are to be held for

investment purposes. The project is scheduled to be completed by December 2006.

We entered into a long-term management contract with the Hyatt hotels group on

December 10, 2003 to manage the hotel for a term of 20 years starting from the formal

opening of the hotel, which is currently scheduled for December 2006. Details of these

properties as at March 31, 2006 were as follows:

Hotel


Estimated total hotel GFA (sq.m.) . . . . . . . . . . . . . . . . . . . . . 100,972

Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hotel

Estimated number of rooms . . . . . . . . . . . . . . . . . . . . . . . . . 618

Estimated average unit size (sq.m.) . . . . . . . . . . . . . . . . . . . . 46

BUSINESS

— 92 —

A total capital value of RMB3,622 million was attributable to Shanghai Hyatt on the Bund





31, 2006, were approximately RMB704 million. We currently estimate that an additional

RMB774 million will be required to complete this project.

We hold a 100% interest in Shanghai Hyatt on the Bund through our wholly-owned

subsidiaries. Double Achieve holds a 50% equity interest while each of Shimao Jianshe and

Mega Universe holds a 25% equity interest in North Bund Project Co.

Shanghai Shimao Wonderland

Shanghai Shimao Wonderland will be a large-scale residential, retail and hotel

development at the Sheshan State Tourist Resort Area, Songjiang District, Shanghai. The

total site area of Shanghai Shimao Wonderland is approximately 428,213 sq.m. with a total

planned GFA of approximately 551,000 sq.m. of which approximately 421,000 sq.m. is

planned rentable/hotel GFA. Our plans for the development include two hotels, an

entertainment/retail complex and service apartments, all of which we plan to hold for

investment purposes.

Details of our plans for the development of the project as at March 31, 2006 were as

follows:

Entertainment/

Retail Complex Hotels Service Apartments

Planned construction period . . 2006/09–2009/06 2007/12–2010/12 2006/09–2009/06

Estimated total rentable/hotel

GFA (sq.m.) . . . . . . . . . . 310,000 73,000 38,000

A total capital value of RMB350 million was attributable to Shanghai Shimao Wonderland







We hold a 100% interest in Shanghai Shimao Wonderland through our wholly-owned

subsidiaries, Shimao Jianshe and Widely Known, which hold 70% and 30% equity interests,

respectively.

BUSINESS

— 93 —

Beijing Shimao Olive Garden

Beijing Shimao Olive Garden isplanned as a residential and retaildevelopment to the north of theplanned site of the Olympic Villagein Beijing. The total site area ofBeijing Shimao Olive Garden isapproximately 100,002 sq.m., andthe total planned GFA isapproximately 288,457 sq.m., ofwhich 238,864 sq.m. is plannedsaleable GFA. We plan that, uponcompletion, the development willinclude residential blocks, ashopping mall and car parkingspaces, all of which will bedeveloped for sale. Based on ourcurrent design plans, thedevelopment will overlook the

Olympic Village and the Olympic Garden and the center of the development will be a largegreen area of approximately 40,000 sq.m. The project is scheduled to be completed byDecember 2007.

As at March 31, 2006, we were developing approximately 232,382 sq.m. and 6,482sq.m. of the residential and retail units, respectively. We began the pre-sale of the residentialunits in September 2005 at an average selling price of RMB12,234 per sq.m. based on ourinternal records. Pre-sales of the retail units are expected to commence at the end of 2006.Details of these properties as at March 31, 2006 were as follows:

Residential Retail

Planned construction period . . . . . . . . . . . . . . 2005/05–2007/12 2005/05–2006/12

Date of pre-sale permit . . . . . . . . . . . . . . . . . 2005/09 2005/09

Estimated total saleable GFA (sq.m.) . . . . . . . . 232,382 6,482

Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Residential Retail

Estimated number of units . . . . . . . . . . . . . . . 1,237 —

Number of units pre-sold. . . . . . . . . . . . . . . . 228 —

Estimated average unit size (sq.m.) . . . . . . . . . 188 —

Average pre-sale price

per sq.m. (RMB). . . . . . . . . . . . . . . . . . . . 12,234 —

A total capital value of RMB1,879 million was attributable to Beijing Shimao Olive

Garden as at March 31, 2006 in the property valuation report in Appendix IV, all of which was






We hold a 100% equity interest in Beijing Shimao Olive Garden through our wholly-

owned subsidiaries, Precise Choice as to a 90% equity interest and Shanghai Riviera Project

Co as to a 10% equity interest.

BUSINESS

— 94 —

business - hkexnews · development but had not, as at march 31, 2006,obtained land use right...

Documents