In the wake of rapid transformation in last year, the Group maintained expansion in real estate investment business through the strategic investment and financial services segment. This segment has been in operation and its objectives include investments in real estate agency business and real estate investment funds as well as other potential investment opportunities.
On 10 November 2017, the Group entered into an investment agreement with Wonderland (UK) Holdings Limited (“Wonderland (UK)”) to subscribe up to GBP3.5 million 6% convertible guaranteed redeemable loan notes (the “Loan Notes”). Wonderland (UK) is the exclusive licensee of the Sotheby’s International Realty brand in England and holds the entire equity interest of Sotheby’s International Realty Limited (“SIRL”) which is operating a real estate agency business under the Sotheby’s International Realty brand in England. The Sotheby’s International Realty brand primarily deals in residential sales, lettings, development sales, investment and international sales and its franchise network currently has approximately 22,000 sales associates, located in approximately 950 offices across 69 countries. SIRL plans to expand the number of offices under operation across London in the next three years to increase brand presence and to capture additional revenue in multiple areas in the city of London. We are convinced that the real estate market in England has a huge potential for future growth.
On 22 February 2018, the Group entered into a subscription agreement with Orient Capital Opportunity Fund SPC (the “Investment Fund”) pursuant to which the Group has agreed to subscribe for Participating Shares of the value equivalent to HK$76,000,000 in the Investment Fund in respect of the Orient Capital Real Estate Fund SP (the “Sub-Fund”) in accordance with the terms and conditions of the subscription agreement and the private placing memorandum. The principal investment objective of the Sub-Fund is to achieve capital returns by investing solely in a residential estate project (the “Project”) in West London. The Project comprises 49 apartment units and 31 car parking spaces which are located at 9 Lillie Square, Lillie Square, London, SW6, United Kingdom. The Project is the fourth block within Phase 2 of a larger development known as Lillie Square. Lillie Square is owned and developed by a joint venture formed by Capital & Counties Properties PLC (“Capco”), one of the largest listed property investment and development companies that specialise in central London real estate, and interests of certain members of the Kwok family (“KFI”). KFI represents interests of certain members of the Kwok family, who are major shareholders of Sun Hung Kai Properties Limited, one of the largest real estate companies listed on The Stock Exchange of Hong Kong Limited. The Project is expected to be completed in 2020.
On 4 October 2018, the Company entered into a non-binding memorandum of understanding (the “MOU”) with Rosebery Capital Limited (“RC”) in relation to formation of a joint venture (the “JV”). The JV would seek to acquire and develop properties across the United Kingdom especially in the student housing, serviced apartments and built to rent sectors. Pursuant to the MOU, the Company shall hold 51% of the JV and RC shall hold 49% of the JV. The Company shall act as a direct investor in the JV and will provide capital on real estate projects managed by the JV. RC shall provide investment management personnel with the appropriate experience to lead each key function of the JV. The parties anticipate that the Company will contribute approximately GBP3.5 million as seed capital and RC will contribute approximately GBP0.5 million. The JV shall seek to both wholly invest in suitable real estate projects or seek further capital injection from other institutional and individual investors with a target of GBP100 – 150 million for the acquisition and financing of suitable real estate projects.
On 26 October 2018, the Company entered into a collaboration agreement (the “Collaboration Agreement”) with Equitativa Real Estate Limited (“Equitativa”) in relation to setting up one or more REITs (the “REITs”) along Eurasia to be managed by an entity or entities established and wholly owned by Equitativa or its affiliates. Under the Collaboration Agreement, the Group will facilitate the implementation of the REITs, identify assets to seed the REITs, refer clients for investment in the REITs and act as an advisor to and work closely with Equitativa in relation to the REITs. Equitativa or its affiliates will be responsible for the establishment and management of the REITs and will be appointed as the manager. The Group shall be entitled to a referral fee equivalent to certain percentage of the transaction value of any assets acquired by the REITs and for any investments in the REITs introduced by the Group. The Group will also be entitled to a one-off performance fee upon the successful listing of the REITs on a recognised stock exchange on a pro rata basis as relative to the assets identified and referred by the Group and acquired by the REITs. Equitativa is part of The Equitativa Group which is the leading regional asset manager focuses on creating and managing real estate investment trusts and is based in the United Arab Emirates (“UAE”). Having established the UAE’s first Shari’a compliant REIT, Emirates REIT (CEIC) Limited (“Emirates REIT”) incorporated in the Dubai International Financial Centre, Equitativa is today considered the largest REIT Manager in the Gulf Cooperation Council countries and the biggest REIT Manager for Shari’a Compliant REITs in the world. The Equitativa Group has about US$2 billion of assets under management. Equitativa is an independent REIT manager. It manages Emirates REIT which is listed on Nasdaq Dubai and The Residential REIT, the latter incorporated in Abu Dhabi Global Markets. Equitativa is further diversifying its REITs by launching a hospitality REIT, a logistics REIT, and several other REITs in emerging markets.
Looking forward, with gradual expansion in real estate investment business, our targets are the United Kingdom and the countries along “Eurasia”. We anticipate such investments and the strategic investment and financial services segment will diversify the income streams of the Group, and generate additional investment returns on the available funds of the Company from time to time. We expect that the segment will be the growth driver of the Company and will actively make continuous efforts to find appropriate investment projects in the future. With the MOU related to the student housing, serviced apartments and built to rent sectors and the Collaboration Agreement with Equitativa entered recently and the development of the existing Strategic Investment and Financial Services Segment, the Group will focus its investments and operations more in the real estate and investment and asset management sectors especially in Europe and Asia.