Yuexiu Real Estate Investment Trust : ANNOUNCEMENT - CONNECTED PARTY TRANSACTION RELATING TO THE ACQUISITION OF A COMMERCIAL PROPERTY IN HANGZHOUpdf Download

The Securities and Futures Commission of Hong Kong, The Stock Exchange of Hong Kong Limited and Hong Kong Exchanges and Clearing Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

(A Hong Kong collective investment scheme authorised under section 104 of the Securities and Futures Ordinance Chapter 571 of the Laws of Hong Kong))

(Stock code: 00405)

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ANNOUNCEMENT

CONNECTED PARTY TRANSACTION RELATING TO THE ACQUISITION OF A COMMERCIAL PROPERTY IN HANGZHOU

The Acquisition

On 23 December 2018, Yuexiu REIT 2018 Company Limited (a special purpose vehicle of Yuexiu REIT) as the Purchaser entered into the Share Purchase Deed with Guangzhou Construction & Development Holdings (China) Limited as the Vendor and Yuexiu Property as the guarantor, pursuant to which the Purchaser agreed to: (i) acquire the Target Property (through the purchase of the Shares representing all the issued share capital of the Target Company, which indirectly holds the entire equity interest in the Project Company, which in turn is the registered legal owner of the land use rights and current ownership rights underlying the Target Property) from the Vendor; and (ii) accept the assignment of the Loan from the Vendor with the rights attached to it as at the Completion Date. Upon Completion, Yuexiu REIT will (through the Target Group) hold the Target Property known as "Hangzhou Victory Business Center Tower 2 (؄ψၪεлਠਕ ʕː2ᄸ)" located in Qianjiang New Town, Jianggan District, Hangzhou, Zhejiang Province, PRC.

The consideration for the acquisition of the Shares and the assignment of the Loan is RMB590,000,000 (being the Agreed Acquisition Amount), subject to an adjustment being the Target Group Adjusted NAV as at Completion. The Agreed Acquisition Amount was arrived at after taking into account the valuation of the Target Property as at 30 September 2018 by the Independent Property Valuer (being the current principal valuer of Yuexiu REIT), and represents a discount of approximately 1.7% to the Appraised Value.

The Target Property comprises: (a) an 18-storey commercial building with a 16-storey office component and a 2-storey retail component; and (b) 315 underground carpark spaces.

Financing of the Acquisition

The Manager intends to finance the Consideration by drawing down on the New Bank Facility up to an amount not exceeding the HKD equivalent of RMB400,000,000 (based on the exchange rate set out in the New Bank Facility) and internal resources (including part of the net proceeds from the Neo Metropolis Plaza Property Disposal). The Manager expects the Gearing Ratio of Yuexiu REIT to increase from approximately 39.2% (being the expected Gearing Ratio immediately after: (i) the completion of the Neo Metropolis Plaza Property Disposal; (ii) the payment of the estimated Bulletin 7 tax amount in respect of the Neo Metropolis Plaza Property Disposal; and (iii) the payment of the deferred consideration for the acquisition of the Wuhan Property) to approximately 39.8% immediately following payment of the Initial Payment at Completion, assuming: (i) completion of the Acquisition; and (ii) the Consideration would be equal to the Initial Payment and financed as to approximately 65.0% thereof by the New Bank Facility and approximately 35.0% thereof by existing cash of Yuexiu REIT.

Reasons for and Benefits of the Acquisition

The Board (including all the INEDs) believes that the Acquisition is a good investment opportunity which will bring benefits to Yuexiu REIT and its Unitholders for the following reasons:

• 1. the Target Property is strategically located at the heart of Hangzhou's newly developed central business district;

• 2. the Acquisition diversifies Yuexiu REIT's portfolio and further reduces the risk of regional concentration for Yuexiu REIT; and

• 3. the Acquisition of a high quality asset is in line with the investment strategy of Yuexiu REIT.

Regulatory Implications

The Acquisition constitutes a connected party transaction for Yuexiu REIT under the REIT Code. Pursuant to paragraph 8.9 of the REIT Code, unitholders' prior approval is not required for connected party transactions of a REIT where the total consideration or value of the transaction is less than 5% of the latest net asset value of the REIT, as disclosed in the latest published audited accounts of the REIT.

Since the Agreed Acquisition Amount is less than 5% of the latest audited net asset value of Yuexiu REIT (as disclosed in the latest published audited accounts of Yuexiu REIT for the financial year ended 31 December 2017 (as adjusted for subsequent transactions since the publication of such accounts, including the interim distribution paid by Yuexiu REIT, the Neo Metropolis Plaza Property Disposal and the payment of the deferred consideration for the acquisition of the Wuhan Property)), the Manager is therefore of the view that the Acquisition is not required to be approved by Unitholders and is only subject to the reporting and announcement requirements under Chapters 8 and 10 of the REIT Code.

The Board (including the INEDs) is satisfied that the Acquisition and the transactions contemplated under the Share Purchase Deed are on terms which are normal commercial terms, are at arm's length, are fair and reasonable and in the interests of Yuexiu REIT, the independent Unitholders and the Unitholders as a whole in accordance with the REIT Code. The Board is satisfied, and (based on and in sole reliance on the opinion of the Board and the information and confirmations provided by the Manager, and having taken into account its duties set out under the Trust Deed and the REIT Code), the Trustee is also satisfied, that no independent Unitholders' approval is required under the REIT Code and the Trust Deed for the Purchaser to enter into the Share Purchase Deed and the transactions contemplated thereunder.

As the Acquisition is subject to the satisfaction of the Conditions and, accordingly, may or may not proceed to Completion, Unitholders and prospective investors of Yuexiu REIT are advised to exercise caution when dealing in the Units.

A. THE ACQUISITION

1. Overview of the Acquisition

On 23 December 2018, Yuexiu REIT 2018 Company Limited (a special purpose vehicle of Yuexiu REIT) as the Purchaser entered into the Share Purchase Deed with Guangzhou Construction & Development Holdings (China) Limited as the Vendor and Yuexiu Property as the guarantor, pursuant to which the Purchaseragreed to: (i) acquire the Target Property (through the purchase of the Shares representing all the issued share capital of the Target Company, which indirectly holds the entire equity interest in the Project Company, which in turn is the registered legal owner of the land use rights and current ownership rights underlying the Target Property) from the Vendor; and (ii) accept the assignment of the Loan from the Vendor with the rights attached to it as at the Completion Date.

The total consideration for the acquisition of the Shares and the assignment of the Loan is RMB590,000,000 (the "Agreed Acquisition Amount"), subject to an adjustment being the Target Group Adjusted NAV as at Completion. For illustrative purposes, based on the management accounts of the Target Group as at 31 October 2018, the Target Group Adjusted NAV as at 31 October 2018 is

approximately minus RMB32.6 million, and is mostly attributable to: (i)

approximately RMB21.5 million of cash held by the Project Company; and (ii) the outstanding construction costs of the Project Company and the estimated land value-added tax payable by the Project Company (being approximately RMB27.2 million and RMB26.5 million, respectively, which would be taken into account in determining the Target Group Adjusted NAV as liabilities of the Project Company). The Manager does not expect there to be any other material assets and liabilities that are attributable to the Target Group Adjusted NAV save for the items disclosed above. The Agreed Acquisition Amount was arrived at after taking into account the valuation of the Target Property by the Independent Property Valuer (being the current principal valuer of Yuexiu REIT), and represents a discount of approximately 1.7% to the Appraised Value.

The Target Property comprises: (a) an 18-storey commercial building known as "Hangzhou Victory Business Center Tower 2 (؄ψၪεлਠਕʕː2ᄸ)" with a 16-storey office component and a 2-storey retail component; and (b) 315 underground carpark spaces (the "Carpark Spaces"). The Target Property is part of a larger integrated development project (the "Development"), which also includes another 18-storey commercial building and four blocks of detached villa-style office buildings.

As the Agreed Acquisition Amount (being RMB590,000,000) does not exceed 5.0% of the net asset value of Yuexiu REIT (as disclosed in the latest published audited accounts of Yuexiu REIT for the financial year ended 31 December 2017 (as adjusted for subsequent transactions since the publication of such accounts, including the interim distribution paid by Yuexiu REIT, the Neo Metropolis Plaza Property Disposal and the payment of the deferred consideration for the acquisition of the Wuhan Property)), the Acquisition is not required to be approved by Unitholders and is only subject to the reporting and announcement requirements under Chapters 8 and 10 of the REIT Code.

2. Holding structure of the Target Property before Completion

Below is a chart showing the holding structure of the Target Property as at the date of this announcement:

Yuexiu Property

100.0%

Vendor (BVI)

100.0%

Target Company

(BVI)

100.0%

Intermediary Company 1

(Hong Kong)Offshore

100.0%

Onshore

Intermediary Company 2

(PRC)

100.0%

Project Company

(PRC)

100.0%

Target Property

The Vendor is a BVI business company incorporated under the laws of the BVI, and holds all the issued share capital of the Target Company as at the date of this announcement. The Target Company is a BVI business company incorporated under the laws of the BVI and indirectly holds 100.0% of the Project Company, which is the registered legal owner of the land use rights and current ownership rights underlying the Target Property. The principal business activity of the Vendor is the holding of investments.

To the best of the knowledge, information and belief of the Manager as at the date of this announcement: (i) the Target Company, Intermediary Company 1 and Intermediary Company 2 are existing indirect subsidiaries of Yuexiu Property; (ii) the principal business activities of the Target Company, Intermediary