Annual Report 2019

FAR EAST CONSORTIUM INTERNATIONAL LIMITED 40 MANAGEMENT DISCUSSION AND ANALYSIS 7. Post balance sheet events In April 2019, the Group entered into an agreement for the acquisition of a property on Bourke Street in the CBD of Melbourne, which is near the West Side Place development, at a consideration of AUD90 million. The property currently has approval to be redeveloped into a residential project with total GFA of approximately 940,000 sq. ft.. The Group intends to redevelop the property into a residential tower. Completion of the acquisition is subject to the vendor providing vacant possession of the property and certain other obligations the vendor has to fulfill, and is expected to take place before the end of 2019. BUSINESS REVIEW 1. Property division The view from West Side Place, Tower 4 The Group’s property division includes property investment and property development. Property investment comprises investments in retail and office buildings located mainly in Hong Kong, Mainland China and Australia. For FY2019, a fair value gain of investment properties of approximately HK$673 million (HK$548 million after tax) was recognized, as a result of an increase in fair value of the investment properties in Hong Kong, Mainland China and Australia. As at 31 March 2019, valuation of investment properties was approximately HK$5.4 billion (31 March 2018: HK$3.2 billion). The Group has a diversified portfolio of residential property development in Australia, Mainland China, Hong Kong, Singapore, Malaysia and the UK, which are largely focused on mass residential market from which the Group can benefit due to the growing affluence of the middle class. To carry out property development in the various markets, the Group has established strong local teams in each of these markets which, coupled with the regionalisation approach, allow the Group to take advantage of the different property cycles in different markets. The Group is also actively looking to work with property owners for redevelopment opportunities, an example of which is the partnership with The Star. These land acquisition strategies have resulted in a relatively low land cost base for the Group’s development projects. During FY2019, the Group launched pre-sales of seven of its residential development projects, namely (i) The Garrison in Hong Kong; (ii) West Side Place (Tower 3) in Melbourne; (iii) Royal Riverside (Tower 5) in Guangzhou; (iv) Hornsey Town Hall in London; (v) Perth Hub in Perth; (vi) Manor Parc in Hong Kong; and (vii) MeadowSide (Plot 5) in Manchester. Total expected attributable GDV and attributable saleable floor area of these seven development projects are approximately HK$7 billion and 1.2 million sq. ft. respectively. Having pre-sold residential units worth HK$5.8 billion during FY2019, total attributable cumulative pre- sales value of the Group’s residential properties under development amounted to approximately HK$14.6 billion as at 31 March 2019 (excluding the pre-sales value of Artra in Singapore recognised as revenue on a percentage of completion basis). Such pre-sales proceeds are not reflected in the Group’s consolidated income statement until the point in time when the relevant projects are completed.