Annual Report 2019

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2019 111 The United Laboratories International Holdings Limited Annual Report 2019 19. INVESTMENT PROPERTIES AND PROPERTIES HELD FOR DEVELOPMENT (Continued) b) Investment properties (Continued) In September 2017, the Group entered into an agreement with the local government of Pengzhou to facilitate the development of the Chengdu Lands for five years (the “Cooperative Agreement”). Pursuant to the Cooperative Agreement, the Group will contribute approximately 40 acre of the lands and existing structures erected on the lands (including office buildings and 102 workshops) to Pengzhou local government, whilst the Pengzhou local government will fund the construction of an administrative centre which is regarded as the first phase development of the Chengdu Lands (the “First Phase Development”). The Group will also be responsible to construct the administrative centre. Such administrative centre will be entirely owned by Pengzhou local government after five years from September 2017. To compensate the 40 acre lands contributed by the Group, the local government of Pengzhou has agreed to adjust the plot ratio of the remaining area of the lands to the original gross floor area. Meanwhile, a supplementary agreement has been entered into between the Pengzhou local government and the Group on 26 March 2018 (the “Supplementary Agreement”) that the First Phase Development would commence upon the submission of the construction plan and the related documents. Also, the construction should be completed within 1 year from the date of signing the Supplementary Agreement i.e. 25 March 2019. In December 2018, the Group has obtained the building permit from the relevant local authority in Pengzhou. Due to unforeseen reasons, the Group has not commenced the construction of the administrative centre in 2018. Based on the meeting minutes between the Group and the local government of Pengzhou on 8 March 2018, the Group is relieved from the responsibility for the delay of completion of the administrative centre. It is further agreed that the construction of the administrative centre should be completed within 1 year after the construction permit has been obtained. The directors of the Company have obtained a legal opinion in respect of the Cooperative Agreement, the Supplementary Agreement and the meeting minutes between the Group and the local government of Pengzhou on 8 March 2019. As advised by the legal counsel of the Group, there will be no Idle Land Fee imposed to the Group though the First Phase Development did not commence in 2019 and the land will not be taken back by the government without compensation. In May 2019, the Group has obtained the approval of the plan of the First Phase Development prior to the disposal. During the year ended 31 December 2019, the Group has incurred some demolition costs of approximately RMB28,562,000. The entire investment properties with carrying amount of RMB629,372,000 after taking into consideration of the fair value change of the investment properties of approximately RMB97,614,000, have been disposed of through the disposal of a subsidiary as set out in Note 10.