en.Wedoany.com Reported - On July 3, China New JI O RV issued an announcement stating that its indirect wholly-owned subsidiary, Xinglongcui Automotive Technology (Zhejiang) Co., Ltd. (referred to as "Xinglongcui"), signed a factory construction and lease contract with Longcui (Zhejiang) Automotive Co., Ltd. (referred to as "Longcui Zhejiang"). According to the agreement, Xinglongcui will lease the factory built by Longcui Zhejiang on the target land, with a fixed lease term of 20 years starting from the lease commencement date.
The announcement shows that the factory has a construction area of approximately 15,880.86 square meters and is expected to be completed on March 29, 2027. The construction cost is RMB 38,514,644.41 (tax included), with the final amount subject to confirmation by Xinglongcui based on a completion settlement audit report issued by an independent third-party audit institution, with an upward adjustment not exceeding 10%. This construction cost will be paid as a one-time lump sum for the 20-year rent, with the annual rent fixed at 5% of the final construction cost. Longcui Zhejiang is not permitted to request a rent increase during the lease term.
Regarding the payment schedule, Xinglongcui is required to pay 50% as a deposit within 15 days after the contract is signed, followed by phased payments based on project progress, until 97% is paid after completion settlement. The remaining 3% will be paid as a quality guarantee after the warranty period expires.
The announcement also discloses that Longcui Zhejiang is 30% owned by Executive Director, Board Chairman, and Chief Executive Officer Miao Xuezhong, who indirectly holds 65% equity in Longcui Zhejiang, making him its ultimate beneficial owner. According to the Hong Kong Listing Rules, Longcui Zhejiang is a connected person of the company, and this transaction constitutes a one-off connected transaction. Mr. Miao has abstained from voting on the relevant resolution.
New JI O explained the background of this transaction in the announcement: The company previously planned to purchase the land use rights for a new production base in Zhejiang, but the application was not approved due to local government land allocation issues. During the search for alternative land, Xinglongcui discovered that the factory on the target land was already under construction and adjacent to the existing plant area. However, under Chinese laws and regulations, the target land cannot be transferred separately from the entire piece of land wholly owned by Longcui Zhejiang, nor can the factory ownership be separated from the land use rights. Therefore, the company could only adopt a leasing approach. Xinglongcui will pay the construction cost using proceeds from the global offering.
Under Hong Kong Financial Reporting Standard 16, the company expects to recognize RMB 38,514,644.41 as a right-of-use asset in its consolidated statement of financial position. This amount is unaudited and may be adjusted in the future based on actual lease conditions. Since the highest applicable percentage ratio for the right-of-use asset exceeds 0.1% but is below 5%, this transaction is subject to reporting and announcement requirements but is exempt from circular and independent shareholder approval requirements.
New JI O stated that this transaction allows the group to enjoy a fixed annual rent, mitigating the risk of future rent increases for industrial factories, while securing an exclusive and irrevocable 20-year lease, which is conducive to enhancing operational stability.
