NAM TAI PROPERTY INC. Announces Q2 2021 Results

SHENZHEN, July 29, 2021 /PRNewswire/ -- Nam Tai Property Inc. ("Nam Tai" or the "Company") (NYSE Symbol: NTP) today announced its unaudited financial results for the quarter ended June 30, 2021.

SUMMARY

All of our PRC lenders have demanded us to repay their respective outstanding loans immediately due to the significant uncertainty on share ownership and the potential changes in the Board of Directors of the Company. The Company has been in an ongoing dialogue with the lenders to appease them from taking further legal actions, while exploring other potential lenders for refinancing. In addition, the lenders have suspended fund withdrawal of some of our bank accounts in light of freezing orders issued by the relevant PRC courts regarding some lawsuits filed by our suppliers, resulting in a liquidity crunch in our operations. As a result, the Company is unable to meet the progress payment of our contractors and suppliers, causing delays in the construction in progress and disrupting the day-to-day operations. Further, some of our suppliers and contractors have also taken legal actions against the Company for the outstanding payments. In general, our suppliers and contractors have imposed more stringent payment terms, further exacerbating the liquidity of the Company. The Company has been operating in this challenging environment, while striving to meet the completion schedule of Nam Tai Inno Park and the commencement of pre-sale of Nam Tai • Longxi.

In the quarter ended June 30, 2021:

• Revenue was $9.5 million in the second quarter of 2021, an increase of $8.7 million year-on-year.
• Net loss from operations was $0.3 million in the second quarter of 2021, reduced from net loss from operations of $4.5 million in the second quarter of 2020.
• Consolidated net loss was $0.3 million in the second quarter of 2021, reduced from consolidated net loss from operations of $3.8 million in the second quarter of 2020.
• Real estate properties under development, net was $336.1 million as of June 30, 2021, an increase of $23.9 million from the end of 2020.
• Real estate properties held for lease, net was $124.5 million as of June 30, 2021, an increase of $32.3 million from the end of 2020.

In addition:

• The occupancy rate of Nam Tai Inno Park reached 59% by the end of the second quarter, an increase of 11% from the first quarter of 2021.
• Approximately 1,200 dormitory units of Nam Tai Inno Park have been delivered to our tenants as of June 30, 2021.
• The capping of the roof of Nam Tai Technology Center has been completed as of June 30, 2021.
• We have applied for the pre-sale of Nam Tai • Longxi. Subject to the approval of the local authority, the pre-sale is expected to commence in August 2021. The sales center and the show flats for the pre-sale have been opened since July 2021.

The following tables set forth key highlights of the financial information for the periods indicated:

SUPPLEMENTARY INFORMATION (UNAUDITED) IN THE SECOND QUARTER OF 2021

Key Highlights of Financial Position

FINANCIAL RESULTS

Revenue

Revenue for the second quarter of 2021 was $9.5 million, compared to $0.8 million for the second quarter of 2020. Revenue for the second quarter of 2021 mainly consisted of the lease income of $5.5 million recognized following the delivery of the dormitory units and operating lease income of $1.8 million from Nam Tai Inno Park, operating lease income of $1.1 million from existing buildings located on the sites of Inno Valley, Wuxi, Shanghai, and the leased space at Nam Tai • Tang Xi Technology Park. Revenue for the second quarter of 2020 mainly consisted of rental income of $0.8 million from existing factory buildings located on the sites of Inno Valley, Wuxi and the leased space at Nam Tai • Tang Xi Technology Park.

Gross Profit

Gross profit for the second quarter of 2021 was $5.5 million compared to $0.2 million in the second quarter of 2020. Gross profit for the second quarter of 2021 mainly consisted of revenue of $9.5 million, offset by cost of $4.0 million for the period. Gross profit for the second quarter of 2020 mainly consisted of revenue of $0.8 million, offset by rental cost of $0.6 million for the period.

Net (Loss) Income from Operations

Net loss from operations for the second quarter of 2021 was $0.3 million, compared to net loss from operations of $4.5 million for the second quarter of 2020. Net loss from operations for the second quarter of 2021 mainly consisted of gross profit of $5.5 million, offset in part by our general and administrative expenses of $4.2 million and selling and marketing expenses of $1.6 million for the period. Net loss from operations for the second quarter of 2020 mainly consisted of general and administrative expenses of $2.6 million and selling and marketing expenses of $2.1 million, offset in part by our gross profit of $0.2 million for the period. The increase in general and administrative expenses of $1.6 million in the second quarter of 2021 was mainly due to the increase in legal, agent and professional fees. 

Consolidated Net Income (Loss)

Consolidated net loss for the second quarter of 2021 was $0.3 million, compared to consolidated net loss of $3.8 million for the second quarter of 2020. Consolidated net loss for the second quarter of 2021 mainly consisted of net loss from operations of $0.3 million and income tax expenses of $0.4 million, offset in part by other income of $0.3 million and interest income of $0.1 million. Consolidated net loss for the second quarter of 2020 mainly consisted of net loss from operations of $4.5 million and other net loss of $0.02 million, offset in part by interest income of $0.4 million from time deposits and deferred income tax credit of $0.3 million.

Cash and Cash Equivalents

Cash and cash equivalents decreased by $56.6 million in the six months of 2021 from $61.0 million as of December 31, 2020 to $4.4 million as of June 30, 2021. The decrease was primarily attributable to net cash provided by investing activities of $83.2 million, offset by net cash used in operating activities of $39.2 million and financing activities of $2.0 million, an exchange rate effect of $0.05 million and the increase in restricted cash of $98.5 million. The net cash provided by investing activities was primarily attributable to proceeds from the redemption and distribution of short term investments of $83.5 million in the first six months of 2021.

Restricted Cash

Restricted cash increased by $98.5 million in the six months of 2021 from $2.1 million as of December 31, 2020 to $100.6 million as of June 30, 2021, as our lending banks have restricted the remittance from the bank accounts of some of our subsidiaries in the PRC in light of  freezing orders issue by the relevant PRC courts regarding some lawsuits filed by our suppliers in the PRC and an injunctive order was imposed on the Company by the High Court of Justice of the British Virgin Islands of the Eastern Caribbean Supreme Court in March 2021, which has restricted us from dealing with the proceeds raised from the Private Placement.

Real Estate Properties under Development, Net

Real estate properties under development, net increased by $23.9 million in the six months of 2021 from $312.2 million as of December 31, 2020 to $336.1 million as of June 30, 2021, primarily attributable to the increase of $25.1 million for the construction of Nam Tai Technology Center, $15.2 million for the construction of Nam Tai • Longxi, and decrease of $16.8 million for the construction of Nam Tai Inno Park. During the six months of 2021, the Company completed Tower 5 of Nam Tai Inno Park which was then transferred to real estate properties held for lease, net.

Real Estate Properties Held for Sales Type Lease

Real estate properties held for sales type lease are stated at the lower of carrying amounts or fair value less selling costs. Real estate properties held for sales type lease decreased by $23.9 million from $31.6 million as of December 31, 2020 to $7.6 million as of June 30, 2021. The decrease was mainly due to delivery of part of Towers 8, 9 and 10 during the six months of 2021.

Real Estate Properties Held for Lease, Net

Real estate properties held for lease, net are recorded at cost less accumulated depreciation. Real estate properties held for lease, net increased by $32.3 million from $92.2 million as of December 31, 2020 to $124.5 million as of June 30, 2021. The increase was mainly due to the transfer of Tower 5 of Nam Tai Inno Park from real estate properties under development during the six months of 2021.

Accounts Payable

Accounts payable increased by $19.1 million in the six months of 2021 from $61.6 million as of December 31, 2020 to $80.7 million as of June 30, 2021. The increase was mainly due to the increase of project payable of $9.5 million, $1.9 million and $8.7 million for Nam Tai Technology Center, Nam Tai Inno Park and Nam Tai • Longxi, respectively, offset partially by the decrease of project payable of $1.0 million for other subsidiaries, respectively.

Advance from Customers

Advance from customers decreased by $64.5 million in the six months of 2021 from $69.7 million as of December 31, 2020 to $5.2 million as of June 30, 2021. The decrease was mainly attributed to the recognition of revenue of $72.4 million from the prepaid rent for the units delivered to customers of Nam Tai Inno Park during the period, offset by $7.9 million of rent and other fees received in advance during the period.

Current Portion of Long Term Bank Loans

The current portion of long term bank loans decreased by $1.4 million in the six months of 2021 from $122.9 million as of December 31, 2020 to $121.5 million as of June 30, 2021, due to $2.6 million of loan repayments and $1.2 million of exchange loss in the period. In March 2021, the Company received demand letters from Bank of China, Bank of Beijing, Industrial Bank, and Xiamen International Bank (the "Lending Banks"), regarding payment in full of amounts due under the respective loan agreements with the banks. Following the demand letters, the Lending Banks have restricted the remittance from the accounts of the subsidiaries of the Company in their banks in the PRC. The Company continues to negotiate with the Lending Banks. All bank borrowings were re-classified as current liabilities as of December 31, 2020.

Liquidity and Capital Resources

As of June 30, 2021, the Company had a total cash and cash equivalents of $4.4 million. As of December 31, 2020, the Company had a total cash and cash equivalents of $61.0 million.

The Company continues to discuss liquidity solutions with the lending banks and other financial institutions, and will provide a further update in due course.

Going Concern

The unaudited consolidated financial information of the Company for the second quarter of 2021 has been prepared on the assumption that the Company will continue as a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of June 30, 2021, the Company had net current liabilities of $55.0 million which, among other conditions and uncertainties, raised substantial doubt about its ability to continue as a going concern. 

In addition to the continuing negotiations with the Lending Banks and certain other creditors, the Company is evaluating several methods of financing, such as additional external financings, acceleration of the leasing of Nam Tai Inno Park, and pre-sale of Nam Tai Technology Center and Nam Tai • Longxi, failing which rights offering and project disposal will also be considered. Currently, the Company intends to raise loans from financial institutions and potential funders to maintain our operations.

However, there are significant uncertainties pertaining to the management of the Company as a result of the postponing of a special meeting of shareholders. For more information, see "Recent Developments – Dispute with IsZo Capital LP ("IsZo")". The current Board and management are committed to taking actions to preserve the best interests of all shareholders.

Please see the Company's Condensed Consolidated Statements of Comprehensive Income for further details. The information contained herein has also been published on the Company's website at https://www.namtai.com/quarterly/index.html.

BUSINESS OVERVIEW

Leasing Progress

As of June 30, 2021, we had leasable area of approximately 365,000 square meters, of which around 85% was located in Shenzhen and 15% was located in Wuxi and Shanghai. As of June 30, 2021, the occupancy rate of our Shenzhen projects was approximately 63%, and that of our Wuxi and Shanghai projects was approximately 99%. The occupancy rate of Nam Tai Inno Park was 59%, an increase of 11 percentage points from the quarter ended March 31, 2021.

Project Construction and Development Progress

• For Nam Tai Inno Park, all constructions have been completed and approximately 1,200 dormitory units have been delivered to our tenants as of July 28, 2021. We attracted approximately 60 new corporate tenants in the second quarter of 2021, mostly from healthcare, technology and related industries. We will continue to promote the leasing of industrial office and commercial spaces in the second half of 2021.
• For Nam Tai Technology Center, roof capping for Towers A, B, C and D has been completed as of June 30, 2021. Currently, we are conducting masonry and plastering works, and mechanical and electrical works for the four towers. We have not met the conditions for applying the pre-sale permit for the project.
• For Nam Tai Inno Valley, we are in the process of obtaining approval for our urban renewal application. Before obtaining the approval from the local authorities, we will continue to lease the units in Inno Valley for short-term tenancy. The occupancy rate of Inno Valley was 79% as of June 30, 2021.
• For Nam Tai • Longxi, the main structures of the towers of the project are under construction. Subject to the approval of the local authority, the Company expects to obtain the pre-sale permit and commence the pre-sale in August 2021. The sales center for the pre-sale has been opened since July 2021 and show flats are available for public viewing. The Company will continue to make every endeavor to facilitate the pre-sale amid the liquidity issues. However, there is no assurance that the pre-sale permit will be obtained and the pre-sale will be a success. Further, there is no assurance that we will receive payments regarding the pre-sale in a timely manner from the purchaser of Nam Tai • Longxi and/or their respective mortgagees, which may adversely affect our liquidity and financial condition.

Industrial Operation Progress

• In the second quarter of 2021, we held several events to provide various services to our corporate tenants in respect of talent recruitment, technology facilitation, financing and policy consulting, aiming to support the growth of our corporate tenants and the technology community.
• In respect of talent recruitment, we held a talent fair and partnered with six human resource agents to assist our corporate tenants. In respect of technology facilitation, we have established the "Nam Tai Inno Park Medical Device 3C Industry Platform" in Nam Tai Inno Park in April 2021, aiming to facilitate cooperation and technology exchange among enterprises from biopharmaceuticals and medical device sectors.
• In respect of financing, we co-organized the "2021 Investment and Financing for Smart Industry Roadshow" with the First Roadshow Co., Ltd. in Nam Tai Inno Park in May 2021. The event, hosted by the Science and Technology Innovation Association of Guangming Science City, attracted nearly 80 investment institutions to participate and facilitate potential investments for the projects presented in the roadshow. In respect of policy consulting, we held the "1^st Nam Tai National High-tech Enterprise Cultivation and Innovation Training Class" and provided one-on-one policy counseling services for 38 enterprises in the second quarter of 2021.

Real Estate Market update

In order to promote the healthy development of the housing market, the PRC government has been rolling out restrictive measures with the objectives to curb the rapid price increase in housing and speculation activities.

The Company is planning to launch the pre-sale of Nam Tai • Longxi situated in Dongguan in the second half of 2021. In particular on Dongguan housing market, the local government has also promulgated restrictive measures to curb rapid rise in housing price. For instance, on February 27, 2021, the Bureau of Housing and Urban Rural Development of Dongguan, Municipal Natural Resources Bureau and six other departments jointly issued a "Notice on the Further Regulating of the Real Estate Market Regulation" to curb speculation and excessive price increases. On April 29, 2021, the Bureau of Housing and Urban Rural Development of Dongguan, the Trade and Industry Department of Dongguan and the Immovable Property Registry of Dongguan have jointly issued a "Notice on Further Guiding the Selling Price of Commodity Housing" to restrict the pricing of the newly marketed commodity housing. Further, on July 9, 2021, the Bureau of Housing and Urban Rural Development of Dongguan has issued a "Notice on Declaring the Pricing of the New Commodity Housing Project" stipulating the rules to control the price of the new commodity housing and land tendering so as to curb speculation and excessive price increases.

Despite the implementation of these policies, the land sales market in Dongguan remains buoyant. On July 22, 2021, a parcel of residential and commercial land situated in Machong town, which is in close proximity to our Nam Tai • Longxi project, attracted 11 participants for public bidding and was transacted at a premium of 39.7% with an effective per-square-meter price of RMB14,008. This transaction, compared to the purchase price of the land where Nam Tai • Longxi is (i.e. approximately RMB10,950 per square meter), reflects our foresight to the market of Guangdong–Hong Kong–Macau Greater Bay Area, and our abilities to create value for shareholders through strategic expansion. Hence, we believe that despite the restrictive government measures, the growth of the real estate market remains steady and it is conducive for a healthy and sustainable development of our business.

RECENT DEVELOPMENTS

Dispute with IsZo Capital LP ("IsZo")

On April 7, 2021, we filed an application to appeal the March 3, 2021 judgment issued by the Eastern Caribbean Supreme Court in the High Court of Justice in the British Virgin Islands where it was held that the Private Placement was void and should be set aside (the "Appeal"). On April 20, 2021, the Eastern Caribbean Court of Appeal in the British Virgin Islands (the "Court of Appeal") has granted an order postponing the special meeting of shareholders previously scheduled for April 26, 2021 at a later date to be determined pending judgment of the Appeal.

West Ridge Investment Company Limited ("West Ridge"), being the 3rd Defendant in the dispute with IsZo, filed a Notice of Application for judgment requesting the Company to refund the consideration paid for the purpose of the Private Placement and other costs incurred in relation to the dispute with IsZo. By an order approved on June 28, 2021, the said application was adjourned with permission to restore after the handing down of judgment by the Court of Appeal regarding the Appeal.

Further, IsZo filed a certificate of urgency to, among others things, restrain the Company and Greater Sail Limited ("GSL"), being the 2nd Defendant in the dispute with IsZo, from taking any further steps in relation to an arbitration in Hong Kong whereby GSL has requested the Company to refund the consideration paid for the purpose of the Private Placement. The hearing in relation to such certificate of urgency was adjourned, and the Company and GSL have undertaken to take necessary steps to stay the arbitration in Hong Kong as stated in an order dated May 28, 2021.

The Appeal was heard before the Court of Appeal from June 14, 2021 to June 16, 2021. However, there is no indication as to when the Court of Appeal will hand down its judgment.

Supply Chain Finance Fund Managed by Credit Suisse

We have placed $150 million out of the proceeds from the Private Placement to the Fund with the objective of seeking a stable and enhanced return through an insured cash management solution. The Fund was managed by Credit Suisse with underlying notes insured by insurance companies with a credit rating of at least A by Standard & Poor's or A2 by Moody's. In January 2021, the Company received a redemption amount of $15 million from the Fund. The Fund was terminated with effect as of March 4, 2021 due to some of the fund's assets being subject to considerable valuation uncertainty and reduced availability of insurance coverage for new investments, and was subsequently in liquidation. We have been notified by Credit Suisse that the liquidation proceeds will be repaid by instalments. As of July 7, 2021, the Company received three instalments in aggregate of $70.7 million (the "Sum") from the Fund. We are restricted from dealing with the Sum as it belongs to the proceeds from the Private Placement. Please see "Financial Result – Restricted Cash" for more information.

We continue to negotiate with Credit Suisse and are committed to act in the best interest of the Company. Further, the Securities & Futures Commission of Hong Kong and Hong Kong Monetary Authority have confirmed receipt of our complaint sent on April 19, 2021. We will render every assistance so requested by the aforementioned regulators to the extent necessary and appropriate, and as advised by our external counsels. However, there is no assurance that we can fully recover our principal from the Fund.

Lawsuits filed by our suppliers 

As of July 28, 2021, the Group has received a total of seven writs of summons from our suppliers in the PRC seeking orders from the relevant PRC courts to settle the alleged outstanding construction fees/payments amounting to an aggregate of approximately RMB80.7 million, in which the respective PRC courts have issued rulings to freeze bank accounts of the relevant subsidiaries of our Group amounting to approximately RMB21.9 million in relation to four of the aforementioned writs of summons. We are negotiating with the relevant suppliers, and seeking legal advice from external counsel to prepare for the upcoming hearings. Further, an arbitration in the PRC regarding a dispute over a design fee of one of our suppliers in the PRC was concluded whereby the Shenzhen Court of International Arbitration ordered that one of our subsidiaries in the PRC was to pay the supplier a sum as recognized and enforced via an award from the Shenzhen Intermediate People's Court in June 2021. The said awarded sum was subsequently deducted from the bank account of the relevant subsidiary.

OPERATING RESULTS

Project Portfolio - As of June 30, 2021

Properties Under Development

The table below sets forth certain information of our property projects under development as of June 30, 2021, comprising properties under development with the foundation work construction permits obtained but the construction work was still in progress.

Properties for Future Development

The table below sets forth certain information of our property projects held for future development as of June 30, 2021, comprising properties for which we have obtained the land use right certificate and are in the process of obtaining the foundation work construction permits, or we have entered into land grant contracts or are in the process of applying for special planning although the land use right certificate is not yet obtained.

Projects for Operation and Management

The table below sets forth certain information of our projects leased from third parties for operation and management as of June 30, 2021.

The information contained in, or that can be accessed through, the website mentioned in this announcement does not form part of the announcement.

FORWARD-LOOKING STATEMENTS AND FACTORS THAT COULD CAUSE OUR SHARE PRICE TO DECLINE

Certain statements included in this announcement, other than statements of historical fact, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "might", "can", "could", "will", "would", "anticipate", "believe", "continue", "estimate", "expect", "forecast", "intend", "plan", "seek", or "timetable". These forward-looking statements, which are subject to risks, uncertainties, and assumptions, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business and the industry in which we operate. These statements are only predictions based on our current expectations about future events. There are several factors, many beyond our control, which could cause results to differ materially from our expectation. These risk factors are described in our Annual Report on Form 20-F and in our Current Reports filed on Form 6-K from time to time and are incorporated herein by reference. Any of these factors could, by itself, or together with one or more other factors, adversely affect our business, results of operations or financial condition. There may also be other factors currently unknown to us, or have not been described by us, that could cause our results to differ from our expectations. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. You should not rely upon forward-looking statements as predictions of future events. These forward-looking statements apply only as of the date of this announcement; as such, they should not be unduly relied upon as circumstances change. Except as required by law, we are not obligated, and we undertake no obligation, to release publicly any revisions to these forward-looking statements that might reflect events or circumstance occurring after the date of this announcement or those that might reflect the occurrence of unanticipated events.

CONFERENCE CALL INFORMATION

The Company will hold a conference call at 8 a.m. (Eastern Time) on August 2, 2021, in which the senior management will discuss the results for the second quarter of 2021. Investor may register and get access to the listen-only webcast through the link which can be found under "Investor News – Information and Activities – Investor Relations" on the Company's website at https://www.namtai.com/investornews/index.html. Please note that no question-and-answer session will be arranged during the call and investors are welcome to make enquiries by writing to the media and investor relations department of the Company by email at [email protected] or by contacting our US-based public relations agent Edelman at [email protected].

ABOUT NAM TAI PROPERTY INC.

We are a real estate developer and operator, mainly conducting business in Mainland China. Our main land resources are located in the Guangdong-Hong Kong-Macao Greater Bay Area ("Greater Bay Area") and Wuxi, the PRC, of which the three plots of land in Shenzhen will be developed into the technology parks of Nam Tai Inno Park, Nam Tai Technology Center and Nam Tai Inno Valley. We plan to build these technology parks into landmark projects in the region, and provide high-quality industrial offices, industrial service spaces and supporting dormitories to the park tenants. Based on the experience of developing and operating technology parks, and the industrial relationship network accumulated over the past 40 years, we have also exported the operation mode of technology parks to other industrial properties using the asset-light model to rent industrial properties for repositioning and business invitation. We will also expand the commercial and residential property business in the PRC as an auxiliary development strategy of the Company. As the growth prospects of the PRC maintain, we will actively seize development opportunities in the Greater Bay Area and other first- and second-tier cities in the PRC, and continue to strengthen and expand the business of industrial real estate, and commercial and residential properties.

Nam Tai Property Inc. is a corporation registered in the British Virgin Islands and listed on the New York Stock Exchange (Symbol: "NTP"). Please refer to the Nam Tai website (www.namtai.com) or the SEC website (www.sec.gov) for our press releases and financial results. 

CONTACTS

Ira Gorsky, Edelman
Email: [email protected]
Cell: 732-740-5872

Media and Investor Relations, Nam Tai Property Inc.
E-mail: [email protected]

SOURCE Nam Tai Property Inc.

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