China Real Estate Opportunities, a Chinese property company quoted on the AIM market of the London Stock Exchange, says the aggregate gross value of its portfolio at 31 December 2009 was RMB9.188bn (equivalent to GBP837m).

The valuation is broken down as follows: City Centre, Shanghai RMB5,564m, City Centre Extension, Shanghai RMB1,261m, Central Plaza, Shanghai RMB1,604m, The Treasury Building, Shanghai RMB641m and Beijing International Logistics Centre RMB118m.

These valuations represent an increase of four per cent in local currency terms (7.35 per cent in sterling terms) since the 30 June 2009 valuation of RMB8.834bn (equivalent to GBP780m).

They exclude the recent disposal of the company’s interest in the Tangdao Bay property, the proceeds of which will be received upon completion of the standard PRC regulatory procedures for the offshore repatriation of proceeds of domestic asset sales.

Creo says 2009 proved to be a challenging year on the office leasing front with vacancy rates in Shanghai peaking at 14.2 per cent in Q1 and reducing to 11.4 per cent by year end. The retail sector continued to perform strongly, aided by the resurgence of the Chinese consumer.

The property portfolio witnessed 212 lease expiries during the year, representing more than 50 per cent of its entire tenancy base. Approximately 55 per cent of these leases were renewed, whilst a further 15 per cent were moved out of the Central Plaza property as part of the refurbishment and re-positioning program.

Sixty new tenants, amounting to 28 per cent of lease expiries, entered into leases including Metlife Insurance, Prudential Insurance and Johnson & Johnson. Overall, this resulted in portfolio occupancy (excluding space under refurbishment) at 31 December 2009 of 85 per cent, (office 79 per cent; retail 97 per cent) representing a reduction of six per cent over 31 December 2008 but translated into increases in gross rental income on a per square metre basis.

During the year two disposals have been made at premia to the values at which they had been included in the financial statements. These were the five per cent interest in City Centre 5, disposed of in June 2009 for an 8.9 per cent premium over the valuation at 31 December 2008, and the 50 per cent interest in Tangdao Bay, disposed of in January 2010 for a 10.9 per cent premium over the valuation at 30 June 2009.

In addition, the disposal in November 2009 of approximately 60 per cent of the company’s shareholding in Rreef China Commercial Trust, a Hong Kong listed entity, generated a 20 per cent return on acquisition price.

Including the proceeds from the Tangdao Bay disposal, the company’s cash holdings at 31 December 2009 would have amounted to approximately GBP75m.

The company also made significant progress in the first phase of its refinancing programme with the completion of a loan facility with Citic Ka Wah Bank in December 2009. This replaced, on improved terms, the existing loan with Credit Suisse in respect of the Treasury Building in Shanghai, which had been due to expire in March 2010.

The company’s shares continue to trade at a significant discount to net asset value. With a view to narrowing the gap, the board has been considering for some time a number of options intended to widen the universe of potential shareholders, including obtaining a listing for the company on a recognised stock exchange in Asia.

The board has identified Singapore as its preferred listing location and a business trust structure under Singapore law as the likely structure, and subject to ongoing communication with shareholders and the relevant regulators, the company intends to proceed with this proposal within the next six months.

Singapore business trusts provide greater operational and investment flexibility than real estate investment trusts with regard to matters such as development limits and levels of gearing.