Mandarin moves into property market

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HONG KONG -- Hong Kong production and distribution outfit Mandarin Entertainment has diversified its core activities, recently making a HK$240 million ($30.8 million) investment in the Chinese property market, the company said Wednesday.

The move comes as Mandarin faces increasing competition not only from other local production houses vying for a slice of an ever-shrinking pie, but from overseas production companies as well as the DVD and VCD trade, both legal and illegal.

Mandarin acquired Profit Source International, a company jointly owned by Cheng Keung Fai and Lam Suet Chung, giving them a 90% stake in Minzu Plaza, a five-story shopping arcade located in Sichuan, China.

Minzu Plaza was valued before the acquisition at approximately HK$428 million ($54.9 million), but Mandarin was able to purchase their stake at a considerably reduced price as the property is currently under civil and other litigations, the responsibility for paying which now falls on Mandarin.

Although Mandarin has expressly stated that they will continue their work in film production, Minzu Plaza could be the beginning of a new profit stream for the company if their first venture into the Chinese property market proves fruitful.

HK$140 million ($18 million) of the purchase price will be paid to Cheng and Lam in the form of new shares and convertible bonds. The HK$70 million ($9 million) in new shares will represent a 23.3% stake in Mandarin. As part of the deal, Cheng and Lam have agreed that they will not own more than 25% of Mandarin at any one time.
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