City Developments Limited (CDL), a global real estate company, listed on the Singapore Exchange, has entered into a definitive agreement to acquire a 51.01% joint controlling interest in Sincere Property, a real estate developer in China, for RMB 4.39 billion (appr. S$0.88 billion, appr. US$620 million).
Upon completion of the transaction, CDL will hold a joint controlling interest in Sincere Property via an offshore investment vehicle, making CDL the single largest shareholder of Sincere Property.
Mr Wu Xu, Sincere Property’s Chairman and Founder, will see his stake reduce from 60% to 29% while Greenland Holdings Group Co., Ltd, a prominent developer in China, will see their shareholding in Sincere Property decrease from 40% to 19.99%.
As part of the transaction, a call option will also be granted to CDL to purchase an additional 9% effective interest in Sincere Property for RMB 0.77 billion (approximately S$0.16 billion) at the same entry valuation.
The call option will be exercisable at CDL’s discretion during a six-month period which will only commence upon either the expiry of 18 months from the completion of this transaction or 1 July 2022, whichever is later.
Assuming the call option is exercised, the total consideration to acquire a 60.01% effective stake in Sincere Property is RMB 5.16 billion (appr. S$1.04 billion) as compared to the original deal consisting of RMB 5.5 billion (inclusive of interest-bearing loans) for a 24% effective stake.
In May 2019, CDL had announced its intention to invest RMB 5.5 billion (appr.S$1.10 billion) comprising an equity investment and the extension of interest-bearing loans to acquire a 24% effective stake in Sincere Property.
”Given the adverse impact of the COVID-19 crisis and the global uncertainty, CDL has taken the opportunity to negotiate new terms for its investment into Sincere Property, which are significantly improved over the original investment terms announced last year,” said CDL in a statement.
“Our strategic partnership with Sincere Property marks a major milestone in CDL’s history and represents a gamechanging investment for us. Their high quality and sizeable asset portfolio is a synergistic fit and complements our core businesses of property development, asset management and hospitality. Despite our relatively late entry into China’s real estate market only a decade ago, this investment will immediately accelerate CDL’s geographical presence from three to 18 cities in China,” said Sherman Kwek, Group Chief Executive Officer of CDL.
”While there are challenges and uncertainties caused by the COVID-19 pandemic, China remains one of our key overseas markets and we hold a positive view of the long-term growth and market outlook there,” he added.
“Since our founding in 1999, Sincere Property has built up a strong presence and reputation in China, with a diversified portfolio comprising residential, commercial, retail, business parks, serviced residence and hotels. CDL’s investment will strengthen and expedite Sincere Property’s growth as we work closely to prioritise our core business segments,” added Wu Xu, Sincere Property’s Chairman and Founder.