Singapore-listed City Developments Ltd(CDL) announced that it has entered into agreements to invest RMB 5.5 billion (approximately S$ 1.1 billion) in Sincere Property Group, an established real estate developer in China.It will be CDL’s single largest investment in China.
CDL will indirectly hold an approximately 24% effective equity stake in Sincere via its offshore investment vehicle, making CDL the second largest shareholder after Sincere’s Founder and Chairman, Mr Wu Xu. CDL will have representation on Sincere’s Board at both offshore and onshore levels and have the right to participate in key decision making.
In addition, CDL has entered into an agreement with Sincere to acquire a 70% stake in Shanghai Hongqiao Sincere Centre (Phase 2) (Hongqiao Property), a prime commercial property in the heart of Shanghai’s Hongqiao Central Business District (CBD), for RMB 1.2 billion (approximately S$247 million), equivalent to about RMB 49,000 per square metre (sqm).
Spreading across 11 blocks, the Hongqiao Property has a Gross Floor Area (GFA) of 35,739 sqm comprising offices, serviced apartments, a retail component and a basement car park with 384 lots. This investment is expected to be completed by Q3 2019. The investments in Sincere and Hongqiao Property will be funded through internal cash resources and credit facilities.
“Rapid urbanisation, economic growth and rising disposable incomes will continue to drive demand for real estate in China. This transformational deal is CDL’s single largest investment in China to date,” said Mr Sherman Kwek, CDL’s Group Chief Executive Officer in statement.”It is a rare opportunity to acquire a meaningful stake in an established platform at an attractive valuation. This game-changing initiative will drive CDL’s next phase of growth in this important market.”
”Since our founding in 1999, Sincere has built a strong presence and reputation in China. CDL’s investment and support will be instrumental in accelerating Sincere’s growth as we continue to increase our land bank and pipeline of properties with the aim of achieving even stronger sales growth.” said Mr Wu Xu, Sincere’s Founder and Chairman.
The deal will expand CDL’s geographical presence in China from three to 20 cities and increase CDL’s portfolio allocation in China from 9% (as at 31 December 2018) to 15% (post acquisition). CDL will be able to achieve scale and attractive returns through immediate access to an enlarged portfolio and pipeline as well as potential joint venture (JV) opportunities for acquisitions in China’s Tier 1 and Tier 2 cities.