Developer City Developments (CDL) has set up a special working group to improve the profitability of its stake in Sincere Property Group after yet another director quit over the troubled investment.
The latest departure came last Wednesday when independent non-executive director Tan Yee Peng resigned, citing disagreements with the board and management over the handling of the firm's investment in Sincere.
Fellow director Koh Thiam Hock had quit two days earlier, following the abrupt resignation of Mr Kwek Leng Peck, the longstanding director and cousin of billionaire executive chairman Kwek Leng Beng, last October after clashes with the board.
CDL said yesterday that it aims to limit any additional financial exposure to the China-based real estate group.
It will review potential divestments of Sincere's assets and restructuring of its liabilities.
It noted in October that its investments in Sincere totalled about $1.9 billion, including 4.39 billion yuan (S$894.8 million) for a 51 per cent joint venture equity stake in April last year.
CDL also subscribed for US$230 million (S$302.8 million) worth of bonds issued by Sincere and provided a working capital loan of 650 million yuan.
The investment has triggered considerable unrest at the board level.
Mr Kwek Leng Peck, 64, the uncle of group chief executive Sherman Kwek, had served on the board for more than 30 years before his sudden resignation.
Ms Tan, 47, had clocked up about six years in her role.
Her departure followed that of Mr Koh, 70, who resigned after "having shared his observations, concerns and suggestions on the group's investment in Sincere".
CDL noted in an exchange filing in October that Sincere's liquidity position was challenging, having being severely impacted by the Covid-19 pandemic and property cooling measures that hit real estate companies in China.
"The intended asset divestment plan for some of Sincere's retail, hospitality, office and business park assets to lighten its debt load on investment properties' exposure... is now expected to take longer due to the current climate," CDL said then.
Yesterday's announcement of the new special working group comes after CDL's external financial adviser, Deloitte & Touche Financial Advisory Services, completed a review of the investment.
This identified major bank loans and non-trade liabilities maturing between the end of last year and this year that require debt restructuring.
Sincere has started negotiations with certain major lenders and is awaiting approval, CDL said.
The board will engage Deloitte China to assist CDL's special working group, which will evaluate options to improve Sincere's liquidity.
It is led by Ms Goh Ann Nee, chief transformation officer in the executive chairman's office.
Said Mr Kwek Leng Beng: "The CDL special working group will accelerate efforts to work closely with Sincere to improve its liquidity and profitability while limiting any additional financial exposure to the group.
"Notwithstanding the liquidity challenges, Sincere remains a platform for future growth in the Chinese market because of its real estate footprint across China."
CDL has appointed Mr Philip Lee Jee Cheng, 60, to replace Ms Tan and take on additional roles as member of the audit and risk committee, remuneration committee and nominating committee.
He has 35 years of experience in accounting and finance.
He was admitted into the partnership of KPMG Singapore in 1995 and served until his retirement in September 2018.
Sincere has 71 projects in 18 cities totalling around 8.6 million sq m, including hotels and serviced apartments, commercial and office buildings, business parks and residential projects.
Deloitte's review assigned these projects into three categories: those that are profitable and generating positive cash; ones that can be sold to improve liquidity and those that need further detailed reviews to identify feasible options to improve profitability.
CDL shares closed at $7.80 yesterday, down 17 cents, or 2.1 per cent.