CDL invests $1.1b in Chinese real estate developer

CDL has agreed to acquire a 70 per cent stake in Shanghai Hongqiao Sincere Centre (Phase 2), a commercial property in Hongqiao Central Business District, from Sincere Property Group for 1.2 billion yuan (S$239 million). An artist's impression of Zhen
An artist's impression of Zhengzhou Financial Island, of which Sincere Property Group is a major developer. The island is a mega mixed development comprising offices, serviced apartments, hotels, a retail mall and cultural centres. City Developments' investment in Sincere is expected to be completed by the fourth quarter of this year, giving CDL a 24 per cent equity stake in the Chinese company.PHOTO: CITY DEVELOPMENTS
CDL has agreed to acquire a 70 per cent stake in Shanghai Hongqiao Sincere Centre (Phase 2), a commercial property in Hongqiao Central Business District, from Sincere Property Group for 1.2 billion yuan (S$239 million). An artist's impression of Zhen
CDL has agreed to acquire a 70 per cent stake in Shanghai Hongqiao Sincere Centre (Phase 2), a commercial property in Hongqiao Central Business District, from Sincere Property Group for 1.2 billion yuan (S$239 million). PHOTOS: CITY DEVELOPMENTS

The US-China trade war may be harmful to both economies if it is prolonged, but it has created opportunities in the Chinese property market, City Developments (CDL) group chief executive Sherman Kwek said yesterday.

"After the US-China trade war implications started to become real... the Chinese government has started slowly but certainly relaxing property restrictions," he said at a question-and-answer session during a press conference announcing CDL's 5.5 billion yuan (S$1.1 billion) investment in Chinese real estate developer Sincere Property Group.

For example, the Chinese authorities have loosened home purchase and loan restrictions for buyers, as well as raised price ceilings for developers when selling properties, he said. "It has created opportunities for developers like us to enter the market," said Mr Kwek.

The trade war between the United States and China escalated recently, with the US hiking tariffs on US$200 billion (S$274 billion) worth of Chinese goods.

Nonetheless, he added that a prolonged trade war will hurt all companies in China, and hopes that a trade deal between the two superpowers can be hammered out soon.

CDL's head of strategic investments Sophia Dai added that there may be less impact on the property market in China as it is powered by domestic demand.

"The trade war may have broad implications, but in this sector, we are still cautiously positive," she said, adding that CDL also has confidence in the quality of land banks that Sincere has acquired, such as those in developed regions like the Yangtze River Delta.

The investment amount comprises share subscription and a four-year loan, the allocation of which will be finalised upon completion of the deal.

CDL said the amount is its single largest investment in China to date.

The investment is expected to be completed by the fourth quarter of this year, giving CDL a 24 per cent equity stake in Sincere and making the Singapore company the second-largest shareholder after Sincere founder and chairman Wu Xu.

Sincere has residential projects ranging from villas to low-and high-rise condominiums, and more than 15 business parks under development or in operation.

It owns and operates Chinese investment properties, including 14 retail malls, two serviced residences and five hotels.

In addition, CDL has entered into an agreement with Sincere to acquire a 70 per cent stake in Shanghai Hongqiao Sincere Centre (Phase 2), a prime commercial property in the heart of Shanghai's Hongqiao Central Business District, for 1.2 billion yuan, equivalent to about 49,000 yuan per sq m.

When the acquisition is completed, China will be CDL's second-largest asset contributor (15 per cent), with Britain (14 per cent) dropping to third place.

Singapore will remain the largest contributor at 46 per cent.

Spread across 11 blocks, the Hongqiao property has a gross floor area of 35,739 sq m comprising offices, serviced apartments, a retail component and a basement carpark with 384 spaces. This investment is expected to be completed by the third quarter of the year.

The announcement comes as CDL more than doubled its net profit to $199.6 million for its first quarter to March 31, from $85.3 million for the corresponding period a year ago, boosted by strong profit margins for development projects and realisation of a $144.3 million pre-tax gain from the divestment of Manulife Centre.

CDL also announced the appointment of Mr Kwek to the board of directors, and he assumed the role of executive director from yesterday.

He is the elder son of executive chairman Kwek Leng Beng and a nephew of non-executive director Kwek Leng Peck. He is also the executive chairman of CDL China.

A version of this article appeared in the print edition of The Straits Times on May 16, 2019, with the headline 'CDL invests $1.1b in Chinese real estate developer'. Print Edition | Subscribe