Singaporean CDL Buys 24% Stake in Chinese Developer Sincere Property Group

Main Photo: The Shama Luxe Huashan, Shanghai

Location: China

Name: Sincere Holdings Group

No. of Keys: TBA

Seller: Sincere Holding Group

Buyer: City Developments Limited (CDL) has entered into agreements to invest in Sincere Property Group (Sincere, or 协信远创), an established real estate developer in China.

The investment consideration, comprising share subscription and a four-year interest-bearing loan, the allocation of which is subject to adjustments and will be finalised upon completion, amounts to a total of RMB 5.5 billion (approximately S$ 1.1 billion)

The key elements of the deal are:

  • CDL’s single largest investment in China to date
  • Expands CDL’s geographical presence in China from 3 to 20 cities
  • Increases CDL’s portfolio allocation in China from 9% to 15%
  • Access to a substantial landbank of 12.6 million sqm GFA across 70 development
    projects
  • Broadens CDL’s asset classes in China to include business parks and serviced
    apartments
  • Invests another RMB 1.2 billion for a 70% stake in a prime Shanghai commercial
    property

Subject to various conditions precedent, including further adjustment of Sincere’s onshore
shareholding structure and completing or obtaining any required governmental and regulatory
reviews and approvals in China, the investment is expected to be fully completed by Q4 2019.

Upon completion, 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) (上海虹桥协信中心(二期)) (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.

With over 20 years of track record, Sincere is ranked as one of China’s Top 100 Developers by
China Real Estate Association (中国房地产业协会) and one of China’s Top 10 Business Park
Developers and Operators by Guandian (观点地产). Sincere has a full set of development and
asset management capabilities across different sectors, including residential, retail, office,
serviced apartment, business park and large-scale mixed-use development. Sincere’s
geographical presence in China spans 20 cities including key Tier 1 and Tier 2 cities where it
employs over 1,800 professionals.

Sincere has a full spectrum of residential projects ranging from high-end to mass market which
include villas as well as low- and high-rise condominiums. It also has more than 15 business
parks, which are under development or in operation, with a total GFA over 5 million sqm.

Sincere also owns and operates a substantial portfolio of investment properties in China,
including 14 retail malls with a total GFA of about 700,000 sqm, two serviced residences with
536 apartments and five hotels with approximately 1,400 rooms.

This transformational deal is CDL’s single largest investment in China to date. 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.”
“Leveraging Sincere’s development and asset management capabilities, local expertise and
wide geographical presence in China, CDL will be able to significantly boost its scale and
accelerate its growth in this huge market with a substantial portfolio and pipeline of development projects and investment properties.

Sincere’s capabilities in retail, business parks and serviced apartments will also enhance and deepen CDL’s expertise in China. Moreover, there is tremendous potential to develop fund management platforms via Sincere’s existing portfolio and through new acquisitions.”

Mr Wu Xu, Sincere’s Founder and Chairman, said, “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.”

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.

Leveraging on an enlarged resource pool, CDL will benefit from Sincere’s sizable team with
strong local execution capabilities. With Sincere’s local networks and partnerships coupled with
CDL’s international expertise and capital markets connections, the two companies will achieve
a significant competitive edge.

There is also potential to develop fund management platforms via Sincere’s existing portfolio
and through new acquisitions.

For CDL’s investment in Sincere, The Hongkong and Shanghai Banking Corporation Limited
acted as the financial advisor and Fangda Partners as the legal advisor.

The investment in the Hongqiao Property is in line with CDL’s focus on enhancing recurring
income. The prime commercial property is strategically located in the heart of Shanghai’s
Hongqiao CBD and within 10 minutes’ drive to one of China’s most important transportation
hubs which consists of an international airport, railway and subway stations. It is also within 15
minutes’ drive to the Shanghai National Exhibition and Convention Centre.

Notable projects nearby include Alibaba’s Regional Headquarters, Vanke Centre and Longfor Paradise Walk.

THPT Comment: Big move for CDL into China

First Seen: CDL website

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