City Developments Limited (CDL) has set up a special working group to improve the liquidity and profitability of its 51.01% joint venture (JV) equity investment in Sincere Property Group (Sincere Property), alongside a review of potential divestments of assets and restructuring of existing liabilities of the China-based real estate group.
The formation of the working group follows the completion of a third-party review by Deloitte & Touche Financial Advisory Services, which was appointed by the CDL Board in November last year as its External Financial Advisor to assess the Group’s investment.
After the completion of Deloitte’s review in end-November Sincere Property has over 314 legal entities and 71 projects spanning 18 cities, totalling around 8.6 million square metres. Its assets comprise hotels and serviced apartments, commercial and office buildings, business parks and residential projects. In its review, Deloitte had preliminarily allocated the 71 projects into three categories:
- Projects that are profitable and generating positive cash flow;
- Projects that can be divested (subject to the right market conditions) to improve liquidity; and
- Projects which need further detailed operational review to identify feasible options to improve profitability and/or liquidity.
The review also identified major bank loans and non-trade liabilities maturing between end-2020 and 2021 which require debt restructuring. Sincere Property has begun negotiations with certain major lenders and is awaiting approval.
Following a detailed review of Deloitte’s findings, the CDL Board has engaged Deloitte China to assist the special working group, which comprises a cross-section of internal expertise across divisions led by Ms Goh Ann Nee, Chief Transformation Officer in the Executive Chairman’s Office.
CDL Executive Chairman Mr Kwek Leng Beng said, “The CDL special working group will accelerate efforts by CDL to work closely with Sincere Property to improve its liquidity and profitability while limiting any additional financial exposure to the Group. Notwithstanding the liquidity challenges, Sincere Property remains a platform for future growth in the Chinese market because of its real estate footprint across China.”
