The global business climate may be challenging, but this may have created opportunities for City Developments Limited (CDL), where it has sealed a major property deal in China. The Singapore property giant is taking up a 24% stake in Chinese developer Sincere Property Group for RMB 5.5 billion yuan (S$1.1 billion), marking the group's single biggest investment in China to date. The investment is expected to be completed by the fourth quarter of 2019. Find out more about CDL’s path to expand in China below.

Speaking in Singapore at a press briefing to announce the deal, CDL Group Chief Executive Officer Mr Sherman Kwek said, “This transforms our company in China. Now we can seriously bulk up on scale and grow with our partner with the necessary expertise on the ground.”

Since entering China in 2010, CDL has built a presence in three cities (Suzhou, Shanghai and Chongqing). But with this deal, it will go up to 20 cities with a portfolio allocation rise from 9% (as at Dec 31, 2018) to 15% after acquisition.

“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. 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,” said Mr Kwek.

“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,” he added.

Strategic transformational investment into Sincere

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. These properties include commercial property Shanghai Hongqiao Sincere Centre; Chengdu Hilton Hotel; Jinglan Peak residential development and Starlight 68 Mall, both properties located in Chongqing.

Sincere’s contracted sales grew at a compounded annual growth rate of 47% from RMB 9.9 billion (approximately S$2 billion) in 2016 to RMB 21.3 billion (approximately S$4.3 billion) in 2018.

Mr Kwek said, “We want to grow our commercial portfolio in a larger way so our earnings have a stronger foundation, that is also what attracted us to the deal.”

Accelerate the growth of CDL’s portfolio in China: The deal will expand CDL’s geographical presence in China from three to 20 cities. CDL will be able to achieve scale and attractive returns through immediate access to Sincere’s pipeline of 70 development projects, including mega development Zhengzhou Financial Island in the Henan province of China, with a total landbank of 12.6 million square metres. Over 90% of Sincere's landbank is located in Tier 1 and 2 cities.

Enhance and deepen CDL’s expertise: Following the investment in Sincere, CDL’s expertise in China will be significantly enhanced. CDL’s existing platforms and investments in the residential, office, retail, apartment rental and hotel sectors will be supplemented by Sincere’s expertise in managing retail, business parks and serviced apartments.

Combine local and international expertise: 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.

Mr Wu Xu, Sincere’s Founder and Chairman, said, “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. This strategic partnership also brings together Sincere’s deep local capabilities and CDL’s extensive international expertise. Our combined strengths will not only give our joint venture a distinct advantage in property development and asset management but also open doors to further growth opportunities, such as tapping CDL’s experience and networks to jointly explore fund management initiatives.”

After the deal, CDL will be the second largest shareholder after Sincere's founder and chairman Mr Wu Xu. CDL will also have representation on Sincere’s Board at both offshore and onshore levels and have the right to participate in key decision making.

For more information, please click here for CDL’s announcement.