CDL forms working group to improve Sincere's liquidity

CITY Developments Limited (CDL) on Monday said it has set up a special working group that will focus on improving Sincere Property Group's liquidity and profitability.

Options to do so include a review of potential divestments of assets and the restructuring of existing liabilities of the China-based real estate group.

In a bourse filing on Oct 21, CDL noted that its investments in Sincere totalled about S$1.9 billion. These include a 51 per cent joint-venture equity investment in Sincere amounting to some 4.4 billion yuan (S$896.8 million).

CDL's latest move comes after it previously appointed Deloitte & Touche Financial Advisory Services as its external financial adviser to review the group's investment in Sincere.

As at the completion of Deloitte's review in end November, Sincere had over 314 legal entities and 71 projects in 18 cities, totalling around 8.6 million square metres (sq m), CDL said on Monday. These comprise hotels and service apartments (174,000 sq m), commercial and office buildings (2.7 million sq m), business parks (2 million sq m); as well as residential projects (3.7 million sq m).

In its review, Deloitte had preliminarily allocated the 71 projects into three categories, CDL noted.

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These are: projects that are profitable and generating positive cash; projects that can be divested to improve liquidity; and projects which need further detailed operational review to improve profitability and/or liquidity.

In addition, Deloitte's review also identified major bank loans and non-trade liabilities maturing between end 2020 and 2021 which require debt restructuring, CDL said.

It added that Sincere has started negotiations with "certain major lenders and is awaiting approval".

Having considered Deloitte's findings, CDL's board has decided to engage Deloitte China to assist its new working group comprising a "cross-section of internal expertise across divisions" led by Goh Ann Nee, chief transformation officer in the executive chairman's office, CDL noted.

Said CDL executive chairman, Kwek Leng Beng: "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."

In recent months, three CDL directors have quit over issues related to the group's investment in Sincere. The latest to step down was independent non-executive director, Tan Yee Peng.

Ms Tan's departure comes after independent non-executive director Koh Thiam Hock similarly resigned with immediate effect from Dec 28, after more than four years on the group's board.

Last October, CDL's former non-executive and non-independent director Kwek Leng Peck also quit after more than 30 years in the role. He cited disagreements with the board over CDL's investment in Sincere, as well as its continuing provision of financial support to the Chinese property group. He also had reservations with the group's approach in managing its London-based wholly-owned unit Millennium & Copthorne Hotels, which he concurrently resigned from as a director.

CDL shares closed at S$7.80 on Monday, down S$0.17 or 2.1 per cent.