First Sponsor extends payment deadline for 465m yuan Chengdu project disposal

MAINBOARD-LISTED First Sponsor Group's indirect wholly-owned subsidiary, Chengdu Gaeronic Real Estate (CGRE), has extended the payment deadline, allowed payment in instalments, and further amended other payment terms for its proposed sale of certain parts of Chengdu Cityspring.

CGRE is selling parts of the mixed-use residential and commercial project in China for around 465 million yuan (S$92.5 million) in cash to Minyoun Industrial Group, a Chengdu-based hotel, real estate and finance company.

First Sponsor said that three parties entered into a fifth supplemental agreement to the sale and purchase agreement (SPA) on May 22: CGRE, Minyoun Industrial, and Ningbo Meishan Bonded Port Area Nanshe Yachun Investment Management Partnership - a joint venture vehicle in which Minyoun Industrial has a majority interest.

Under this fifth supplemental agreement, the buyer and/or Ningbo Meishan will pay the outstanding amount of the consideration, which amounted to 155.1 million yuan (S$30.8 million) as at May 22, via monthly instalments of at least 10 million yuan to CGRE by the last business day of each month starting from May 2019.

Also, the buyer and/or Ningbo Meishan will pay liquidated damages at 1 per cent per month on the outstanding amount for the period from May 28, up to the date on which CGRE receives full payment of the remaining consideration. If they fail to pay these liquidated damages by the fifth business day of each month, they will have to pay double the liquidated damages for that month.

CGRE will transfer the title to certain parts of the property to the buyer and/or Ningbo Meishan, the consideration for which shall not exceed the monthly instalment amount, after CGRE receives each instalment.

CGRE will transfer the title to any remaining parts of the property to the buyer and/or Ningbo Meishan upon full payment of the outstanding amount.

Previously, the third supplemental agreement stated that the buyer and/or Ningbo Meishan were to pay to CGRE the entire outstanding amount of the consideration by May 27.

CGRE was also previously supposed to transfer the title to the relevant parts of the property to Ningbo Meishan after CGRE received additional cash totalling 20 million yuan.

First Sponsor said on Wednesday that CGRE will be entitled to terminate the SPA and forfeit the total deposit if the buyer and/or Ningbo Meishan fails to pay any monthly instalment or liquidated damages by the due dates or breaches any other term of the SPA for more than 10 business days.

Likewise, the buyer and/or Ningbo Meishan will be able to terminate the SPA and CGRE will return the total deposit to them if CGRE fails to provide any relevant documentation or breach any other term of the SPA for more than 10 business days.

Chengdu Cityspring comprises six residential buildings, four commercial buildings and 1,272 basement car park lots. The sale involves one of the commercial buildings, a retail space and 318 basement car park lots.

The property is owned by CGRE under a leasehold which expires in March 2049.

The proposed disposal was announced in May last year, before the payment terms were amended several times through multiple supplemental agreements. The fourth supplemental agreement was entered into in January this year.

First Sponsor said in an exchange filing on May 30, 2018 that the sale was a good opportunity to dispose of an underperforming asset at a profit, and will further strengthen its balance sheet.

The sale price represents an excess of 102.9 million yuan over the net book value of the property as at March 31, 2018. The company intends to use the net proceeds of about 396.7 million yuan to fund its existing operations in China, it said in the May 30 filing.

First Sponsor shares were trading down two Singapore cents at S$1.19 as at 2.49pm on Thursday.