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Business deals

Singapore's City Developments bets big on China real estate

Developer partners with Sincere Property to tap mainland's long-term growth

CDL will take a 70% stake in a commericial property in the heart of Shanghai's commercial district.  (Photo by Kosaku Mimura)

SINGAPORE -- Major Singaporean property developer City Developments announced on May 15 a pair of transactions with China's Sincere Property Group totaling nearly $1 billion, underscoring its faith in the mainland real estate market.

City Developments, also known as CDL, will purchase a roughly 24% stake in Sincere for 5.5 billion yuan ($800 million) in a deal financed by loans and equity. "It is a rare opportunity to acquire a meaningful stake in an established platform at an attractive valuation," said CDL Group CEO Sherman Kwek.

Wu Xu, chairman of Sincere, said the partnership will open up growth opportunities, "such as tapping CDL's experience and networks to jointly explore fund management activities."

In addition, CDL will spend 1.2 billion yuan to purchase from Sincere a 70% stake in Shanghai Hongqiao Sincere Centre, a prime commercial property located in the heart of Shanghai's Hongqiao Central Business District. This raises China's share of CDL's global portfolio allocation to 15% from 9%, placing the market second only to Singapore's 46%.

The Singaporean developer is expanding its footprint in China because it believes there is significant room to develop the mainland market on a long-term basis. Sincere has locations in 20 major cities, including Shanghai, Chongqing and Guangzhou. As a mid-tier player, Sincere's real estate development and investment profile ranges from houses and offices to industrial parks.

When this round of transactions closes by the end of the year, Sincere and CDL's Chinese operation will merge with the goal of developing properties in leading mainland cities.

CDL reported on May 15 a net profit of 199.56 million Singapore dollars ($146 million) for the first quarter ended March, a 130% surge from a year earlier. The improvement was largely credited to a SG$144.3 million capital gain from the sale of the Manulife Centre, a commercial development in Singapore.

The trade tensions between the U.S. and China remain a concern, but "for the next 10 years, you will see constant and sustainable growth in the property market in China," said Wu.

"This trade war definitely has some negative repercussions on both sides of the economy," said Kwek. "I hope this will not be a prolonged thing."

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