CDL to raise $1.5b via Sentosa Cove investment platform

18 Dec

SINGAPORE — City Developments (CDL) is raising S$1.5 billion via three Sentosa Cove properties from a group of investors and banks, including American investment giant Blackstone Group, to finance global expansion, Singapore’s second-largest listed property developer said yesterday.

Quayside Collection

Under the five-year deal using an investment vehicle called the Profit Participating Security (PPS), Blackstone and Malaysian bank CIMB will receive a fixed payout based on 5 per cent interest per year and participate in cash flows generated from the properties.

The properties are the W hotel, the Quayside Isle retail complex and the Residences at W Singapore, collectively called the Quayside Collection.

The total value of the PPS is S$750 million: CDL’s wholly-owned subsidiary Astoria Holdings will subscribe S$281 million, Blackstone’s Tactical Opportunities Fund will pump in S$367 million and CIMB Bank will invest S$102 million.

As the same time, DBS Bank and Oversea-Chinese Banking Corp will provide S$750 million in loan facilities.

CDL executive chairman Kwek Leng Beng said: “This offers investors a rare opportunity to participate in the cash flow from high-quality assets in Sentosa Cove. By leveraging the operating strength and solid cash flows of the Quayside Collection, we will be able to build and deploy capital for our global plans.”

CDL chief executive Grant Kelley said the PPS is part of a company plan to broaden its revenue by creating investment products linked to its real estate assets. CDL plans to use part of the funds to finance overseas expansion including in Japan, the United States and China, he added.

“Product expansion is really in some senses critical because for many of our investors, they want to see a diversification of income streams. If you look at our balance sheet, we actually are very cash rich,” he added.

Mr Nicholas Mak, executive director for research and consultancy at SLP International Property, added that beyond monetising the three properties over the five-year investment time frame, CDL will be protected against the rising cost of funds via the PPS. Referring to the 5 per cent fixed payout to the two investors, he said: “If interest rates go up, then CDL’s interest rate exposure is covered.”

Mr Kelley said despite the general property slowdown here, investors are optimistic about Sentosa’s long-term prospects.

“The beauty of the investment structure is that investors will benefit over the long term. For instance, rentals of the residential property on Sentosa Cove began only in the second quarter of this year and we won’t commence selling until 2018 or 2019. We don’t know where the market will be in the near term, but in the long term, it is going to be a strong market.”

Mr Kishore Moorjani, head of tactical opportunities Asia at Blackstone, told TODAY: “You have a hotel that is operating with very strong cash flows, a retail offering that is the only one of its kind on Sentosa Cove, and residences that are the only premium-branded ones on Sentosa.”

Dr Chua Yang Liang, head of research and consultancy at property firm Jones Lang LaSalle, said: “The Sentosa area offers a unique environment — a high-end waterfront concept. Beyond the current island-wide market weakness, this area offers good upside in the mid- to longer term given the lack of such assets in Singapore.”

Mr Mak said that over the next five years, there is a chance that the market outlook could improve, with prices rising above today’s levels. According to SLP, the last reported transaction price for a unit at the Residences at W Singapore was in October at S$2,891 per square foot, up from S$2,726 psf in August last year. WITH AGENCIES

Source: The Straits Times

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