CDL Files for Singapore REIT IPO of London Commercial Assets

SGX-listed City Developments Ltd on Friday said it had applied for an initial public offering of a real estate investment trust that will own commercial assets located in the UK.

The official statement confirmed rumours that had been building for weeks regarding the potential listing on Singapore’s mainboard. However, in its notice to the exchange, CDL said that no decision has been made as to whether the transaction will take place and there is no certainty that the company will proceed with the IPO.

Unnamed sources have told Bloomberg that the Singaporean development giant plans to raise £500 million ($706.2 million) via the offering of the REIT, whose £1.8 billion portfolio would be seeded with 8 Canada Square, the HSBC global headquarters building in London’s Canary Wharf currently owned by the Qatar Investment Authority.

The emirate’s sovereign wealth fund bought the 42-storey office building from South Korea’s National Pension Service for an undisclosed amount in 2014. Published reports at the time put the sale price at over £1.1 billion.

Portfolio Intrigue

CDL hasn’t dropped any hints about which assets would make up the rest of the reported £1.8 billion portfolio. But the company owns two commercial buildings in Britain that it purchased in 2018, Aldgate House and 125 Old Broad Street, both in the City of London.

The Singaporean firm bought the eight-storey, 1970s-vintage Aldgate House from a joint venture of Hermes Investment Management and the Canada Pension Plan Investment Board for £183 million. CDL acquired 125 Old Broad Street, home to Cushman & Wakefield’s European headquarters, from US private equity major Blackstone for £385 million.

With its potential REIT IPO, the developer led by billionaire Kwek Leng Beng may be looking to create some market buzz after reporting a loss attributable to shareholders of S$1.9 billion ($1.4 billion) for 2020.

The red ink was driven largely by a cash-devouring investment in mainland Chinese developer Sincere Property Group last year. CDL’s handling of Sincere compelled director Kwek Leng Peck — the uncle of CDL chief executive Sherman Kwek and the cousin of chairman Kwek Leng Beng — to leave the company in October. Three other board members followed him out the door over the next seven months.

In Need of a Win

Under pressure to boost its finances, CDL was reported in late May to be in talks to sell the Millennium Hilton Seoul to Korea’s Igis Asset Management for $891 million. In December, the company had sold its Copthorne Orchid Hotel & Resort Penang in Malaysia for about $18.9 million, as its Millennium and Copthorne Hotels division continues to see income dented by the pandemic.

At its annual general meeting in April, CDL told shareholders it would have earned a profit after tax and minority interests of S$140 million in 2020, if it had been able to exclude its investment in Sincere, a Chongqing-based developer specialising in business parks.

Vowing that it had “ring-fenced” its commitment to Sincere to prevent further losses, CDL earlier this year declared an S$1.8 billion write-down on the mainland builder. The company also suffered impairment losses on hotel and investment properties during 2020.

After a bond default in March, Sincere issued a statement complaining that a delay in decision-making by “the controlling shareholder” — apparently meaning CDL — had “seriously affected the timely implementation of financing and asset disposal to improve company operations and cash flow”. CDL said its partner had misrepresented the circumstances.

CDL’s RMB 4.39 billion investment in Sincere in April last year gave it a 51 percent stake in the company, without giving it board control. The Singapore firm has said it will “take all necessary steps, including legal actions, to ensure corporate transparency and good governance” in coping with Sincere’s credit woes.