Third Director Leaves CDL Board Over Investment in China’s Sincere Property

The new year is looking much like the old for City Developments Ltd and its board, with a third director in as many months stepping down over the Singaporean firm’s contentious investment in Chinese developer Sincere Property Group.

The resignation of independent non-executive director Tan Yee Peng was announced in a filing with the Singapore Exchange on Monday, effective 30 December 2020.

The 47-year-old Tan, who was chairman of the board sustainability committee, had served as a director since May 2014. The former partner at accounting giant KPMG is also an independent director of Dutech Holdings Ltd, a China-based, Singapore-listed maker of safes and semiconductor-related products.

“Ms Tan’s reasons for her resignation as a director of the company are in relation to the group’s investment in the Sincere Property Group,” CDL said in the filing. “She disagreed with the board and the management about the handling of the investment after the acquisition.”

Three’s a Crowd

Tan’s exit comes in the wake of two other departures from the developer’s board in recent months.

In October, non-executive, non-independent director Kwek Leng Peck stepped down after more than 30 years in his role. Then just last week, Koh Thiam Hock, a former vice chairman of Bank of America in Singapore, resigned as a CDL director after serving since September 2016.

In his resignation, Kwek had cited disagreements with the board and management about CDL’s investment in Sincere, as well as the company’s approach to its struggling hospitality division, Millennium & Copthorne Hotels Ltd (M&C). Kwek is the cousin of CDL executive chairman Kwek Leng Beng and the uncle of CDL group chief executive and executive director Sherman Kwek.

The Sincere dispute factored in Koh’s decision as well. “Having shared his observations, concerns and suggestions on the group’s investment in Sincere Property Group with all members of the board, Mr Koh is of the view that it is most appropriate for him to now step down as a director,” CDL said in its announcement of his resignation.

The developer appeared to acknowledge the concerns of its former directors today with an announcement to the Singapore exchange that it has appointed a special working group to review and improve liquidity for its investment in Sincere.

“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,” the developer’s chairman, Kwek Leng Beng said in a statement. “Notwithstanding the liquidity challenges, Sincere Property remains a platform for future growth in the Chinese market because of its real estate footprint across China.”

CDL in April said it had agreed to acquire a 51 percent stake in Chongqing-based Sincere for RMB 4.39 billion ($621 million). The news came just under a month after four domestic bonds issued by Sincere were suspended from trading for a day after the developer had failed to make payments on the instruments worth an aggregate RMB 2.6 billion.

In the unaudited financial statements for the first six months of the year, CDL estimated the fair value of Sincere’s net identifiable assets at RMB 9 billion. Based on its purchase consideration of S$882 million (about $665 million), which was on an agreed valuation of Sincere at RMB 8.6 billion, CDL recognised S$43.2 million of negative goodwill for its joint controlling interest and a S$7.7 million mark-to-market gain on a 9 percent call option, which was included in the takeover but cannot be exercised before July 2022.

Upon Further Review

In early November, CDL announced the appointment of Deloitte & Touche Financial Advisory Services to assist in reviewing its investment in Sincere. Upon completing its review, Deloitte said the mainland developer possessed good assets from which CDL could extract further value.

Even so, CDL said it would weigh Deloitte’s findings and those of auditor KPMG before finalising its own assessment of the fair value of the Sincere assets by the end of 2020.

Former director Tan had served as an audit partner with KPMG from 2003 to 2010. But she was not involved in any KPMG audit engagement with CDL, according to the developer.

On Monday, CDL announced the appointment of Lee Jee Cheng Philip, 60, as an independent non-executive director with immediate effect, replacing Tan. Also an experienced accountant, Lee made partner at KPMG Singapore in 1995 and served until his retirement in September 2018. He currently sits on the governing council of Singapore Agro-Food Enterprises Federation Ltd.

In late November, CDL issued guidance predicting a full-year loss for 2020, which it linked to the expected continued effects of the COVID-19 pandemic.

CDL foresees its global hospitality segment, led by wholly owned M&C, recording a deficit in 2020 amid the ongoing COVID crisis, as the group continues to smart from its £776 million (then $989 million) buyout of the London-listed hospitality firm in 2019.