City Developments (CDL) is raising $1.5 billion from big investors and banks with a method never used in Asia before to beef up its war chest for global expansion.
Singapore’s second-largest developer has set up an investment instrument linked to its Sentosa Cove properties.
Private equity giant Blackstone Group will sink $367 million into the “profit partnering security” investment, as it is called, while Malaysia’s CIMB Bank will fork out $102 million.
CDL, through its subsidiary Astoria Holdings, will inject $281 million, raising $750 million in all.
The other $750 million will come from bank borrowings from OCBC and DBS Bank.
Under the deal – which will allow CDL to rake in some $1 billion – a fixed payout of 5 per cent is guaranteed for Blackstone and CIMB for five years.
The partners will enjoy cashflow from W Singapore-Sentosa Cove hotel, retail property Quayside Isle and The Residences at W Singapore- Sentosa Cove condo. This includes proceeds from any potential sale of the assets.
“Over the past 24 months, we’ve been actively pursuing a strategy of diversification where we don’t just have exposure solely to Singapore property and our Millennium and Copthorne (hotel) chain. We’ve expanded geographically but the second arrow in diversification is in our products,” Mr Grant Kelley, the CDL chief executive, told The Straits Times.
The launch of the product is not to raise cash, he added, as CDL is already well capitalised, but to demonstrate to the market the move towards fund management. “This should, in time, help us to attract a higher price earnings multiple, more akin to an asset manager than a property developer,” Mr Kelley said.
W hotel has 240 luxury rooms, while the 44,121 sq ft retail component, Quayside Isle, is fully tenanted. At the 228-unit The Residences at W Singapore, 25 units have been sold and 106 units leased.
CDL will maintain full ownership of the Sentosa properties through its unit Cityview Place Holdings, but will “sell the present and future cash streams to Blackstone and CIMB” via a special-purpose vehicle, Sunbright Holdings.
Blackstone’s investment represents its “long-term commitment” to Singapore, said Mr Kishore Moorjani, head of Blackstone’s tactical opportunities fund.
“If you’re just buying and selling an asset, it’s all about price. But in a partnership, you need a long-term view, and with the combination of forces you have here, in five years, (the assets) are going to do much better,” he said.