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Singapore’s CDL counts cost of US$1.4 billion ‘cautionary tale’ investment in Chinese developer Sincere Property Group

  • City Developments Ltd last month revealed a writedown on the Chongqing-based developer that led the Singapore firm to suffer a record annual loss
  • The US$1.3 billion impairment serves as a warning to others that investing in the world’s second-largest economy comes with hidden risks

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A residential area in Beijing. China’s real estate industry has been roiled by the pandemic and a crackdown on leverage. Photo: EPA
Bloomberg
When Singapore’s richest property family invested in a Chinese real estate group, the deal was touted as “game-changing” for its expansion in Asia’s largest economy. Almost a year later, it has instead become a cautionary tale for firms looking to invest in Chinese developers.
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In a case of a dream turning into a burden, City Developments Ltd. last month revealed a S$1.78 billion (US$1.3 billion) writedown on Chongqing-based Sincere Property Group that led the Singapore firm to suffer a record annual loss.

The impairment constituted almost all of CDL’s S$1.9 billion investment in Sincere, which more than doubled from its initial outlay as its partner’s finances deteriorated. Now CDL has had enough, saying it will no longer inject funds until the Chinese company returns to health. Cash-strapped Sincere has dragged their rift into the open after missing a bond repayment.

CDL’s wager in a Chinese developer with liquidity issues quickly unravelled when Beijing imposed checks on fresh fundraising by highly indebted builders that breached its “three red lines”. For others seeking to expand in China, its predicament is a warning: investing in the world’s second-largest economy may be seductive but also comes with hidden risks.

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“It’s a tightly regulated sector and swift change in policies can quickly turn the table against an investor,” said Bloomberg Intelligence analyst Kristy Hung. “In Sincere’s case, the three red lines rule heightened the refinancing difficulties of smaller-scale developers with high leverage.”

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