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City Developments Limited (CDL) has described the statement of Sincere Property Group, the firms’ joint-venture (JV) investment in China, as misleading and contains incorrect information about CDL.
“Sincere Property has mis-represented the circumstances, the actions surrounding the investment, the relationship between both parties and CDL’s efforts to engage the JV partners to deal proactively with the challenging operating environment,” it said in a statement on Thursday (11 March).
“The Group takes a serious view of the recent statements by Sincere Property,” said CDL, adding that it will “strenuously defend itself against major inaccuracies”, while continuing “to adhere to high standards of disclosure even as it continues to engage its JV partner”.
CDL shared that it will “take all necessary steps, including legal actions, to ensure corporate transparency and good governance”.
CDL clarified two material incorrect information in Sincere’s statement.
First, it explained that it holds a joint controlling equity stake in Sincere Property. As such, it will “jointly control the JV on its material decisions” while the existing operation team previously set up by Sincere Property “continues to exercise direct oversight of its day-to-day operations and worksite matters”.
On the suggestion that Sincere Property’s corporate governance structure and approval procedures have undergone major changes due to CDL’s investment, CDL noted that Sincere Property’s eight-member Board of Directors is represented by all three shareholders – four from CDL, two from Sincere Property Holdings Limited and two from Greenland Holdings Group.
Despite having four board seats, the JV’s legal structure does not accord CDL majority control of Board decisions.
Moreover, Sincere Property has more than 2,000 employees compared to the “less than eight employees seconded by CDL to Sincere Property’s headquarters in Shanghai”.
Such employees were sent there following the conclusion of the JV to co-share knowledge and best practices; as well as to work as subordinates to the senior management of Sincere Property.
It revealed that there have been occasions when CDL could not support the recommendations of Sincere Property’s management since they “contravened CDL’s corporate governance as a listed company and the recommended use of funds were not in the best interest of all shareholders”.
It noted that the liquidity issued faced by Sincere Property was inherent even prior to its investment, saying that Sincere Property’s growth-focused approach kept its gearing high in the face of the COVID-19 pandemic and the structural policy shifts relating to China’s real estate sector.
“As a shareholder of the JV, CDL’s intention has always been to support Sincere Property in restructuring its debt and improving its capital position,” it said.
But given “the complexities of the debt structure and cross-collaterals of Sincere Property’s assets, the restructuring process has remained difficult and long-drawn amid an already challenging operating environment”.
Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this story, email: victorkang@propertyguru.com.sg
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