Nouvel 18 is a prime freehold project near Orchard Road. (Photo: CDL)
Sunmaster Holdings, a unit of City Developments Limited (CDL), has entered into an agreement to exit its entire interest in Summervale Properties, the owner of Nouvel 18 – a 156-unit luxury residential development on Anderson Road, for $977.6 million.
In an SGX filing last week, CDL noted that the move enabled the company to unlock the value of the freehold property through its third Profit Participation Securities (PPS) platform.
The property developer will not hold any interests in the ordinary shares and preference shares in Summervale following the completion of the transaction.
Trentwell Management, a CDL unit, will be appointed as the exclusive asset manager and marketing agent for five years with an option to extend to seven, to manage, lease, market and sell the units in Nouvel 18.
Meanwhile, Credit Suisse expects CDL to “record a profit and loss gain of about $27 million following the conclusion of the deal in Q4 2016”.
Since the PPS investors are Singaporeans and companies fully-owned by Singaporeans, the sale of its stake will allow CDL to absolve itself of the Qualifying Certificate (QC) deadline in end-November 2016, and hence, avoid a $38 million charge, said Credit Suisse.
As CDL will continue to manage Nouvel 18, further upside could also accrue through base annual management fees as well as an incentive fee after a performance benchmark is met, added the financial services company.
“CDL’s third PPS is in line with our strategy to grow our funds management business. It is also our first funds management platform where the asset is a purely high-end residential project,” said its Executive Chairman Kwek Leng Beng.
“The success of our latest PPS initiative reflects investors’ confidence in the tremendous value and potential of a rare, freehold product like Nouvel 18, as prices of Singapore’s luxury residential segment show signs of bottoming out. There is a return of interest in Singapore’s high-end properties due to their competitive pricing compared to other global cities and pent-up demand. Moreover, high-end residential supply remains limited in the medium and long term.”
According to a JLL report, the average price of luxury prime residential property in Singapore fell by about 20 percent in Q4 2015 from 2011, while prices of prime properties in other global cities such as New York, London and Hong Kong have an 82 percent, 92 percent and 165 percent premium over Singapore.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
