CDL seeks PPS transaction for Nouvel 18 worth $965m

Romesh NavaratnarajahJuly 29, 2016

Nouvel 18 condominium

Nouvel 18 was completed almost two years ago, but has yet to be launched.

Property developer City Developments Limited (CDL) is working on a Profit Participation Securities (PPS) scheme involving its Nouvel 18 condominium, with a deal size of $965 million, revealed Credit Suisse citing The Business Times.

A PPS platform is defined as a type of floating rate note which has its coupon linked to the profits of the issuer.

This comes after CDL’s recent purchase of Wing Tai’s 50 percent stake in Summervale Properties, the developer of the luxury condo along Anderson Road, noted Credit Suisse. The $410.96 million acquisition, which was funded through the internal resources of CDL, brings its stake in the project to 100 percent.

“We believe the sale by Wing Tai was likely motivated by the impending Qualifying Certificate (QC) deadline for the project due at the end of November 2016,” said Credit Suisse.

The 156-unit freehold project achieved its temporary occupation permit (TOP) in November 2014, but has yet to be launched.

Credit Suisse noted that foreign developers who fail to complete and sell all units within two years from the TOP date will be subject to a QC extension fee at eight percent, 16 percent and 24 percent of the land cost, pro-rated on the percentage of unsold units for the first, second, third and subsequent years.

Even at estimated costs of $2,343 psf (versus $3,000 on average in the vicinity), CDL would still be able to make 15 percent margins, the financial services company said.

It also believes the acquisition allows CDL greater flexibility and optionality, heading into the QC deadline.

“In addition to a potential public launch or bulk sales, CDL would now be able to optimise the value of the project via a “capital markets transaction”. This would likely be conducted through its growing funds platform, and structured as a variant of its PPS transactions,” said Credit Suisse.

In May, The Business Times reported that CDL had appointed JLL to search for potential investors for its third PPS platform, involving a portfolio of 48 residential units in three residential projects, estimated at $350 million ($2,300 psf).

 

Romesh Navaratnarajah, Senior Editor at PropertyGuru, wrote this story. To contact him about this or other stories, email romesh@propertyguru.com.sg

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