Saturday, January 5, 2013

City Developments to buy Wachovia's 60% stake in Grange 100

The deal costs $204m.

According to Maybank Kim Eng, despite relatively weak 3Q12 profits, CDL’s share price has surged up strongly in the past month by nearly 8.5%, outperforming the FTSE Real Estate Index’s ~4.5% gain.

Here's more from Maybank Kim Eng:

On a one-year basis however, CDL’s share price may have risen 44%, but it still marginally underperformed the same index by 3.7%. We think that fundamentals have hardly changed to support current lofty valuations, and maintain our SELL recommendation, preferring CapitaLand, Keppel Land and CMA amongst the big-caps.

Pricing for the upper “Echelon”. CDL previewed the 508-unit Echelon at Alexandra View last Friday, and in that one day, 200 units were sold at an ASP of SGD1,700 psf, 13% higher than our assumption of SGD1,500 psf, which is close to the median transacted price at Ascentia Sky next door over the past 12 months.

It remains to be seen if the rest of the units can be sold at that ASP, but in the best-case scenario, the higher ASP would only lead to a 4 ct/share accretion to our RNAV estimate.

Unwinding another partnership. In 2011, CDL acquired a larger stake in South Beach as original partners Istithmar and the Elad group exited from the project. Last week, CDL announced that it is buying out Wachovia’s 60% stake in the JV company Grange 100, which holds 44 units at the now-completed Cliveden at Grange.

The deal will cost CDL  SGD204m, pricing the units effectively at SGD2,956 psf, with Wachovia realizing a loss of 21% over 5 years. Pegging CDL’s initial 40% stake at the latest transacted price, CDL may be sitting on paper losses of SGD36m, or around 4 ct/share. 

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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