Singapore property tycoon Sherman Kwek seeks to salvage CDL investment in China

In the past month, Sherman Kwek, the 45-year-old chief executive officer of City Developments Ltd. (CDL), has had to contend with two more board member resignations, taking the total to three since October. His firm set up a special team to decide on the sale of assets at its joint venture with Sincere Property Group, the Chinese developer that has driven a rift in the family, and to look at restructuring its liabilities. His father, CDL’s executive chairman, came out to defend the investment.

It is the biggest challenge yet for Kwek, who has been at the helm for three years and spearheaded the Sincere deal in 2019. With its pipeline of 64 projects and sizeable land bank, the developer increased CDL’s presence in China to about 20 cities from three and was touted as “game changing” for growth. But the coronavirus pandemic and tighter borrowing rules governing real estate firms in the country have instead forced losses on the Singaporean company.

“Sherman will have to engage with investors and show that he can deliver to convince them that he’s the right person to lead the company,” said Mak Yuen Teen, associate professor of accounting at the National University of Singapore. “The Sincere investment is probably a make or break deal to either cement his role or to call for change in leadership.”

Trouble started with Covid-19, which brought much of China’s economic activity to a halt at the start of 2020. Most of Sincere’s projects were put on hold or delayed, and CDL renegotiated the terms of its joint venture in April, effectively giving the firm a big valuation discount. China’s “three red lines” policy to rein in leverage in the sector only added to the woes, spelling the end of the fast growth seen in previous years and increasing liquidity constraints at Sincere, which is now seeking to accelerate asset sales.