SINGAPORE (Oct 25): The securitisation of Nouvel 18 is a “win-win outcome” for City Developments (CDL) and investors with UOB Kay Hian maintaining its “buy” call with a target price of $10.36.
(See also: CDL monetises Nouvel for $977.6 mil via profit participation securities)
The deal values Nouvel 18 at $965.4 million or $2,750 psf.
In a Monday note, analyst Vikrant Pandey says CDL’s carrying costs for the project stands at $2,700 psf, resulting in a gain of $27 million.
The 14 high net worth individuals -- with investment sizes of between $7 million to $8 million -- stand to receive 5% per annum over five years, as well as participate in the asset divestment.
No seller stamp duty or additional buyer’s stamp duty is applicable in this share recapitalisation transaction.
CDL will be the exclusive asset manager and marketing agent for five years, with an option to extend to seven years.
There is also an upside potential as CDL will take an incentive fee if it hits the performance benchmark, notes Vikrant.
The benchmark takes into account funds to repay debt and deliver the 5% rate of return, with a portion of the excess paid going towards the incentive fee and the remainder distributed. Vikrant highlights the breakeven psf as $2,900 psf after the 5% returns.
This move is seen as a trade-off between avoiding extension charges versus future price appreciation, notes Vikrant. Extension charges have been estimated at $118 million, with the worst case scenario at $228 million.
“Should there remain any unsold units beyond seven years, the equity risk will be borne by the new investors,” says Vikrant.
Shares of CDL are up 2 cents at $8.84
