Chip Eng Seng in joint $47.5 mil investment of China distressed property company
SINGAPORE (June 15): Chip Eng Seng and controlling shareholder Haiyi Investment are jointly investing RMB240 million ($47.5 million) in a distressed property company based in Taicang city in Jiangsu province, China.
Chip Eng Seng says the investment will enable the project company to discharge its outstanding liabilities such that its assets will be unsealed and restart a project involving the development and construction of a residential development on a land area of 38,000 sqm, with a gross floor area of 111,111 sqm.
The project company, effective controlled by local shareholder Ren Weimin, currently owns a property covering a total land area of 90,657 sqm at 26 Dangqian Road, Huangjing town in Taicang city, Jiangsu, which is bordered by Shanghai.
The project company has constructed a mixed development on the property over a land area of 51,684 sqm, consisting of 12 residential buildings and two commercial buildings in Phase 1 of the development.
However, due to ongoing legal proceedings, the assets of project company -- including the land use right to the property -- are currently sealed off by the local courts.
“Accordingly, the project company is not able to start any development works in relation to the project at this point in time,” says Chip Eng Seng in its Friday night filing.
On Friday, Chip Eng Seng’s subsidiary, CEL Property Development (CEL) and Haiyi Investment signed a master framework agreement with the project company and existing shareholders.
Haiyi Investment is an associate of Gordon and Celine Tang who jointly hold 29.73% in Chip Eng Seng.
Although the investment is considered an interested person transaction, Chip Eng Seng’s audit committee says the agreement are on normal commercial terms and are not prejudicial to the interests of the company and its minority shareholders.
CEL will set up a wholly foreign-owned enterprise (CEL WFOE) in China to undertake the investment.
The investment amount of RMB240 million will be contributed by the investors in the proportion of 63.75% by CEL and 36.25% by Haiyi Investment.
Following the investment, CEL WFOE will hold 51% in the project company while Haiyi Investment will hold 29% in the project company. Ren will hold the remaining 20%.
In accordance with the master framework agreement, the investment will be carried out in four stages: Stage One and Stage Two will involve the provision of loan of RMB45 million and RMB171 million respectively.
Stage Three will into the transfers of the 51% and 29% stakes in the project company to CEL WFOE and Haiyi Investment respectively for a combined consideration of RMB1.00.
Stage Four will see the provision of the final tranche loan of RMB24 million.
Chip Eng Seng says its contribution of RMB153 million will be funded from internal sources.
As Chip Eng Seng’s first foray into property development in China, the investment will provide the opportunity for the company to establish a presence in the fast-growing Yangtze River delta area.
Shares in Chip Eng Seng closed 1 cent lower at 70 cents on Friday.
