Kwek Leng Peck has resigned from his position as non-independent and non-executive director of City Developments Ltd (CDL), according to the company.

His letter of resignation had cited disagreement with the company's board and management over the following two issues as the primary reasons:

• CDL's investment in a China-based developer, Sincere Property Group, including its continued financial support of the developer which amounts to S$1.9 billion, and
• "Reservations" over CDL's approach towards the management of Millennium & Copthorne Hotels (M&C).

Prior to his resignation, Kwek had held his position for more than 30 years, according to Business Times (BT).

In addition, Kwek has also resigned from his position as director of M&C at the same time.

Why did Kwek have disagreements about Sincere Property Group and M&C?

Investment approach in Sincere

In its press release, CDL elaborated that its investment in Sincere consists of:

• A 51 per cent stake in Sincere for 4.4 billion yuan (S$896.8 million) which was obtained earlier this year in Apr.,
• A subscription of US$230 million (S$312 million) worth of bonds,
• A working capital loan of 650 million yuan (S$132.26 million),
• The provision of 1.5 billion yuan (S$305.2 million) in liquidity support undertaking for Sincere's bonds maturing on Oct. 26, and
• A 1.5 billion (S$305.2 million) corporate guarantee in relation to an external bank loan taken out by Sincere.

In addition, CDL highlighted that liquidity position of Sincere is "challenging" as a result of Covid-19 and property cooling measures, which has tightened liquidity for real estate companies in China.

This means that the planned asset divestment plan for some of Sincere's assets in the retail, hospitality, office and business park sectors will take a longer period than expected.

The divestment is aimed at lightening Sincere's debt load on its exposure to investment properties and strengthening its residential development plans.

In the meantime, CDL is in the process of identifying and appointing an external financial advisor to assist with the evaluation and review of its investment in Sincere

The impact of this investment on either CDL or its financial reporting will then be prepared together with the external financial advisor.

Management approach of M&C

Meanwhile, in the case of M&C, CDL further highlighted that 2020 had been a challenging year for hospitality and tourism.

The first half of the year saw CDL's hotel operations segment record a "substantial" pre-tax loss of S$208.2 million, including S$33.9 million of impairment losses made in view of the current pandemic.

Currently, M&C oversees the ownership and management of over 145 hotels globally, and is a wholly-owned subsidiary of CDL which.

It was listed on the London Stock Exchange in 1996 then delisted on Oct. 11, 2019, following a successful privatisation exercise launched by CDL.

Left on Oct. 19

According to The Straits Times, Kwek's resignation took effect on Monday, Oct. 19.

He still sits on the board of 81 other companies which includes CDL's substantial shareholders such as Hong Realty (Private) Limited, Hong Leong Holdings Limited and Hong Leong Investment Holdings Pte Ltd.

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