(Reuters) – Property group Hongkong Land said on Thursday it has agreed to sell its MCL Land residential development business to a unit of Malaysian conglomerate Sunway for S$739 million ($577.98 million).
Hongkong Land said the proceeds will be used to strengthen its balance sheet and increase its share buyback programme by an additional $150 million, on top of the $200 million announced in April.
MCL Land is a residential developer with projects in Singapore and Malaysia.
Hongkong Land Chief Executive Michael Smith told Reuters in a briefing on Thursday that the transaction is further evidence of the group delivering on its strategic vision to recycle capital and exit the residential build-to-sell segment, although Singapore will remain a core market for the Hong Kong group.
Selling assets at full net asset value reinforces that the group’s NAV is recognised by buyers, he said.
“This is further evidence of the fact that we believe and buyers believe that our net asset value is real,” he said.
The sale, by way of a share sale, is part of Hongkong Land’s 2035 strategic vision to shift away from the residential build-to-sell segment and focus on ultra-premium commercial properties in major Asian cities, it said.
“It’s really a win-win transaction,” Smith said. “We’re pivoting away from this market, and Sunway is pivoting towards it.”
Hongkong Land’s Chief Investment Officer Michelle Ling said the divestment will also strengthen the company’s ability to reinvest in its core markets.
“So beyond $150 million for (the) share buyback, the rest will be with regards to reinvesting and building up our capacity to deploy our strategy in the ultra-premium integrated property sector,” she said.
Sunway, in a separate statement, said the acquisition will strengthen its “property development and property investment portfolio in Singapore and Malaysia through income-generating projects and assets that provide near to mid-term earnings visibility.”
Hongkong Land, part of conglomerate Jardine Matheson, said Singapore remains a core market despite the exit from residential development.
“Singapore is a core market alongside Hong Kong and Shanghai that we would like to deploy more capital in,” Smith said.
($1 = 1.2786 Singapore dollars)
(Reporting by Shivangi Lahiri in Bengaluru and Yantoultra Ngui in Singapore; Editing by Vijay Kishore and Susan Fenton)
