Yesterday evening, City Developments Limited (CDL) announced that it has jointly acquired, with a U.S. based investment firm, a prime freehold site in Tokyo’s Minato ward for JPY 30.5b (~S$355.5m) from Seiko Holdings Corporation. The large freehold site comprises a land area of 16,815 sqm, on which the group intends to develop iconic high-end condominiums. The site also currently holds a 1,340 sqm mansion, the former residence of Seiko’s founder Mr Kintaro Hattori, which will be conserved.

This is the first time CDL has acquired a residential land bank of this size in Tokyo and marks a shift in the group’s strategy to accelerate its expansion overseas, particularly as the residential market in Singapore continues its marked slowdown. We see management’s drive for geographical diversification in key markets to be a sound strategic move and believe the acquisition price for this site appears fair.

That said, pending more details from management regarding the development plan, we opt to assign no accretion to RNAV for now and keep our fair value estimate unchanged at S$8.72. Maintain SELL on valuation grounds.

Source: OCBC Research - 1 Oct 2014