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City Developments Limited Just Made A Bet on Australia – Is It Right?

City Developments Limited (SGX: C09) has been diversifying itself away from Singapore for years now.

At the end of 2014, the real estate juggernaut derived about 58% of its revenue from Singapore. The two other major geographical markets for the company include the United States and the United Kingdom, where it has significant hotel operations. The two countries had respectively accounted for 13% and 9.5% of total revenue in 2014.

Now, it seems that City Developments is planning to re-enter the residential development business in Australia, after more than a decade.

Earlier today, City Developments announced that it is investing in a residential housing project in Brisbane with Abacus Property Group and KPG Capital. The former is a property group listed on the Australian stock market with a market capitalization of more than A$1.6 billion. Meanwhile, the latter is a privately owned, Brisbane-based property development and investment group.

The project is located in South Brisbane with a land area of 2,733 square metres (sqm). The plan is to develop the freehold site into two 30-storey towers that are able to accommodate 472 apartments in total.

City Developments’ latest Australian venture will have a total gross development value of around A$275 million. Both Abacus and City Developments will be providing the “majority of equity funding” for the project; they’d each pump in A$30 million.

Given that City Developments had recorded revenue of S$3.8 billion and a profit of over S$900 million in 2014, the investment in this project is not significant.

But, it does show that the company is actively looking for opportunities overseas. And if this small project eventually proves to be profitable for City Developments, it’d make sense to expect that more investments in Australia from the company would follow.

In the company’s news release on the aforementioned project, City Developments did mention that there are more than A$5.0 billion worth of proposed infrastructure investments in South Brisbane alone and the future prospects of the area is huge.

Let’s see if the company is able to make this investment work.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.