City Developments Limited (CDL) has reported earnings of $165.8 million for 2HFY2022, up 42% y-o-y, on the back of a 27% improvement in revenue to $1.82 billion.
For the full year, the property and hospitality company posted all-time-high earnings of $1.29 billion, thanks to an operational recovery from the pandemic and a slew of divestment gains. For FY2021, it recorded earnings of just $84.7 million. Revenue for FY2022 was $3.29 billion, up 25.4%.
CDL, which turns 60 this year, plans to mark its diamond jubilee in style by paying a final dividend of 8 cents per share, plus a special dividend of another 8 cents. With an interim special dividend of 12 cents already paid in September 2022, this brings the total cash dividend for FY2022 to 28 cents. In contrast, CDL paid a cash dividend of 12 cents for FY2021 and 20.2 cents worth from the distribution-in-specie of CDL Hospitality Trust (CDLHT) units.
CDL’s executive chairman Kwek Leng Beng calls the FY2022 results a “sterling” one, driven by prudent divestments and strong operational performance from its core business segments. “Notably, our hotel operations made an outstanding rebound, having recovered in most markets to pre-pandemic levels,” he remarks in a Feb 23 statement.
Significant divestment gains recognised by CDL over the past year include the sale of Millennium Hilton Seoul; the gain on the deconsolidation of CDL Hospitality Trusts (CDLHT); and the collective sales of Tanglin Shopping Centre and Golden Mile Complex in 2H2022 where CDL owns share values and strata areas. In FY2022, CDL recognised a total gain (inclusive of negative goodwill) of $492 million on the deconsolidation of CDLHT as well as pre-tax divestment gains og $1.26 billion on the sale of the properties.
As at Dec 31, 2022, CDL’s net asset value (NAV) was $10.16, up 9.7%. The company maintains its conservative stance of stating its investment and hotel properties at cost less accumulated depreciation and impairment losses. If fair value gains are factored in, CDL’s revalued NAV would be $16.98 as at Dec 31 2022, versus $15.73 as at Dec 31 2021. Had the revaluation surpluses of its hotels been included, the RNAV per share would be $19.14.
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Robust property segment
For FY2022, property development remained CDL’s biggest revenue contributor, accounting for 42% or $1.38 billion of the year’s revenue. Three key Singapore projects – Amber Park, Haus on Handy and Irwell Hill Residences – collectively made up 74% of property development revenue.
In terms of Singapore residential sales, CDL sold a total of 1,487 homes including executive condominiums (ECs) in FY2022, representing a total sales value of $2.9 billion. In comparison, the group sold 2,185 residential units worth $4.3 billion in FY2021.
FY2022 sales were underpinned by the launch of two projects – Piccadilly Grand and Copen Grand – which are both joint venture projects with MCL Land. The 407-unit Piccadilly Grand, located in Farrer Park, launched in April 2022 with 86% of its units sold to date. Copen Grand, an EC located in Tengah Town, launched last October and was fully sold out one month after its launch.
CDL has a Singapore residential pipeline of over 2,100 units which will launch across the next couple of years. In 1H2023, it will launch Tembusu Grand, a 638-unit development along Tanjong Katong Road and Jalan Tembusu in District 15. It is a joint-venture project with MCL Land.
Another launch slated in 1H2023 is Newport Residences, a 45-storey freehold development comprising 246 residences. Newport Residences is part of Newport Plaza, an integrated mixed-use development with apartments, serviced residences, offices and retail units. It is a redevelopment of the former Fuji Xerox Towers on Anson Road in Tanjong Pagar.
In the second half of the year, CDL will launch The Myst, a 99-year leasehold condominium along Upper Bukit Timah Road. The project comprises two 24-storey blocks with 408 apartments.
CDL is also undertaking the redevelopment of Central Mall and Central Square. The combined site will be redeveloped into an enlarged mixed-use integrated development comprising office, retail, hotel and residential components. The residential component, with some 300 units, is expected to launch in 2H2024. Meanwhile, it is targeted to launch its 510-units EC project at Bukit Batok West Avenue 5 in 1H2024.
Strong rebound in hospitality
CDL’s hotel operations, hurt like everyone else during the pandemic, rebounded strongly in FY2022. “Our hospitality segment displayed a very resilient and strong performance as they recovered off of three very difficult years during Covid,” remarked Sherman Kwek, CDL’s group CEO, at a results briefing on Feb 23.
FY2022 hospitality revenue was up 58% to $1.38 billion, supported by a 91% increase in hotel RevPAR (revenue per average room) to $137.90. The RevPAR growth was attributable to a 48.9% increase in average room rates and a 14.2 percentage point improvement in occupancy.
Yiong Yim Ming, CDL’s group CFO, adds that RevPAR in UK and Europe have exceeded 2019 levels, or pre-Covid levels, while Singapore and New York are close to 2019 levels. “With China and Taiwan opening up, we do expect Asia to pick up right very quickly in 2023,” she remarked during the briefing.
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The hospitality segment was also bolstered by divestment gains from the sale of Millennium Hilton Seoul and the deconsolidation of CDLHT.
CDL chairman Kwek anticipates the hospitality segment to continue gaining traction this year. “Riding on the return of corporate travel and unabated pent-up demand for leisure travel, our hospitality segment will continue to strengthen and is poised to be a star performer for the year ahead,” he says.
CDL says it will accelerate plans for asset optimisation of for its hospitality portfolio. “We certainly have a lot of aspirations for our hospitality portfolio and a lot of plans in place to unlock value,” comments CEO Sherman Kwek. This includes opportunistic asset divestments, portfolio restructuring and asset positioning, as well as driving operational efficiency.
Building scale in living sector
Over the past year, CDL has steadily built its “living sector” portfolio, which includes private rented sector (PRS) and purpose-built student accommodation (PBSA) assets. In FY2022, it acquired six PBSA assets in the UK, two PRS sites in Australia, and another three PRS projects in Japan.
CDL’s UK living sector portfolio currently comprises around 2,400 PBSA beds and a pipeline of over 1,300 PRS units, inclusive of a 352-unit project in Manchester under CDLHT. The portfolio has a combined assets under management (AUM) value of about $1 billion, based on current gross development value.
In Japan, CDL has eight PRS assets across Yokohama and Osaka which account for 512 beds with a total AUM of $164 million. Meanwhile, the two PRS sites in Australia, located in Melbourne and Brisbane, will yield 490 units upon completion by 2026.
According to CEO Sherman Kwek, CDL will continue building up its living sector portfolio, as part of its aim to grow the group’s funds under management to US$5 billion, up from its current AUM of US$3.1 billion. “[Once we’ve achieved] scale, we can start to look at potential fund management opportunities and platforms for those assets,” he adds.
To grow its portfolio, CDL is also looking at more acquisitions overseas. This includes the potential acquisition of St Katharine’s Docks, a mixed-use development in London. Last month, CDL was reported to be in talks to buy the development from Blackstone for around GBP400 million ($647 million).
