Investors were transfixed by the $1.9 billion loss at Singapore-listed City Developments (CDL) in its FY2020 financial results last week, due to the firm’s misadventure in China through its joint venture with Sincere Property Group. The last time CDL registered a loss was in the early 1970s, according to the group’s CFO Yiong Yim Ming.
Kwek Leng Beng, CDL’s executive chairman and one of Singapore’s richest man with a net worth of $8.8 billion, according to Forbes, reminded analysts and the media that the firm, founded in 1963, has weathered many challenges over the decades: the oil shocks and subsequent recession of the 1970s, the financial crises of 1997–1998 and 2008– 2009, and now, Covid-19. “Having gone through these difficulties, we emerged stronger every time,” Kwek says. “I’m confident that this will make us an even stronger company.”
Despite losses from its misadventure in China, CDL intends to continue land banking in its home market, says Kwek. When it comes to property, “we are a proxy to Singapore”, he declares. “We always want to have enough land.”
As at Dec 31, 2020, CDL has a land bank estimated at 533,600 sq ft in Singapore. (See table). It has a launch pipeline of about 1,200 units. That includes the upcoming 540- unit Irwell Hill Residences, which sits on a 99-year leasehold site on Irwell Bank Road in prime District 9. CDL had purchased the 137,634 sq ft, 99- year leasehold site for $538.9 million ($1,515 psf per plot ratio) in a government land tender in January last year. The upcoming project is scheduled for launch sometime in 2Q2021.
Another upcoming project is the redevelopment of Liang Court into a new mixed-use development that includes Canninghill Square, a 696- unit residences. The existing Liang Court will be demolished, and the new project is targeted for launch sometime in 2H2021.
The redevelopment of Liang Court is a 50:50 joint venture between CapitaLand and CDL. The site at River Valley Road will receive a fresh 99-year lease. The upcoming development offers views of the Singapore River on one side, and Fort Canning Park on the other.
Before the deal was inked with CapitaLand in Nov 2019, Sherman Kwek, CDL’s group CEO and Kwek’s elder son, had visited the Novotel Singapore Clarke Quay on the site, which was previously owned by CDL Hospitality Trusts. “I went to the higher floors, and the view was really breathtaking,” he recalls.
Sherman agrees with his father on the need to “replenish our land bank”. He adds, “We’ve done a big exercise internally to look at the optimal level of inventory for us to maintain”. However, he declined to disclose a figure, except to say that it has to be “sufficient to allow CDL to run it down in two years or so”.
Last year, CDL sold a total of 1,318 residential units worth $1.85 billion in sales in Singapore. The best-selling projects in its portfolio include the 566-unit Penrose on Sims Drive, a JV between CDL and Hong Leong, which was launched last year and 74% sold; the 820-unit Piermont Grand executive condo at Sumang Walk in Punggol which is 87% sold and where CDL has a 60% stake; and the 716-unit Whistler Grand at West Coast Vale, which is 95.5% sold. Meanwhile, the 861-unit The Tapestry at Tampines Street 86 is practically sold out with just one unit left.
Across its portfolio of launched residential projects, CDL’s share of unsold inventory in Singapore stood at 1,031 units as at end of last year. For developers, land is our “primary raw material”, says Chia Ngiang Hong, group general manager of CDL. “Our projects have sold well over the past few years, and we remain focused on maintaining a healthy optimal inventory level in Singapore. In replenishing our landbank, CDL will continue to adopt a strategic approach, through participating in land tenders including potential collective sale sites,” says Chia, in response to queries from The Edge Singapore.
Sherman describes the pressure of running this business. As a result of how the pandemic has affected construction activities, labour cost has risen. Materials costs, too, are rising because supply chains are disrupted. And last but not least, land cost here remains high. “It’s so competitive, and selling prices have more or less reached a higher inflection point,” he observes.
However, he sees genuine demand in the Singapore housing market, especially in the suburban projects, which are supported by HDB upgraders.
He expects 2021 to bode well for the Singapore residential market. “That’s what CDL does best traditionally,” notes Sherman. “We have a strong team that executes well. So, we will continue to replenish our land bank. In fact, we have been participating in the last couple of government land tenders and the bids were very close, but we didn’t win.”
CDL still has some legacy land bank, including Good Class Bungalow plots on Swiss Club Road totalling 215,438 sq ft, located off Dunearn Road; as well as 150,840 sq ft site at the Tampines Road-Upper Changi Road North neighbourhood, near the 428-unit The Jovell on Flora Drive. “We will develop these sites at the appropriate time,” says Chia.
It was the attempt to build up its land bank and substantially increase its presence in China that led to the group’s JV with Sincere. In FY2020, CDL sold 441 residential units worth RMB1.48 billion ($284 million). “Almost all of that sales came from our flagship project, Hong Leong City Centre in Suzhou,” says Sherman.
Hong Leong City Centre is a mixeduse scheme in Suzhou Industrial Park that includes offices, hotel, serviced apartments and 1,287 residential units. The sale of the 441 units had depleted CDL’s inventory in China.
“That’s part of the reason we invested in Sincere — because we did not have any further land bank in China to rely on,” says Sherman. “And we felt that we were ready for this big leap into China.”
