Read related article: The development will be preview on May 12 by Far East Organization and Sino Group
The Singapore listed property firm City Developments Ltd (CDL) announced on May 19 that it will begin construction of the Myst A new 99-year leasehold, 408-unit development located at Upper Bukit Timah Road at some point in the second half of 2023. The private condominium is only five minutes walk from the MRT station of Cashew on the Downtown Line.
However, CDL has changed the date of the preview for Newport Residences initially scheduled for the 29th of April. The freehold 246 unit Newport Residences is part of a mixed-use project which includes office space, serviced apartments as well as F&B along with retail. It’s a revamp of the previously-used Fuji Xerox Towers commercial building located on Anson Road in Tanjong Pagar in District 2 of the Core Central Region (CCR).
CDL delayed the preview after the implementation of the latest phase of property cooling measures that went in force on April 27th in 2003. Additional buyer’s stamp duty (ABSD) for foreign buyers purchasing residential property increased by 30% and increased to 60%. ABSD for Singapore citizens purchasing their second and third homes doubled from 30% to 60%. ABSD is applicable to Singapore citizens purchasing their third or second subsequent residential property has increased by 20% as well as 30% and 30%, respectively. Meanwhile, that for Singapore permanent residents (PRs) was increased by 30% as well as 35% in both cases.
“The Group will monitor the market conditions carefully and then start Newport Residences at the right moment,” says CDL.
“Minimal impact” on mid-tier and mass segments
In the near future, CDL expects the latest property cooling measures to affect projects that have a greater percentage of foreign demand, which is typically luxurious or high-end properties located in prime districts or CCR.
The group anticipates “minimal effect” on the mid- and mass-tier segments, where the majority of buyers are PRs and locals such as the launch of the EL Development’s Blossoms by The Park at one-north and 75% of the 275 units sold on the day of the launch on April 29, at the average price of $2,423 per square foot. The opening of 816 units at the freehold The Continuum by Hoi Hup and Sunway Property the following weekend saw the sale of 211 units (26%) at an average of $2,730 per square foot. The 732-unit The Reserve Residences at Jalan Anak Bukit, which is an alliance between Far East Organization and Sino Group The Reserve Residences will be launched on the 27th of May.
The analyst of RHB, Vijay Natarajan, In his report, he notes on May 19, that effect from the measures to cool the residential inventory of CDL “is manageable” because the company has sold the equivalent of 88% of its new inventory in Singapore in April.
Natarajan believes that the company could be able to recognize around $5 billion in residential sales that have not been billed in the coming three years. CDL owns four different projects totalling around 1500 unit ($2 billion gross value of development) in the pipeline for launch. He claims that the majority of% of the un-sold units are in the mid-tier or mass-market segment, which is not affected by the most recent cooling measures targeted primarily at investors and foreigners.
“While we anticipate a slight decrease in prices for new launches post-measures margins are likely to be significantly reduced and will remain within an eight to 20% interval,” says Natarajan in his research.
The company has residential developments across Australia as well. At the time of 1Q2023, construction of 198 units at The Marker in West Melbourne is complete. So far, it’s 92% sold. The 60-unit apartment development, Fitzroy Fitzroy, in Melbourne is currently 40% pre-sold in advance of the completion date of 1Q2024. In Brisbane it’s 215 unit Brickworks Park is 49% pre-sold. Its 97 unit Treetops at Kenmore, a JV development located in Brisbane is also presold at 49% pre-sold.
Commercial portfolio – strong occupancy
CDL announced it’s office inventory has an occupancy commitment that was 94.3% as at 1Q2023 which was higher than the island-wide percentage which was 88.8%. Republic Plaza, the flagship office of the group’s Grade A building located in the heart of downtown, is 93.2% occupied, with positive rental reversions to 8.9% in 1Q2023. The other office assets of CDL, City House and King’s Centre King’s Centre, have committed occupancies that are 96.7% and 100% respectively.
The portfolio of retail properties owned by the group has an occupancy committed that was 97.6%, higher than the overall rate which was 92.4%. The City Square Mall’s occupancy rate was 95% in the 1Q2023, whereas Palais Renaissance, Waterfront Plaza and The Venue Shoppes are 100% lease-up. Reversions in rental at City Square Mall and Palais Renaissance increased 7.9% and 7.5% in 1Q2023, respectively.
The increase in shopper traffic and returning of tourists are aiding the revival of the retail industry. But, retailers are beware of the risks of inflation in the form of utility bills and rising rates of interest, CDL comments.
Acquisitions from overseas
The group completed its acquisition in March. company has completed its purchase of St. Katharine Docks, an iconic 23-acre freehold marina estate located in Central London, for PS395 million (about $636 million) or PS751 per square foot ($1,209 per square foot) in the current Net Lettable Area. The estate covers more than 500 000 sq feet in Grade A offices space, F&B retail, residential and F&B located across four major buildings, as well as additional spaces and a marina that has the capacity to accommodate up to 185 vessels. The office portion currently has a high occupation rate of around 90% with a broad tenant base that spans industries like shipping, consulting education, co-working spaces and more.
The purchase of St. Katharine Docks adds to the portfolio of top commercial assets in the UK and will increase the value of the entire portfolio to PS1 billion. In addition to enhancing the group’s regular earnings stream, it is a complement to its strategy for managing funds by allowing the company to transfer their UK assets into platforms that are listed or not at the right time as per CDL.
The company is owned by its hotel subsidiary wholly owned by the group Millennium & Copthorne Hotels (M&C) and through a 50:50 joint partnership with its NewZ-listed affiliate M&C Hotels New Zealand, decided to acquire the hotel with 416 rooms Sofitel Brisbane Central hotel for A$177.7 million (about $159.2 million) which is equivalent to the equivalent of A$427,000 ($383,000) for each key, in March. When the deal is completed, acquisition in the 2H2023, CDL will benefit from this five-star hotel, which has the largest conference facilities located in the middle of Brisbane CBD, the group’s third hotel in Australia.
Acquisitions like St. Katharine Docks and Sofitel Brisbane increase CDL’s fund assets under management by 4 billion dollars, according to RHB’s Natarajan. CDL has set its sights on $5 billion at the end of 2023. “The fund management’s growth in business is one of the most important strategies to boost its low fundamental ROE (return on equity),” he comments.
PRS, PBSA portfolio boost
The month of April saw CDL bought two properties in the Osaka private rented segment (PRS) at Y=31.5 billion ($314.1 million). With the acquisition of 201 units, they increase an overall number of PRS units in Japan to 714. Average occupancy in it’s Japanese assets is higher than 95%. CDL says that a strong demand from both corporate and residential customers will fuel leasing growth in the first half of 2023, as the border restrictions are eased and foreigners come back.
According to CDL the company’s UK PRS portfolio continues to be “a class of assets that is counter-cyclical” after the pandemic. The leasing process is in progress in The Junction, the Group’s PRS development in Leeds that has achieved practical completion for three from five blocks (307 out of 665 units).
In the UK the company offers a specially-built students’ accommodation (PBSA) portfolio that includes 2,400 beds spread across five cities. It has an occupancy rate of 99% for the academic year 2022/23. Due to the high need and post-pandemic improvement CDL anticipates “significant rent growth” for the coming academic year.
Hotel portfolio RevPAR rebounds
CDL’s hotels recorded worldwide revenue per available room (RevPAR) an increase to 65.4% to $13.2 for 1Q2023, an increase of $79.3 on a yearly basis, driven by the robust recovery in Asia as well as Australasia.
In the 1Q2023, Singapore hotels recorded an 88.9% y-o-y increase in RevPAR which is mainly due to the higher rooms rates on average. As travel restrictions gradually eased for the rest Asia Singapore hotels saw 150.2% y-o-y RevPAR growth driven by the impressive performances of Taipei in China and Beijing.
The company opened its 294 room M Social Suzhou hotel in April, the debut M Social property in China. M Social Suzhou is located in China. M Social Suzhou is within Hong Leong City Center, the group’s integrated development adjacent to Jinji Lake in Suzhou Industrial Park.
According to CDL Hotels in Australasia had a significant increase in RevPAR in the range of 126.8% to $112.5 in 1Q2023 due in part to increased occupancy and rooms rates.
In Europe CDL’s hotels posted an 40.9% increase in RevPAR in the 1Q2023 quarter to $138.9. London hotels had an average room price that was $248.7, 22.3% higher than in the same period last year. This resulted in an 39.7% growth in RevPAR.
The US hotels registered an 38.4% y-o-y increase in RevPAR in 1Q2023, fueled mostly by New York hotels. The higher average rate for rooms and a continued effort to manage costs allowed hotels in the New York hotels to achieve an operating profit that was lower than the Q1 2022.
Ratio of net gearing at 55% and cash reserves of $1.9 billion
The company’s net gearing ratio was at 55% at the end of March 2023, after the purchase from St. Katharine Docks. The interest coverage of 3.1 times, and reserves for cash at $1.9 billion. CDL keeps its “liquid position” consisting of cash and non-renewal bank facilities of $3.6 billion. According to the company its debt expiry report, the group “remains sound”.
“The recently announced property cooling measures that were announced in April serve as a continual reminder to the Group that it shouldn’t be relying too heavily on a particular region or asset class,” states CDL. “The diversification of the portfolio geographically across all its business segments helps it remain stable while also embracing expansion.”