Deal values Norman Foster-designed complex at S$2.75 billion proceeds will help CDL trim debt, recycle capital

 

[SINGAPORE] City Developments Limited (CDL) has agreed to sell its 50.1 per cent stake in the South Beach mixed project to its Malaysian partner, IOI Properties Group (IOIPG), for about S$834.2 million.

 

The deal values the complex at about S$2.75 billion, which represents a premium of about 3 per cent over the most recent valuation of S$2.67 billion as at Dec 31, 2024.

 

CDL expects to see a gain on disposal of about S$465 million for the financial year ending Dec 31, 2025.

 

In a statement earlier on Wednesday, CDL said the sale price was based on 50.1 per cent of the consolidated net assets of Scottsdale Properties, which owns South Beach Consortium, which in turn owns South Beach.

 

Cash proceeds from the divestment will enable CDL to reduce bank borrowings and improve its net gearing ratio, the group said. Capital from the sale will also be used to pursue new acquisitions, invest in upcoming pipeline development projects and optimise capital management.

 

Assuming that the deal had been completed at the end of FY2024, the group&rsquo s net gearing ratio would have fallen to 103 per cent, from 117 per cent, CDL said. It would have logged earnings of S$638.5 million, up from S$190.8 million, had the deal been completed at the beginning of FY2024. Earnings per share would have risen to S$0.712, from S$0.213.

 

CDL&rsquo s board believes the sale supports positive returns for the group&rsquo s business and aligns with its strategic focus on capital recycling. The group aims to divest S$1 billion in assets, and has announced about S$600 million in divestment so far.

 

It said the Beach Road property has reached maturity and has been delivering &ldquo strong occupancy and stable income&rdquo . The Norman Foster-designed project in Singapore&rsquo s Central Business District includes retail space, a 34-storey office tower and a 45-storey building housing JW Marriott Hotel Singapore.

 

Sherman Kwek, CDL&rsquo s group chief executive, said: &ldquo Having fulfilled our vision for South Beach &ndash from securing the land site via a rigorous tender process in 2007, navigating macroeconomic challenges, to transforming it into the high-performing, stabilised asset it is today &ndash it is now time to crystallise its value.&rdquo

 

As at Mar 31, South Beach&rsquo s office and retail components posted committed occupancy of 92.4 per cent and 92.5 per cent, respectively, CDL said on Wednesday. Major tenant Meta Platforms last year gave up seven floors of space at the office tower the exit brought occupancy down to 92.4 per cent from 94.4 per cent at the end of last year.  

 

CDL acquired the site through a government land sale for nearly S$1.7 billion in 2007, with two foreign partners &ndash a unit of state-owned Dubai World, and El-Ad Group.

 

According to a Bloomberg report, the global financial crisis led to a years-long delay in construction. The two partners exited the project, with IOIPG eventually taking a minority stake in 2011. Kwek Leng Beng, executive chairman of CDL, resisted letting IOIPG take an equal stake in order to maintain control, based on a biography published in 2023, Bloomberg said.

 

In CDL&rsquo s statement on Wednesday, the elder Kwek said: &ldquo South Beach began as a bold vision to enhance Singapore&rsquo s reputation as a global city, attract international investors and create a new icon that blends modern, sustainable architecture while preserving the site&rsquo s conserved buildings.&rdquo

 

IOIPG group CEO Lee Yeow Seng said: &ldquo The acquisition of a 100 per cent equity stake in this landmark development marks a significant strategic expansion for IOIPG in Singapore. Combined with the IOI Central Boulevard Towers and W Singapore Marina View hotel, this acquisition will elevate the group&rsquo s profile as one of the major landlords of premium office space and a prominent player in the hospitality industry within the Republic.&rdquo

 

The Malaysia-listed group is controlled by the Lee family, which made its fortunes from palm oil.

 

News of the South Beach sale comes in the wake of a public feud between father and son in CDL&rsquo s Kwek family, which erupted in late February.

 

While they have since buried the hatchet, the younger Kwek acknowledged at CDL&rsquo s annual general meeting in April that the dispute had hurt shareholders&rsquo confidence. He also identified reducing the growing debt load as a priority.

South Beach sale sharpens capital flexibility

• CDL agreed to divest 50.1% stake in South Beach mixed-use development, valued at c. SGD 2.7bn
• Potential gain of around SGD 450mn for CDL net gearing projected to fall to c.105% from 117% and net debt-to revalued NAV improving to c.60% from 70%
• Key priority will be to unlock additional debt headroom, enabling CDL to reap deep value within books

What has happened:

CDL has agreed to divest its 50.1% stake in the South Beach mixed-use development, valued at close to SGD 2.7bn, to JV partner IOI Properties Group. The iconic asset comprises a 34-storey office tower, retail podium, and a 45-storey JW Marriott Hotel, strategically located at Beach Road and linked to Esplanade MRT and City Hall MRT. This divestment will mark one of its largest asset sales to date and is a major step toward its FY25 deleveraging plan, which targets at least SGD 600 mn in asset sales outlined by CEO Sherman Kwek at the recent AGM. The move comes after the group fell short of its SGD 1 bn divestment goal in FY24, as the group was looking to maximise value instead of divesting just to meet targets. 

Our view:

We understand that CDL holds the South Beach asset at cost less depreciation, which we estimate to be in the range of SGD 1.6-2.0bn for the entire development, excluding the residential component. This suggests a potential gain of around SGD 450mn for CDL (50.1% stake). The divestment is expected to meaningfully strengthen the balance sheet, with net gearing projected to fall to c.105% from 117% and net debt-to revalued NAV improving to c.60% from 70%. We anticipate further divestments as the group works towards a more comfortable debt-to-revalued NAV level in the low 60% range in the near-term. While a special dividend could be on the cards, we believe the key priority will be to unlock additional debt headroom, enabling CDL to capitalise on the significant unrealised value embedded within its portfolio.

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State tender draws six bids for site zoned residential with commercial at first storey

 

[SINGAPORE] City Developments has placed the top bid for a 99-year leasehold site next to Lakeside MRT station in the Jurong West area.

 

Its bid of S$608 million, which works out to about S$1,132 per square foot per plot ratio (psf ppr), was the highest of six bids received for the site at a state tender that closed on Tuesday (Jun 3).

 

The plot, in Lakeside Drive, is zoned residential with commercial at first storey. It can be developed to a maximum gross floor area (GFA) of 537,065 sq ft.

 

The plot can yield about 575 private homes. The commercial component is capped at 10,764 sq ft GFA, of which a minimum 7,535 sq ft has to be for supermarket use.

 

The second-highest bid at the tender, from a partnership between Frasers Property and Mitsubishi Estate, came in at S$550.56 million (or S$1,025 psf ppr).

 

Also bidding for the site was a tie-up between units of CapitaLand Development and Sing Holdings, which offered S$529 million or S$985 psf ppr.

 

Wee Hur Development bid S$938 psf ppr.

 

Intrepid Investments and TID Residential offered S$922 psf ppr.

 

The lowest bid, from Sim Lian Land and Sim Lian Development, was S$909 psf ppr.

 

The plot is a stone&rsquo s throw from Jurong Lake Gardens it is also near schools such as Rulang Primary School, Shuqun Primary School, Yuhua Secondary School and Yuan Ching Secondary School.