During a results briefing by City Developments (CDL), CEO Sherman Kwek said the group is exploring establishing a REIT listed on the Singapore Exchange for its commercial assets in UK and would most likely aim for a listing in 1Q2021. In 2018, CDL acquired 125 Old Broad Street with net lettable area 328,819 sq ft for GBP385 million and Aldgate House with NLA of 210,504 sq ft for GBP183 million in 2018.

 

In 2016, CDL bought Development House in Shoreditch, a six-storey office building with NLA of 28,266 sq ft for GBP37.4 mil-lion. It is being developed in to 71,700 sq ft of space of which 2,024 sq ft will be allocated for retail and 7,147sq ft will be affordable workspace.

 

The yield for 125 Old Broad Street is 4.8% and for Aldgate House, 4.6%. With quantitative easing expected to continue at least till 2022, a 30&ndash 40% debt to asset ratio would provide distribution per unit yields of more above 5%. Given that Elite Commercial REIT is trading at just shy of 7%, CDL could easily list its REIT with its inevitably cheaper cost of capital. In March, CDL said in a statement to the SGX that the pipeline assets had not been finalised. &ldquo We are excited to set up a REIT in Singapore as and when market conditions allow,&rdquo confirms Frank Khoo, chief investment officer at CDL. &ldquo We will be delaying the potential REIT listing we are looking for a Q1 listing next year,&rdquo he adds.  

 

Separately in China, CDL completed its ac-quisition of Sincere, a Chinese developer that has a portfolio of retail and residential properties. Kwek says, &ldquo They are still too heavy on retail. We need to optimise the capital structure because of too much leverage and we&rsquo re looking at debt restructuring and asset divestment.&rdquo

 

At one point, CDL was looking into a retail REIT with Chinese assets that could potentially list either in Singapore or China. &ldquo We have been looking at this REIT proposal for a few years but [the Chinese regulators] only allow the listing of infrastructure REITs at the moment. We looked at listing a REIT in Singapore with China retail assets and some retail mall players are also interested but the problem lies in the yield. With high borrowing costs in China, the assets have a negative yield so from a yield perspective it would be prohibitive,&rdquo Khoo explains.

 

In April, CDL acquired additional 8.4% effective stake in IREIT Global for $25.5 milion, taking its stake to 21.4%. On Aug 7, IREIT Global&rsquo s manager announced it plans to exercise the call option to acquire the 60% of four Spanish properties it does not own from Tikehau Capital, for around EUR47.8 million ($77.4 million). In Dec, CDL had lent IREIT EUR32.0 million to acquire the properties. On a 100% basis this Spanish portfolio cost EUR133.8 million.

 

To fund the transaction and to repay CDL, IREIT Global&rsquo s manager has announced a renounceable non-underwritten, dilutive rights issue of new units in IREIT, to raise EUR90 million. Rights units will be issued to existing unitholders on a pro rata basis. CDL has provided an undertaking to subscribe to its stake and to take up the excess. If CDL takes up all its share of excess units, its stake will rise to 24.5%. 

 

CITY Developments Limited (CDL) posted a 99.1 per cent plunge in net profit to S$3.1 million for its first half ended June 30, 2020, from S$362 million a year ago.

 

The prolonged Covid-19 pandemic " severely impacted" the property and hotels group' s performance across its business segments, according to its results released on Thursday.

 

Loss per share stood at 0.4 Singapore cent for H1 2020, based on a net loss of S$3.3 million recorded after deducting preference dividends of S$6.4 million paid on June 30, 2020. For H1 2019, CDL posted an earnings per share of 39.2 Singapore cents.

 

Revenue for H1 fell 32.8 per cent to S$1.07 billion, from S$1.6 billion a year ago. The decline was seen across all business segments, with hotel operations accounting for 82 per cent of the drop in revenue.

 

CDL had on May 12 declared a non-cumulative 1.94 Singapore cents per share preference dividend to holders of its preference shares for the Dec 31, 2019, to June 29, 2020 period. The preference dividend was paid on June 30, 2020.

 

For the corresponding period last year, CDL paid out a special interim dividend of six Singapore cents per ordinary share, along with a preference dividend of 1.94 cents per preference share.

 

CDL executive chairman Kwek Leng Beng said the group' s hotel operations continue to face pressures in the subsequent quarters, although its property development and investment properties segments have remained relatively resilient.

 

" Despite the uncertainties, we are confident that with the eventual pent-up demand for travel, the road to recovery will be accelerated, especially when a vaccine for Covid-19 is likely to be available next year," Mr Kwek said.

 

CDL group chief executive Sherman Kwek said a thorough review is ongoing for the hotels segment. The group is also keeping a close watch for signs of improvement in the global travel sentiment.