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CDL to launch The Myst at Upp Bukit Timah in 2H2023; impact of cooling measures on residential portfolio 'manageable'

CDL to launch The Myst, a 408-unit project at Upper Bukit Timah Road, in 2H2023 (Picture: CDL)

SINGAPORE (EDGEPROP) - Singapore-listed property group City Developments Ltd (CDL) announced on May 19 that it would launch The Myst, a new 99-year leasehold, 408-unit project at Upper Bukit Timah Road sometime in 2H 2023. The private condo is within a five-minute walk of the Cashew MRT station on the Downtown Line.

On the other hand, CDL has rescheduled the preview for Newport Residences, initially slated for April 29. The freehold, 246-unit Newport Residences is part of a mixed-use development that includes offices, serviced apartments and F&B and retail. It's a redevelopment of the former Fuji Xerox Towers commercial building on Anson Road in Tanjong Pagar in District 2 of the Core Central Region (CCR). (Find Singapore commercial properties with our commercial directory)

CDL deferred the preview following the rollout of the latest round of property cooling measures that came into effect on April 27, 2003. The additional buyer's stamp duty (ABSD) for foreigners buying residential property doubled from 30% to 60%. The ABSD for Singapore citizens buying their second and third or subsequent residential property increased to 20% and 30%, respectively, while that of Singapore Permanent Residents (PRs) increased to 30% and 35%, respectively.

"The Group will monitor the market conditions closely and launch the project [Newport Residences] at the appropriate time," says CDL.

‘Minimal impact’ on mass and mid-tier segments

In the near term, CDL expects the latest property cooling measures to impact projects with a higher proportion of foreign demand, typically high-end/luxury properties in prime districts or CCR.

The group expects "minimal impact" on the mass and mid-tier segments where most buyers are locals and PRs, as evidenced by the launch of EL Development's Blossoms By The Park at one-north, where 75% of 275 units sold on the first day of launch on April 29 at an average price of $2,423 psf. The launch of the 816-unit, freehold The Continuum by Hoi Hup and Sunway Property the following weekend saw 211 units sold (26%) at an average price of $2,730 psf. Meanwhile, the 732-unit The Reserve Residences at Jalan Anak Bukit, by a joint venture between Far East Organization and Sino Group, will launch on May 27.

Analyst at RHB, Vijay Natarajan, notes in his report on May 19 that the impact of the cooling measures on CDL's residential portfolio "is manageable", as the group has sold 88% of its launched inventory in Singapore as of April.

Natarajan estimates the group could recognise about $5 billion in unbilled residential sales over the next three years. CDL has four projects with about 1,500 units ($2 billion in gross development value) in the launch pipeline. He says that 80% of the unsold units are in the mid-tier and mass-market segments, less impacted by the latest cooling measures aimed mainly at foreigners and investors.

"While we expect a slight moderation in new launch prices post measures, margins are unlikely to see significant compressions and remain in an 8-20% range," says Natarajan in his report.

The group has residential developments in Australia too. As of 1Q2023, construction of the 198-unit The Marker in West Melbourne has been completed. To date, it is 92% sold. The 60-unit apartment project, Fitzroy Fitzroy, in Melbourne, is 40% presold ahead of its completion in 1Q2024. In Brisbane, its 215-unit Brickworks Park is 49% presold. The 97-unit Treetops at Kenmore, a JV project in Brisbane, is also 49% presold.

Palais Renaissance is 100% occupied as at end March 2023 (Photo: CDL)

Commercial portfolio – strong occupancy

CDL reported that its office portfolio had a committed occupancy of 94.3% as at 1Q2023  – above the island-wide occupancy of 88.8%. Republic Plaza, the group's flagship Grade-A office building, is 93.2% occupied, with a positive rental reversion of 8.9% in 1Q2023. CDL's other office assets, City House and King's Centre, registered committed occupancies of 96.7% and 100%, respectively.

The group's retail portfolio had a committed occupancy of 97.6%, higher than the island-wide occupancy of 92.4%. City Square Mall's occupancy was 95% in 1Q2023, while Palais Renaissance, Waterfront Plaza and The Venue Shoppes are 100% leased. Rental reversions at City Square Mall and Palais Renaissance increased 7.9% and 7.5% in 1Q2023, respectively.

Increased shopper traffic and the return of tourists are helping the recovery of the retail sector. However, retailers remain cautious due to inflation challenges, utility costs and rising interest rates, CDL comments.

In March, the group completed its acquisition of St. Katharine Docks, a landmark 23-acre freehold mixed-use marina estate in Central London, for £395 million (about $636 million) [Photo: CDL]

Overseas acquisitions

In March, the group completed its acquisition of St. Katharine Docks, a landmark 23-acre freehold mixed-use marina estate in Central London, for £395 million (about $636 million) or £751 psf ($1,209 psf) on the existing net lettable area. The estate comprises over 500,000 sq ft of Grade A office, F&B, retail and residential arranged across four main buildings and supporting ancillary spaces, including a marina with berths for up to 185 yachts. The office component currently enjoys a strong occupancy rate of 90% with a well-diversified tenant base across sectors such as consulting, shipping, education and co-working spaces.

The acquisition of St. Katharine Docks adds to the group's portfolio of prime commercial assets in the UK, boosting its total value to over £1 billion. Besides enhancing the group's recurring income stream, the acquisition complements its fund management strategy, allowing the group to inject its UK assets into listed or unlisted platforms at an opportune time, says CDL.

The group, through its wholly-owned hotel subsidiary Millennium & Copthorne Hotels (M&C) and in a 50:50 joint venture with its New Zealand-listed subsidiary M&C Hotels New Zealand, agreed to acquire the 416-room Sofitel Brisbane Central hotel for A$177.7 million (about $159.2 million), or A$427,000 ($383,000) per key in March. Following the completion of the acquisition in 2H2023, CDL will benefit from this five-star hotel with the most extensive conference facilities in the heart of Brisbane CBD, the group's third hotel in Australia.

The acquisitions of St. Katharine Docks and Sofitel Brisbane increase CDL's fund management's assets under management to US$4 billion, notes RHB's Natarajan. CDL has a target of US$5 billion by the end of 2023. "The fund management's business growth has been one of its key strategies to improve its weak core ROE [return on equity]," he comments.

The 48-unit Pregio Joto Chuo in Osaka (left) and the 78-unit City Lux Yokohama in Yokohama (right), are among the freehold residential buildings in CDL’s Japan PRS portfolio, which has 714 units to date and occupancy above 95% (Hong Leong Hi Life website)

PRS, PBSA portfolio boost

In April, CDL acquired two assets in Osaka's private rented sector (PRS) for ¥31.5 billion ($314.1 million). With 201 units, they bring the total number of PRS units in Japan to 714. The average occupancy of its Japanese assets is above 95%. CDL states that strong demand from residents and corporates will drive leasing momentum in 1H2023 as border restrictions ease and foreigners return.

According to CDL, the group's UK PRS portfolio continues to be "a counter-cyclical asset class" post-pandemic. Leasing is ongoing for The Junction, the Group's PRS development in Leeds, which obtained practical completion for three out of five blocks (307 out of 665 units).

In the UK, the group has a purpose-built student accommodation (PBSA) portfolio of 2,400 beds across five cities, with committed occupancy of 98% for the academic year 2022/2023. With high demand and post-pandemic recovery, CDL expects "significant rental growth" in the next academic year.

The group opened the 294-room M Social Suzhou hotel in April, marking its first M Social property in China (Photo: CDL)

Hotel portfolio RevPAR rebounds

CDL's hotels registered global revenue per available room (RevPAR) growth of 65.4% to $13.2 for 1Q2023, up from $79.3 y-o-y, fuelled by the strong recovery from Asia and Australasia.

In 1Q2023, Singapore hotels recorded an 88.9% y-o-y increase in RevPAR, mainly due to higher average room rates. As travel restrictions have gradually lifted for the rest of Asia, these hotels recorded 150.2% y-o-y RevPAR growth propelled by the strong performance in Taipei and Beijing.

The group opened the 294-room M Social Suzhou hotel in April, marking its first M Social property in China. The M Social Suzhou is within Hong Leong City Center, the group's integrated development next to Jinji Lake in Suzhou Industrial Park.

According to CDL, the hotels in Australasia achieved strong RevPAR growth of 126.8% to $112.5 in 1Q2023 due to higher occupancy and room rates.

In Europe, CDL's hotels recorded a 40.9% increase in RevPAR in 1Q2023 to $138.9. London hotels achieved an average room rate of $248.7, 22.3% higher than last year, resulting in a 39.7% growth in RevPAR.

The US hotels recorded a 38.4% y-o-y increase in RevPAR in 1Q2023, driven primarily by the New York hotels. The higher average room rate and the continued focus on cost management enabled the New York hotels to achieve a lower gross operating loss than Q1 2022.

Source: CDL 1Q2023 business update 

Net gearing ratio at 55%, cash reserves at $1.9 bil

The group's net gearing ratio stood at 55% as of March 31, 2023, following the acquisition of St. Katharine Docks. Interest cover is 3.1 times, with cash reserves of $1.9 billion. CDL maintains a "liquid position" comprising cash and available undrawn committed bank facilities totalling $3.6 billion. According to the group, its debt expiry profile "remains healthy".

"The recent property cooling measures in April serve as a continued reminder that the group should not be overly reliant on a specific country or asset class," says CDL. "The Group's geographically diversified portfolio across its various business segments enables it to maintain stability while embracing growth."

Check out the latest listings near The Myst, Newport Residences, Blossoms By The Park, The Continuum, The Reserve Residences, Republic Plaza, Palais Renaissance, City Square Mall, Upper Bukit Timah, Cashew MRT station

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