03/04/2023
SINGAPORE (EDGEPROP) - ...
The Newport development will stand at 202m, with around 45 storeys. The higher floors will be the residential units, most likely with a penthouse or two on top. That would make the residential units among the highest in Singapore — physically. As for the pricing, the launch is scheduled for 1HFY2023. There isn’t much detail on Central Mall and Central Square along the Singapore River, opposite Canninghill Piers (the former Liang Court), as CDL is in the process of “pursuing planning permission”. However, the broad plans are to redevelop the property into a mixed-use integrated development comprising office, retail, hotel and residential apartments.
On the asset management front, it appears increasingly difficult for CDL to put its two Grade-A commercial buildings in London into a REIT, along with HSBC’s London headquarters. CDL acquired 125 Broad Street for GBP385 million in October 2018 and Aldgate House for GBP183 million in September 2018. Qatar Investment Authority acquired HSBC HQ in 2014 for GBP1.1 billion, news reports had said at the time. In 2021, CDL announced it had applied for an IPO of a REIT that will own commercial assets in the UK.
A commercial REIT?
Based on conversations with investors, appetite for S-REITs with foreign assets is lukewarm. Instead, CDL should consider putting some of its Singapore commercial properties into a REIT, they suggest.
Singapore’s real assets are in demand. “Singapore took centrestage in the Asia Pacific commercial real estate market, with volume climbing by 74% to US$5.6 billion ($7.7 billion) — the highest tally ever for a single quarter,” says a report by MSCI Real Assets titled Asia Pacific Capital Trends on 2Q2022. Demand for property was broad-based, with CBD offices garnering most of the investments. Overall transaction volume reached US$7.8 billion for the first half of 2022, an increase of 53% y-o-y, the report indicates.
South Beach, a 50:50 joint venture between CDL and IOI Corp, is valued at $2.5 billion.
It so turns out that the valuation of South Beach, excluding residential units which have been sold, is around $2.5 billion. South Beach is held by CDL and IOI Corp in a 50:50 joint venture. The 999-year leasehold Republic Plaza was last valued at around $2.5 billion as well. City Square Mall, a suburban mall connected to Farrer Park MRT Station, was valued at around $600 million. These assets would make a tidy commercial REIT.
Nowadays, many commercial REITs have a mix of office and retail assets. Mapletree Pan Asia Commercial Trust, CapitaLand Integrated Commercial Trust, Suntec REIT, Starhill Global REIT, Lendlease Global Commercial REIT, and so on, are commercial REITs comprising office and retail assets.
The theoretical CDL Commercial REIT would have a pipeline in the Newport Plaza and Tower complex, and the redeveloped Central Mall and Central Square project. Eventually, if City House gets redeveloped, that too could be a pipeline.
In the meantime, CEO Kwek is looking at recycling some of Millennium & Copthorne’s hotels into CDLHT. Following a strategic review of the M&C portfolio, Kwek says the focus is on improving asset performance for hotels that will remain as hotels, redeveloping those with latent value, AEIs to improve returns, and divestment to CDLHT or an outright sale.
When asked how much per year M&C would divest to CDLHT, Kwek says: “We are talking closely to the REIT and that is the purpose of the deconsolidation. It’s hard to commit to a churn, but it should be a constant churn. We have quite a big portfolio and we have purpose-built student accommodation (PBSA) and private rental sector assets (PRS). Ideally, we should see one of these three assets being injected into the REIT [regularly].”
Kwek is keen on the living sector because of an increasing trend of people renting in developed markets. “We want to redeploy more into the living sector. We just acquired a PBSA in UK [in Coventry], with more to come, and we acquired PRS assets in Australia, Japan and UK,” he says.
For now, though, CDL’s billions in earnings are likely to come from its home market of Singapore, with redevelopment and monetisation of its legacy properties. The cash inflow can either be returned to shareholders or redeployed to higher-yielding assets, but it’s difficult to envisage any assets yielding more than these Singapore properties.
City Developments: Home is where the cash is, as investors expect more uplift from legacy assets, Edgeprop, 11 Aug 2022
