City Developments Limited (CDL) has become one of Singapore’s largest landlords in the office and retail property sector, with over six million sq ft of rentable space, according to a report by The Edge.
In a report released by Morgan Stanley, CDL’s office property accounts for nearly 30 percent of gross asset value, while retail property accounts for another 10 percent. Meanwhile, residential property accounts for a further 36 percent, while most of its hotel properties are held under its 54-percent-owned unit Millennium & Copthorne Hotels Plc.
CDL owns Republic Plaza at Raffles Place and several Grade B office buildings in the country, including City House, Fuji Xerox Towers and some strata-titled offices. It also owns several retail malls such as Central Mall, City Square Mall, Republic Plaza, Delfi Orchard and Palais Renaissance.
Yet, with the low-key nature of many of its commercial properties, CDL is thought to be primarily a property developer rather that an owner, with a substantial portfolio of property assets.
In the past few months, that perception has not served CDL well at all, due to the anxiety of the market over tougher measures to curb speculation in the residential market, to which CDL’s development projects are exposed. The company’s shares declined 11.8 percent this year against a 4.9 percent and two percent drop in the FTSE Real Estate Index and Straits Times Index respectively.
Now, the company will likely change the perception, as it is looking less at the residential property market. This could also draw attention to the underlying value of its investment properties as a result of divesting some of its investment properties and injecting the proceeds into new projects and investments.
“We believe that the strongest driver for CDL’s share price in 2011 will be its asset-recycling potential,” said Pang Chin Hong, an analyst at CLSA. “The group has actively engaged in divesting older properties since 2009.”
Among the properties it divested last year were Chinatown Point, New Tech Park, Pantech 21 and The Corporate Building. These boosted pre-tax profit contributions from the company’s property segment to S$422 million, or approximately 40 percent of the S$1.03 billion total profit before tax for the year.
CDL is also raising its stake in the South Beach project, its most ambitious development. The company will now take a 50.1 percent stake in the project, which comprises 171 apartment units, 560 hotel rooms, and 158,014 sq ft and 632,164 sq ft of gross floor area (GFA) in retail and office space respectively. The project is expected to be completed in 2015.
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