Early signs of improving property market conditions have emerged, with declining interest rates boosting buying sentiment and transaction activity while easing financial burdens. This has helped City Developments Limited C09 (CDL) post a strong sell-through rate for its new Singapore launches in 3QFY2024 ended Sept 30.
CDL and its associates sold 321 units with a total sales value of $611.1 million In 3QFY2024, nearly double the 183 units sold with a total sales value of $325.0 million in the same quarter last year.
Sales were driven by the launch of the 276-unit freehold Kassia in July, with 179 units (65%) sold. Other launched projects continue to sell well; to date, Tembusu Grand and The Myst have sold 91% and 73% of units, respectively.
Still, Phillip Securities analyst Darren Chan warns that CDL posted high net gearing following several acquisitions, including the Hilton Paris Opéra hotel and four Japan private rented sector (PRS) properties.
CDL’s interest coverage ratio stood at 2.1 times, and the developer remains in a “strong” liquidity position with $2 billion in cash, says Chan.
In a Nov 25 note, Chan maintains his “buy” call on CDL with an unchanged target price of $6.87, representing a 45% discount to his revalued net asset value (RNAV) of $12.50.
See also: CDL sales value nearly doubles y-o-y to $611.1 mil in 3QFY2024
“There is no change to our estimates. We believe asset monetisation, unlocking value through asset enhancement initiatives [AEI] and redevelopments, establishing a fund management franchise and the continuous recovery in the hospitality portfolio are potential catalysts for CDL, which could help drive the share price recovery,” writes Chan.
Singapore residential
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Singapore’s residential sales have notably increased since 3QFY2024, supported by a more favourable interest rate environment, says Chan.
CDL launched the 348-unit Norwood Grand at Champions Way in October to an “overwhelming” response, selling 84% of units sold at an average selling price (ASP) of $2,067 psf during the launch weekend.
CDL’s 366-unit luxury Union Square Residences in prime District 1 at Havelock Road was launched in November, with 95 units (26%) sold at an ASP of $3,200psf.
Meanwhile, the group plans to launch its 777-unit Toa Payoh joint venture project The Orie in 1Q2025. Citi Research analyst Brandon Lee notes that CDL has brought forward this launch from 1H2025 previously, and he expects ASP of $2,600 to $2,700 psf, which implies a profit before tax margin of 7%-10%.
In a Nov 25 note, Lee says CDL’s shares have fallen some 20% year to date, underperforming the Straits Times Index, which has risen some 16% over the same period. Still, Lee is maintaining “buy” on CDL with a target price of $9.51, much higher than Phillip Securities’ Chan.
‘Healthy’ rental reversion
Meanwhile, CDL’s Singapore office portfolio saw “healthy” rental reversion, with committed occupancy up 4.4 percentage points (ppts) q-o-q to 97.4%, helped by Republic Plaza (up 1.3ppts to 98.3%) with City House and King’s Centre unchanged at 98.6% and 100% respectively.
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Likewise, CDL’s Singapore retail portfolio registered “strong” committed occupancy of 98.5% as at Sept 30, up 0.9ppts.
However, in CDL’s two core overseas markets — the UK and China — committed occupancies weakened by 4.5ppts and 3.9ppts to 85.8% and 68% respectively.
The office leasing market in China, in particular, remains “challenging”, says CDL. Still, CDL has replenished its residential land bank in Shanghai.
The group announced on Nov 1 the joint acquisition of a 27,994 sqm mixed-use development site in Shanghai for RMB8.94 billion with its partner Lianfa Group.
Located in the core and mature Xintiandi area in Shanghai’s Huangpu District, the site has a GFA of 76,000 sqm, with up to 77% of the gross floor area for residential use, with the remaining 19% for commercial purposes and 4% for public amenities.
Despite challenges in China’s real estate sector, tier-1 cities like Shanghai remain promising due to their economic growth, notes Phillip Securities’ Chan.
Hotel performance
CDL’s 9M2024 portfolio revenue per available room (RevPAR) grew 2.7% y-o-y, reaching $167.4, driven by strong growth in Australasia following the acquisition of the Sofitel Brisbane Central hotel.
Citi’s Lee notes that the y-o-y growth is slower than before, at 3.0% in 1HFY2024 and 5.3% in 1QY2024.
The slowdown was seen across the majority of its regions, says Lee. Australasia saw RevPAR rise 27.2% in 9M2024 compared to 30.4% in 1HFY2024, as international tourists had yet to hit pre-pandemic levels. This was mitigated by higher average room rate (ARR) of newly-acquired Sofitel Brisbane Central Hotel in December 2023.
Asia RevPAR fell 1.6% y-o-y in 9M2024, compared to 1.3% growth in 1HFY2024; while RevPAR in the US rose 5.6% y-o-y in 9M2024 compared to 7.4% in 1HFY2024.
Europe RevPAR was a bright spot, at 7.0% higher y-o-y, compared to 0.6% lower y-o-y in 1HFY2024, supported by acquisition of Hilton Paris Opéra in May 2024 and strong demand during the Paris Olympic Games.
Four hotels are currently or soon to begin major renovations. Millennium Hotel London Knightsbridge is being upgraded and renamed to M Social Knightsbridge at a cost of $29 million between 1H2025 and 4Q2025.
Copthorne Orchid Hotel Penang is being upgraded and rebranded to M Social Resort Penang at a cost of $29 million, with a soft launch slated for 1Q2025.
Millennium Downtown New York is being upgraded and rebranded to M Social Downtown New York at a cost of $60 million, with works between 3Q2024 and 2Q2025.
Finally, M Social Hotel Sunnyvale is undergoing a $159 million AEI and will open in 2H2026.
Group RevPAR in 9M2024 stood at 123% of pre-Covid-19 levels, according to Citi’s estimates, led by Europe (157%), US (121%), Australasia (114%) and Asia (111%, including Singapore: 118%).
As at 3.18pm, CDL shares are trading 7 cents lower, or 1.33% down, at $5.19, down 21.5% year to date.
