City Developments will be selling its 50.1% stake in South Beach development to joint venture partner IOI Properties Group for $834.2 million and book a gain on disposal of some $465 million in the current FY2025.
The partners now own this mixed-use integrated development along Beach Road via an entity called Scottsdale Properties.
At this agreed purchase price, South Beach has an implied property value of $2.75 billion, which is a 3% premium over the valuation of $2.67 billion accorded by Edmund Tie & Company as of last December.
Upon completion of the transaction expected by Q3 2025, IOIPG will gain full ownership of South Beach’s commercial components, which consists of the 34-storey South Beach Tower Grade A office, the 634-room JW Marriott Hotel Singapore South Beach, restaurants and cafes.
The development also features the strata-titled South Beach Residences, with all 190 units sold since September 2021. The residences are located in the same 45-storey tower as the hotel.
As of March 31, South Beach’s office and retail components achieved a committed occupancy of 92.4% and 92.5%, respectively.
See also: City Developments announces divestment of South Beach stake, but should it be Mortlake instead?
CDL and IOIPG, blue-chip developers from opposite sides of the Causeway, co-developed South Beach back in 2011.
CDL's divestment of its stake in South Beach will help realise value from this asset as it continues with its asset monetisation bid to unlock value from its portfolio and to hold down debt levels.
According to CDL, net gearing ratio will drop from 117% to 103% following the sale.
See also: Mapletree Investments reports FY2025 earnings of $227.2 mil; AUM increases to $80.3 bil
On the other hand, IOIPG's acquisition will help boost its portfolio of investment properties here in Singapore. On its own IOIPG has developed the IOI Central Boulevard Towers, and also the W Residences Marina View – Singapore and 350-room W Singapore – Marina View.
In an interview with The Edge Singapore back in Oct 2023, IOIPG's group CEO Lee Yeow Seng sketched out plans to list a REIT comprising properties from its growing portfolio, as part of a broader strategy to generate more recurring income from mature markets, especially Singapore.
CDL shares, following the news, was up 2.46% to close at $4.99 on June 4; Bursa-listed IOIPG closed at RM1.90, unchanged for the day.
'Exceptional value'
In a joint statement, CDL's executive chairman Kwek Leng Beng recalls how South Beach began as a "bold vision" to create a new icon blending modern, sustainable architecture while preserving the site’s conserved buildings, namely, the former NCO Club, a landmark along Beach Road, where an army base was sited.
Kwek made it a point to acknowledge IOIPG’s late founder and executive chairman, Tan Sri Dato' Dr Lee Shin Cheng, his "esteemed" partner who shared his conviction to make South Beach one of "Singapore’s most iconic developments."
Besides IOIPG, Lee Shin Cheng was known for building a sprawling palm oil business organised under IOI Corporation, which is headed by Lee Yeow Chor, brother of IOIPG's Yeow Seng.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
"Today, South Beach is a testament to our long-standing collaboration, foresight and resilience. As this property reaches maturity, we have fulfilled our promise," says Kwek.
He believes that the divestment of South Beach enables CDL to realise "exceptional value" while entrusting the ownership to a partner who knows the development well.
CDL group CEO Sherman Kwek says South Beach represents the "shared commitment and fruitful partnership" CDL and IOIPG have enjoyed for over a decade.
"Having fulfilled our vision for South Beach – from securing the land site via a rigorous tender process in 2007, navigating macroeconomic challenges, to transforming it into the high-performing, stabilised asset it is today – it is now time to crystallise its value.
"This transaction gives a strong boost to CDL’s efforts to accelerate capital recycling so as to reduce gearing and redeploy capital. We will continue to unlock value across our diversified portfolio and pursue future growth opportunities," adds Sherman.
IOIPG's Lee says South Beach "holds immense significance" for his company. "This development presented us with the opportunity to change the skyline of Singapore, while building a good relationship with CDL, a leader in the real estate industry.
"The exemplary leadership of Mr Kwek Leng Beng, his grit and steadfast vision were instrumental in transforming this site, a place of great historical and sentimental value to many of the Singaporeans and visitors alike," he adds.
Lee says 100% ownership of South Beach marks a "significant strategic expansion" for IOIPG in Singapore.
"Combined with the IOI Central Boulevard Towers (ICBT) and the W Singapore – Marina View hotel, this acquisition will elevate the group’s profile as one of the major landlords of premium office space and a prominent player in the hospitality industry within the Republic,” says Lee.
Inclusive of this acquisition, IOIPG's total net lettable area (NLA) of its investment assets in Singapore would stand at 1.8 million sq feet.
Company-wide, the total NLA of its property investment segment would stand at 9.82 million sq feet across five malls and six offices in Malaysia, Singapore and China.
As of March 31, the total assets of IOIPG, including investment properties, hotel assets and property development assets, was RM47.93 billion.
IOIPG says it is keeping its "options open" for "any opportunities by leveraging and optimising its position in creating additional value" for its stakeholders.
