In 1972, the Hong Leong Group acquired a controlling interest in CDL. The group’s first mixed-use project, City Plaza, was completed in 1980. The group’s flagship skyscraper, Republic Plaza, was completed in 1996 and opened in 1998. At 280m, it is the joint-tallest building in Singapore along with UOB Plaza 1 and One Raffles Place. The record would be held for more than 20 years, till the 290m Guoco Tower was completed in 2016.
For many years, CDL was known as the most conservative developer in Singapore. This was partly because it kept to historical cost accounting when other developers and companies moved to mark-to-market valuations. As a result, its price to net asset value ratio used to be above one time while other developers traded at a discount.
In 2013, CDL started the first of many purchases in the UK with a carpark property in Knightsbridge for the equivalent of $159.6 million. In 2014, CDL acquired Stag Breweries Mortlake for $334.96 million, and a site in Teddington, Richmond-upon-Thames, for $180.2 million, followed by Ransomes Wharf in 2017 for $103.2 million. Ransomes Wharf was divested for $115.3 million.
In 2023, CDL acquired the Morden Wharf development in Greenwich as part of a joint venture with Galliard Homes for the equivalent of $129.6 million. The Morden Wharf project is a large-scale development with a proposed 1,500 residential units, commercial, and retail space.
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In March 2023, CDL completed the acquisition of St Katharine Dock for the equivalent of $636 million. Last year, CDL acquired the Hilton Paris Opera Hotel for the equivalent of $350.2 million.
These acquisitions in the past 12-13 years caused CDL’s gearing to balloon to around 117% based on historical cost and 72% based on mark-to-market valuations.
In the past 10 years, CDL toyed with private equity when then CEO Grant Kelley created profit participation securities to securitise commercial properties and unsold residential properties in private equity funds, which have since been unwound.
In FY2024’s presentation, Morden Wharf in Greenwich and Mortlake in Richmond are classified under “planning in progress”. The Teddington site, which has been renamed Teddington Riverside by CDL, is classified as build-to-sell. A small property in central London, 31 & 33 Chesham Street, Belgravia, is also a build-to-sell property.
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On May 20, CDL announced it has received planning permission for a GPB1.1 billion ($1.88 billion) residential-led mixed-use scheme on the former Stag Brewery site in Mortlake for 1,068 homes, a 1,200-pupil secondary school academy, retail, offices, hotel, cinema and nine acres of green space. “The group will review its plans for the site now that planning consent has been granted,” CDL said.
For all these corporate moves, this year, CDL will likely be remembered for the board tussle that pitted father against son. On Feb 26, CDL announced that executive chairman Kwek Leng Beng filed court papers to replace group CEO Sherman Kwek with nephew Kwek Eik Sheng, claiming corporate governance lapses. The family issues have been settled.
On July 15, following the resignation of Philip Yeo from CDL’s board, JP Morgan upgraded CDL to overweight from neutral with a target of $6.85. “We believe the desire to repair reputations and CDL’s share price should galvanise CDL to be more proactive to execute a monetisation and deleveraging plan going forward, despite bumps along the way,” JP Morgan says. Since the report, CDL’s share price is up 12.4% and last traded at $6.26 on Aug 4.
The appointment of board directors, the retirement of Yeo, the sale of South Beach, the declines in Sora and borrowing costs, the sale of non-core assets, and extra profit recognition from projects delayed last year should aid in the share price re-rating, JP Morgan indicates.
“We believe CDL’s board and management are motivated to repair their reputations following the earlier dispute, with a recovering share price being the best approach. The unexpected sale of South Beach — despite prior reluctance to cede control — gives us confidence in CDL’s commitment to enhancing shareholder value. Further non-core sales are anticipated to sustain improved sentiment and act as positive share price catalysts, with the potential disposal being the former Stag Brewery site in Mortlake, London, recently receiving planning approval,” JP Morgan says.
The divestment of Mortlake will help reduce gearing, demonstrate CDL’s book value, and boost profitability, as the landbank generates zero income and allows CDL to repay more expensive GBP debt. Other non-core assets include commercial strata title units and less well-positioned lodging assets, according to JP Morgan.
CDL’s shareholders are likely to keep a close watch on the group’s divestment plans as it repairs its balance sheet and its share price moves closer to the end-December 2024 NAV of $10.17.
