Billionaire Kwek Leng Beng, executive chairman of City Developments Ltd., left, speaks as Sherman … [+]
Singapore-based City Developments Ltd. (CDL)—controlled by billionaire Kwek Leng Beng—will continue to look for overseas acquisitions even as soaring interest rates are starting to dampen the property group’s earnings.
“I would like to grab opportunities whether it’s in the U.K., Asia, or America,” Kwek, 82, executive chairman of CDL, said Thursday after the company announced its first-half results. Downplaying concerns over rising interest rates, the tycoon said he believes rates won’t rise much further as inflation has peaked. “We have journeyed through many years, many experiences of up and down. This is not something new to us.”
CDL has stepped up acquisitions this year despite a continued tightening in interest rates. The company bought the historic London waterfront landmark St Katharine Docks in central London for £395 million (about $500 million) in March and has since acquired hotels in Brisbane and Seoul to tap into the post-pandemic tourism boom.
The group had S$31 billion ($23 billion) of assets across the world as of end-June, with Singapore accounting for more than half. Properties in Australia, China, Japan, the U.K., and the U.S. account for the rest. “During times of uncertainty, strategic acquisitive opportunities often emerge and we must be nimble to secure opportunities to solidify our market position, augment and diversify our portfolio and leverage our core expertise for sustainable long-term growth,” Kwek said.
St Katharine Docks in central London.
Despite writing off its investment in China’s Sincere Property Group at the peak of the pandemic in 2020, resulting in record losses that year for the company, CDL recently bought a site in the eastern Chinese city of Suzhou that it plans to develop into a mixed use office, hotel and residential property. “Now is the right time for us to get back into China,” Sherman Kwek, group CEO of CDL and eldest son of Kwek Leng Beng, said. Properties “can be bought at very good valuations,” he added.
CDL said its net profit in the first half of the year declined 94% year-on-year to S$66.5 million (about $50 million) in the absence of exceptional gains from the divestment of Millennium Hilton Seoul that drove record earnings in 2022 and on the back of impairment losses from its properties in Australia and the U.K. amid soaring interest rates.
While the group’s net financing charges almost quadrupled to S$147.2 million in the first half from the year before as average borrowing costs increased to 4.1% from to 2.4% in the whole of last year, the company said net gearing ratio remains at 57%. It also has a robust capital position, with cash and undrawn bank facilities of S$3.4 billion.
The softer net profit contrasts with an 84% jump in revenue to S$2.7 billion in the first half, bolstered by increased contributions from its housing projects and hotel business. Revenue from property development increased 183% to S$1.7 billion as the company recognised contributions from fully sold Piermont Grand, an executive condominium in the northeastern Singapore town of Serangoon, and other projects.
While sales remain robust, the company is holding back the launch of luxury residential developments such as the Newport Residences, a mixed use redevelopment project in Tanjong Pagar on the edge of the Raffles Place central business district, as home prices started to moderate after the government doubled stamp duties for foreign buyers and with interest rates rising. “We want to wait for the market to stabilize before we launch,” Sherman said.
Reflecting the post-pandemic tourism recovery, CDL said revenue from its hotels increased 12% to S$673 million in the first half from the previous year. “We continue to be optimistic in the recovery of global travel,” Sherman said.
The elder Kwek is also the executive chairman of Singapore’s Hong Leong Group, which was founded by his father in 1941. His billionaire cousin Quek Leng Chan runs a separate group in Malaysia, Hong Leong Co. (Malaysia), which has interests in finance, food and property. With a net worth of $9.3 billion that he shares with his family, Kwek was ranked No. 5 on the list of Singapore’s 50 Richest that was published last September.