For the year ended 31 December 2008, CDL achieved revenue of $2,945.2 million (2007: $3,106.1 million) and posted after-tax profit attributable to shareholders of $580.9 million (2007: $725.0 million). The Group’s net profits which are core earnings, show a credible performance given the severe economic conditions that it operated during 2008. Its results are the second highest achieved since its inception in 1963.

The decrease in earnings was largely due to lower contribution from the Group’s subsidiary, Millennium & Copthorne Hotels plc (M&C) hotel operations as a result of the strength of the Singapore dollar particularly against the Sterling Pound which had a significant impact when the exchange rate translation was factored in the consolidation at the Group level. M&C also took in impairment charges relating to its joint-venture investments in Beijing and Bangkok and some of its assets in Asia, UK and US.

The Group’s property development segment continued to be the main contributor to its core earnings. Profits have also yet to be recognised fully from its pre-sold residential developments as these projects are still in the early stage of construction. These healthy gains have been locked in and will be booked in progressively based on the construction progress.

Rental properties segment, though the third in line, had shown a further improvement of 2.0% on top of last year’s profit which had benefited from $75.0 million of reversals of impairment provisions. This year, the rental properties segment benefited from the sale of Commerce Point and higher occupancy during the year.

As the Group adopted the conservative accounting policy of stating its investment properties including joint-venture investments and associate companies such as CDL Hospitality Trusts at cost less accumulated depreciation and impairment losses, its profit is not subject to volatility arising from anticipated lower valuations due to the current economic downturn.

Whilst the credit market has tightened, the Group continued to maintain a healthy balance sheet. Net gearing ratio was at 48.0% (2007: 48.0%) with interest cover of 11.0 times (2007: 10.5 times). Had the Group adopted a revaluation policy, its net gearing ratio would be 32.0%.

During the year, the Group pioneered Singapore’s first corporate Sukuk-Ijarah through the establishment of a S$1 billion unsecured Islamic Trust Certificate Programme. It was able to do so because it has a diversified portfolio of assets and had the advantage to extract appropriate assets which have to be Shariah compliant to tap on these new investors and diversify its financing stream. In parallel, the Group had also upsized one of its current existing Medium Term Note Programmes from S$700 million to S$1.5 billion on 29 December 2008. This fund-raising exercise adds another dimension to the Group’s financial strength, providing flexibility to meet the Group’s financing and working capital requirements as well as enhance its war-chest, allowing it to seize potential investment opportunities at the appropriate time.

Despite the difficult trading conditions going forward, the Board will recommend a final dividend of 7.5 cents (2007: 7.5 cents) per share, which is consistent with its dividends declared in past years, other than additional special ordinary dividends and preference dividends.


The global financial crisis worsened in the last quarter of 2008 dragging Singapore’s GDP down by 3.7% in Q4 08. The GDP growth for the whole of 2008 is estimated at a mere 1.2% compared to the initial estimates made in the beginning of the year of between 4.5% and 6.5%.

Not unexpectedly, 2008 was a challenging year for the Singapore property market with downward pressure on both transaction volumes and sale prices after a blistering performance in the previous two years, weighed down by global financial woes.

According to official statistics released by the Government, residential property prices fell 4.7% in 2008 compared to a 31.2% increase in 2007. While property prices for the mass market had dropped slightly, the high-end property segment showed steeper falls. Transaction volume of new residential units plummeted to 4,264 units compared to 14,811 units in 2007, a decline of 71% year-on-year.

In view of the subdued market conditions, the Group tested the market with the launch of its small development Shelford Suites in June. The response was not up to its expectations. After reviewing the strategy, the Group extracted from its land bank and launched Livia to the mass market in Q3 08 with a different price package as its land and construction costs were relatively low. The launch was very well received with strong take-up rates even without the Deferred Payment Scheme (DPS) or interest absorption scheme. Recently, another 30 units were re-launched and more than half of them have been sold. To-date, the Group has sold more than 350 units of Livia out of the 440 launched units.

During the year under review, the Group booked in profits from pre-sold projects such as City Square Residences, One Shenton, Tribeca, The Solitaire, Wilkie Studio and Cliveden at Grange. It also booked in profits from joint-venture projects namely The Sail @ Marina Bay, St. Regis Residences, Botannia, The Oceanfront @ Sentosa Cove, Parc Emily and Ferraria Park Condominium.

The turmoil in the financial market during the last quarter caused many firms to shelve business expansion plans or to downsize their workforce hence reducing their office space requirements. Such contraction has affected the office market. According to property consultants, prime Grade A office rental fell by 12.5% in Q4 08 alone. Though the occupancy rate remained relatively healthy, it is expected to moderate downwards due to the contraction in the economy.

For the year under review, the Group managed to achieve an occupancy level of about 94% for its office portfolio.


In 2008, M&C in which the Group has a 53.5% interest, continued to maintain a strong balance sheet and low gearing at 16.4% (2007: 18.3%) with interest cover up at 12.4 times (2007: 8.5 times). As at 31 December 2008, M&C had cash of £212.1 million and total undrawn committed bank facilities available at £188.6 million.

Despite the difficult economic conditions, M&C in 2008 achieved a 5.0% increase in revenue to £702.9 million (2007: £669.6 million) in reported currency. Its RevPAR in reported currency also increased by 7.6% to £57.19 (2007: £53.16) while headline profit before tax increased by 6.4% to £125.9 million (2007: £118.3 million).

M&C opened seven new hotels in 2008 – one in Beijing, another two in China operating under franchise agreements and four in the Middle East region operating under management contracts. Since then, a new managed hotel in Sheffield, United Kingdom, has been opened and a management contract for two hotels has been signed in Liverpool. As at 31 December 2008, M&C had 102 hotels operational and 17 hotels in the pipeline to be managed under M&C’s brands.

Prior to the global economic turmoil in 2008, a period of high liquidity and relatively easy access to credit markets had fuelled an insatiable demand for real estate properties including hotels and has contributed to an escalation in asset prices in many countries around the world. During this period however, M&C adopted a conservative approach and had been selective in making investments in Asia, with a particular emphasis on growing the Group’s presence in key gateway cities. Accordingly, M&C has been relatively less aggressive than other investors, and thus, the overall exposure of its investments to the deterioration in the global markets has been less significant.

In June 2008, M&C entered into a contract to dispose of CDL Hotels (Korea) Limited. Although the purchaser was unable to complete the transaction, M&C recorded a £31.4 million gain arising from the forfeiture of the non-refundable cash deposit paid by the buyer. This has helped to boost M&C’s cash position by £27.3 million.


The severe contraction in the Singapore economy in Q4 08 has prompted the Government to drastically mark down its GDP forecast to -2% to -5%, the gloomiest forecast for Singapore to-date.

Recognising the severity of the downturn, the Government brought forward its 2009 Budget to January and presented a resilient budget of $20.5 billion, drawing $4.9 billion from its past Reserves for the first time.

In the property sector, the Government suspended sale of Confirmed List sites in its Government Land Sales programme which will help to curb the supply of land for new developments in the future. It also introduced new measures to ease the cash flow of developers by giving them greater flexibility to stage sale and construction of projects according to market conditions. The measures include deferring land tax and provision for longer completion period of new projects. Property tax rebates were also given to assist landlords and tenants to help ride through the difficult period.

In view of the market conditions, the Group has held back the launch of two residential projects namely The Arte at Thomson and The Quayside Collection at Sentosa Cove (comprising 336 and 228 units respectively) even though it has continued to construct these developments. The continued construction reflects the Group’s confidence of the market’s recovery before the completion of the projects. As market sentiments continue to improve, the Group may launch these projects soon. When the projects are launched, the Group will be able to book in more profits immediately based on the advanced stage of construction at the time of sale.

While the high-end residential property market has been sluggish, the recent successful new launches targeting the mid and mass market segment is generating renewed interest with increased visitorship to showflats and good take-up rates. This is largely due to developers aligning their prices with the market appetite to push sales or generate cash flow with the possible aim of self-financing the projects. The well-received launches are an indication that buyer sentiment is improving and purchasers, especially the mid and mass market segment, have the financial capability to commit to property investments as banks are still lending on housing loans even though the quantum may be more conservative. Many investors prefer to own real assets and are returning to invest in property as such investments do not plunge as much within a short time frame as compared to stocks and shares. Furthermore, real estate in Singapore is likely to outperform other classes of assets when viewed with a medium to long term perspective. The Group believes that as the property market turns more active, confidence will increase which augurs well for the economic recovery.

Currently, the Group has low stock of unsold inventory of its launched projects. An estimated 142 units are left of its share of already launched developments. Less than 10% of these units are for the high-end market and the remainder is for the mid and mass market.

The Group has also done an extensive analysis of buyers who had opted for DPS when it was made available. Its exposure is limited as only 30% of units sold were under this scheme. The Group has adopted the policy of collecting a 20% down payment for DPS buyers unlike other developers who may require a lower quantum. The Group does not extend DPS to subsales. The sales and purchase agreement is a legally binding document and buyers cannot breach their contractual obligations. The Group believes that there is hardly any risk of DPS buyers being unable to fulfil their commitments for the properties pre-sold prior to 2007. For units pre-sold especially during the second half of 2007, the percentage of the Group’s exposure is relatively low. Notwithstanding the current market conditions, and considering the land cost of those pre-sold developments, the Group believes the situation has not arisen to warrant any alarming concern on DPS buyers defaulting.

As reported in Q3 2008, the Group in consultation with its joint-venture partners have deferred the construction of its South Beach development as it believes that construction cost will come down further over time as it is already beginning to do so, making the project even more attractive when market conditions improve. The joint-venture partners are engaged in discussions with the consortium’s banks to extend its loan for the land. It is important to note that South Beach development was awarded after an intensive competitive tender exercise. Even though the consortium was not the highest bidder, it won based on its innovative eco-design. In a recent external valuation for the year ended 31 December 2008, there is no provision required for impairment on this development.

The Group has also introduced cost-saving measures to rein in operating cost and expenses. For projects which the Group has not commenced construction, it has decided to defer further development of its land bank for the time being as past experience has shown that the value of its undeveloped land bank will not fall as much as a built environment during the lull periods, but instead, continues to appreciate over time. Moreover, the Group will be able to utilise this land more effectively in an upturn. Nevertheless, depending on demand, it does have the option to tap on its extensive land bank, much of which was acquired at a low cost. Its strong land bank and investment portfolio of hotels and commercial properties provide the Group with a sustainable model to grow its business or to extract value from its investments.

The Group’s office portfolio is enjoying healthy occupancy of about 94% compared to 83% achieved during the difficult period in 2003. Nevertheless, no effort is being spared to ensure a high rate of renewal for existing tenancies and also to attract new tenants to its buildings as the Group has a diversified office portfolio that caters to different tenant mix and requirements. The Group has already renewed most of its office leases at higher rates and these have been locked in. In light of the present economic conditions, even though office rentals will be moderated, most of the Group’s remaining leasing contracts up for renewal should still be renewed at a higher rate as previous rental rates committed during the lull period were low.

The Group’s mega retail complex, City Square Mall is progressing on schedule for opening in the last quarter of 2009. Strategically located at the fringe of the city and conveniently connected to Farrer Park MRT Station, the Mall is attracting retailers who are starting to move out of the city centre into the captive suburban market. With its good location and also with large numbers of residents soon to move into the area from new residential developments like the 910-unit City Square Residences, the Mall is targeting to attract at least 1.3 million footfalls per month. Over 75% of the retail spaces have already been committed and the Mall will be ready to open for business once TOP is obtained.

Leasing of the two suburban office buildings at Tampines, 9 Tampines Grande and Tampines Concourse is progressing and active negotiations are ongoing to fill up the remaining space.


Airline load factors are currently in decline despite the reduction in energy and fuel oil prices. Leisure and corporate travel are also facing great constraints. The global hospitality market will not be spared from these tough times.

M&C’s RevPAR for the first five weeks of 2009 has declined by 21.2% mainly due to decrease in contributions from New York and Regional US markets (41% and 23% respectively). New York hotels were affected the most, especially the Millenium Hilton Hotel which saw a steeper decline with its greater exposure to the city’s ailing financial sector. The refurbishments of M&C hotels in Boston and Chicago (except its lobby) were also just completed in Q4 08. M&C has flattened the management structure in the US and is closely monitoring to improve its operations. Despite the softening of demand across the regions which M&C operates, it is important to note that in general, the lower performance of the first 5 weeks of 2009 is not a good indication as the lion’s share of M&C’s earnings are traditionally achieved in the second half of the year.

In general, the hospitality market is expected to decline further before it gets better. While the next few quarters will present challenging trading conditions, this is expected to be partially mitigated by the fact that global rooms supply from new build hotels will be limited due to the lack of debt financing. Moreover, M&C’s extensive portfolio of hotels are diversified geographically and are positioned as 4-star hotels, even though some are of 5-star standard. They offer very competitive rates for the high standards that they deliver. During this downturn, many discerning travellers are expected to downtrade their stay from 5-star hotels to 4-star facilities that offer value for money. M&C stands to benefit from this and should have the advantage of performing better than other hotel operators. Riding through this storm, M&C will continue to focus on conserving cash and profit protection plans, to mitigate the impact of the global downturn.

Some tough decisions have been made in recent years at M&C, including changes in senior management, and a prudent approach to acquisitions, divestments and the way in which these are financed, have been maintained. While some of these decisions were unconventional and may have even been unpopular, M&C’s responsible actions have helped to enhance its strength to withstand the current economic crisis. With a continued policy of tough, prudent and analytical management, M&C will be able to steer through these rough waters. When calm returns to the world economic scene – as eventually it must, M&C would have secured an enviable competitive position from which it can exploit the best commercial opportunities that become available.


The Group is cognisant of the many challenges that lie ahead.

Moving forward, the Group will adopt a “3P” approach. It will exercise prudence in the management of expenses and remain thrifty. The Group will take a pragmatic strategy in managing our risks and opportunities and will work harder to ensure no stone is left unturned in the drive towards continued profitability. It will streamline its operations and prepare for the recovery and the next boom. Finally, the Group will exercise patience in riding out this difficult period. It is confident that after this storm, there will be growth and just as it has done in the past, with foresight, the Group will do the groundwork which will enable it to take the next quantum leap forward.

While much of the global economic woes are beyond its control, the Group remains optimistic of Singapore’s prospects. Given Singapore’s strong fundamentals and the dedication shown by the Government in its recent extraordinary budget, it is confident that Singapore has the ammunition to ensure that her economy will be one of the first to emerge from this recession stronger. The Government has done its part through its Budget incentives, but it cannot act alone. This worldwide financial tsunami is not one that can be easily resolved. The challenges are so globally intertwined that it is imperative for everyone to preach the belief that there is light at the end of this tunnel. Together, the community can help restore market confidence which is the bedrock of any economic revival. The Group believes that Singapore remains an excellent city to live, work, play and invest.

Depending on how quickly the global economy recovers, the Group is confident that with good management strategies in place, its sheer tenacity and resilient spirit will help tide it through this year; and it expects to continue to perform profitably.


On behalf of the Board, I wish to express our sincere appreciation to Mr Chow Chiok Hock, who will be retiring from the Board at the forthcoming Annual General Meeting, for his invaluable contribution to the Group over the last 30 years. I would also like to thank the Management and staff for their unstinting dedication and hard work in the past year. We are also deeply appreciative of the continued support of our stakeholders, including our investors, customers, business associates and community.


Kwek Leng Beng
Executive Chairman
26 February 2009

Copyright 2009© City Developments Limited,
All rights reserved.