Chairman's Statement

Group Performance
Despite the challenging property market in Singapore, resulting in part from several rounds of Government cooling measures, the Group continued to deliver a respectable performance for the year ended 31 December 2013 (FY 2013). For FY 2013, the Group achieved attributable profit after tax and non-controlling interests of $683.0 million, on par with FY 2012 of $678.3 million.

For the quarter ended 31 December 2013 (Q4 2013), the Group posted an attributable profit after tax and non-controlling interests of $221.0 million (Q4 2012: $249.3 million).

Basic earnings per share of the Group stood at 23.6 cents for Q4 2013 (Q4 2012: 26.7 cents) and 73.7 cents for FY 2013 (FY 2012: 73.2 cents).

In terms of pre-tax profit, the property development segment was the main contributor, representing 46.3% and 66.8% of the Group’s profit before tax for FY 2013 and Q4 2013 respectively, despite reporting lower profits. The lower profit contribution from this segment was due to the completion of Hundred Trees and Tree House in 2013, coupled with the absence of similar gain from disposal of industrial land parcels at Jalan Lam Huat recorded in Q4 2012. Furthermore, the Group was unable to recognise profits for some of its launched private residential projects as construction of these projects have yet to commence or reach recognition stage. The Group was also unable to recognise profits from its three fully sold Executive Condominiums (ECs), following the mandatory adoption of accounting standard INT FRS 115 in 2011, which only allows profit recognition of ECs in entirety, upon completion of construction.

The rental properties segment, though second in line, had seen its profit contribution increased by 68.1% for FY 2013, primarily due to the disposal of 100G Pasir Panjang warehouse, a non-core investment property in Q2 2013.

Profit contributions from Millennium & Copthorne Hotels plc (M&C) to the Group were lower primarily due to differences in accounting treatment of income recognition between Singapore and London for The Glyndebourne condominium (former Copthorne Orchid Hotel), which was completed in Q4 2013. Its hotel revenues for the year also showed a reduction of 1.5% compared to 2012 as a result of the temporary removal of a net 290,000 room nights from the system over the course of the year, in connection with the ongoing asset management programme. During the year, there was a greater emphasis on driving revenue through higher occupancy ratios rather than increased room rates. This reflected a more competitive trading environment in some regions – especially Singapore – and other factors, notably the absence of the Olympics in London compared to 2012 and the reduced number of Japanese visitors to Seoul, mainly as a result of political tensions.

As at 31 December 2013, the Group’s gearing ratio, without factoring in any fair value surpluses on investment properties, was 20.0% (FY 2012: 25.0%). Its interest cover was at 15.2 times for FY 2013 (FY 2012: 17.4 times).

The Board is recommending an ordinary dividend of 8.0 cents per share. Together with the special interim ordinary dividend of 8.0 cents per share paid on 5 September 2013, the total dividends for 2013 amount to 16.0 cents per share.

In Q4 2013, the Singapore economy grew by 5.5% on a year-on-year basis (Q3 2013: 5.8%). On a quarter-on-quarter seasonally-adjusted annualised basis, the economy grew by 6.1%, much higher than the 0.3% growth in the previous quarter. For the whole of 2013, Singapore economy expanded by 4.1%, higher than the 1.9% growth in 2012, marginally beating Ministry of Trade and Industry’s (MTI) growth estimates of 3.5% to 4.0% for the year. While most sectors saw growth, the construction sector moderated to 5.9% (FY 2012: 8.6%), due to a slowdown in both public and private construction activities.

According to data from Urban Redevelopment Authority (URA), developers sold 2,568 private residential units (excluding ECs) in Q4 2013 – an increase of 5.7% (Q3 2013: 2,430 units sold). For the whole of 2013 however, developers sold a total of 14,948 private residential units (excluding ECs) – representing a fall of 32.7% (FY 2012: 22,197 units sold). If ECs are included, developers sold 18,536 units of new homes – a drop of 30.6% (FY 2012: 26,696 units sold).

In 2013, prices of private residential properties increased by 1.1% (FY 2012: 2.8%). URA data indicated that the Residential Property Price Index (PPI) decreased to 214.3 points in Q4 2013 (Q3 2013: 216.3 points). Overall prices of non-landed private residential properties decreased by 0.9% quarter-on-quarter in Q4 2013, compared to the 0.4% increase in the previous quarter.

Notwithstanding the challenging conditions caused by the numerous property cooling measures, the Group‘s ongoing residential projects, officially launched in 2013, continued to book in reasonable sales.

Echelon, a 508-unit joint venture development centrally positioned at Alexandra View is almost sold-out, with only three penthouses left. Bartley Ridge, an 868-unit joint venture development located at Bartley Road/Mount Vernon Road has seen strong take-up with about 90% of the project sold to date. D’Nest, a 912-unit Pasir Ris Grove condominium, located within walking distance to Pasir Ris MRT station, is now 93% sold. Jewel @ Buangkok, the 616-unit project situated just minutes’ walk to the Buangkok MRT station, has achieved steady sales with 86% of the 450 launched units sold. Lush Acres, a 380-unit EC project located along Fernvale Close in Sengkang, is now 100% sold.

In Q4 2013, the Group launched two projects in October. The first is The Venue Residences and Shoppes – a mixed development offering 266 apartments and 28 retail units. Situated along Tai Thong Crescent, at the junction of Upper Serangoon and MacPherson Roads, it is just a few minutes’ walk from Potong Pasir MRT station. 50% of all the retail units and 66% of the 70 apartments released for sale have been taken up.

Buying interests in this city fringe project was affected by the latest round of property cooling measures especially the Total Debt Servicing Ratio (TDSR) which restricts potential buyers’ borrowing capacity, resulting in many preferring to adopt a wait-and-see attitude. Given its excellent location in an area that is undergoing rapid transformation and its unique position as a mixed-use development, The Venue Residences and Shoppes should continue to enjoy interests from investors and home-buyers in the medium to long-term.

The other project is The Inflora, a 396-unit joint venture condominium at Flora Drive, located in the Changi/Pasir Ris locale. The project was competitively priced based on low land cost and sold out within a few weeks.

For the year under review, the Group, together with its joint venture associates, sold 3,210 units, including ECs, at a value of about $3.32 billion, emerging as the top-selling private developer in Singapore (FY 2012: 2,395 units with total sales value of $2.78 billion).

In Q4 2013, profits were booked in from various pre-sold projects, namely 368 Thomson, Buckley Classique, H2O Residences and UP@Robertson Quay. Profits from joint venture projects were also booked in. They include HAUS@SERANGOON GARDEN, The Palette, Bartley Residences, Hedges Park, The Inflora and Bartley Ridge.

Profits were also realised from The Glyndebourne, which is developed by M&C. While M&C’s Q4 2013 performance was significantly boosted by profit recognition from this development, it should be noted that the CDL Group has been progressively recognising profit for The Glyndebourne project based on stage of construction for the units sold, whereas M&C could only book in the profits in entirety in Q4 2013, when the development was completed, based on UK accounting standards. Therefore, the substantive jump in profits as seen in M&C’s performance would not be reflected on the CDL Group level.

Profits however, were not realised from Echelon, D’Nest, Jewel @ Buangkok and The Venue Residences and Shoppes as these projects are either in early stages of construction or construction has not commenced yet. No profits were booked from sales of the three fully sold EC projects namely, Blossom Residences, The Rainforest and Lush Acres due to prevailing accounting treatment for ECs.

The Singapore office market registered moderate improvement. URA data showed that prices of office space rose 5.2% in 2013, compared with the 1.4% increase in 2012. Overall rentals of office space increased by 1.3% in 2013, compared with the 1.3% decline in 2012.

The rental index for office space in Central Area increased by 1.8%, while the rental index for Fringe Area increased by 0.6%. According to a property consultant, the leasing activity in the Central Business District (CBD) increased in 2013 on the back of relocation activities by corporates for office space upgrades and expansion.

In Q4 2013, the Group’s office portfolio continued to enjoy healthy occupancy of about 96.5%, compared with the national average of 90.1% year-on-year.

The construction of the superstructure for South Beach Tower – the office component of the South Beach development – is targeted to be completed by Q1 2014. This 34-storey tower encompasses 500,000 sq ft of lettable prime Grade A office space. Currently, more than 50% of the office tower is under negotiations and the first tenant is a renowned foreign bank, which has leased approximately 30,000 sq ft. Leasing interest for its retail component has been healthy with numerous enquiries.

Designed by Philippe Starck, the fitting out of the 654-room luxury concept hotel named as The South Beach has commenced and the opening of the hotel is expected to be in 2015. Recruitment for respective Senior Executives for the Hotel is also in progress. For the residential component, the Group is still monitoring the market and will only launch the exquisite 190-unit South Beach Residences at the appropriate timing.

Overseas Platforms
In addition to the Group’s global hospitality portfolio through M&C, it has also made further progress on its overseas growth engines to drive its diversification efforts.

CDL China Limited, a wholly-owned subsidiary of the Group, continues to push forward on its three projects and 2014 marks a critical milestone. Eling Residences, the luxury development located at the peak of Eling Hill in Yuzhong District, Chongqing, will be completing its earthworks in February 2014, with construction having already commenced in January 2014.

Huang Huayuan, a mixed-use project in the same district in Chongqing, completed concept design at the end of 2013 and the team is currently working on the schematic design. Excavation and retaining wall works commenced in February 2014 and construction is expected to begin in the second half of 2014.

Suzhou Hong Leong City Center (HLCC), CDL China’s sizable mixed-use development next to Jinji Lake in Suzhou Industrial Park District, continues to show good progress. In order to reach the pre-sales stage at a faster pace, the project’s construction schedule has been split into two phases, consisting of one block of residential apartments and one block of SOHO units in Phase 1, with the second residential tower and the commercial components (office, retail mall and hotel) to follow in Phase 2. Construction for Phase 1 started in January 2014 while piling works for Phase 2 is scheduled to begin in May 2014.

If market conditions are favourable, both Eling Residences and Suzhou HLCC will officially commence sales in September/October this year, typically the strongest sales period in China. Due to the deep excavation required and the lofty height of its three buildings, Huang Huayuan will start selling in 2015.

In London, the Group continues to analyse off-market property development and investment propositions across all sectors. Notwithstanding a challenging acquisition environment, a number of well-located buildings and sites in Central London are in the process of being bought off-market, at prices which represent good value despite some commentators’ views that London may be developing a bubble. There is a focus on strategic opportunities in the Greater London area where demand from local and overseas buyers is proven and the sustainable growth in the market will remain positive in the medium to long-term. In line with this strategy, the Group has exchanged contracts to acquire a prime investment/development opportunity in Croydon, close to the newly proposed mega £1 billion shopping centre.

Plans to redevelop 28 Pavilion Road in Knightsbridge into a contemporary residential development continue to advance and discussions with the local planning authority and consultations with local residents have been well received. The site is located in close proximity to Harrods. A full detailed planning application is expected to be submitted in June 2014, ahead of schedule.

M&C, in which the Group has a 59% interest, posted record revenue of £1.04 billion for FY 2013 (FY 2012: £768.3 million) and achieved a 69.3% increase in net profit after tax and noncontrolling interests of £228.5 million (FY 2012: £135.0 million). For Q4 2013, its revenue was £471.3 million (Q4 2012: £203.2 million) and registered a 226.8% increase in net profit after tax and non-controlling interests of £150.0 million in Q4 2013 (Q4 2012: £45.9 million). Basic earnings per share for FY 2013 increased by 67.9% to 70.5p (FY 2012: 42.0p).

M&C’s robust performance was mainly boosted by recognition of profits arising from the 147 apartments sold in The Glyndebourne development, which was completed in Q4 2013, following the issuance of its Temporary Occupation Permit (TOP). The level of profit reflects the successful timing of the 150-unit condominium project and the low historical book value of the land. It demonstrates the strength of M&C’s business model as an owner and operator of hotels, with gains generated through timely and opportunistic asset management, in addition to income from hospitality services.

Although M&C’s Global RevPAR increased by 3.4% during the year to £69.58 (FY 2012: £67.32), its hotel revenue fell by 1.5% to £738.0 million (FY 2012: £749.4 million) due to the impact of rooms temporarily lost to refurbishment as well as a reduction in hotel non-room revenue.

Positive RevPAR performance in London, New Zealand, New York and Regional US outweighed the fall in RevPAR in Singapore, Rest of Asia and UK regional hotels.

As the asset management programme continues, M&C’s management anticipates that this effect will reverse. For example almost 14,000 room nights re-entered the system in 2013, with significantly higher room rates, following the refurbishment of ONE UN New York.

M&C’s financial position remained strong throughout the year, placing it in a good position for growth through acquisition. With the recovering global economy, hotel capital values have increased, although at a faster rate than hotel earnings. With the current low interest rate environment, many investors expect hotel earnings to improve. In 2013, M&C completed and embarked on some key asset and land acquisitions.

In April 2013, M&C completed its purchase of a 1,563.7 sq m land parcel adjacent to the Millennium Seoul Hilton for £17.2 million. Architectural detailing is underway for a business lifestyle hotel and serviced apartment complex which will be complementary to the Millennium Seoul Hilton.

In December 2013, M&C announced the proposed acquisition of a hotel located within the Chelsea Harbour district in London for £65.0 million, subject to standard purchase price adjustments. M&C believes that this property is the city’s first and only all-suite hotel. It currently offers 154 suites and four penthouses, and is situated in a prestigious riverside area that will be undergoing further transformation in the near future. The property will fit efficiently into M&C’s existing portfolio of London properties with minimum impact on central management costs. Completion is expected in Q1 2014.

In February 2014, M&C also announced that it has entered into two conditional purchase and sale agreements. The first is to acquire the 480 room 4-star Novotel New York Times Square for US$273.6 million (£167.0 million) subject to standard purchase price adjustments. Completion is expected in Q2 2014. The second, just announced by M&C on 24 February 2014, is to acquire a hotel in Rome, Italy – the 5-star Boscolo Palace Roma for €65.5 million, subject to standard purchase price adjustments. Situated on Via Veneto, one of the city’s most attractive streets, the hotel offers 87 luxury guest rooms and suites, and is well located to serve the needs of visitors to Vatican City. Rome is one of the most popular tourist destinations in the world. This acquisition adds an important new destination to M&C’s European portfolio. M&C has been seeking to establish a presence in Rome for many years, and this acquisition continues its strategy of selective growth through careful investment in gateway cities. The property was recently refurbished and does not require material capital investment or significant management infrastructure. Its location together with the quality of the product and its high service levels will enhance the Millennium brand experience and reputation.

Other strategic asset purchases include the acquisition of the 35-villa Jumeirah Dhevanafushi by CDL Hospitality Trusts (CDLHT), M&C’s hospitality real estate investment trust associate, in December 2013. This asset is CDLHT’s second luxury resort hotel in the Maldives.

In 2013, M&C continued to make headway in its development plans. The construction of M&C’s Tokyo hotel, in the heart of Ginza district is progressing well and is scheduled to complete at the end of 2014. With the positive impact of Abenomics, coupled with Tokyo’s successful bid to host the Olympic Games in 2020 and the possibility of a proposed casino resort in the capital city, the Japanese hotel business is beginning to rebound strongly. Hotel capital values are increasing. The purchase timing and completion of M&C’s hotel is ideal, as M&C will stand to benefit from these developments.

In January 2014, M&C closed its Millennium Hotel St Louis hotel, as refurbishment of the property was unlikely to offer attractive returns in the foreseeable future. M&C is considering a full range of options for the freehold property, which occupies a 17,033 sq m site in the city. In addition, M&C closed two hotels in New Zealand in 2013.

In the current hotel trading environment, M&C considers it vital to invest in its asset portfolio in order to enhance trading performance, especially in its main gateway city properties. Results from hotels where significant renovations have been completed have generated higher room rates and RevPAR compared to their pre-renovation performance. Since its asset enhancement programme commenced in 2011 with capital expenditure of £240.0 million, a total of £87.8 million had been invested by 31 December 2013, mainly on the refurbishment of several key hotels including the west tower of ONE UN New York, Millennium Seoul Hilton, Millennium Hotel Minneapolis and Grand Hyatt Taipei.

Refurbishment of the Grand Hyatt Taipei’s west wing was completed and re-opened in Q3 2013. Work is currently underway on renovation of the east wing. The hotel is scheduled to re-open fully in Q3 2014.

In the US, refurbishment of the Millennium Hotel Minneapolis completed in Q2 2013, and the hotel fully re-opened in May 2013, and has since received a much improved rating from guests. In 2H 2013, RevPAR for the hotel was £52.89 compared to £44.19 in the same period of 2012, representing an increase of 19.7%.

M&C’s associate, First Sponsor Capital Limited (FSCL), continued to make good progress with development in Chengdu, China. M&C’s investment in FSCL is a key part of its China strategy, building its brand proposition in this key market, enabling it to participate in hotel ownership through mixed-use property development in a capital efficient manner.

For FY 2013, M&C has recognised £7.4 million as its share of FSCL’s net profit after tax (FY 2012: £9.3 million). Profits arose mainly due to FSCL’s disposal of the land in Humen and profits on the sale of the remaining Chengdu Cityspring residential units, the bulk of which were sold in 2012. The 196-room M Hotel Chengdu, part of the Chengdu Cityspring project, soft opened in September 2013 and is being managed by M&C.

Progress on the Wenjiang development land site in Chengdu, purchased in November 2011 and branded as Millennium Waterfront, is on track. The land is designated for residential, commercial and hotel development. The total residential component comprises 50 apartment blocks with 7,110 units. The sale of 10 blocks with 1,618 residential units had been launched as at 31 December 2013. At that date 1,490 out of the 1,618 residential units launched had been sold either under option agreements or sale and purchase agreements. FSCL has also commenced the sales of some auxiliary retail commercial units and sales have been encouraging. Development of the project will be phased according to demand. In the meanwhile, the construction of a Millennium branded hotel with convention facilities commenced in Q2 2013 and is scheduled to open in 2017.

FSCL is considering an initial public offering and listing on the Singapore Stock Exchange of its principal operating subsidiary, First Sponsor Group Limited, later in 2014.

M&C recognised profit of £9.1 million from land sales in New Zealand during the year (FY 2012: £6.3 million). It also announced in Q4 2013 that it had signed a Collective Sale Agreement (CSA) with other selling unit-holders in Tanglin Shopping Centre, a shopping-cum-office complex situated within the Orchard Road shopping belt, in which M&C holds approximately a 34% interest. This process will be directed by an independent sales committee, representing all selling unit-holders.

During 2013, the Copthorne Hotel Birmingham became the subject of a compulsory purchase order as part of the redevelopment of Birmingham city centre. As a result of this, M&C entered into an agreement with the developer of the scheme that grants it with a number of options including the construction of a new hotel and/or the sale of the existing site, the timings of which are currently unknown. M&C is also in discussions with the appropriate authorities in Scotland regarding the impact of the redevelopment of the local area on the Millennium Hotel Glasgow.

The global economy is showing some signs of recovery. The troubled Eurozone has technically emerged from recession, unemployment in US has moderated and Japan is seeing an economic revival. Growth in the developed economies is expected to pick up as the drag from fiscal consolidation and policy uncertainty eases. The recovery is expected to improve exports from developing economies. However, risks to a long-awaited global economic recovery remain as the speed of the Quantitative Easing (QE) tapering in US could place pressures on financial markets and dampen business sentiments in the short-term. Additionally, China’s outlook remains uncertain as the economy continues to undergo restructuring. In light of the unpredictable macroeconomic environment and the tightness in the domestic labour conditions, MTI has maintained Singapore’s growth forecast for 2014 at a modest 2.0% to 4.0%.

Following several rounds of property cooling measures and the implementation of the TDSR, residential property transactions and prices have begun to decline. The TDSR framework was introduced in June 2013 by the Monetary Authority of Singapore (MAS) to encourage prudent borrowings by households and to strengthen credit underwriting standards of Financial Institutions. In addition, rules applicable to the Loan-to-Value (LTV) limits for housing loans were further refined to address any circumvention.

New measures targeting the EC market were also introduced in December 2013 to refine the EC housing scheme and align it closer to other public housing schemes. A resale levy has been imposed on second-timer applicants buying EC units directly from developers for EC land sales launched on or after 9 December 2013. In addition, the MAS has moved to cap the Mortgage Service Ratio (MSR) for EC loan granted at 30% of a borrower’s gross monthly income. These measures could impact EC affordability, and consequently, pricing and sales volumes of EC units.

Taking advantage of the moderating effect on EC land tender bids, in January 2014, the Group won a 99-year EC housing site located at Canberra Drive, within Sembawang New Town, for $226.0 million. This joint venture bid topped the tightly contested tenders by a mere 4.4% margin. Located in an established residential area and surrounded by greenery, the 307,447 sq ft site is easily accessible by major expressways and is strategically located near Sembawang MRT station and bus interchange. It offers easy access to a host of amenities, such as Sembawang Shopping Centre, Sun Plaza and Northpoint Shopping Centre. In addition, the site could be near a future MRT station located between Yishun and Sembawang MRT stations that is being considered as part of Land Transport Authority’s (LTA) rail transit masterplan. The Group plans to develop a mid-rise EC project of between 10 and 11 storeys with approximately 660 units. Given the popularity of ECs in Singapore and the site’s convenient access to Sembawang MRT station and amenities, it expects this development to be well-received. Recent EC projects in the vicinity have enjoyed healthy uptake and there is limited supply of unsold EC units in Sembawang area. This will be the Group’s 7th EC project, after The Florida, Nuovo, The Esparis, Blossom Residences, The Rainforest and Lush Acres.

With the market stabilising, the Government has moved to slow down the supply of residential land under the Government Land Sales (GLS) Programme. For 1H 2014, the Government is making available 21 sites yielding about 11,600 units compared with 25 sites released in 2H 2013. This move should help reduce the risk of an oversupply of private residential units down the road.

The 2013 Draft Master Plan, which makes provisions to house a growing population with diverse needs, has identified districts such as Holland Village, Kampung Bugis and Marina South, which will provide 14,500 new homes over the medium term. The Woodlands Regional Centre is ear-marked to be a key commercial cluster in the north. A new shopping and entertainment belt is expected to be developed at Marina Bay. With the relocation of the Paya Lebar Airbase, the site will undergo major redevelopment for the eastern part of Singapore. These plans, amongst several others, present good long-term growth opportunities for the industry.

Singapore’s economic outlook in 2014 remains positive despite ongoing efforts to restructure its economy to raise the nation’s productivity for quality growth and better prospects for the future. The Group is confident that Singapore will evolve to be a leader with forward thinking strategies that have made the city a choice place to work, live, play and invest in. With a healthy economy, strong fundamentals, an efficient and responsible Government, and a low interest rate environment, Singapore remains an attractive hub for investors to anchor their business.

The Group is planning to launch two new joint venture residential developments in the next few months, subject to market conditions.

The first project is sited at Pasir Ris Grove. It is the final parcel in an exclusive residential enclave comprising four of the Group’s earlier successful developments – Livia, NV Residences, The Palette and D’Nest. It offers 944 apartments and 6 retail units within 12 blocks of 12 to 16-storey towers. Units range from one to five-bedroom apartments, three to four-bedroom dual-key suites and penthouses. Designed with a large lagoon pool surrounding the blocks, most of the units will enjoy a pool-view. This project is also within several minutes’ walk to the Pasir Ris MRT station and White Sands shopping centre. It is also strategically located several minutes’ drive to mega stores like Ikea, Courts Megastore and Giant Hypermart, as well as Downtown East and Pasir Ris Park.

The second project is located at Commonwealth Avenue, next to the Queenstown MRT station. This upcoming residential development houses 845 units in two 43-storey towers, offering one to four- bedroom unit types. It features four sky terraces with a myriad of facilities, specifically designed to maximise the views of both the city and the surrounding verdant greenery. This city-fringe development is also close to several entertainment, recreation and F&B hotspots such as Holland Village, Dempsey Hill, VivoCity and Sentosa Island. The consortium had won this site by tender in February last year. This project is expected to be well received in view of its enviable location and amenities.

Based on anecdotal evidence by property consultants, demand for office space in the Central Business District (CBD) has firmed up, resulting in a tighter leasing environment with improved rental expectation. The average monthly gross rents across Premium and Grade A offices buildings in the CBD increased by 2.2% quarter-on-quarter in Q4 2013 as compared with the 1.2% increase in Q3 2013. On a year-on-year basis, the average monthly gross rents increased by 2.9% for 2013, a contrast from the 6.9% drop in 2012. Analysts expect bargaining power to remain with the landlords in the near-term, given the limited new supply in the CBD.

Singapore is poised to benefit from the strength of Asia’s economic growth. With its business-friendly legal, tax and regulatory environments, coupled with excellent infrastructure and strong connectivity with the global economy, Singapore remains the premium choice destination for the Asian regional headquarters of multi-nationals. In addition, Singapore will continue to grow and develop as a financial and wealth management hub, a top destination for legal services and dispute resolutions, and as a sustainable energy hub. The combination of these elements should ensure that Singapore remains a top business centre which will support the demand for office space.

Management Appointments
With effect from 17 February 2014, Mr Kwek Leng Joo assumed the role of Deputy Chairman of the Company, relinquishing his post as Managing Director. In addition, Mr Grant L. Kelley was appointed as the Group’s Chief Executive Officer (CEO).

Mr Kelley has more than 20 years of global experience in corporate strategy, private equity and real estate investment in Australia, Hong Kong, Japan, Singapore, South Korea, UK and US. Having been a management consultant for 11 years with Booz Allen & Hamilton (now known as Booz & Company), advising major listed companies, Mr Kelley will help enhance the Group’s management structures and systems to strengthen its capabilities and drive greater productivity, which is in line with the Government’s emphasis. Mr Kelley also has significant investment management experience, having led the Asian real estate investment practices for both Colony Capital and, subsequently, Apollo Global Management, for a combined eight years. At Colony Capital, he acquired and managed a wide portfolio of hotel assets, including Raffles Holdings’ global portfolio in 2005.

These senior management appointments are in line with the Group’s strategy to bring fresh perspectives to address a rapidly changing and competitive business landscape. The Group needs to be less Singapore-centric as the local property sector is expected to face continued headwinds. Leveraging on Mr Kelley’s real estate and hotel expertise, looking overseas and setting up synergistic platforms to capitalise on growth markets and for risk diversification is the right step forward.

The global economy has not yet been fully restored to complete health, with pockets of uncertainty continuing to affect some travel destinations. However, M&C expect its properties in the main gateway cities to see improvements in 2014.

In the first six weeks of 2014, Global RevPAR was up 5.3% on a reported currency basis, compared to the same period last year.

In 2014, M&C will continue to pursue its core strategic objective of improving returns on shareholders’ capital while growing the business. In line with this strategy, it will continue to enhance its properties, with a number of refurbishment projects ready to commence in 2014, subject to relevant consents.

M&C will soon be fully re-opening all of the guest rooms at its largest hotel in Asia, the Grand Hyatt Taipei, before completing refurbishment of the public areas and restaurants and creating an outstanding five-star deluxe property. Elsewhere, it will continue to maximise the value of its real estate portfolio. In addition, it will continue to be alert to acquisition and disposal opportunities.

Overall, M&C remains cautiously optimistic about its performance for 2014 despite uncertainty affecting some regions, and poor weather conditions in US and UK in Q1 2014. It anticipates performance to be further impacted by its ongoing refurbishment programme and the resulting temporary removal of rooms from inventory.

Group Prospects
In the near-term, the Group, like all property developers, will have to grapple with the uncertain global economic outlook, challenges on the domestic landscape, with several headwinds looming. However, with over 50 years of experience, the Group has a proven track record of resilience and emerging stronger from these periodic turbulent periods.

In view that the Government has very recently announced, in its Singapore Budget 2014, that it will not be relaxing the property cooling measures soon and will further tighten foreign labour in the construction sector, macro headwinds are expected to continue to weigh on the domestic property market. The Group notes that the Government is not engineering a hard landing for the property sector and will continue to monitor and adjust the measures when necessary. The Group is hopeful that some of the cooling measures could be tweaked in due course, particularly in the area of foreign investment, to mitigate any prolonged down cycles, taking into account time lags in implementation and unforeseen risks. This will help the nation maintain its competitiveness as a global city. Notwithstanding this, while the medium to long-term prospects in Singapore continue to remain strong, the Group will focus on accelerating its diversification efforts overseas.

In the year ahead, the Group will look at various ways to derive greater value from its global hospitality arm – M&C – as hotel operations is a significant contributor to its performance. The Group is poised to reap the benefits from its establishment of China and London platforms and will continue to pursue opportunities in these markets. It will also actively seek opportunities in mature markets such as the US, Japan and Australia. These economies are just recovering and their capital markets have the sophistication, transparency and corporate governance protocols that are akin to Singapore’s. This will enable the Group to move swiftly with greater confidence to secure projects.

The Group has taken deliberate efforts over the years to further strengthen its financial position and is well poised to leverage on a down cycle of the property market. With its solid foundation, the Group has its eyes set on growth. It will utilise both intuition and institutional knowledge to seize opportunities, evolving with fresh innovative initiatives and platforms that will deliver greater value for its shareholders.

On behalf of the Board of Directors, I would like to express our heartfelt appreciation to our stakeholders, including our shareholders, customers and business associates, for their continued support of the Group. I also take this opportunity to welcome Mr Grant L. Kelley, our CEO, who joined the Group on 17 February 2014. Mr Chee Keng Soon, our Lead Independent Director and chairman of our Audit & Risk, Nominating and Remuneration Committees, will be retiring from the Board at the forthcoming Annual General Meeting. On behalf of the Board and the Management, I wish to express our sincere appreciation for his invaluable contributions since he joined the Board in 1995. I would also like to thank my Deputy Chairman and fellow Directors for their invaluable advice and guidance, and the Management and staff for their unwavering dedication and commitment in the past year.

Executive Chairman
27 February 2014


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