CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2022 OVERVIEW 16 17 GROUP CEO’S STATEMENT Dear Shareholders, 2022 was an exceptional year for the CDL Group. We unlocked significant shareholder value through strategic divestments and improved operational performance, achieving record earnings and marking a strong comeback after three years of living under the shadow of the pandemic. The Group continues to steadfastly execute on our Growth, Enhancement and Transformation (GET) strategy that we unveiled in 2018, growing our traditional development and investment portfolio while accelerating our expansion into the Living Sector, both domestically and overseas. Underscoring our conviction in the Living Sector’s immense growth potential, namely in asset classes such as multi-family rental apartments (also called the Private Rented Sector or PRS), Purpose-Built Student Accommodation (PBSA) and workers’ dormitories, we made further inroads to expand our portfolio in this sector, bolstering our recurring income and creating potential fund management opportunities. To drive performance and maximise value, we also implemented various Sherman Kwek Group Chief Executive Officer GROWTH Building a development pipeline while strengthening recurring income ENHANCEMENT Enhancing asset value and driving operational efficiency TRANSFORMATION Transforming via strategic investments, fund management and innovation G E T ENERGISED Asset Enhancement Initiatives (AEIs) across our commercial and hospitality portfolio in Singapore and overseas. Our efforts to integrate and align the Group’s core businesses have enhanced our operational efficiency and execution. Going forward, we will continue to sharpen our value proposition to grow market share and maximise value to all stakeholders. EXPANDING OUR PRODUCT OFFERINGS In 2022, CDL continued to seize opportunities in our home market of Singapore to replenish our landbank, ensuring a stable launch pipeline and optimal inventory levels. Through selective land replenishment efforts, we now have a diversified pipeline of over 2,000 units in Singapore, ranging from suburban to luxury projects. We secured four sites within the year, two via the Government Land Sales (GLS) programme. In January 2022, we acquired a GLS site at Jalan Tembusu near the upcoming Tanjong Katong MRT station. Together with our JV partner MCL Land, the site is being developed into a 638unit condominium named Tembusu Grand, which we will launch in 1H 2023. In March 2022, we completed the acquisition of Central Square, which will be redeveloped alongside our Central Mall properties into an enlarged mixed-use development. In April 2022, we completed the off-market acquisition of a site at 798 and 800 Upper Bukit Timah Road, which we are developing into a 408-unit development named The Myst, planned for launch in 2H 2023. In September 2022, we also acquired a GLS Executive Condominium (EC) site at Bukit Batok West Avenue 5, emerging as the top bidder by a razor-thin margin of 0.2%. A 510-unit EC project is being planned and will incorporate Super Low Energy features. Aside from Tembusu Grand and The Myst, the Group plans to launch a third project in 2023 – Newport Residences – which is located at the site of the former Fuji Xerox Towers on Anson Road and part of a 45-storey mixed-use development called Newport Plaza. Comprising 246 rare freehold residences with all apartments elevated from level 23 to 45, Newport Residences will also feature a super penthouse, estimated at 13,000 sq ft and near the top of the 215-metre-tall building. We continue to diversify our recurring income streams to build a more resilient portfolio across geographies and asset classes. Over the past few years, our expansion into the Living Sector has started to bear fruit as these recurring income assets have been resilient and outperformed other asset classes throughout the pandemic. Ever since our maiden PRS acquisition in 2019 of a build-to-rent site in Leeds, the Group now has 2,288 operational and pipeline PRS units across the UK, Japan, Australia and the US. In June 2022, we made our initial foray into the PBSA sector by acquiring Infinity, a 505bed asset in Coventry, UK. Subsequently, we acquired five more UK PBSA assets in Birmingham, Canterbury, Coventry, Leeds and Southampton in December 2022. With the completion of these acquisitions, our UK PBSA portfolio comprises six assets with about 2,400 beds. In Q4 2022, our UK PRS project in Leeds, The Junction, obtained sectional completion for three out of five blocks and we recently welcomed our first batch of residents. Construction of The Octagon, our 370-unit PRS project located in the heart of Birmingham, is in progress with an estimated completion in 2025. Over in Japan, we acquired three newlybuilt PRS assets totalling 271 units in Yokohama and Osaka in 2022. This brings our PRS portfolio in Japan to eight assets in operation, comprising 513 units. To leverage the rising demand for rental accommodation in Australia, we also acquired two PRS development sites in Brisbane’s Toowong riverside suburb and Melbourne’s Southbank, totalling around 490 apartments. The construction of both projects is targeted to commence in 2H 2023. Revitalising Our Portfolio Asset rejuvenation and portfolio enhancement are key pillars of the Group’s GET strategy. We tirelessly explore ways to derive more value from our asset portfolio, including AEIs, asset repositionings and redevelopment opportunities. In 2022, we completed the AEI at Palais Renaissance, which included creating a unique alfresco dining area on the first floor and more F&B offerings. Beyond physical upgrades, we also introduced our proprietary CityNexus smart building app to enhance our tenants’ daily operations – making Palais Renaissance the first retail property in CDL’s portfolio to feature this digital solution. The AEI at our King’s Centre office building was also completed within the year. In Thailand, the Phase 1 revamp of Jungceylon Shopping Center in Patong, Phuket, was unveiled in December to welcome the return of both domestic and international tourists with a range of exciting new lifestyle attractions. The remaining phases of the AEI are on track for completion by the end of 2023. Beyond rejuvenating existing assets, we have also embarked on the redevelopment of certain older properties to unlock value through various incentive schemes. The redevelopment of Central Mall and Central Square is at an advanced planning stage and they will be redeveloped under the Urban Redevelopment Authority’s (URA) Strategic Development Incentive Scheme. Provisional Permission has been obtained for a mixed-use development comprising commercial, hospitality and residential components yielding a GFA uplift of 67% to approximately 735,500 sq ft from the current GFA of 441,650 sq ft. The redevelopment will rejuvenate and transform the precinct into a vibrant lifestyle hub. Over at Tanjong Pagar and overlooking the Greater Southern Waterfront, we have already commenced demolition of Fuji Xerox Towers and have tapped on the URA’s CBD Incentive Scheme to redevelop the site into an iconic mixeduse development, Newport Plaza, yielding a GFA uplift of 25%. Transforming for the Future Our hospitality portfolio is a key transformation lever. Since we privatised Millennium & Copthorne Hotels Limited (M&C) in November 2019, our hotel operations segment has undergone an upheaval, with the pandemic decimating the travel industry in 2020 and 2021. However, with the reopening of borders and easing restrictions in 2022, our hospitality segment has rebounded strongly, with operations in most markets having recovered to prepandemic levels. With a more stabilised position, we will accelerate our plans for asset optimisation and drive alignment to the Group’s strategic plans and processes. Following a holistic review of our hospitality portfolio, we have executed strategic asset divestment and restructuring initiatives to unlock latent value during the year. These include the KRW 1.1 trillion (approximately $1.25 billion) sale of Millennium Hilton Seoul, the divestment of interest in Tanglin Shopping Centre held by M&C, as well as the accounting deconsolidation of CDL Hospitality Trusts (CDLHT) from the Group following a distribution in specie of CDLHT units in May 2022 to reward shareholders. Another integral component of the Group’s transformation strategy is our fund management business. Besides nurturing existing listed platforms like CDLHT and IREIT Global, the Group continues to lay the foundation to drive future AUM growth. While the Group has paused our IPO aspirations for our UK commercial properties due to unfavourable market conditions, we continue to explore strategic acquisitions that will complement our ambitions. The Group’s recent acquisition of the landmark 23-acre St Katharine Docks prime freehold estate in London is one such opportunity. Following the completion of the acquisition in March 2023, the total value of the Group’s commercial assets in Central London has increased to around £1 billion. This transaction allows us the option to inject our UK assets into listed or unlisted platforms at an opportune time. AN ENERGISED SPIRIT Amidst all the challenges and disruptions we have faced over the past three years, our Group has navigated the trying times with courage, resilience and focus. This took exceptional dedication from our greatest asset, which is our people. They are the ones who enabled the Group to steadfastly execute on our GET strategy and emerge stronger than ever. On behalf of Senior Management, I would like to thank our valued employees for their dedication and hard work. I am deeply grateful for their unwavering commitment to the company. I would also like to welcome Ms Lilian Tan, our Group Chief Human Resources Officer and newest member of the Key Management team, who joined us in March 2023. She will help to further strengthen the People Agenda by building an even stronger and more inclusive culture within our organisation. I would also like to thank our Chairman and the Board of Directors for their invaluable guidance in shaping our strategy and navigating our Group through choppy waters. Last but not least, I would like to express our heartfelt appreciation to our shareholders, customers and business associates for your continued support. As we embark on our 60th Anniversary milestone, the Group will push ahead with an energised spirit to accelerate our growth and future-proof our business while embracing excellence, innovation, determination and discipline. Sherman Kwek Group Chief Executive Officer
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