CDL selling its 50.1% South Beach stake to partner IOI for S$834 million, yielding S$465 million gain

Business Times

5 days ago

[SINGAPORE] City Developments Limited (CDL) has agreed to sell its 50.1 per cent stake in the South Beach mixed project to partner IOI Properties Group (IOIPG) for about S$834.2 million.
The deal values the complex at about S$2.75 billion, which represents a premium of about 3 per cent over the latest valuation of S$2.67 billion as at Dec 31, 2024.
The transaction is expected to result in a gain on disposal of about S$465 million for the financial year ending Dec 31, 2025, CDL said on Wednesday (Jun 4). IOIPG will take full ownership of South Beach's commercial components upon completion in the second half of 2025.
CDL added that the sale price was based on 50.1 per cent of the consolidated net assets of Scottsdale Properties, which owns South Beach Consortium, which in turn owns South Beach. It also takes into account an agreed property value of the property of S$2.75 billion and Scottsdale's liabilities of S$1.16 billion.
Cash proceeds from the proposed divestment will allow CDL to reduce bank borrowings and improve net gearing ratio, the group said. Capital from the sale will also be used to pursue new acquisitions, invest in upcoming pipeline development projects and optimise capital management.
Assuming that the deal had been completed at the end of FY2024, the group's net gearing ratio would have fallen to 103 per cent, from 117 per cent, CDL said. It would have logged earnings of S$638.5 million, up from S$190.8 million, had the deal been completed at the beginning of FY2024. Earnings per share would have risen to S$0.712, from S$0.213.
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CDL's board believes the sale supports positive returns for the group's business and aligns with its strategic focus on capital recycling.
It said the Beach Road property has reached maturity and has been delivering 'strong occupancy and stable income', the group said.
Sherman Kwek, CDL's group chief executive, said: 'Having fulfilled our vision for South Beach – from securing the land site via a rigorous tender process in 2007, navigating macroeconomic challenges, to transforming it into the high-performing, stabilised asset it is today – it is now time to crystallise its value.'
The Norman Foster-designed project in Singapore's Central Business District includes retail space, a 34-storey office tower, and a 45-storey building housing JW Marriott Hotel Singapore.
As at Mar 31, South Beach's office and retail components posted committed occupancy of 92.4 per cent and 92.5 per cent, respectively, CDL said on Wednesday. Major tenant Meta Platforms last year gave up seven floors of space at the office tower, with the exit bringing occupancy down to 92.4 per cent, compared with 94.4 per cent at the end of last year.
CDL acquired the site at a government land sale for nearly S$1.7 billion in 2007, with two foreign partners – a unit of state-owned Dubai World, and El-Ad Group.
Based on a Bloomberg report, the global financial crisis led to a years-long delay in construction and the two partners exited the project, with IOIPG eventually taking a minority stake in 2011. Kwek Leng Beng, executive chairman of CDL, resisted allowing IOIPG to take an equal stake in order to maintain control, based on a biography published in 2023, Bloomberg said.
In CDL's Jun 4 statement, the elder Kwek said: 'South Beach began as a bold vision to enhance Singapore's reputation as a global city, attract international investors and create a new icon that blends modern, sustainable architecture while preserving the site's conserved buildings.'
IOIPG group CEO Lee Yeow Seng said: 'The acquisition of the 100 per cent equity stake in this landmark development marks a significant strategic expansion for IOIPG in Singapore. Combined with the IOI Central Boulevard Towers and W Singapore – Marina View hotel, this acquisition will elevate the group's profile as one of the major landlords of premium office space and a prominent player in the hospitality industry within the Republic.'
The Malaysia-listed group is controlled by the Lee family, which made its fortunes from palm oil.
CDL shares were up 2.1 per cent or S$0.10 at S$4.97 on Wednesday, shortly after its trading halt was lifted.
The group said in 2024 that it aimed to divest S$1 billion in assets, and has announced about S$600 million in divestments so far.
News of the South Beach sale comes in the wake of a public feud between father and son in CDL's Kwek family, which emerged in late-February.
While CEO Kwek and his father and chairman Leng Beng have since buried the hatchet, the younger Kwek acknowledged at CDL's annual general meeting in April that the dispute had hurt shareholders' confidence, and said reducing the growing debt load is a priority.