[SINGAPORE] City Developments Ltd (CDL) has agreed to sell its 50.1 per cent stake in the South Beach mixed project to its Malaysian 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 most recent valuation of S$2.67 billion as at Dec 31, 2024.
CDL expects to see a gain on disposal of about S$465 million for the financial year ending Dec 31, 2025.
The company’s shares rose 2.5 per cent on the news, gaining 12 Singapore cents to close at S$4.99 on Wednesday (Jun 4). CDL had opened 1.6 per cent higher in the morning before trade was halted at 9.20 am. Trading resumed after 3 pm.
In a statement earlier on Wednesday, CDL said 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.
IOI noted in a Bursa bourse filing that Scottsdale’s liabilities of S$1.16 billion were also factored in. IOIPG will take full ownership of South Beach’s commercial components upon completion in the second half of 2025.
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Cash proceeds from the divestment will enable CDL to reduce bank borrowings and improve its 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.
CDL’s board believes the sale supports positive returns for the group’s business and aligns with its strategic focus on capital recycling. The group aims to divest S$1 billion in assets, and has announced about S$600 million in divestment so far.
It said the Beach Road property has reached maturity and has been delivering “strong occupancy and stable income”. 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.
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.”
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; the exit brought occupancy down to 92.4 per cent from 94.4 per cent at the end of last year.
CDL acquired the site through 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.
According to a Bloomberg report, the global financial crisis led to a years-long delay in construction. The two partners exited the project, with IOIPG eventually taking a minority stake in 2011. Kwek Leng Beng, executive chairman of CDL, resisted letting IOIPG take an equal stake in order to maintain control, based on a biography published in 2023, Bloomberg said.
A 190-unit luxury condominium, South Beach Residences, was also built on the site. First marketed in September 2018, the project sold 53 units within six months of launch at an average selling price of S$3,450 per square foot, including a 6,728 sq ft super penthouse sold for S$26 million.
In CDL’s statement on Wednesday, 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 a 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.
News of the South Beach sale comes in the wake of a public feud between father and son in CDL’s Kwek family, which erupted in late February.
While they have since buried the hatchet, the younger Kwek acknowledged at CDL’s annual general meeting in April that the dispute had hurt shareholders’ confidence. He also identified reducing the growing debt load as a priority.
