CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2021 OVERVIEW 16 17 GROUP CEO’S STATEMENT Dear Shareholders, 2021 continued to be a challenging year for the CDL Group but it was marked by resilience and recovery. We battled numerous challenges to overcome the disruption from the prolonged COVID-19 pandemic and the stringent cooling measures in China’s property market. Embracing the resilient spirit that is core to our DNA, we navigated the headwinds resolutely and returned to profitability. The Group is wel l-posi t ioned to redeploy capital to higher growth assets and expand our diversified portfol io. Revital ised by the new perspectives we have gained over the past two years, along with the improving macroeconomic conditions and a brighter outlook, we resume our growth journey with renewed confidence, backed by resiliency and strong fundamentals. Building a Solid Development Pipeline In 2021, we completed a series of strategic acquisitions and investments. In Singapore, we secured two land sites – located at Northumberland Road and Tengah Garden Walk – in 1H 2021 through the Government Land Sales (GLS) programme with our joint venture (JV) partner MCL Land. In November, we also entered into an off-market agreement to acquire a residential development parcel at 798 and 800 Upper Bukit Timah Road. With the completion of this transaction in 1H 2022, along with a recent GLS site acquisition at Jalan Tembusu in January 2022 and our other existing development sites, we have built a significant launch pipeline of around 2,350 units. In the UK, we expanded our Private Rented Sector (PRS) portfolio with the acquisition of a 250-year leasehold site in Birmingham’s vibrant Paradise precinct, on which we will develop The Octagon, an iconic 49-storey residential tower with 370 units, that will be the world’s tal lest pure octagonal resident ial skyscraper when completed in 2025. Our other PRS project in the UK, the 665-unit The Junction in Leeds, will be completing in phases commencing in late 2022. Over in Australia, we replenished our landbank with the acquisition of Kenmore Treetops, a 97-unit residential JV project in Br isbane, wi th Br isbane-based developer Metro Group. To ensure a stable launch pipeline and optimal inventory levels, the Group will continue to actively replenish our landbank through the GLS programme or selective private acquisitions. We will also enhance our recurring income portfolio, focusing on the Living Sector comprising asset classes such as the PRS, senior housing, workers’ dormitories and student accommodations, which offer income stabi l i ty and strong growth potential. Rejuvenating our Asset Portfolio Recent macroeconomic events, especially the pandemic and the ongoing Ukraine crisis, are fitting reminders that we cannot be overly reliant on a specific geography or asset class. We must continue to build a diversified portfolio, which will enable us to tap on various sustainable income streams to weather cyclical headwinds. Asset rejuvenat ion and por t fol io enhancement are key pillars of our GET strategy. The Group forged ahead with several of such initiatives for 2021, including Asset Enhancement Initiatives (AEIs) as well as redevelopment opportunities that wi l l al low us to unlock asset value and capitalise on incentive schemes. In December, the Group announced our plans for our Central Mall properties into a large-scale mixed-use project following the acquisition of Central Square. The enlarged site, comprising office, retail, hospitality and potentially a residential component, will be redeveloped under the Urban Redevelopment Authority (URA)’s Strategic Development Incentive Scheme. This exciting rejuvenation complements the revitalisation of the Singapore River planning area and is anticipated to yield a significant GFA uplift. We also continued to progress with our redevelopment plans for our mature freehold asset at 80 Anson Road (former Fuji Xerox Towers) under the URA CBD Incentive Scheme. Demolition works have started and construction is expected to begin in late 2022. The development is the first to achieve the Building and Construction Authority’s Green Mark Platinum Super Low Energy (SLE) certification, with SLE certification for the residential, serviced apartments, office and retail categories. Apart from these two large-scale redevelopment projects, the Group has also embarked on AEIs to reposition and refresh our asset portfolio. In 2021, we commenced an AEI for our mall located at Orchard Road, Palais Renaissance, to upgrade the common areas and increase its F&B provision, which is expected to fully complete by 1H 2022. With the AEI, committed occupancy for the retail space has improved to above 90%. Over in the UK, AEIs at both Aldgate House and 125 Old Broad Street are underway and these initiatives are expected to bolster rental rates. In Thailand, we will embark on a major AEI of the Jungceylon retail complex in Patong, Phuket, to increase the net lettable area with exciting new-to-market concepts and a refreshed trade mix. Forging Ahead with Transformation Since we pr ivat ised Mi l lennium & Copthorne Hotels Limited (M&C) in 2019, we have undertaken a holistic review of our entire hospitality portfolio. Our ongoing portfolio review is centred on a three-pronged approach: capital recycling to streamline the portfolio and unlock value through opportunistic divestments, portfolio restructuring and asset repositioning to improve performance, and driving operational efficiency through the reorganisation of structures and processes. Ou r cap i t a l recyc l i ng focus , as demonstrated by the divestment of Millennium Hilton Seoul for KRW 1.1 trillion ($1.25 billion) in 2021, and more recently, of our interest in the stratatitled Tanglin Shopping Centre through a collective sale tender that closed i n February 2022 , a l l ows us to unlock the deep value of these two investment assets, which have been held for several decades. The Proposed Distribution in specie of CDL Hospitality Trusts (CDLHT) units to our shareholders is another positive outcome of the strategic review of our hospitality portfolio. Its completion would reward shareholders for their support and result in an accounting deconsol idation of CDLHT from the Group. Apart from strengthening our balance sheet, the Group wi l l also be wel l-positioned to unlock value from our hospitality portfolio through future value-accretive transactions with CDLHT. Shareholders wi l l also have the opportunity to participate in the growth of the hospitality sector, which is on the cusp of a strong postpandemic recovery. EMERGING STRONGER In 2021, we made the difficult decision to divest our entire equity interest in Sincere Property Group. This was to mitigate the Group frombeing engaged in a long, drawn out bankruptcy reorganisation of Sincere Property Group and we will continue to actively pursue our rights as a creditor. Barring further disruptions from the pandemic, we look forward to the workforce gradually returning to the office in 2022. Collaboration at the office still plays a pivotal role in nurturing stronger teamwork and enhanced productivity, and allows for more effective mentorship and knowledge growth. Since the start of 2022, geopolitical conflicts have cast a shadow on global recovery. These events are a stark reminder that the future is marked with unpredictability and the business environment is also changing rapidly. We must be better prepared for unforeseen events and strengthen our resilience. APPRECIATION On behalf of Senior Management, I wish to express our heartfelt gratitude to our shareholders, customers, business assoc iates and partners for your unwavering support throughout the turbulent year. We are also grateful to our Board of Directors for their guidance and counsel. To our valued employees, I am humbled by your loyalty and resilience in pushing through the storm. Your steadfast commitment has been integral to our growth and recovery plans. We have a renewed focus to revitalise our business. Together, we will push forward to bring our plans to fruition, with the aim of delivering excellence and maximising value for all our stakeholders. Sherman Kwek Group Chief Executive Officer Sherman Kwek Group Chief Executive Officer GROWTH Build a development pipeline and recurring income streams ENHANCEMENT Enhance asset portfolio and drive operational efficiency TRANSFORMATION Transform via strategic investments, new platforms and innovation G E T R E V I T A L I S E D Despite the turbulent conditions we faced in 2021, the Group continues to execute on our GET (Growth, Enhancement and Transformation) strategy to renew and reposition our business, sharpen our value proposition and expand our asset portfolio.
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