CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2021 BUSINESS OVERVIEW 82 83 OPERATIONS AND MARKET REVIEW On 16 December 2021, the Government introduced property cooling measures to temper the rising residential property prices and high transaction volumes that could potentially run ahead of market fundamentals. Residential property prices registered an increase of 10.6% in 2021, while transaction volume rose over 30% to 13,027 units year-on-year. Alongside the tighteningmeasures, the Government also boosted supply by increasing the GLS programme for 1H 2022 with five confirmed sites whichwill yieldmore than 2,880 units (including ECs), an increase of 39% over 2H 2021. Following the implementation of the measures, sales are still healthy, though some homebuyersmay takemore time to assess the situation before committing to a purchase. However, with limited supply of newunits in themarket, buying interest is expected to remain. INTERNATIONAL Australia Despite tight COVID-19 restrictions domestically, the Group’s residential portfolio continued to see positive uptake. In New South Wales, the Group’s collaboration with Waterbrook Lifestyle for a retirement village project in Bowral has exchanged contracts on all the 77 townhouses launched. The Marker, a JV project comprising 198 residential units located in West Melbourne, has pre-sold 81% of its apartments. The Group’s mixed-use JV development named Fitzroy Fitzroy in Melbourne, launched in October 2021, has pre-sold 24% of its 62 apartments and townhouses. The 215-unit Brickworks Park located in the prestigious Alderley suburb of North Brisbane has sold 82% of its 151 units released to date#. In December 2021, the Group entered into a JV with Brisbane-based developer Metro Group to acquire Kenmore Treetops, located in the leafy suburb of Kenmore. The project will comprise 97 units and is slated for launch in 2022. Japan The Group continues to hold its sizeable freehold land site in Shirokane, Tokyo, acquired in 2014. Land values have appreciated substantially in Japan and the Group can develop or divest this prime site at the appropriate time tomaximise value. UK 2021 saw the strongest year in real estate price increase in the UK since the Global Financial Crisis. The strong housing demand was driven by the pandemicfuelled desire for more space as well as the stamp duty holiday, which resulted in high levels of sales activity. Rental growth and demand remain strong. As more buyers return to the capital, the Group expects the sales for its two prime London developments in Belgravia and Chelsea to pick up in 2022. Marketing activities are ongoing for Teddington Riverside, the Group’s 239unit development in Southwest London, with more than 43% of the units currently occupied. The Group is on track to submit its revised planning application based on a hybrid scheme for the former Stag Brewery site in Mortlake in 1H 2022, even as it progresses with plans for its other three development projects in London – namely Ransomes Wharf, Development House and 28 Pavilion Road. INVESTMENT PROPERTIES Singapore Despite a challenging economic backdrop, the committed occupancy of the Group’s Singapore office portfolio remained resilient at 93.3%, above the island-wide occupancy of 87.2%. Republic Plaza, the Group’s flagship Grade A office building, achieved a healthy committed occupancy of 96.4% and registered positive rental reversion in Q4 2021. The tight CBD office supply situation coupled with the improved business outlook are expected to support rental rate growth in the near term. The Group’s retail portfolio was also resilient, with committed occupancy at 93.8%, above the national average of 91.9%. The pandemic has given rise to new lifestyle trends such as athleisure, focusing on wellness and active living. To leverage this growth trend, City Square Mall has rejuvenated its tenant mix and will welcome an athleisure cluster by Q2 2022, which includes an integrated golf flagship store occupying more than 15,000 sq ft under MST Golf Super Store, together with Puma and Adidas. In line with its focus to unlock value from its asset portfolio, the Group has progressed on its redevelopment plans for its two mature assets in the CBD, 80 Anson Road (former Fuji Xerox Towers) and Central Mall. The 80 Anson Road si te is being r e - deve l oped unde r t he Ur ban Redevelopment Authority (URA) CBD Incentive Scheme, with Provisional Permission for a 25% uplift in gross floor area (GFA) to approximately 655,000 sq ft obtained in May 2021. The project will comprise a 46-storey mixed-use integrated development with office, retail, serviced apartments and 256 apartments for sale. This project is the first integrated development to achieve the Building and Construction Authority (BCA) Green Mark Platinum Super Low Energy (SLE) certification, with SLE certification for the residential, serviced apartments, office and retail categories. Demolition works have commenced and construction is expected to begin in end-2022. In December 2021, the Group announced its redevelopment plans for its Central Mall properties into a large-scale mixeduse development following the acquisition of Central Square for a purchase consideration of $315 mi l l ion. The enlarged site will be redeveloped under URA’s Strategic Development Incentive Scheme into a mixed-use development comprising office, retail, hospitality and potentially a residential component. Through the scheme, the redevelopment will yield a significant GFA uplift of about 67% to approximately 735,500 sq ft and transform the precinct into a new and vibrant lifestyle hub. Apart from its redevelopment projects, the Group has also embarked on AEIs to reposition and refresh its asset portfolio. In Q2 2021, the Group commenced on an AEI for Palais Renaissance to upgrade the common areas and increase its F&B provision. By the end of 2021, more than 90% of the AEI works have been completed, with a unique alfresco dining area created at level 1. With the AEI, committed occupancy for the retail space has improved to above 90%. International Leas ing of the Group’s overseas investment properties remained resilient despite lockdowns, imposed COVID-19 restrictions and uncertainties over the Omicron variant infections. China In Shanghai, Hong Leong Plaza Hongqiao has leased 76% of its space for serviced apartments, a confinement centre and corporate office use, sustaining stable recurring income as majority of the leases tenures are over 10 years. At Hong Leong Hongqiao Center, the committed occupancy of the office and retail space is maintained at 93%, above the average occupancy level in the Hongqiao area. Shenzhen Longgang Tusincere Tech Park, a large-scale mixed-use business park development in Shenzhen, of which the Group now owns 65% effective equity interest, has contracted a total of 341 units since March 2021 (post the Group’s acquisition) with a sales value of RMB 910.7 million ($193.6 million). After the deduction of contracted sales from the previous period terminated mainly by a third-party office sales agent in August 2021, the net contracted sales value achieved since March 2021 was RMB 611.7 million ($130.0 million). In 2021, the construction of three blocks under Phase 2 of the project was completed and the office units in Block 22, along with the apartments in Block 20, were successfully handed over. Fitzroy Fitzroy I Melbourne, Australia Artist’s Impression Central Mall and Central Square I Singapore # As of 20 February 2022 China With the Chinese Government’s continued deleveraging efforts, residential price growth slowed in 2021 due to weaker demand. In FY 2021, the Group continued to sell down its existing inventory, with most projects substantially sold. Hong Leong City Center (HLCC), a mixeduse development in Suzhou Industrial Park, has sold 1,670 (92%) of its 1,813 residential and retail units to date#. HLCC’s Grade A office tower is now 94% occupied while HLCC mall’s occupancy is currently at 87%, and the 295-room five-star MSocial Suzhou hotel is expected to open in 2023. In Chongqing, the completed 126-unit Eling Palace has sold 115 units (91%) to date#. In Shanghai, Hongqiao Royal Lake, a luxury development in Qingpu District, has sold 71 out of the 85 villas (84%) to date#. In September 2021, the Group announced the divestment of its 50.01% joint controlling interest in Sincere Property Group (Sincere Property) tomitigate being engaged in a long drawn bankruptcy reorganisation of Sincere Property. Concurrently, the Group entered into an agreement for the transfer of 15.4% interest in Shenzhen Tusincere Technology Park Development Co, Ltd., (Shenzhen Tusincere) from Sincere Property as partial repayment for an outstanding loan. Shenzhen Tusincere is the holding company with a 65% equity interest in the Shenzhen Longgang Tusincere Tech Park asset. Shenzhen Tusincere is now a wholly-owned subsidiary of the Group and the Group holds a 65% effective stake in the asset, with direct control over the project’s management. Following the above transactions and based on the estimated fair value of Shenzhen Tusincere, the Group’s current financial exposure to Sincere Property is reduced to $82 million. The Group has no stake in Sincere Property andwill continue to protect its rights as a creditor in relation to the repayment of outstanding loans extended by the Group. Shenzhen Longgang Tusincere Tech Park I Shenzhen, China Artist’s Impression
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