CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2021 84 85 BUSINESS OVERVIEW UK In 2021, Aldgate House and 125 Old Broad Street remain well occupied with stable rent collections. New leases are being entered into alongside ongoing discussions with existing tenants on potential lease renewals and new space requirements. AEIs at both properties are underway to enhance tenant welfare and these initiatives are expected to bolster rental rates. The office market is expected to strengthen in 2022 as pandemic restrictions ease. In 2019, the Group expanded into the Private Rented Sector (PRS) segment and now has three projects in the UK with a pipeline of over 1,300 units. This includes a 352-unit forward- funded project in Manchester acquired by CDLHT in August 2021. The Group’s first PRS project in the UK, The Junction in Leeds, is currently under construction and will complete in phases starting from mid-2022. The project comprises 665 PRS units and 24,000 sq ft of commercial space within the site’s attractive heritage arches beneath a viaduct. In December 2021, the Group acquired a 250-year leasehold PRS site in the heart of Birmingham’s Paradise precinct. The 16,760 sq ft site will be developed into The Octagon, an iconic 155-metre tower with 370 units, at an estimated total development cost (including land cost of £6.5million) of around £110million ($200 million). Completion of the development is expected in 2025 and The Octagon will be the world’s tal lest pure octagonal residential skyscraper. ThePRS segment continues to outperform many other asset classes despite market volatility stemming from the pandemic. In anticipation of housing supply shortages and elevated property prices, the PRS is projected to be in high demand for renters looking for high-quality and professionally-managed homes. OPERATIONS AND MARKET REVIEW Japan The Group has five PRS projects located in Osaka and Yokohama with 242 units, with another two PRS projects totalling 207 units in Yokohama pending sale completion. The Osaka and Yokohama projects enjoy stable rent and strong occupancy of above 90%. In October 2021, the Group entered into a Sale and Purchase Agreement (SPA) for two PRS projects – Tobe Residence (117 residential and 1 retail unit) and LOC’s Yokohama Bayside (89 residential units) – in Yokohama City for JPY 4.9 billion ($60.5 million). The transactions are expected to complete in Q2 2022. Others In the US, the Group has completed Phase 1 of its redevelopment project in Sunnyvale, California, with the 250-unit residential development ready for lease. The apartments capitalise on Sunnyvale’s strategic location as the headquarters of many technology companies. Leasing activity has commenced with a strong take up of over 70% as of end 2021. In Thailand, the Group will embark on a major AEI of its Jungceylon retail complex in Patong, Phuket to increase the net lettable area with new-to-market concepts and a refreshed experiential trade mix. The enhancement works will be completed inphases, with the reopening of the first phase planned in Q4 2022. FUND MANAGEMENT With improving sentiments of the UK commercial market, the Group continues to pursue its plan for a Singapore-listed REIT with UK office properties. The Group rema i ns focused on achieving its US$5 billion in Assets Under Management (AUM) by 2023. In addition to the proposed UK REIT initiative, the Group also has stakes in other fund management platforms. It has a 50% interest in the manager of S i ngapore- l i sted IREIT Gl oba l and currently holds 21% of the total issued units. This pan-European REIT has an AUM of €889.7 million as at 31 December 2021. Following the special distribution in specie of 144,300,000 stapled securities in CDL Hospitality Trusts (CDLHT) on a pro rata basis to shareholders, the Group will continue to hold approximately 27% interest in CDLHT, one of Asia’s leading hospitality trusts with an AUM of about $2.9 billion as at 31 December 2021. HOSPITALITY Whi le the operating chal lenges of COVID-19 continued to be felt in 2021 as international travel restrictions were still largely in place, the Group’s hospitality business progressed on its road to recovery. In constant currency, global revenue per available room (RevPAR) for FY 2021 increased 48.6% to $78.9 (FY 2020: $53.1). Global room occupancy increased 12.4% to 51.0% (FY 2020: 38.6%) while global gross operating profit (GOP) margins registered an increase of 18.1% points to 21.8%. For Asia, RevPAR for FY 2021 increased 17.6% to $64.6 (FY 2020: $55.4), while Australasia increased 1.4% to $73.9 (FY 2020: $72.9). Europe and the US – regions with strong domestic markets – showed the strongest performance improvements, with RevPAR jumps of 128.7% (to $78.9) and 72.3% (to $98.4) respectively. This recovery trend is expected to continue in 2022. In 2021, the Group continued to make progress on its hotel repositioning initiatives. The M Social Hotel Times Square New York opened in May 2021 with a strong performance and the property has been GOP positive since. Formerly the Novotel New York Times Square, this reflagged property marks the first M Social hotel in the US. In Europe, the Group debuted its first MSocial in the continent with theMSocial Hotel Paris Opera, which opened in September 2021. The Group will continue its rollout of the M Social brand with a second European outpost planned for Spring 2023 in London’s Knightsbridge. Situated on majestic Sloan Street, one of the most enviable addresses in the capital , the 222-room hotel brings guests right into the heart of London’s most exclusive experiences, such as shopping at Harrods and strolling in leafy Hyde Park. In Singapore, the Group plans to comp l ete the refurb i shment s of Studio M which started in 2020 but was subsequently suspended due to the pandemic. The first phase comprising 146 rooms has been completed and the remaining rooms will complete in Q2 2022. Grand Copthorne Waterfront is planning to commence the refurbishment of its guest rooms and its meeting and events facilities towards the end of 2022, with completion expected in 1H 2023. The Group will also be exploring the refurbishment for Millennium Resort Patong Phuket, in tandem with the AEI works at the adjoining Jungceylon mall. In New Zealand, Kingsgate Hotel Greymouth was closed in April 2021 for refurbishment. It will be rebranded to the Copthorne Hotel Greymouth when it reopens in 1H2022, while refurbishments for two levels of guestrooms atMillennium Hotel Queenstown are ongoing. The Groupwill also be completingMSocial Suzhou in 2023, located in the heart of Suzhou Industrial Park and adjacent to the beautiful Jinji Lake. The 295-room hotel integrates the traditional local characteristics of Suzhou, combining a modern and creative fashionable design with oriental beauty. The Group will continue to review and optimise its hospitality portfolio by refurbishing its properties, evaluating alternative uses for its sites and executing divestments where appropriate, including being an active sponsor to CDLHT. As an operator, the Group will harness technology and innovation to address labour shortages, improve operational efficiencies and focus on the customer experience and brand promise. GROUP DIVESTMENTS On 10December 2021, the Group signed a SPAwith an entitymanaged by IGIS Asset Management to divest the Millennium Hilton Seoul and the adjoining land site for KRW 1.1 trillion (approximately $1.25 billion). A deposit of KRW110 billion was received upon signing and the sale was completed on 24 February 2022 with the balance payment of KRW 990 billion (approximately $1.13 billion) received. The Group expects to recognise a total estimated gain on disposal of $528.83 million, net of taxes and related transaction costs. The sale of the Seoul assets marks the Group’s third hotel divestment of the M&C portfolio since its privatisation and its largest hotel divestment to date. The previous two M&C hotel divestments completed were Millennium Hote l C i nc i nnat i and Copthorne Hotel Birmingham. The Group terminated the SPA with Ivory Properties Group Berhad for Copthorne Orchid Hotel & Resort Penang, due to the buyer’s failure to pay the balance consideration when the remedy period expired on 17 December 2021. The buyer forfeited the deposit and extension fees paid. In December 2021, a public tender was launched for the collective sale of Tanglin Shopping Centre, with a guide price of $828 million. Through King’s Tanglin Shopping Pte Ltd, a whol ly-owned subsidiary of M&C, the Group owns about 34.6% of Share Value and 60.2% of Strata Area in the strata-titled development. The tender closed on 22 February 2022 and received a top bid of $868 million (or $2,769 psf ppr), at a premiumof 10% over the reserve price. The Group has held its interest in this freehold office-cum-shopping complex for long-term investment since 1981, as part of its investment properties portfolio. This collective sale exercise will enable the Group to unlock value and realise a significant capital gain from its investment. The sale is subject to approval of Strata Titles Board and other conditions. GETTING REVITALISED Moving into 2022, financial markets met with impact from the geopolitical crisis while climate change considerations continue to permeate policy agendas around the world. Notwithstanding the evolving macroeconomic concerns and challenges, there are still reasons to be optimistic in the year ahead with the promise of global economic reopenings and recovery. The Group will continue to progress with its Growth, Enhancement and Transformation (GET) strategy to expand, unlock value and transform for the future – and emerge stronger from the aftermath of the COVID-19 disruptions. M Social Hotel Times Square New York I New York, US
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