CDL H1 Profit Soars to Record High After Unloading Millennium Hilton Seoul

City Developments Ltd on Thursday posted a first-half net profit of S$1.1 billion (now $800 million), a record-high result propelled by a one-time gain from the Singapore-based builder’s divestment of the Millennium Hilton Seoul hotel.

Revenue in the first six months of 2022 leapt 23.5 percent year-on-year to S$1.5 billion, as hotel operations led by the Millennium & Copthorne division recovered amid border reopenings and the relaxation of pandemic-related travel restrictions, SGX-listed CDL said in a release.

The group swung into the black after having announced a net loss one year earlier despite Singapore’s property boom. The city-state’s largest non-government-backed developer has sought to turn the page after its ill-fated investment in China’s Sincere Property Group and a rough ride for its hospitality business during the COVID-19 crisis.

“The group’s record profit performance in 1H 2022 has provided substantial cash flow generation from timely asset divestments,” said CDL executive chairman Kwek Leng Beng. “Our hotel operations segment has also rebounded strongly. With post-pandemic travel fuelling continued recovery, we expect hospitality to be a star performer for the rest of the year.”

Divestments Deliver a Boost

CDL’s stellar performance was largely due to the sale of the Millennium Hilton Seoul to Korean fund manager IGIS Asset Management for KRW 1.1 trillion ($930 million). The Singaporean firm unloaded the 22-storey hotel and an adjoining freehold land parcel in the heart of the capital city, freeing up IGIS to convert the site into a complex combining Grade A offices, a five-star hotel and retail space.

In addition, CDL scored a S$492.4 million divestment gain from the May deconsolidation of its sponsored CDL Hospitality Trusts from the group. Without the two one-off items, CDL still would have ground out a net profit of S$110.3 million, according to the group’s interim financial results.

While property development continued to be the lead contributor of revenue, accounting for 41 percent of the first-half total, the 23.5 percent rise was driven primarily by hotel operations as revenue per available room surged 110.4 percent year-on-year in the first half. Europe and the US experienced a strong improvement in both occupancies and average room rates, CDL said.

Other bright spots were residential sales, including a strong response to the May launch of the Piccadilly Grand project near Singapore’s Little India, as well as the continued growth of the rental housing segment with the purchase of three properties in Japan totalling 271 units and the £59.2 million ($72 million) acquisition of a student housing facility in the English city of Coventry.

“Our expansion into the living sector over the past few years has started to bear fruit as we gradually build up scale and diversification,” said CDL group CEO Sherman Kwek. “We now have apartment rental sites across the UK, Japan, Australia and the US, and have recently completed our first purpose-built student accommodation deal located in the UK. Throughout the pandemic, these recurring income assets have shown strong resilience and the outlook for them continues to remain bright.”

Sincere in the Rearview

After investing $1.4 billion in Sincere Property Group over a period of 17 months, CDL announced last September that it would sell its majority stake in the Chongqing-based developer for a nominal consideration of $1 and write off the mainland joint venture.

CDL also arranged to trade loans extended to the JV for an effective 65 percent stake in Shenzhen Longgang Tusincere Tech Park, ending Sincere’s participation in that 575,000 square metre (6.2 million square foot) project.

The pair of moves helped to extricate CDL from the Sincere quagmire after red ink from the business park developer dragged the Singaporean firm to a S$1.9 billion ($1.4 billion) loss in 2020 and led to the departure of four directors from CDL’s board.