Sherman Kwek maps out CDL’s next three years: $5 bil to invest, $6 bil to divest

Singapore-listed City Developments Ltd (CDL) intends to launch its high-rise condo in Shanghai’s Xintiandi in December. The luxury development will have 70 apartments, each measuring at least 400 sq m (4,306 sq ft).

A further 75 homes will be villas ranging from 250 sq m to 700 sq m, bringing the total to 145. The villas will be released in phases next year.

“These are going to be real trophy and iconic assets,” says CDL group CEO Sherman Kwek, at the company’s strategic review briefing on Sept 28.

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CDL acquired the 27,994 sq m (about 301,325 sq ft) site in November 2024 for RMB8.94 billion ($1.66 billion at the time) through a 51:49 joint venture with Lianfa Group, whose controlling shareholder is the state-owned Xiamen C&D Group. CDL holds the 51% stake and is the lead developer.

In addition to luxury homes, the mixed-use development will include a boutique hotel and retail space. The site is in Shanghai’s Huangpu district, within walking distance of Xintiandi and Taipingqiao Park. Kwek calls it the “last remaining prime piece of land in Xintiandi”.

While China’s housing market is in its fifth year of decline, pockets of resilience remain in first-tier cities. Shanghai’s new home prices have risen for 12 of the past 13 months, the longest run among China’s first-tier cities, according to National Bureau of Statistics data cited by Nicholas Spiro in the South China Morning Post on Sept 14.

Demand for luxury homes remains strong in Shanghai’s prime districts, says Kwek, and Huangpu is “arguably one of the most desirable districts”.

On Sept 28, Shanghai issued implementation guidelines for national housing sale rules announced a month earlier. For residential sites whose land sale announcements were issued after Aug 28, developers are encouraged to sell completed homes. Those that choose to pre-sell must first complete the main structure of the building before launching units for sale.

That could push project launches to one to two years after a site is acquired, compared with about six to 10 months previously.

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However, CDL is still targeting to launch its Xintiandi project before end of the year. “China’s real estate market is not in good shape. It’s under tremendous pressure, but there are still opportunities to be had,” says Kwek.

Sticking with GET

Xintiandi is one of several property bets under GET+, the refreshed three-year strategy unveiled at the briefing. It builds on the original GET strategy — Growth, Enhancement and Transformation — which Kwek introduced in 2018 after becoming CDL’s CEO.

Under GET+, CDL plans to make $5 billion of new investments and divest at least $6 billion of assets over FY2027 to FY2029. Of the new investment target, 60% will go to Singapore, 30% to China and Japan, and 10% to other markets. “It’s not good to be exposed and fully concentrated in one market, no matter how strong you are in that market,” says Kwek.

The investments will span four sectors: residential, commercial, hospitality and living, including rental housing such as the private rented sector (PRS), student accommodation and senior housing.

The market response was muted. CDL’s share price closed at $7.39 on Sept 30, down 10.5% from $8.26 before the strategic review was announced.

CDL, however, is taking a three-year view, and whether GET+ delivers will ultimately depend on execution. As Kwek said several times during the briefing: “The proof will be in the pudding.”

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Kwek says CDL had considered replacing the GET strategy altogether, despite his having introduced it in 2018. Instead, after a year-long review, the group retained “its three pillars” while adding specific investment and divestment targets.

Under its GET strategy, CDL has sold more than 15,000 homes worth over $26 billion since 2018. It has also completed five major asset enhancement initiatives (AEIs), including those at Republic Plaza, where its headquarters is located, City Square Mall and Palais Renaissance in Singapore, and Jungceylon Shopping Center in Phuket, Thailand.

Banking on China

Kwek acknowledges that China’s inclusion in the investment plan is likely to raise eyebrows, describing it as “very much an opportunity bet”.

For the upcoming launch of the Xintiandi development, Kwek expects most buyers to be wealthy Shanghai residents. Buyers without Shanghai household registration must meet local residency, tax or social-security requirements, while foreign buyers are subject to separate eligibility rules.

He expects the 145 homes to generate “no less than RMB15 billion in sales value”, if all are sold.

“Currently, a lot of our hopes and expectations ride on our Xintiandi project in Shanghai,” he says.

He has taken his cue from nearby launches. In October 2024, Shui On Land launched the first phase of its Lakeville 6 residential project, facing Taipingqiao Lake in Xintiandi. All 108 units in the first phase, with a total gross floor area of 57,000 sq m, were taken up on launch day, generating RMB12 billion.

Land in Shanghai is costly. “One piece of land there can easily cost $2 billion and above,” says Kwek.

CDL was previously the sole developer of its projects in Chongqing and Suzhou. “Going forward, it will be more partnership-driven,” says Kwek. If Xintiandi performs well, CDL intends to pursue more projects with Lianfa Group.

Asked about the downside if the project underperformed, Kwek said: “If the project doesn’t sell well or tanks or something, then there’s not going to be a lot of confidence for management, especially for the board to approve future investments.”

In FY2020, CDL took a $1.78 billion impairment on its investment in Chongqing-based Sincere Property Group.

Exiting Australia’s non-hotel assets

CDL entered Australia in 2015 and has since undertaken several developments, including the Brickworks Park master-planned residential development in Brisbane, build-to-rent residential projects in Brisbane and Melbourne, and Zenith Residences in Sydney.

“It’s not a market that’s worked out too well for us, and we’ve been unable to build scale,” says Kwek.

CDL intends to divest its residential and commercial assets in Australia. That includes its 50% stake in the office tower at 330 Collins Street in Melbourne, which it co-invested alongside a fund in which CDL also has a stake.

“We have to ensure that it’s an orderly exit, so that we obtain the right exit price for the building,” says Kwek.

CDL will, however, keep its Australian hotels, such as Sofitel Brisbane Central, which it acquired in 2023, and the hotels in Brisbane and Perth held under CDL Hospitality Trusts.

Singapore: $3 bil for land and 2,200 homes in pipeline

About $3 billion (60%) of the new investment budget is earmarked for Singapore, which Kwek calls “business as usual”. The money will go into Government Land Sales (GLS), collective sales and off-market deals, though acquisitions will be “primarily GLS-driven”.

CDL’s current launch pipeline stands at 2,200 units after it won sites at Tanjong Rhu Road and Peck Hay Road this year.

The next test comes this weekend, on Oct 3, with the launch of the 570-unit Lucerne Grand at Lakeside Drive in Jurong West.

“If that substantially depletes our launch pipeline, then it’s time for us to replenish it,” says Kwek.

The rest of the pipeline comprises Tanjong Rhu Road, with about 515 units; Peck Hay Road, with about 380 units; and two executive condos, Solano Grand, with about 300 units, and Wynwood Grand, with about 430 units.

“In Singapore, no one can predict with a crystal ball how many land sales we can win in a year,” he says.

While CDL has raised its return targets for overseas investments, it has moderated its return expectations for Singapore land bids.

“If you’re going to have very high expectations and targets,” Kwek says of Singapore, “I may end up losing every single GLS tender.”

Redeveloping its own assets

CDL has another source of land: its own buildings. The 336-unit Union Square Residences is part of a mixed-use development that includes offices, retail and co-living components. It is a redevelopment of the former Central Mall and Central Square.

Newport Plaza, another mixed-use development with residences, offices, retail and serviced apartments, is targeted for completion next year. It is a redevelopment of the former Fuji Xerox Towers.

Two more assets are under study. CDL bought Delfi Orchard through a collective sale for $439 million in May 2024. The site sits next to its Orchard Hotel and Claymore Connect, and could be redeveloped together under the Strategic Development Incentive Scheme.

City House, which Kwek calls “our venerable iconic office building in the CBD”, could qualify for the CBD Incentive Scheme.

He has no intention of undertaking too many redevelopments at once. Redeveloping an existing building means giving up its rental income while taking on development loans.

“We don’t want too much happening at the same time. Otherwise it will put a lot of strain on us,” he says.

Rental housing as seed assets

CDL has also built up a living sector portfolio with a total gross development value of $3.7 billion, including pipeline projects.

It comprises 5,240 PRS units across Japan, Singapore, the UK and Australia, and 2,368 purpose-built student accommodation (PBSA) beds in the UK.

The portfolio was built partly with fund management in mind. “It was also meant to form our seed assets for the fund management business, and that is still the case,” says Kwek.

Under GET+, CDL plans to sell suitable assets into funds and other vehicles it manages as it aims to double its assets under management from about $5 billion to $10 billion by FY2029.

When it does, Kwek prefers to hold no more than 20% of the fund, “so it will be a real divestment”.

Japan is the strongest performer, with 2,246 units.

“We have 40 operational PRS or multifamily assets in Japan, and they are doing really well for us, so there may be further expansion on that front,” he says.

In Singapore, recent additions include a standalone 35-storey serviced apartment tower at Zyon Grand under the SA2 long-stay serviced apartment category, which has a minimum stay of three months, and serviced apartments at Newport Plaza.

Not all the assets are ready to be sold into funds.

“Some of them, we may have to nurture for a bit longer, and stabilise over a period of time before we eventually turn it into a fund management vehicle,” says Kwek.

In the UK, CDL has 1,505 PRS units and 2,368 PBSA beds. The portfolio came under pressure when interest rates were high, and CDL is continuing to review it.

Hotel portfolio: Keep, fix or sell

The biggest review was of CDL’s hotel portfolio. Of the group’s 88 owned hotels, 54 are directly held by CDL and valued at about $8.6 billion.

“We went through every single hotel,” says Kwek.

The directly held portfolio has been split into three groups. About $5 billion worth of hotels will be retained, around $1.8 billion will be enhanced through renovation or redevelopment, and another $1.8 billion will be divested.

The exercise reflects GET+’s broader push to distinguish between assets CDL intends to hold and enhance, and those where capital can be recycled.

Freeing up trapped capital

Kwek says the group has identified more than $6 billion of potential divestments, giving it scope to exceed its $6 billion target.

But he will not sell at any price. This year, he says, CDL had several potential sales in hand but chose not to proceed. “I would be leaving money on the table,” he says.

Of the $6 billion divestment target, commercial assets make up 45% and hotels 30%. Legacy residential assets, including an $800 million UK portfolio, account for 20%, while living assets make up 5%.

According to Kwek, legacy residential assets include some in Singapore, such as the 59 units CDL still holds at the 110-unit freehold Cliveden at Grange, completed in 2011.

“Even in Singapore, we have some legacy residential that we need to get going when it comes to recycling the capital that’s been trapped there for quite a while,” he says.

In December 2023, CDL sold the loss-making Millennium Harvest House in Boulder, Colorado, for $94.4 million and recognised an $80 million gain. According to Kwek, the buyer intended to convert the property into student housing.

What keeps him going

At the end of the two-hour briefing, an analyst asked Kwek what still motivates him to lead CDL despite the scrutiny that comes with the job.

Kwek pointed to his grandfather, Hong Leong Group founder Kwek Hong Png.

“I think I’ve always been driven by the fact that I want to perpetuate the legacy, our family legacy,” he says. “My grandfather had a very deep and meaningful influence on me when I was growing up.”

When Republic Plaza was refurbished, Kwek turned part of the ground floor into a founder’s gallery depicting his grandfather’s life and how he built up Hong Leong Group and CDL.

In 2018, when he was 42 and a new CEO, Kwek said: “We cannot rest on our laurels. A lot needs to be done, especially in this day and age of disruption and innovation.”

He now adds: “I used to think that career was everything in life, and the be-all and end-all. But after you start having a family and kids, you realise that there are other aspects of life as well.”

He admits he is “still unable to strike a work-life balance”. But his sense of responsibility to the family legacy remains — and with it, his commitment to CDL.