Singapore Property Firms’ Profit Hit by High Rates, Downturn (2)

2024-02-28 04:40:18.848 GMT

By Low De Wei and Krystal Chia

(Bloomberg) -- Singapore property firms City Developments Ltd. and CapitaLand
Investment Ltd. reported bigger-than- expected declines in full-year profits, after being
battered by high interest rates and a global real estate downturn. Net income at CDL
dropped to S$317 million ($236 million) for the year ended December, down 75% from a
record in 2022, the city-state’s largest listed developer said Wednesday. CapitaLand
Investment’s profit fell 79% to S$181 million. The results cap a tough year for the
companies. Singapore’s residential market is cooling, China remains mired in a three-
year housing crisis and a commercial real estate slump is reverberating around the
world, hurt by the double whammy of high interest rates and post-pandemic remote
work. CDL pointed to higher financing costs and the absence of substantial divestment
gains compared to 2022. Real estate investment manager CapitaLand Investment said
it was impacted by valuation losses in China and the US.

Shares of CDL fell 2.5% in Singapore trading on Wednesday, the second-worst

performer on the Straits Times Index, while CapitaLand Investment climbed 2.6%. Both
stocks have been pummeled in the past year, losing more than 20% of their value.
CDL’s profit missed the S$358 million average analyst estimate compiled by
Bloomberg. CapitaLand Investment’s results fell short of a consensus estimate of
S$815 million. CDL’s results were “resilient” despite an “extremely challenging year for
the global real estate sector, with a high interest rate environment, inflation, weak global
economies and geopolitical tensions,” Executive Chairman Kwek Leng Beng said in a
statement. Kwek also highlighted the challenge posed by measures to cool the local
housing market. Singapore’s developers sold the fewest private residential units since
2008 last year after authorities raised stamp duties. Still, a recovery in residential and
hotel earnings has helped to cushion the blow. CDL’s revenue rose 50% to a record
S$4.94 billion last year. That beat analysts’ average estimate of S$4.08 billion. In an
earnings call, Chief Executive Officer Sherman Kwek said the company is targeting
divestments of S$1 billion this year. *T
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Massive Office Tower Losses Reveal Hidden Risks Across the Globe Singapore to
Raise Bar for Property Taxes Amid Affordability Hit Singapore Home Sales Off to the
Slowest Start Since 2009 *T

For CapitaLand Investment, which is backed by state investor Temasek

Holdings Pte, its sizable property holdings in China remain a major drag. About 34% of
its S$134 billion in assets under management are in the country, the largest slice of its
geographical allocation. It made divestments of S$2.1 billion last year. Revenue fell
3.2% to S$2.78 billion in 2023, in line with analysts’ estimates. The company said it is
on track to meet a 2024 target of S$100 billion worth of funds under management and
announced a new goal of doubling it to S$200 billion in the next five years. CEO Lee
Chee Koon said the firm will “optimize” its China portfolio and grow yuan-denominated
funds, as well as increase fund product offerings in markets including Japan, South
Korea and Australia. “I wouldn’t say we are planning to shrink China,” Chief Financial

Officer Paul Tham said in a Bloomberg Television interview after the earnings
release. “Rather, we are trying to focus on renminbi funds.” Broader market conditions
should turn in the company’s favor this year if interest rates don’t rise further, Tham
added. Transaction volumes are likely to pickup in China and other countries, following
a difficult year for the sector, he said. --With assistance from Nurin Sofia, Haslinda Amin
and Anand Menon.

To contact the reporters on this story:

Low De Wei in Singapore at dlow47@bloomberg.net;
Krystal Chia in Hong Kong at kchia48@bloomberg.net

To contact the editors responsible for this story:

Lulu Yilun Chen at ychen447@bloomberg.net
Russell Ward, Adam Haigh

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