City Developments Limited (C09) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, friends from the media, analysts, bankers, investors and fellow CDL colleagues. My name is Belinda, and I'm the Head of Investor Relations and Corporate Communications at CDL. Now, on behalf of the CDL management, we warmly welcome you to CDL's briefing on its unaudited financial results for the Half Year Ended 30th of June 2022. So thank you very much for joining us this morning. This is a hybrid briefing format. We have guests that are physically here at the M Hotel as well as those joining us on our webcast this morning. For all of us in this room, it has been a very long time since we were able to gather like this in an enlarged group. So it's definitely a pleasure to have all of you here in person for this briefing. As part of our own safe management measures, please keep your mask on at all times during the briefing. As for the panelists, they may be taking off their mask when they are responding to your questions. Now, in line with CDL's commitment to sustainability, we will not be providing printed copies of our materials this morning. Instead, you are encouraged to scan the QR code on the screen to download and view the following documents on our website. Now, these documents were uploaded to SGX early this morning before trading. They include: firstly, a copy of the detailed financial statement; secondly, a press release summarizing some of the key highlights of our performance; thirdly, a presentation deck that the management team will be using in a very short while. Now, for all our guests that are joining us on webcast, you would similarly be able to download these documents, which are available on the CDL website. I would like to introduce you to the CDL management panel. In the center, we have Mr. Kwek Leng Beng, our Executive Chairman. On his right, we have Mr. Sherman Kwek, our Group CEO. On his left, we have Mr. Kwek Eik Sheng, our Group Chief Operating Officer; then we have Mr. Chia Ngiang Hong, our Group General Manager. We have Ms. Yiong Yim Ming, our Group Financial Officer; and Mr. Frank Khoo, our Group Chief Investment Officer. The format of today's briefing will be in 2 parts. We will kick off with a presentation of some of the key highlights of our performance then followed by a Q&A opportunity with the panelists. So without further ado, I would like to invite Mr. Sherman Kwek, CDL Group CEO, to kick start the presentation. Sherman, please.

Okay. Good morning, everyone. Good morning, ladies and gentlemen. Good to have you join us here physically. As Belle mentioned, it's been quite a long time since we last had this. Obviously, we're not back to the crowds we used to have, but still good to be able to meet in person and also a warm welcome to all the attendees via our webcast, and we look forward to an invigorating Q&A session later. This is our vision, mission, values. We've had this for quite a long while, but I just thought I'd flash it up just to -- because not everyone knows about it or it's been to see it on our website and really represents what we are here for, what we are doing and what we aim and aspire towards. The deck is pretty long, what we've uploaded, but actually, we're going to just take you through a small portion of it. So I will do the overview and strategic initiatives, and then Yim Ming will do the financial highlights and the rests are, you can read through it at your own leisure and let us know if you have any questions. In terms of overview, I think all of you have seen the press announcement this morning. Certainly, it's been a much better set of numbers than the last few years. Obviously, the big improvement and the big gains have been driven primarily by 2 things. So we've had a improvement and resilient performance across all of our operating divisions. But the reason the PATMI has jumped so significantly is because of the divestment of our hotel in Seoul, Millennium Seoul Hilton, as well as we deconsolidated our CDL Hospitality Trusts. So each one resulted in a gain of around $500 million on the PATMI level. So that's been -- but even, as I said, if you strip out the gains and we've taken a liberty to show you what the numbers look like across EBITDA, profit before tax and profit after tax, minority interest. You can see that the numbers are all markedly improved against the same corresponding period last year. And obviously, one of the top performers in our business divisions was our Hospitality segment. As many of you may remember, our Chairman was the one that called it earlier than almost most -- than most people, saying that we would see an imminent recovery. Most people are forecasting '23, '24, even 2025. But already this year, I think we have seen a research in travel, especially as borders reopen. And obviously, the global vaccine has been accelerated, too. So this has been a real boon for us. And you will see later on for our hotel metrics, things like RevPAR are up 110% year-over-year. So it's been very, very encouraging performance. This is just a quick snapshot of our share price. And obviously, our NAV per share is on a book basis. And since the last probably 2 years, we started disclosing what our fair value look like for investment properties and also if you want a fair value all of our hotel assets. So we are certainly trading at a big discount to RNAV, but we will endeavor to close up this gap as quickly as possible. We have proposed a $0.12 interim -- special interim dividend. And as of yesterday, our share price closed at $8.25. So we are up 21% for the year, which I would say is a pretty resilient performance considering how many turbulences and headwinds we've seen this year so far. In terms of key operational highlights, I have the screen here. So let me use this. In terms of key operational highlights, we've sold 712 units with sales value of $1.6 billion. This is in Singapore. Obviously, as per accounting methods, we will recognize this progressively as per the stage of construction. We successfully launched Piccadilly Grand at Farrer Park in May, and we are now 77% sold -- well, 77% was sold on the launch weekend. So we're really, really glad with the performance of this and the Singapore resi market has remained resilient. So last year, prices were up about 10.6% for the overall market -- resi market in Singapore. And this year, prices continue to trend up. They're up about 4% for the half year. And we are glad to see that the property market still remains resilient. And as our Chairman has said in our press release, it's still a good investment for the medium- to long-term and certainly a good hedge against inflation. In terms of replenishing our land bank, which is always the most difficult thing to do in Singapore, especially, we are glad that we have 3 sites that we managed to acquire this year. One was the Jalan Tembusu site at Tanjong Katong, that was the first GLS in January. And then subsequently, we acquired Central Square site from Far East Hospitality Trust, and we will amalgamate it with our Central Mall properties to create a new mixed-use development, more on that later. And, of course, we did an off-market deal by buying an Upper Bukit Timah site from Tan Chong International. In China, our existing resi inventory is more or less substantially sold out. And in Australia, we acquired a new site in Brisbane for residential sales. On the investment property front, as you can see on the stats there, our committed occupancies for office and retail are very healthy and significantly above the island-wide average occupancies. Overseas, we've also seen stable occupancies for our London and China office properties and retail properties. And we acquired 2 projects. One is in the U.K. This is a project Infinity. So this is our first foray into Purpose-Built Student Accommodation or PBSA, as we call it. It's 505 beds and located right near University of Coventry. So an excellent asset, and we also think. This asset is part of the living sector, which I'll cover later, and we have -- we feel the outlook is very bright for PBSA. I mean, be it whether the economy is doing well or not, I mean, students still need to go to school. And obviously, U.K. is still a popular choice for parents to send their kids to university. So this is our first foray. We acquired it at a 5.4% cap. So we think we've done very well in terms of pricing. And in Australia, we've also done our first PRS, which is basically a multifamily investment in Australia, and that's basically apartments for rent. And so we will develop this site out, and it's in Melbourne, and we're very excited to expand our PRS strategy to Australia as well. On the hotel side, as I mentioned earlier, you can see all the stats are up. Occupancy is up almost 16 percentage points. RevPAR up over 110% year-over-year and rates are up also. So it's been a great recovery. And obviously, we had an offer that was too good to resist. So we sold our Seoul hotel and booked substantial gains on it. And we will continue to grow our AUM for our Fund Management business. I have more on that later. This just shows you a breakdown by segment. We also illustrated to you what it would look like if we didn't have all these big, extraordinary gains. But having said that, I mean, the performance is still very resilient and all sectors have shown good performance. Again, the same charts that we've shown before, and you can see that whether it's by book value or whether by fair valuing our IP and hotels, Singapore still continues to represent a big chunk of our asset base, roughly around 50%. Obviously, this has to do with historical legacy as well. We have a lot of office buildings in Singapore, so -- and hotels as well. So all these when revalued, obviously account for a sizable portion of the valuation. But I think Singapore will always continue to remain a key part of our business. But at the same time, I think all these economic headwinds and turbulences have highlighted the need for us to accelerate our diversification. We started our diversification in 2010 when we went to Australia -- sorry, when we went to China and then in 2013, we went to the U.K., 2014 we went to Japan, 2015 we went in Australia, 2019 we went in Vietnam. So we continue to push ahead with that. And obviously, I'm just talking about the real estate side, on the property development side, I mean, for the hotel side, I mean, our Chairman started the diversification decades ago when he expanded our hospitality chain. This is just a slide to show you how we stay nimble to navigate near-term challenges. We had mentioned to all of you last year that we were going to start to gradually bring down our gearing. And these divestments have enabled us to pay down quite a bit of debt as well. So our gearing, which hit around 65% at its peak, based on fair value, are now -- is now down to about 52%. So really happy. Our gearing is down, and we have a lot more headroom in case we need to tap on funds for acquisition. And our cash remains strong. So cash and undrawn committed credit facilities is $4.1 billion. We also continue to look at debt. Kudos to Yim Ming, our CFO, for continuing to do like interest rate swaps and stuff in order to get us a higher percentage of fixed rate debt so that we can hedge for the future. But at the same time, it's expensive to do these instruments. So we want to leave a sufficient amount of floating rate as well. So we've been pushing along on these. The rest are basically stuff that you can read. I mean -- and we will continue, I think, to strengthen our capital position to ensure that we're ready to execute on our strategy, our GET strategy as we go along. In terms of enhancing our operations, we obviously have clear strategies, how we manage our 3 key operating divisions: property development, investment properties and hotel operations. So essentially, it's all about finding ways to drive better asset performance to increase the yields or increase the sales values, as well as more important than ever is cost management when environment of inflation, costs are going up substantially, and part of that is also triggered by COVID with those supply chain disruptions, all that. So costs across the board for all sectors for all industries are going up. So I think cost management has been very important for us, value engineering as well, how to deliver a high-quality project without compromising the quality but ensuring that we get the materials faster and we keep the cost in check by preordering earlier. So we've been doing all of that across our 3 key divisions. And hence, it's produced a resilient set of results, too. So in terms of our strategy, you've seen this many times before, Growth, Enhancement and Transformation. For Growth, as mentioned earlier, that's our property development and recurring income revenue. I think we've done well in terms of our first launch for the year, Piccadilly Grand, we've replenished land and we continue to build up our recurring income streams via this living sector, which I'll talk about later. Enhancement, I'll also go into more detail later with some of the properties that we are enhancing in the AEIs, the renovations that we're doing. And of course, Transformation, since we privatized M&C in November 2019, we have been continuously doing a strategic review to unlock value from the hotels, and we continue to drive our Fund Management platform as well as invest heavily in innovation and also venture capital to ensure that we future-proof our business. So for Growth, you can see that these are the completed acquisitions for the first half. The latest one was -- that's been completed was the Infinity, which is the PBSA, the student accom deal in Coventry in the U.K., 505 beds at a 5.4% cap. And for the Singapore, I mentioned earlier, the so-called land bank that we have gained this year. In Australia, we have the build-to-sell project as well as we invested in our first office building in Australia. So we invest in a fund that we are also part of the manager called HThree City Australia. It's a Singaporean startup fund. And so we JV with the fund 50-50 to invest in our first office building in Australia in Melbourne. Actually, those who know Melbourne know that Collins Street is the best address in the CBD. And this building has tremendous frontage, the Collins Street. We feel the building is under rented, and there's a lot of potential to up that occupancy about 90%, and the rents are actually lower than what I think they can be achieving. So it's a great value-add opportunity for a very, very prime core asset, which we have an effective stake of greater than 50% because we are also an LP in the fund. So this is tremendous. And then we continue to increase our PRS portfolio, our Private Rented Sector portfolio in Japan. So with the acquisition of 3 more projects that brings our total in Japan to 8 assets. And, of course, we have one that's yet to complete, which is the one I mentioned earlier, our first PRS project in Melbourne in Southbank. This, I don't need to go through. These are just some of the launches that we have slated for this year, next year and beyond. And it just illustrate that we still have a strong healthy launch pipeline of greater than 2,000 units, and this will stand us in good speed as we progress forward. As mentioned earlier, living sector, so aside from doing our usual residential development for sale and doing our asset management for our investment properties for office buildings, or malls or hotels. We have also, in the last 4 years, chosen to expand into the living sector. This sector predominantly consists of the PRS, which is a multifamily rental accommodation, workers' dormitory, student accommodation, affordable housing and senior housing. These are the key components of the living sector, and we are gradually building up our presence and our scale in each of these key areas. So we have 2 PRS projects in the U.K. One is Leeds, which will be completing in the phases with the first phase completing this year in the next few months actually. And then the rest of it completing in the first half of next year and Leeds will have so-called 665 rental units located right next to the Wellington CBD in Leeds in the city of Leeds, which is the fourth largest city in the U.K. So we -- this is going to do well. I think in this climate where housing prices are rising worldwide and therefore, causing these affordability issues and also because professionals are now more mobile than ever. I feel that this trend towards renting will only grow and strengthen over time across the world. And we, of course, acquired another site last year, which is in Birmingham, second largest city in the U.K. And this will be the tallest octagonal shaped residential tower in the world, and that will take some time to come to fruition. I mean, we need to build it, obviously, but it's situated in one of the best locations in Birmingham. And, of course, the newest acquisition in Coventry, this is completed already and it's new. It's completed within the last 24 months. So it's brand-new and it's running well. And as I said, we're already getting it in place yield. Japan, as mentioned earlier, we acquired 3 more assets this year, which brings our total portfolio to 8. Number of units still not very large because PRS projects are still fairly small in Japan, and it's not easy to acquire prime, well-located assets that are new and that are sizable. So -- but so far, I think these 8 assets have given us a strong base in Japan, and they are 5 in Osaka, 3 in Yokohama, and they are all performing very well. Over the last 2 years, during the pandemic, we've seen actually occupancy strengthened, rates strengthened. So really happy with them. And again, with the exception of one, the other 7 are all pretty much brand-new built within the last, I would say, 2 years or so. In terms of Enhancement, these are the 2 big projects that we have mentioned to you before. We continue to push ahead with it. For Fuji Xerox Towers, we have already obtained provisional permission in May of this year. So we have an uplift of 25% to the GFA. We target to launch this in the first half of next year for the residential component, which is about 256 units. And this will be a really iconic mixed-use development. What you see here in the picture is the bottom part of the building, which is the office component. So again, designed with a lot of wellness in mind as well for office tenants, and we actually designed this before the pandemic. So it's great to see that this is going to be very suitable for so-called workplace wellness in the future. And this can be very iconic, right at the gateway to the Greater Southern Waterfront. So we continue to push along with this, and this will be a mixed-use, obviously, with office, resi and service apartments. For the other project, which is -- we acquired Central Square and amalgamating a Central Mall, you can see it's got great frontage to the Singapore River, very long frontage. It's going to be a very, very iconic mixed-use development. We can -- we are unable to share too many details in the moment, but we are almost getting there with planning permission. So hopefully, by the next time I see all of you, we have a lot of great news to share about this project. It's shaping up nicely. Design is very, very iconic. So this will redefine this side of the Singapore River when it's ready, incidentally. On the other side of this project is CanningHill Piers, our JV project with CapitaLand. Some of the AEIs that we've done recently, Palais Renaissance, we completed the AEI in June of this year. And so far, the post AEI committed occupancy has strengthened. Rents are up. We've been able to bring in new exciting F&B concepts and is doing really well. So if you haven't seen it, please pop by and take a look. I heard a lot of great reviews about how the mall looks now, as well as the new tenant mix and the varied offerings of F&B. King's Centre, an office building next to -- adjacent to Grand Copthorne Waterfront, our hotel. So King's Centre, we have also completed the AEI in June. So this office building now is ready to be more competitive and certainly can stand the test of time. We have one big AEI that's ongoing in Phuket. We're spending quite a lot of money to refresh and to enhance this asset as well as to increase the NLA as well, which is part of the benefits of doing this big AEI. So we have not done an AEI since the mall opened in 2006, and it's always been one of the premier leisure and shopping destinations in Phuket. So now we're about to really transform this mall and entrench it again as the market leader there. In terms of so-called repositioning of M&C assets, here are some of the assets that we are converting over to the M Social brand. So these are assets that are strategically important to M&C. These -- and M Social, obviously, is a brand that our Chairman has created. It's his brainchild, and this is more of a hit lifestyle brand. I think that would appeal to both business travelers and those who are there for leisure purposes. And so these are some of the ones in the pipeline with Suzhou opening up soon within the next 6 to 12 months. And then you've got the rest following on from there. This is our ESG leadership. And obviously, we have made our commitment of achieving net 0 carbon by 2030 for our directly owned and managed buildings. And this is a lofty target, but we aim towards that because we all have a social responsibility to the planet. Recently, this month, we were also -- the news came out, we also ranked fourth on the Singapore Governance and Transparency Index, same ranking as last year. So we are very happy that we continue to maintain our governance and transparency leadership there. And of course, the rest are all of our gender equality as well as our sustainability accolades. Okay. For transformation, this is where I think we really want to make big strides to transform and future-proof our business. This is just a quick overview of our hospitality portfolio, I thought it would be useful for everyone to see it. I mean, 155 hotels worldwide, how it's split in terms of what are owned, what are managed and franchised and what are operated under JV agreements. So this -- and all the brands within Millennium & Copthorne. So like they built more Grand Millennium, Millennium, M Social. So I think this just gives you a snapshot of how the portfolio is diversified and is strong. In terms of the strategic review, I've often mentioned to you that it's been ongoing since we privatized M&C, we've been doing a strategic review to see how we can unlock more value. And in fact, to analysts and shareholders many times I mentioned that we have been splitting our properties into 4 buckets. So finally, I actually review what these 4 buckets are. So the first bucket is basically our core hotels. Hotels that we want to keep for the long run. And therefore, these -- we need to really focus on operational efficiency, how do we continue to drive revenue as well as conserving resources and containing costs. The second bucket of hotels that we also do want to keep for the long run, but badly require an AEI to be done because they are aged or they are rundown. So -- and these are often in key gateway cities and able to meet the lifestyle trends that we're aiming towards. So some of the ones that we completed are the M Social Hotel in New York, which was the former Novotel, the M Social Hotel Paris Opera, both of these were completed in the second half last year. The one in Paris used to be the Millennium Opera Hotel. And in the pipeline, as mentioned earlier, we have like Phuket, we have New York Downtown, which was a Hilton, and we have the nice bridge coming up. So very excited about these. The third bucket are those for redevelopment, where the highest and best use may not be a hotel anymore or may not just be a hotel, but maybe a mixed-use development or maybe something totally different, like a PRS, a multifamily or something. So that's where we're looking at unlocking value. So 2 examples, one is obviously from quite a long while ago was The Glyndebourne in Singapore. That was, as all of you know, that's off Dunearn Road. That was the former Copthorne Orchid Inn and we redeveloped that into residential units and sold it extremely well. And the other is in Sunnyvale, where we had a very rundown kind of motel style property in the heart of Silicon Valley. And we have redeveloped that into PRS as well as a hotel. So the PRS is already ready and running at high occupancies in excess of 95%, the rental apartments and the hotel is still in progress. And the fourth bucket is divestments. So here's where I think for hotels that are noncore to us or that we receive prices that are just too irresistible to refuse, we will consider divesting in order to unlock cash and recycle our capital into better investment opportunities. Our Chairman has acquired all these hotels throughout the decades at a very low -- at very good prices. So they currently sit on our books at low book value. So at any point in time, it does make sense for us to unlock some of that value through divestments. We have done that recently with the Millennium Seoul Hilton, which we sold for $1.25 billion. And Millennium Cincinnati in the U.S. has been sold. Copthorne Birmingham was acquired back by the City because they are so-called rejuvenating the whole Birmingham Paradise district. Incidentally, our new Birmingham octagonal shaped resi, a PRS tower is right next to the hotel. So we sold the hotel, but bought back the site next to it for rental apartments. This W Singapore and Studio M are assets that we sold to the REIT in an effort to be a better sponsor to the REIT. And now that we have deconsolidated the REIT, we can now recognize gains on any divestments for properties we sell to them. So this gives us even more impetus to be a better sponsor. This is our AUM. I felt since we had -- since 2018, we announced a 5-year target of USD 5 billion of AUM. We're starting small. We were never really in the fund management business in the past. So since 2018, we've had to start from scratch to really build this up. And we are not there yet. We are at about USD 2.9 billion right now. That's made up of -- so we have about USD 1 billion of third-party AUM that we manage. So this includes REITs that were part of the manager. So like IREIT listed in Singapore, were 50% of the manager. So this is also considered AUM. We are part of the manager for HThree City earlier, so also part of our AUM. We also now count CDLHT in there because, as you know, to reward our shareholders for the excellent divestment gains we've enjoyed, we did a distribution in specie of the CDL Hospitality Trust shares out to our shareholders. So that's worth $0.20 of dividends. So that was announced, but will be recorded as part of 2021 dividends. And again, that was to reward our shareholders. As I mentioned earlier, I could have gone and sold these shares in the open market on a block trade and gotten a cash worth over $200 million. But instead, I chose to distribute it to shareholders to really thank shareholders for their support. And in the process, I also achieved, obviously, a benefit of deconsolidating the REIT. It doesn't make sense for us to keep consolidating the REIT and the entire REIT's balance sheet on to mine. So now that I've deconsolidated the REIT, I see it as third-party AUM as well. So we are the manager, but we are no longer so-called controlling shareholder of the REIT from a unit perspective. So -- and we don't have to consolidate. So this is part of our AUM. And obviously, we still are some ways to go. Sadly, as you all know, the markets have not been too conducive for public listings of REITs. A lot of REIT listings have been shelved in the first half of this year. And especially now in this inflationary environment and with interest rates going up, it's going to be more difficult to get a REIT listing done. So we have not been able to list our REIT so far. That's the partnership with QIA. And if that was listed, that would have brought in over USD 2 billion of AUM. So that would have got us to our target of USD 5 billion. But unfortunately, that hasn't happened. We're still pushing ahead, evaluating so-called how best can we either list this in a public format like a REIT or potentially we could also do it in a private format. So we inject the assets into a private equity fund. And in fact, in the private equity fund, you're not constrained by leverage because unlike a REIT, so you can get to a much higher LTV. We may or may not continue to do this with QIA. So it depends on how things pan out. Obviously, a REIT listing would have been the preferred, but we continue to explore the various possibilities we can do it. But suffice to say, these 2 office assets, trophy assets we bought in U.K. have sharply increased in their valuations. They are doing well. Occupancies and rents are strong. So regardless, we still own 2 excellent assets. And we will continue to push our fund management business. This is just the asset I talked about earlier, where we acquired this office building in Melbourne, and this is obviously in partnership with a fund that we are also a part of. So we're very, very excited about this. Okay. And my last slide before I hand it over to Yim Ming is basically on maximizing shareholder value. I think that's why we are here for to ensure that we do good for our shareholders and all of our stakeholders. ROE is still very important for us. We have our mid- to long-term targets for ROE. So we will push hard to get to our ROE targets. We know we need to improve on that front. As mentioned earlier, capital recycling is still a very, very important theme. That's central to our plans. We have to continue to recycle capital in order to get our ROE improvements in place as well as to ensure that we use capital more efficiently. We will grow the AUM for our fund management business, our fledgling fund management business. We will exercise prudent capital management in terms of managing our cash, our gearing. We continue to optimize the assets that we currently own, whether by AEIs, repositionings, redevelopments or simply operational improvements. We will enhance our recurring income streams. So that's our expansion into the living sector where we strengthen our recurring income streams. Our property development income streams will always be more bumpy, right? There will be the ups. There will be the downs depending on when you recognize profit. But it's our recurring income that will provide us with a strong base. We need to continue to diversify both geographically and across asset classes. And we have been doing that and executing on that over the last 12 years. And last but not least, as mentioned earlier, we have to be a good corporate citizen as well and do our part to ensure that we have a sustainable planet to hand over to the next generations -- for the generations to come. And all this, obviously, is underpinned by ESG. So thank you very much. I will hand it over to Yim Ming, who will quickly take you through the financial highlights, and then we'll open it up for Q&A.

Thank you, Sherman. Good morning, ladies and gentlemen. Indeed, 2022 started off really well with 2 very profitable transactions, and that's only made possible after the successful privatization of M&C back in 2019. So let us see some colors on this sort of financial statements. This is really underpinned by the challenging macroeconomic conditions. First, let's just look at property development segment. The PBT for this segment has actually improved, factoring the fact that there was a negative goodwill recognized in the first half of 2021. Notably, the very well sold projects, CanningHill Piers, Irwell Hill Residences and Piccadilly Grand, they are still in the very early stages of construction. We'll see them being more significant contributors in the next year or so. Secondly, hotel operations recorded an increase in revenue of 89%. So this segment recorded also a massive PBT as it included the divestment gain on the sale of Millennium Hilton Seoul, as well as a gain on deconsol of CDLHT. So as a refresh, with the distribution in specie of CDLHT completed in May 2022, [indiscernible] has deconsolidated CDLHT. And how it's accounted for is effectively disposed of its interest as a subsidiary at fair value and accounted for our retained interest at fair value, which is why we have this huge mark-to-market gain of about $492 million. So this gain includes negative goodwill, a small amount of about $18 million and this segment across both hotel operations and investment property segment. So lastly, you can see the investment property segments remains resilient and the PBT is, of course, boosted by the divestment gains. So on this slide, the hotel operations have experienced a strong rebound comparing the first half of 2022 versus 2021. Occupancy increased significantly for Europe as well as U.S. hotels following the borders reopenings and the relaxation of travel restrictions. Room rates have caught up close to pre-COVID levels, and occupancy has also gone up significantly. So resultantly, we have a strong RevPAR of growth of 110% and with a flow through direct to GOP margins, GOP margin stands at 24%. So the group continues to increase operational efficiency to further improve the margins. This chart shows the revenue by segment for the half year 2020 to 2022. The 23.5% increase in revenue is largely due to hotel operations segment, which, in fact, compared to pre-COVID levels, which is first half of 2019, we're at about 76% of 2019 levels. This chart shows the EBITDA by segment. You will notice the high orange bar on the right, which is due to the divestment gains, again from Millennium Hilton Seoul and CDLHT deconsol. So notably, hotel operations reversed its negative EBITDA, and all regions actually registered positive EBITDA for this -- for first half of 2022, reflecting a strong recovery momentum. PBT by segment. Once again, our record PBT, similarly to our record PATMI since our inception back in 1963. Next, I'd like to focus on balance sheet and liquidity position of the group. The group has a strong robust fundamentals with cash of $2.2 billion and war chest about $4.1 billion. Gearing has reduced [ in north of ] 52% with the cash proceeds from Millennium Hilton Seoul and the deconsol CDLHT. So addressing interest rate hikes today. Interest rate hikes continue to be on the close radar of the Group. The current fixed rate debt is about 35%, but that does not factor in that denominated in Japanese yen and renminbi, which are less likely to increase rates in the short term. So notably, the Group also do expect to reduce its loans following the projects such as Piermont Grand and Amber Park, which will TOP in the next 12 months. Of course, to further mitigate interest rate exposure, we will also, of course, monitor the situation closely and consider hedging instruments. We will also factor in the future cash flows, we could expect from the on-block sale of Tanglin Shopping Centre and Golden Mile, expected to complete soon. So the Group exercised prudent capital management. For borrowings, which are back-ended for 2022, the Group has reached agreements with the banks for refinancing. The debt due in 2023 is a very small percentage, about 10% of debt profile, which the Group is very confident. So with that, I hand over back to Belinda.

Thank you Sherman, and thank you Yim Ming, for the presentation. We're now moving to the second part of today's briefing, which is the Q&A. So please feel free to ask any questions you may have. My colleagues are standing around the Ball Room, and they will bring you a microphone. If you have any questions, you may raise your hands, and we will come to you. [Operator Instructions] May I just open the floor for the first question. Okay, maybe I'll go with Mervin first and then Rachel, yes.

Mervin from JPMorgan. Congrats with the strong set of results. Maybe we can start off with the hotel segment, maybe touch on how RevPAR compares to 2019 levels? And how is forward-bookings looking like for the second half and are we expecting RevPAR to hit towards pre-pandemic levels? Or are you seeing a slowdown, given especially in Europe, with a recession versus the -- on the Singapore resi side, there's prospects of the mortgage rates hitting closer to 4%, which we haven't seen for a very long time. What's your outlook for Singapore resi? Are you looking to slow down your land bids or better lower land prices to mitigate this potential headwind, I'll stop here.

I'll take the RevPAR question, and of course, Sherman can add in as well. I think for the second quarter, I think the different regions performed slightly differently, for the U.S. and the Europe regions, they actually, in some areas they actually exceeded the 2019 kind of RevPAR numbers, which is, I think because naturally, there's open borders. A lot of people are traveling in and out. Whereas for Asia, it's a bit different, especially in North Asia, it's still quite restricted. So we are not really seeing that kind of a recovery yet. Overall, for the year, I think we are projecting around 80% kind of overall recovery back to 2019 numbers. And for the time being, I think that we're still on track to do that, barring any new changes in the travel policy. But I think we also need to consider that once these other example, China, Japan, they open up, we will see another influx of high demand for travel again. So there is that upside as well once that happens. Yes, I'll hand over for the mortgage question.

Mervin, yes, I mean, it's obviously a worrying sign to see that obviously, when an inflationary environment and interest rates are rising as well, and I have received this question many times as to how will this impact property business. The truth is, I mean, this will impact all sectors and all industries. But having said that, I think our property will still continue to be resilient. As our Chairman had mentioned in his press release statement, right? I mean I think real estate is still a very good hedge against inflation in the medium to longer term. And although, yes, mortgage rates may hit as high as 4% pretty soon. But the great thing is that Singapore household savings are still very strong. Unemployment is still very low. And I think for those, especially for the genuine upgraders who are buying their first time home or upgrading from a small place to a bigger place, I don't believe that they will put off their property purchase just because of the higher mortgage rates and they will find a way to make things work. So I still continue to see that the market will remain resilient. Prices may not keep rising as fast as it's been over the last 1.5 years. But I believe there will still be some price growth. And obviously, the price growth can't soften as long as land prices -- sorry, the prices can't soften as long as land prices still remain so high. Developers have no choice, but to price in a small margin and hence churn out condominium units at a high price. And this is primarily because costs have gone up across the board for all developers for -- land remains stubbornly high. And obviously, construction costs comprising of labor, materials, you name it, steel, sand, concrete, everything has gone up, too. So as a result, I think prices will still remain fairly stable. This year's volume, obviously, is going to drop compared to last year. Last year, the market overall, home market did over 13,000 new launch units were absorbed. This year, I think most people are forecasting 8,000 to 10,000 units transacted this year for new launch units. So volume-wise, there will be a bit of a dip. But I believe the buying will still continue and in terms of us replenishing our land bank, I think we just have to be very strategic. As I just mentioned earlier, land is very, very difficult to replenish in Singapore because developers are always hungry for land. We -- due to the 5-year ABSD, no one can hold land for a very long period of time either so we have to turn to government land sales and on-blocks sooner or later in order to replenish our land bank. We are fortunate in CDL's case that we have managed to replenish our inventory through some so-called redevelopments of our long-standing assets. So things like Central Mall, things like Fuji Xerox Towers, but we definitely still have the resort to land tenders and on-blocks in order to replenish. We have managed to do so in the first land tender of the year with the Jalan Tembusu site. We have tried for the subsequent land tenders. Some sites we have chosen not to go for it if we don't feel that they are that viable or the metrics aren't that great or the location is not something we prefer or perhaps that local is not an area that we traditionally have been that experienced with, that familiar with. But for those that we've liked, we tried to give it a decent shot, but unfortunately, again, land bidding has still been very hotly contested. We will continue to participate in land tenders for the rest of the year. But the good news is that whether we win or not, I'm -- obviously, I can't predict this, but the good news is that at least we have a good inventory and a land bank to last us for the next 2 years or so since, as I presented earlier, we have more than 2,000 units in the launch pipeline. So at least, it reduces the pressure on us to have to engage in a bidding frenzy in order to replenish our land, but we will continue to selectively participate in GLS tenders.

Okay, thanks Sherman. Maybe I'll move on to the next question. Maybe Rachel. Rachel, then I'll come to David, yes.

I'm Rachel from DBS. Congratulations on a good set of results. My first question is on -- I think hospitality has seen a very strong recovery, and you have also given us some color on how you are proceeding with your core strategies. So looking at how successful you are in asset recycling, should we expect the same level of activities going into 2023, next year, same level of asset divestments in 2012? And my second question is on your dividends. I think this year, we have seen strong divestment gains, and you have shared some with shareholders. Should we see that year-end, full year dividend should be last year's dividend? Or should we expect more since there more divestment fees to be booked in the second half of the year?

I'll take this one. In terms of divestments, we do have assets slated for divestment, whether we can trump the kind of gains that you've just seen, right? I mean the Seoul Hilton obviously is a bit abnormally, right? I mean we sold it for $1.25 billion. So, not that many assets can trump this kind of a price. But we do have assets slated for divestment. And I mean, we have no shortage of interested parties, right. We constantly receive inquiries and offers for our hotel properties across the globe. So certainly, we're not in a hurry divest them, but at the right time, at the right point, we will certainly do so. We have some slated and we hope that next year you will continue to see some good so-called divestment performances. And the key is, obviously, when you divest, right, it's not just divesting for the sake of divesting, but how do you recycle the capital. Paying down debt is one way. I think we've already brought our debt down to a very prudent level at 52% gearing. So it's a question of what investment opportunities are you going to redeploy the capital to, so that's very key for us, Rachel. And so we continue -- we are on the lookout for good deals. And in fact, we're working on a few right now. So we hope to be able to share good news with you in the months to come. But yes, I mean, I think for the -- And then for your second question on the dividends, now topping last year's dividend is almost impossible because of that $0.20 CDLHT share distribution in specie we gave out to all of our shareholders, right? I mean I put all these REIT shares in your hands and you're able to participate in the hospitality recovery as well or sell the shares if you just want the cash. I mean a bit hard to top that. I mean, I think our dividend payout ratio, if you include that $0.20 was like over 300%, right, Yim Ming? Over 300% last year. So -- but for this year, I think we want to continue to maintain a good payout. And for the first half, I think the special interim we've declared $0.012, but we thought that's, say, prudent for now. As you know, we are looking at quite a lot of headwinds ahead. So we -- I think we want to stay prudent and depending on how the year ends, right, we certainly look towards further rewarding our shareholders for their support of our Group.

Okay. Thank you. I'll take David first and later Yew Kiang add your question. David?

David Lum from Daiwa Capital Markets. With regard to the living sector, is that your new strategic focus? And if so, -- what are the implications for your hotel and investment property segments? Are you planning to reallocate capital from those segments into the living sector? And if so, do you have any targets for the living sector like you do with the assets under management? That's the first question. The second question is with regard to those 4 buckets for your strategic review of the hotel sector, can you provide like a distribution of hotels you own by each category, like how many core hotels do you have and how many hotels under AI, so forth? Those are my questions.

Thank you, David. So for the living sector, we do have targets, but we're not at liberty to disclose them at the moment. These are internal targets. I wouldn't say that they are -- they would replace our traditional business of property development or asset management. In fact, it's a complement to it. I mean living sector is actually primarily comprised of recurring income assets. So that strengthens our investment properties, our IP segment. So it's just like how I would allocate -- we will allocate cash to buy new office properties in the U.K. and stuff, right? This is no different. And we have been steadily making progress in 4 out of the 5 living sectors, asset classes that I flashed up earlier with our newest one that we entered being Student Accom. So stay tuned. We've been slowly building -- this is not a new strategy by the way as well. We announced -- we started going on this path in 2018. Maybe we weren't as salient about it. Also because back then, I think there wasn't such a thing called living sector. This term only officially came into place maybe in the last 1 or 2 years, when people started terming it the living sector and bundling all these things together. But yes, we've -- since 2018, we've already been embarking on this path, and that's how we've been able to build up some scale. Still not enough. We still need a lot more scale in order -- see, once you achieve scale, you not only achieve so-called cost efficiencies, basically economies of scale, but you also have more options in terms of what you want to do with it. So if I build up our PRS portfolio or our Student Accommodation portfolio, I can eventually again, use it to strengthen our fund management efforts, we can seed it into a public REIT or into a private equity fund. So this really is to open even more avenues for us and to further bolster our fund management efforts. So that's one. The second question is the hospitality. I'm afraid I may have to disappoint you again. We've been so-called asked many times, can you tell us exactly what percentage of your portfolio is in this bucket or that bucket? It's stuff that we are not at liberty to disclose for now. So otherwise, it makes it too easy, right, for everyone to figure out what exactly are we planning? And we don't want to overly say some of these things also because it allows us to more leverage when we are negotiating or when we are embarking on some of these, be it divestments or repositionings and stuff. So yes, so stay tuned. Hopefully, we'll have a lot more news to share with you over the next 12 to 18 months as we continue to execute on our strategy.

Maybe I'll take Yew Kiang.

Yew Kiang from CLSA. I just want to touch on the fund management business. You're still sticking to the $5 billion target. So if the U.K. commercial business doesn't get true, where is the other segments that's going to fuel this? In terms of asset class, would it be the PRS? Secondly is on divestment proceeds from Tanglin and Golden Mile. Are you able to give a guide or range on that?

Yes, I think we are still sticking to the $5 billion AUM target. So obviously, if the REIT doesn't take off, then we will look for alternatives. And like what Sherman said, we're considering putting the REIT into a private fund. So that's one way that we can generate AUM. And the other thing that you guys might be aware of is, we recently teamed up with BlackRock to try to buy [indiscernible], right? Obviously, if that had gone through, that would have put about $1 billion onto our AUM. So I think we continue to explore different options i.e., through a private fund and managing third-party capital. So yes, we are still sticking to that.

So on the part on Tanglin Shopping Centre and Golden Mile, we're currently still not at liberty to share the state of the consideration because we're actually bound under the collective sales agreement. So I think that will also possibly only come out closer to completion.

But it looks quite likely that both of these collective sales should be completed by this year, at least that's how it's looking right now. So that will give us a bonanza year again for 2022. So...

This is Tan Xuan from Goldman. My first question is on what's the focus for second half this year. Are you still looking at divestment? Or do you think it's the right time to go more active into redeployment? And if redeployment then where and what asset class?

So yes, we are so-called aside from, obviously, pursuing divestments because that helps to recycle capital into more higher-yielding and faster-growing and so-called better assets. I mean we are looking at acquisitions as well. And as I mentioned earlier, I think the key areas aside from our traditional business, you can see earlier when I presented, we still continue to acquire land sites for residential sales. And we have acquired an office building in Australia. So these are all traditional assets we're very familiar with. But I think one of the key focuses where we're intending to plow more of our capital and redeploy more of our capital is into the living sector. So, we just did a PBSA deal in the U.K., so hint-hint, maybe more to come. And obviously, some of the other PRS across U.K., Japan, Australia, were still pushing those along too.

Okay. Okay. I'll take Vijay, and then I'll move to the back. Vijay first.

Vijay from RHB. I have a couple of questions. My first question is a bit of a follow-up on the living sector portfolio. I think you have built a fast scale and size in the living sector portfolio. Is this something which is a pipeline for CDL Hospitality Trust? Or is this something which you can read or put it in a private fund to boost your fund management business? My second question is in terms of investment property segment. Can you give a bit of color in terms of rental reversion for your office and retail portfolio in the first half of the year? My last question is in terms of NAV. The RNAV, which you have presented, I believe it is based on a desktop valuation. Can you share some color in terms of cap rates or any assumption changes, which was done by the valuers considering the rising rate environment?

Yes, I will take the first question on the pipeline. So I think you're absolutely right, Vijay. I think the great thing about this going into the living sector is many of these assets are also -- firstly, they are very, very highly sought after by institutional investors and funds right now. So, it's also very tough, bidding is getting very tight for these assets, because they are seen as a recession proof. And again, regardless of how good or bad economy is doing, I mean people still need -- workers still need dormitories, people still -- students still need a place to stay. So this -- by investing in this asset class, it opens up a lot of so-called exit options for us. We can certainly seed it into our own public or private fund. So our own REIT or private fund in order to strengthen our fund management business, we can also sell them to, for instance, the REIT, our CDL Hospitality Trust because we -- as I mentioned earlier, we do endeavor to be a more active sponsor. We recognize over the years, we have not been as active as we should have been. So the REIT, as you know, have announced that they've broadened their mandate. This was, I think, it was 6 months ago or was it last year? Last year, and they announced it last year, and this wasn't in consultation with us, they announced themselves that they are broadening their investment mandate. So they're not just investing in hotels, but they're also investing in PRS and PBSA as well. And they themselves have gone into a PRS project in Manchester in the U.K. So perfect for us, right? I mean, this is another exit avenue for us. Once we develop and stabilize some of these assets, the REIT may be very interested and maybe a potential offtaker or it could just be a third-party sale if the situation warrants it. But certainly, the preference would be towards either supporting our REIT or building up our fund management ambitions rather than just a street sale of the asset, because the valuation has gone up. For rental reversions, Eik Sheng?

I think generally, for office, we have seen positive rental reversions around like 5% to 6%, especially for Republic Plaza, which is the bulk of our office portfolio anyway. I think for the rest, I mean we've done a few AEIs as well, King Center, Palais, so I think falling from the AEI, that's been also very positive increases.