CDL to Sell Majority Stake in South Beach Office Complex for $834 Million to Cut Debt

City Developments Limited (CDL) has agreed to sell its 50.1% stake in the South Beach mixed-use project to its partner, Malaysia’s IOI Properties Group (IOIPG), for approximately $834.2 million.

This deal values the entire South Beach complex at around $2.75 billion, representing a 3% premium over the latest valuation of $2.67 billion as of December 31, 2024.

The transaction is expected to generate a gain on disposal of approximately $465 million for the financial year ending December 31, 2025, CDL said on June 4.

Upon completion in the second half of 2025, IOIPG will take full ownership of the commercial components of South Beach. The residential component, South Beach Residences, has already been fully sold since September 2021.

Following the announcement, CDL’s shares rose by 2.5%, or 12 cents, to close at $4.99 on June 4, with the company lifting a trading halt that had been called at 9:20 AM.

The news of the sale comes amidst a public dispute between father and son in CDL’s Kwek family, which began in late February. Although the matter has since been resolved, CDL’s group CEO, Sherman Kwek, acknowledged during the company’s annual general meeting in April that the dispute had impacted shareholders’ confidence. He emphasized that reducing the company’s growing debt load is a top priority.

For the South Beach sale, CDL explained that the sale price was based on 50.1% of the consolidated net assets of Scottsdale Properties, the company that owns South Beach Consortium, which in turn owns South Beach. The agreed property value of $2.75 billion and Scottsdale’s liabilities of $1.16 billion were also factored into the price.

The cash proceeds from this divestment will be used to reduce CDL’s bank borrowings and improve its net gearing ratio. The funds will also be allocated for new acquisitions, upcoming pipeline development projects, and optimized capital management.

Had the deal been completed at the end of FY2024, CDL’s net gearing ratio would have fallen to 103%, down from 117%. The company would have reported earnings of $638.5 million, up from $190.8 million, with earnings per share increasing to 71.2 cents from 21.3 cents.

CDL’s board believes that the sale will generate positive returns for the company’s business and aligns with its strategic focus on capital recycling.

The South Beach property has reached maturity and has been providing strong occupancy and stable income. Mr. Kwek said, “Having fulfilled our vision for South Beach – from securing the land site through a rigorous tender process in 2007, navigating macroeconomic challenges, to transforming it into the high-performing, stabilized asset it is today – it is now time to crystallize its value.”

The Norman Foster-designed project, located in Singapore’s Central Business District, consists of retail space, a 34-story office tower, and a 45-story building housing the JW Marriott Hotel Singapore.

As of March 31, the office and retail components of South Beach reported committed occupancy of 92.4% and 92.5%, respectively. Major tenant Meta Platforms gave up seven floors at the office tower in 2024, which reduced occupancy to 92.4%, down from 94.4% at the end of 2024.

CDL acquired the site at a government land sale for nearly $1.7 billion in 2007, partnering with two foreign entities, a unit of state-owned Dubai World and El-Ad Group.

According to a Bloomberg report, the global financial crisis caused a delay in construction, leading to the exit of the two partners, with IOIPG eventually taking a minority stake in 2011. Mr. Kwek Leng Beng, CDL’s executive chairman, resisted allowing IOIPG to take an equal stake in order to maintain control, according to a biography published in 2023.

In CDL’s statement on June 4, Mr. Kwek said, “South Beach began as a bold vision to enhance Singapore’s reputation as a global city, attract international investors, and create a new icon that blends modern, sustainable architecture while preserving the site’s conserved buildings.”

IOIPG’s group CEO, Lee Yeow Seng, commented, “The acquisition of the 100% equity stake in this landmark development marks a significant strategic expansion for IOIPG in Singapore. Combined with the IOI Central Boulevard Towers and W Singapore – Marina View hotel, this acquisition will elevate the group’s profile as one of the major landlords of premium office space and a prominent player in the hospitality industry within the Republic.”

IOIPG is a Malaysia-listed company controlled by the Lee family, who made their fortune in the palm oil industry.