Can CDL become a powerhouse in fund management?

[SINGAPORE] The father-son tussle between Kwek Leng Beng and Sherman Kwek for board control at City Developments Limited (CDL) that came out in public late February last year was the talk of the town.

Executive chairman Kwek Leng Beng took his son, group CEO Sherman Kwek, and several other board directors to court over an “attempted coup” to allegedly seize control of CDL’s board.

Peace ensued with the elder Kwek discontinuing the legal action after days of a highly public spat. Octogenarian Kwek Leng Beng continued to serve as executive chairman and Sherman Kwek as group CEO.

The family feud within the billionaire Kwek family appears to be all water under the bridge. 

Recently, CDL’s board was bolstered with the appointment of Kwek Leng Beng’s cousin Kwek Leng Peck as non-executive director and vice-chairman. Kwek Leng Peck resigned from CDL’s board in October 2020 over disagreements with the board and management. 

CDL looks to have a new spring in its step. For 2025, the group’s net profit more than tripled to S$630 million, driven by robust residential sales in Singapore and substantial capital-recycling gains.

For the first six months, the group’s net profit more than trebled year on year to S$302 million, helped by strong performance of the property development segment.

Share price

Between end-2024 and end-2025, CDL’s share price rose 57 per cent. Could the group’s announcement before the start of trading on Monday (Sep 28) of the outcome of its strategic review and the unveiling of a three-year road map for 2027 to 2029 drive the share price to rise further?

Immediately after the above announcement, the share price fell. Perhaps investors did not like that the group earmarked China as a priority market in the residential sector or had baked in excessive expectations over the outcome of the long-awaited strategic review. Possibly, some investors might have hoped for a major corporate move to create immediate value. 

CDL’s share price of S$7.84 as at 12.13 pm on Monday was at a discount of 27 per cent to end-June net asset value (NAV) per share of S$10.74. The discounts to end-June revalued NAV of S$17.94 per share after accounting for fair value of investment properties and S$20.09 per share after accounting for fair value of investment properties and hotels are even larger. 

In my view, CDL’s three-year road map may not be as transformative for the business and exciting for investors compared with Hongkong Land’s strategy update, which was unveiled in late October 2024.

Nonetheless, investors should welcome CDL’s refreshed strategy, which aims to improve sustainable long-term shareholder returns. 

Indeed, what CDL has done raises the ante for other family-controlled local-listed property and hospitality groups to act with urgency on unveiling strategic plans to drive better returns for shareholders. To be opaque with or devoid of such plans is irresponsible on the part of any group’s board of directors.

Kudos to CDL for setting out a clear road map and measurable outcomes. 

Over 2027 to 2029, the group will deploy S$5 billion of growth capital focused on the residential, commercial, hospitality and living sectors. The majority of the capital is expected to be allocated to Singapore.

While having China as a market alongside Singapore for deploying growth capital in the residential sector may be puzzling, perhaps the China bet will pay off if the group is savvy in finding the right opportunities and disciplined in execution. 

Among measurable outcomes for 2027 to 2029, the group aims to have an annual dividend payout ratio on reported net profit of 35 per cent or more and achieve net profit from divestment gains of more than S$1 billion. The targeted net gearing target by 2029 is around 55 per cent.

Fund management

Also, from having around S$5 billion in assets under management (AUM) as at end-June, CDL is eyeing S$10 billion in total AUM by 2029.

Over the years, CDL has done well in residential property development in Singapore and in striking good deals in asset divestments.

However, might the group struggle to scale up in fund management?

CDL wants fund management to become a more significant part of its business, comprising new and existing listed real estate investment trust (Reit) platforms and an expanded private capital platform via funds, partnerships and joint ventures. 

A dedicated fund management entity will be established, with an investment committee and leadership team, to drive AUM growth.

Certainly, CDL’s efforts to grow in fund management will be supported by having a quality portfolio and proven capabilities across acquisition, property development, property sales and leasing, asset management, and hospitality.

Still, arguably, CDL is not a leader in the Singapore Reit space. For example, CDL Hospitality Trusts, whose managers are subsidiaries of CDL’s Millennium & Copthorne Hotels, does not trade well relative to book value and lacks scale compared with leading Singapore Reits.

Growing in real estate fund management makes plenty of sense for a property group. Return on equity can rise when a group uses a fixed sum of equity to own smaller stakes in more assets and earn management fees from managing a larger pool of assets. 

However, many formidable players are aggressively pursuing growth in real estate fund management. Besides global giants, think of names close to home such as CapitaLand Investment , Mapletree Investments and Hongkong Land.

Add to the above, rising interest rates can make it harder for any property fund to juice up returns to investors through using leverage.

Kwek Leng Beng continues to play a central role at CDL. However, with the passing of time, it’s likely to be increasingly Sherman Kwek’s show to drive CDL forward. 

The plans are laid out. The onus now falls on CDL’s team to show growing in China’s residential sector works, continue executing well in Singapore property development, work the owned hotels harder and show it can become a formidable player in fund management.