City Developments Ltd

SGX:C09

Earnings Call Transcript 2019-Q2

[Belinda Lee, executive]

Good morning, ladies and gentlemen, friends from the media, analysts, bankers and fellow CDL colleagues, my name is Belinda, and I'm the Head of Investor Relations and Corporate Communications at CDL. On behalf of the management, we warmly welcome you to CDL's briefing on its unaudited financial results for second quarter and half year ended 30th June, 2019.

I would like to take this opportunity to welcome those of you who have joined us on the live webcast. As you came in this morning, you would have noticed a poster with a QR code for you to scan. The QR code is also now flashed on the screen, and I'll ask you to take the opportunity to please look through and please download a PDF copy of some of the presentations as well as the announcements that we have issued early this morning on the SGX. We encourage you to scan the code and download these documents. They include: firstly, a copy of the detailed financial statement; secondly, a press release summarizing the key highlights of our performance and a presentation deck that the management will be using in a very short while. As we are now ready for all our guests joining us on live 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, Mr. Sherman Kwek, our group CEO; on his left, Mr. Chia Ngiang Hong, our group GM at the far left; Mr. Kwek Eik Sheng, our group Strategy Officer, is next to Mr. Chia. Nearer to me is -- next to Sherman Kwek is Ms. Yiong Yim Ming, our group CFO; and next to Ms. Yiong is Mr. Frank Khoo, our group Chief Investment Officer. The format of today's presentation and briefing will be in 2 parts. Our management will kick off with the presentation of some of the key highlights, which you have already download on your digital devices and followed by an opportunity for Q&A.

So without further ado, I would like to invite Mr. Sherman Kwek, CDL group CEO, to kickstart the presentations. Mr. Kwek, please.

[Eik Tse Kwek, executive]

Thanks, Belinda, and good to see everyone here. In fact, we just had our analyst social drinks event at Haus on Handy not long ago, just couple of weeks ago. So good to see everyone again. We're learning as we go along, and I think in the past, we still feel that our presentation is a little bit long, so this time, we tried our best to condense it further. So we'll try to keep this [ assessing ] as we can.

So this is the basic agenda. I'll take you through the overview and strategic initiatives; Yim Ming will cover the highlights; Mr. Chia, the Sing operations; Frank, international and fund management; and finally, Eik Sheng on hospitality.

Numbers, not so pretty in terms of a Q2 comparison against the same quarter last year, and of course, this is the unfortunate headline that all the press seemed to have picked up on. PATMI, down by 26%, but the truth is, as you know, especially since we are still very reliant on development profit, it's going to always create a bit of lumpiness and unevenness in our earnings. And certainly, the last year's Q2 was a very difficult quarter to compare against because that quarter we had a lot of great projects such as New Futura, Gramercy Park; and then overseas, we had like Suzhou, this HLCC, Hong Leong City Center. As you know, for overseas projects, we recognized profit in entirety, I mean, when we hand over. So that always was going to make it challenging to compare against then. And of course, New Futura and Gramercy Park were also very high margin projects last year.

So this year, I mean, in Q2, we still had a profit from, obviously, a contribution from Tapestry and Whistler Grand. Tapestry, we launched it in March last year; Whistler Grand in November. I think we've done very decently on the sales. So we've progressively recognized it, but it's always going to make a tough comparison.

Similarly, for first half, I mean, I think revenue last year was very, very strong. We have, in the first half of last year, this criterion. As you know, for EC, we recognized that in entirety upon handover rather than progressively, so that set a very high benchmark last year. And the rest of our numbers actually are looking up, but I think as you all can see in the commentary, a lot of that is very much thanks to this unwinding of PPS 2. So from the sale of Manulife Centre and Tampines Grande, we were able to realize a pretax gain of about $154 million. And then for our stake in PPS 2, we also got another gain of $43 million. So thanks for that. I mean, that helped to prop up the numbers a lot. But as I said, I think as the year progresses on, I mean, things should get stronger, and we certainly witness a very decent, I think, performance in our Singapore segment this year.

Interim dividend, choosing to keep it the same at $0.06, same as last year. And share price performance, still not the easiest year for us, but thankfully, we have seen some resurgence in our share price and obviously, this was boosted higher when we -- the market, obviously, took it very favorably when we announced the privatization of M&C. But obviously, in the last week or so, it's been to subjected to law for market jitters law I mean, since there's a lot of economic uncertainty.

Key operational highlights for property development in Singapore. As all of you know, we have launched great many project this year, and 2 of them, I think, we're particularly proud of. One is Boulevard 88. We launched it in March, and in just a few short months, we are actually already 69 units sold. And I think we are very proud of how this is done, and certainly, I think no one can say that those prices are anything to be shy about, I mean, in terms of ASP of over 38.

For Amber Park, I think this was something that we were also quite nervous about because we were testing a new benchmark in the Amber Gardens Tanjong, Katong area. But I would also say -- I'd like to think that I think we've done decently well.

In terms of, obviously, units sold, it's going to take a while for us to clear our entire inventory of 592 units. But I think we're off to a good start, and price again is something that I think we should feel very pleased with.

So in total, I think in Singapore, we sold 505 units with a total sales value of $1.55 billion in the first half. And oh -- and many of you who were at the analyst social will remember my humorous, but true story about how we cleared out that last unit at Gramercy Park. So good news is that we have managed to clear out the last unit at New Futura as well, so we're totally sold out for these 2 projects.

In terms of China, 347 units with sales value of CNY 1.08 billion, and on a asset management side, you can see that for office and retail, I think we are still displaying very, very healthy occupancies for the portfolio.

Hotel side, I don't have to elaborate too much, but I think all of you have certainly attractive interest as we've launched this takeover offer for Millennium & Copthorne. We're still, I think, going through the process and waiting on the Overseas Investment Office, the OIO, in New Zealand, I think, to give us certain approvals. And once that's done, I think we can commence and launch the so-called official offer.

For fund management, Frank will talk more about that later, but great news is that at least we partially unwound PPS 1. We have actually bought back the nonresidential component, which is W hotel and Quayside Isle. We see great value in these 2 assets, and we bought them back or at least we bought back what we don't already own at a value of equivalent of $393 million. Of course, there's still the residential. I'll touch on that subsequently. And then we also successfully unwound PPS 2. I think it's been a great structure and joint venture between us and Alpha Investment Partners. So now all 3 assets have been sold, while 2 have been divested, and we have actually bought back Central Mall Office Tower. We see a great potential in that precinct around there to really do something with it. So currently, yes, unfortunately, Central Mall is quite a quiet place, but again, I think, with a little bit of tweaking here and there and potentially a redevelopment, I think we could really make that place very exciting.

And yes, so PPS 2 has been done. PPS 3, I think we finally decided that, okay, we're going to look for the opportune time to launch. So we launched it, and again, in just a few short weeks, I would say that we have done pretty well with 18 out of -- we decided to test market 30 units first launch. So we managed to sell 18. Majority, as all of you can probably guess, are to PRC buyers. And so far, I think the price has been again very respectable, very commendable. The views are really stunning. We have done a makeover because, obviously, Nouvel 18 is a totally brand new product. I mean, so we have spruced up all the common areas. We've done a new shore flat, and we really injected a lot more color and life into this project. So if you have time, please feel free to hop by and take a look.

And of course, on the AUM side, we're off to a start. I mean, we still have more to go, but we have right now AUM of USD 500 million. Part of that is obviously our investment in IREIT Global. IREIT Global has -- is listed in Singapore, owns so-called the 5 campus star assets in Germany with a very, very good high yield that we're enjoying. So we took a 50% of the REIT manager as well as of 12.4% stake in the REIT units itself. And thanks to Frank's connections, obviously, we were able to become the joint manager for a French CBD office asset in Sydney. So this has certainly helped us.

All of you know this. I've been flashing out many types our growth enhancement transmission, but we really believe in this and feel that this is the way, I think, that we really got to help bring CDL to next level. I mean, we continue to grow our development pipeline, both locally and overseas. But at the same time, I think we need to grow our recurring income at a faster rate. As I've always mentioned, being overly reliant on development income ends up producing what you saw today right for Q2 and first half. I mean, you have a huge unevenness in our earnings, which isn't always very healthy. And of course, we have enhancement as well where we're really trying to look for opportunities to really enhance and derive more value from our existing assets, especially our commercial portfolio of office, retail and industrial. And so we're really looking at that. We're also looking at driving operational efficiency, I mean, by getting to market faster. I mean, when we acquire a site -- from when we acquire a site to when we launch it, things that I would like to think will really put us in good steer and make us a stronger competitor. And lastly, of course, transformation is where we have big items coming. So big strategic investments like what we announced, our partnership into an investment in Sincere Property Group; fund management, which Frank is heading; innovation and venture capital investments.

Year-to-date, these are the investments we've done, just shy of $600 million. We have our PRS project. That means for rent. We're building 664 units in Leeds for rental in a very, very strong location next to the new Wellington Place CBD. Of course, we have the IREIT I mentioned earlier. Australia with -- it's a small investment, but we did a contrarian there where we bought over the residential development platform from Abacus Property Group, who wanted to exit this sector. Resi is not doing great in Australia right now, but again, that's how you get a good valuation. I think we got in. We have a platform. We have a two-man team there that's able to take on all manners of development projects. So I think in future, as the market starts to come back, we can really inject more investments into this platform, more land into this platform and really have a good pipeline.

Lastly, obviously -- oh in Japan, we made a small acquisition as well. So this was also Frank. I think we really believe in some of the Japan fundamentals, especially in Osaka, where many of you know they are the front runner for the Soka Casino for the integrated resort. So we bought a small block of residential apartments there, and we intend to keep it for rent, but it doesn't preclude us from doing a strata titles sales someday.

Lastly, in Singapore, Sims Drive, we partnered with our consortium partners and Hong Leong holdings and managed to acquire that. Liang Court, we bought it together CapitaLand 50-50, so the total acquisition $400 million. So each one half. Liang Court Shopping Mall, obviously, everyone knows we're not buying it because we really like the mall but because we think there's greater potential for that whole precinct, which is right next to the exciting Clarke Quay and has fantastic views in all directions.

If you ever go down, go check it out in Novotel Clarke Quay Hotel, right. You go up to a higher floor. All 4 directions give you unblocked amazing views, Fort Canning views, Marina Bay Sands views, Clarke Quay views, I mean, they're just stunning. So I think there's going to be something great that CapitaLand and us are going to be able to pull of there.

And lastly, of course, W that we have purchased back. As I mentioned again, these are completed acquisitions, so we haven't included things like this potential investment in Sincere because it's not completed yet. We're also buying, obviously, this Hongqiao Center, this 11 blocks of commercial buildings from Sincere. That's also not completed yet, so that's why it's not in the list. Otherwise, this amount will balloon up quite a lot more.

We have ongoing works at RP, but they're almost coming to end. We actually are slated to have the grand opening at the end of next month in September. You'll see that we really went through the works to give this building a new facelift. In fact, not to put ourselves up on the pedestal, but I received so much positive feedback from tenants in the building from visitors that come, and many people are remarking me that, "wow, this is like a brand-new building. I don't know what you guys did, but it's a total refresh. It looks nothing like the RP of the old where it was dark." It was a very dull colors, very -- so-called insufficient light coming. You can see our lobby on top right. That has been brightened up. We've widened it, enclosed in more space and really put in so-called a very, very clean lobby and modernized it but yet kept existing historic elements of this building.

That thing on the right currently is just a rendering, but the real thing will look even better. We have not unveiled it yet, but that entire wall is going to be this big so-called LED screen that we've installed in, and the screen wraps around that entrance that goes into the lifts as well. And we are programming a content in there, so that's going to be very exciting. I'm sure some of you may have seen it before where you have like waterfall coming down like you have flow around the corridors going to the lifts. We have -- in this particular one, we have actually done the animation also where you have different color balls that appear to bounce against the screen and go back again. So it's going to be something that is going to be very exciting. I mean, we tested it on 2 or 3 nights at RP at 11:00 p.m., and even then, there were some people getting off work, and they stood there for about a good 30, 40 minutes just watching us test it because they were just blown away. I think this is going to be a real talking point when we're done and add life. And of course, we can put messages on the screen as well, right, like "Welcome Michael Lim to Republic Plaza "or something like that. "Good morning. Enjoy your coffee."

Of course, we are also -- we have also done almost all of the lift lobbies, the common areas and all the lift lobbies. And so now I think it looks much more spruced up, brighter. We have put a canopy on the outside of the Republic plaza so people no longer, I hope, will complain about getting wet. It's a huge hulking canopy that extends 3 stories above and on to both driveway pass.

And lastly, at the bottom, you can see we shifted and created a new escalator that goes downstairs to the basement where we have a whole plethora of F&B. And in this nice beautiful green corridor, we have a beautiful fan, very stylo fan at the end. It's a beautiful place. The -- what now.

And last time I remember that the Truefaced foot traffic at the basement RP actually wasn't very good. We didn't have a very good selection of F&B tenants, and that was mainly because I mentioned earlier, we didn't have necessary cooking facilities and the exhaust ducts and vents. But now as part of this AEI, this $70 million AEI for the whole building, we have done all the necessary. So all of our tenants in the basement, first and second floor, most of them have a very robust cooking facilities. So we're now able to bring in names like -- we have, obviously, [ Deli ] There used to be lost years ago, but they've come back now. Very popular. We have, obviously, this Mos Burger, something for the person that wants to grab a quick bite on the go. We have Din Tai Fung. I think that's not open yet, but once that opens on the second floor, I think that's going to draw lots of queues. Yesterday, I went to try a new ramen restaurant opened in the second floor. I thought it was really good. So we're going to have lots of stuff. We have Bubble Tea. We have Starbucks. That's opened up now in RP 2. And of course, on the second floor of RP 2, where we have put a lot of new F&B, we've also changed it. So in the past, it was just concrete blocks on the facade. We have now opened it all up and glassed it all. So this is really going to bring a lot more light and life into Republic Plaza. So I'm very excited.

Lastly, on RP, I just want to also mention that we've created the app. Some of you will remember in previous sessions, I talked about how do we get our customers to be more sticky. How do we get them to stay with us so when it comes to lease renewal. And one of the things I wanted to create was our own ecosystem. So this City Nexus has already been rolled out just within CDL. We rolled it out maybe 6 months ago. Is our CTO here, Ivan? Okay. I thought maybe he might be attending today. Anyway, our CTO, Ivan, has done a great job, I think, working to come up with this and many other apps. And so this has been rolled out about 6 to 8 months ago. We've been testing it inside so-called within CDL. It's working really well.

And these are all the things you can now do, right? I mean, you can book meeting rooms. So for your own company, we can program it such that you can or your staff can book your meeting rooms within your company premises. You're getting news feed, building feedback. Obviously, aircon extension. After 6, aircon turns off. You can extend it using this. You can make payments for facility management fees.

Parking is a great one as well, I mean, sometimes even for our own staff at CDL, right? Because we have a parking that goes up to 9th floor. So they sometimes tell me that, "Oh my god, I was in a rush this morning. I parked and I can't remember. Did I park 7 or 8?" Now you just punch in your car plate number, and they'll tell you where is your car because we have all these recognition tools. So you no longer will have to worry where you parked. Easy access. Obviously, you'll be to use your phone. Use this app now to access through the turnstiles and you can send a QR code to your guests who are coming, and they can use that to access as well. So we're really modernizing this.

And of course, the -- one of the key things we're still working on this order, pay, collect. Right now, it's slowly getting to the beta stage. We're testing this with some retail tenants. We intend to expand it in future. So you love your ramen downstairs, something you can literally order it and pay for it through the app. And when it's ready, they'll let you know. You go down and collect it, or you ask your assistant to help you collect it. In future, we hope to be able to let you take a queue number from this app, so you don't have to wait there, right? Let's say, the queue is massively long at Din Tai Fung or something. Take a queue number, and they buzz you on your phone when it's ready. And potentially at some stage where we can work out logistics, maybe even have them deliver the food up to your office. So I think this will really make RP the building to be in and really create their own ecosphere.

We are doing quite a few AEIs, different AEIs this year. We have AEI so-called that we're going to do for industrial building, City Industrial Building, CIB. So -- and I mentioned a few of those I think at the last briefing we talked about. But this one, I think, we haven't really mentioned it. This is Jungceylon. It's our mall in Phuket, specifically in Patong area.

I would say this is -- even though there's new malls that have been opening up, giving us run for money, but this would -- I would still say is the #1 performing mall in Patong. It drives huge visitor foot traffic. It's a fantastic mall. The size of the mall is 787,000 square feet. So I think that's probably as big, if not larger than ION itself. And it's a fantastic mall. I mean, obviously, we have 2 hotels. Millenium-managed hotels joined to this mall as well, and it's doing fantastic. I mean, visitors go there, and they just -- instead going to the beach, they spend all the time going to this mall. If you haven't checked it out, it's really amazing. It has something in it for everyone.

Now unfortunately, like with all things in life, right, I mean, this thing is getting on with age. The mall opened in 2004, and now it's getting quite old. The yield is still very good. The yield on today's valuation is around 13%, okay, on today's market valuation. So our mall is performing really well, okay. We have great NOI coming from it, but the problem is, it's getting old, right? I mean it's 15 years old. So we're now -- we now need to embark on a big so-called AEI that will eventually cover the entire thing, I mean the facade, all the public areas, everything. But I think we better do it stage by stage. So the first stage we're going to do is this section of the mall where we have this sporting tenants. So we didn't renew the lease, and we asked them to move out because they weren't doing well. They were selling sporting goods but took up a huge space. So now we're going to convert that space. It's just shy of 30,000 square feet, not, not super big. And we're going to turn it into -- the theme there is called the Love Eat area so there's going to be, I guess, a lot of food and a lot of love flowing around. So -- and it should be very exciting I think when this is done.

This is a part of the transformation where we have the investment into Sincere Property Group. We're still progressing along. As you know, we have certain regulatory approvals and stuff we need to clear. We had a special so-called analyst briefing, I think, with all of you just on this when we announced the deal because it was quite big and monumental for us. I mean, it's 5.1 -- CNY 5.5 billion investment as well as I think we will try to support them in other areas as well. And so far, I think, we're very pleased. I mean, Sincere is off to a strong start. As many of you know, the Chinese market came roaring back to life after Chinese New Year this year, and developers -- many developers have had been reporting record sales for the first half of 2019. And I think Sincere has done well so far. I mean, last year, their contracted sales, that means the value of all the units they have sold but not necessarily handled over, has been CNY 21.3 billion, about SGD 4.3 billion. They have a 12.6 meter -- 12.6 million square meter land bank and one of the top 50 developers in China and one of the top 10 when it comes to business partners. Sincere gives us aspects that we never had before in China.

So Business Park serviced apartments in China so and of course, they have very strong retail. So I think that's something that really is something we can learn from them and tap on their expertise for our own retail assets in China.

This acquisition, we also reported that at the analyst briefing that was especially on Sincere, but back then we announced that we would only acquire 70% because the owner, Mr. Woo, who many of you met during the briefing, was not willing to sell 100%. And obviously, I think, we negotiated a very, very good price. We squeezed him really hard. So he thought that at this price I don’t want to sell all. But I think lately we've told him that it doesn't really makes sense for you to continue being a 30% shareholder. You may as well let us own this asset fully and then we can properly go and manage it and lease it up. And I think we have established such a great bond of trust and friendship that Mr. Woo said, okay, I'll sell you 100%. So we'll buy 100% of this asset now instead of 70%, and it is at a price of RMB 49,000 per square meter, which I think is very attractive, I mean, this is right near Hongqiao transportation hub. It's going to be the future, I think, one of the future areas of Shanghai. So we're very pleased with it. So it's a 9 blocks of office and 2 blocks of service apartment.

Lastly, my final slide is on PPS. We -- so-called PPS 1, I covered earlier, we bought back W hotel in Quayside Isle. And for the residential, the truth is the market, as you know, is not quite there now for -- to sell high-end luxury in Sentosa. So like, Sentosa still hasn't quite seen the broad base recovery, I think, that other areas and districts in Singapore have. So what we're going to do is probably -- we're exploring a refinancing together with Blackstone so that we have more time, I think, to consider options for the resi component. PPS 2. I've talked about it already. 2 assets sold, 1 bought back and the whole structure is unwound and clear. PPS 3. I also mentioned how we have launched for sale -- sorry, a little bit more on the slide.

M&C takeover. So we announced that we are -- we will be making a preconditional offer of 685p per share. We are 65.2% shareholders, so this is to buyout the rest of what we don't own. We have so-called undertakings. You can see there. So of the shares that we don't own, we -- of that amount, we actually already secured undertakings for 43.48%. And if you assume that everyone that accepted our offer at 620p will also accept at 685p, I think this is pretty much a done deal because none of these guys who gave us -- even bought one takings accepted the offer the last time. So I think this is, to me, it's quite a straightforward done deal, but it's merely procedural. So we just have to wait till we clear the OIO. We expect that we should receive something in the near term, and once we receive that approval from the New Zealand Overseas Investment Office, we then have 28 days, I think, to launch the formal offer. We have to launch it within 28 days. So hopefully, they will be coming pretty soon.

Okay. I will -- I'm done with my section. I will pass it over to Yim Ming now to go through our results. Thank you.

[Yim Ming Yiong, executive]

Thank you, Sherman. Good morning, ladies and gentlemen. So I'm delighted to share some color for first half results.

This slide shows revenue by segment for Q2 for the past 3 years. The revenue for second quarter fell 37.5% against second quarter 2018, clearly evident by the shorter green bar representing property development. [ That we ] reiterated many, many times, right, that revenue for this segment is lumpy subject to various accounting treatments.

So if you look at property development for Q2 2018, 36% of this segment especially contributed by overseas projects, including Hong Leong City Center as well as the Park Court Aoyama in Japan, and 46% is actually contributed by 2 big projects, New Futura and Gramercy Park. While these are Singapore residential projects, they are sold as completed projects, which is why revenue is recognized in entirety.

So hence, total revenue for second quarter remained stable for hotels, and investment properties revenue increased 23%. This is due to new acquisitions, mainly Aldgate and OBS.

For PBT by segment for second quarter. So PBT for second quarter correspondingly fell about 34.2% and from this chart, again, reflected in the shorter green bar. But you can note that the PBT for the investment properties segment has increased by -- due to our $43.3 million that we mentioned earlier for our investments in PPS 2.

Next we go on to revenue by segment for half year. So revenue by segment for half year decreased 34% versus 2018 but it's largely aligned with that of 2017, again, attributable to timing differences. So if you look at 2018, 58% of first half revenue relates to Criterion and overseas projects, which are recognized 100% on [ TOPO Hanover ]. Again, similar to second Q, hotel revenue has always remained stable. And increase in IP is due to a newly acquired properties as well as Le Grove serviced apartment that was reopened in July 2018 as well as the opening of the HLCC mall in Suzhou.

EBITDA for half year remains strong, boosted by the gains from the unwinding of PPS 2. And with these, we also have a very strong cash flow from operating activities for first half year as well.

On PBT by segment, that I think, notably despite a 34% decrease in revenue, PBT for first half fell 4.7%. This is held up by the gains from the unwinding of PPS 2. In addition, the JV projects that sold really well, including South Beach and Boulevard 88. They contribute to the profit, but they don’t contribute to the revenue line.

In terms of hotel operations, you can see the blue bar winning over the 3 years. So the poorer hotel performance for first half 2019 is actually due to Q1 2019. Q2, the hotel operations performed pretty well, but in Q1 I think the U.S. regions suffered substantial losses.

Next let's move on to financial metrics. So the group continue exercise discipline in purchases and capital management. So our group borrowings has gone up to about $8.5 billion. Group net gearing has actually also gone up correspondingly from 31% to now 44%, and if I factor in fair values, which is in line with other competitors, net gearing actually now stands at 32%. Interest cover remains very, very healthy, 14.4x.

So we are also happy to inform that the group has balanced debt expiry profile. We have a low average borrowing cost, 2.4%, very, very credible and we also endeavored to maintain a very balanced debt currency mix against the loan. I know many have concern also with the foreign exchange exposure with the prolonged U.S. China trade tensions. So in terms of CDL, we adopt very much a natural hedge strategy. Our borrowings are largely against our cost of investments. In fact, in all -- for our property investments largely in U.K. and China, we also recycled the proceeds that we have. As of now, I think we are very substantially covered for both U.K. and renminbi as well.

So I think with that, I hand over to Mr. Chia.

[Ngiang Hong Chia, executive]

Thank you, Yim Ming. I will cover the Singapore property market. As you can see from this graph, actually, the price is quite resilient. It went down for 2 quarters but the Q2, it went up by 1.5%. So in fact, it is the highest within the last 5 years. So surprisingly that is holding up well, notwithstanding the cooling measures in July 2018.

Okay, this is a pickup rate versus the price movement. Over the last 5 years, the average per month is about 8,400 units, which is I would consider relatively modest. Hopefully, this year, so far about 4,001 and we think it should be as good as last year because there are many more launches coming onto the market over the next few months.

Okay. This is our residential sales. As you can see, the value has gone up 20-odd percent, but the number of units came down because we have launched 2 of the more high-end project, Boulevard 88 and the Amber Park, that's why the number of units smaller, area also smaller, but the price has gone up, which is a good sign. We hope to, of course, sell more high-end units along the way.

These are some of the steady sales that we recorded over the 2018. As you can see, New Futura, Sherman mentioned earlier that now 100% sold. This is the second high-end project that 100% sold. First one was Gramercy Park, well within the QC deadline, which we are very happy. And The Tapestry, as you can see, sold quite happily 644 units of 861. Whistler Grand, surprisingly, also sold very well. We launched over the last year, 371 units sold of the total of 716, over 50%. And South Beach, we launched it last year during the F1, and now it's over 50% sold. And the average selling price, very healthy, over $3,400, which is quite a credible performance.

Jovell has sold about 90 units of 428, around $1,200 plus. So all these projects that were launched earlier have recorded quite good sales, and we will continue to make sure that the buyers are aware and give us the support that we need.

Boulevard 88, I think mentioned earlier, 154 units. We sold to date 70 units. And the good thing is that the -- many of the buyers find this price quite acceptable, above $3,008 per square foot, which is quite a good price for this Orchard Road location. And one good selling point, like Chairman [indiscernible] developed car parks in this project, which other new project may not have because of the new regulations. So those people looking for places for their huge, beautiful cars, I think they will find this very attractive. Just for your information, our New Futura and Gramercy Park have very -- some very huge lots, and they are very well received. Those with Rolls-Royce, taxi, Ferrari or Lamborghini, they find that the park was very interesting. I -- so I think so far the good thing is that local buyers are about 36% and the foreigners and PRs about 64%, quite a good balance. And of course, you know that there's a beautiful hotel next to it, additional hotel, 204 rooms, which is quite a first of its kind in Singapore and probably we're exciting with the open in a few years' time.

Okay. This is Amber Park. I think Sherman mentioned earlier. When we -- before we launched, we were a bit hesitant, but after the launch, we were so encouraged. Right now, it's about 167 units sold, and the good thing is it's a super location, very, very well-finished product.

And of course, 2 of the beautiful feature is there is a 235-feet high Stratosphere, which is a -- you can see, yes, is a big connecting park with 600-meter jogging track and of course, a lot of other facilities in it. It is something quite unique. And so far, I think, most of the buyers find these very attractive and you can afford good view of the East Coast as well as the surroundings. Of course, architectural wise, it's very handsome by this SCDA, which is a quite Singapore -- one of the famous Singapore architects.

Haus on Handy. We launched and we sold 25 units, which is quite credible. There is a beautiful heritage bungalow on the site, something that we have to do up nicely, do as a clubhouse for the facilities. It's a huge bungalow and inside there, there is a huge gym and many other recreational facilities. This location is very convenient. Across the road is a 3-station Ghaut MRT station. And as you know, the UBS is going over to the former Park Mall redevelopment, which is just a short walk away. And we think that the rental potential for this is actually very, very good, especially when the Park Mall is completed, when all offices are opened. And of course, there are a lot of educational institutions and universities in the area and we think that in the long term, for this price on Orchard Road, it should be -- go down well. It's about $2,800 plus only, which is very reasonable.

This interesting project I've -- [indiscernible] is not here. I'm so happy we headline. It's exclusive only to certain buyers. That's the way to describe our Nouvel 18. We just soft launched it last month, and today we already sold 19 units, which is quite credible. And of course, buyers' preference are for the larger units. We think that there's a lot of more interest now viewing going on, and we think we go down well with many of the potential buyers. Because it's freehold, more location and also, of course, by the famous architect, Jean Nouvel. So anybody looking at this project, Sherman mentioned about the analyst briefing. He forgot to mention this project to you. So at least, go and take a look. Please contact us. It's a beautiful project.

Next, Piermont, the only EC launch for 2019. It 820 units, and we sold to date 380 units. Because it's under the EC rules, we can only sell 30% to the second-time buyers during the first launch. We already have exceeded that limit 246 units. So we have to wait for 1 month before we can accept bookings from the second-time buyers. So we think that when the 1-month period is up, we should be able to count on more sales for the second-time buyers. Of course, location is fantastic with a [ June ] coming up very nicely the Digital park and many other facilities. So we think this project will continue to do well. Probably, yes, the next launch will be next year, which -- and the location is not as good as this Punggol location.

Okay. These are some of the inventory, which is a quite limited stock, as you could see. So we probably have to re-lease more units from those partially re-leased units and also go on the new projects that I will complete later.

These are the 2 new projects that we're launching this year and early next year. The first one is a joint venture with CapitaLand. As you know, CapitaLand has JV with us in long ago in about 10 year part, if some of you can remember. So this is our second project we joint venture with them and -- called Sengkang Grand and Sengkang Grand Mall. We are targeting launch in Q4 this year.

And of course, then the next project to be launch early next year is the Sims Drive, where we JV up with our Hong Leong Holdings partners. We think that these 2 projects should be well received, especially the Sengkang Grand. We're just on top of the MRT station with the bus interchange and many other amenities and facilities, including community space, hawker center and childcare.

I will run through quickly the commercial market. As you can see, the office bucket is on the way up. This year, it's up 0.9% -- this quarter, up 0.9%; and of course, we think that our -- in view of the situation [indiscernible] mentioned, I believe the trend will be stay up, whether the increase will be same as in the previous quarters, yet to be seen. For retail, it's steady. Retail has always been quite steady.

Office rental, also up. We think this trend will continue because of very limited supply coming onto the market. And retail will always be the same because hardly any new addition onto the market. So these 2 factors are quite good for us, and we should be able to do well in our office actually after the AEI, which Sherman showed you just how very exciting. In fact, I think our leasing department getting more inquiries now on the new space, not much space available, but more inquiries.

Okay. Office is about 92% occupied, and of course, retail is 95%. So the lease expiries, as you can see in the graph, it is about 20% per annum, which is very healthy. So -- and we also take on initiative to renew some of the leases earlier. You can see in 2019, some of them already renewed. This is a very healthy spread. So there no lumpy where 1 or 2 tenants are hold you to ransom if they threaten to move out. So in our case, we're quite safe, very well balanced. So -- and my leasing colleague, Yvonne, is very happy that we have a good spread of tenancies, yes, for both retail and also offices.

This is just for inform some of the tenants mix. You look at the office, there's no single major users that were -- take up, let's say, 40%, 50% of the portfolio because once they decide to move, it's a real challenge for the operation people. So in this case, we're very well balanced, and we'll try to keep it this way to make sure that we are always well diversified either with good tenants and good rental.

In retail, of course, F&B is the main sector. In fact, ours is about 32%. I think some of the malls, they go up to about 40%. So we think that we are well within the range. And so far, especially the City Square Mall, has been well received and we will continue to make sure that we provide new ideas, new innovations, which Sherman mentioned earlier to make sure that we -- the tenants will stick to us and also give them long-term benefits with our cooperation and collaboration.

Okay. With this, thank you. I'll pass it to Frank.

[Shao Khoo, executive]

Thanks, Mr. Chia. Morning, everyone. For the interest of time, I won't go through every project.

And so let's start with down under. If you look down under, our maiden development project in Brisbane have done quite well. We have mostly completely sold out. So on the back of that, we have always been looking at residential opportunities in Australia. So I think when the Abacus opportunity came about, which allowed us to acquire 3 prime sites in Australia, 2 in Melbourne and 1 in Brisbane, together was the key, I think we were quite excited by that. Like Sherman said, it's a contrarian play when we made the offer to Abacus and because -- and look, there were not a lot of interest in residential development in Australia at that point in time, we managed to get a good price. At that point in time, the residential market was facing a bit of headwind. Some of these headwinds have gone away. One of the major headwind obviously was that the election was coming up, and the market anticipated that Labor Party might win the election. Obviously, Labor is all about increasing taxes and not so pro business. On the 22nd of May, obviously, the election results came out and Liberal -- Labor didn't win. Liberal stayed back in power, and the Liberal Party is obviously pro business. Because of this election dilemma fading aside, I think, we are seeing the residential market come back. So I think the domestic buyer has a lot more confident now that Liberal is in power.

What we have also seen is that since we have entered into this project, the interest rate has also dropped 50 bps. So I think for buyers that are buying, obviously, their borrowing cost is a lot less. So I think we don't anticipate a V-shape recovery, but we think that the worse is probably over in Australia for the residential market. And we should see some slight recovery.

On China, the main contributor would be in Chongqing, the Emerald. So year-to-date, we have sold 238 units for a total value of RMB 735 million.

In Japan, like Sherman mentioned, we have bought into a small residential -- completed residential project in Osaka. We are quite bullish about the multifamily space in Japan because if you look into 1988, there's about 3 million household that rented. Today, it's more than 10 million, so that increase is about threefold. And if you talk to the young Japanese, the millenniums, I think they still prefer to rent rather than buying. So we think that the multifamily trend will continue. And even at 10 million household, it's about 17% of the total household population in Japan, so we think that the number is still very small. So we think that this -- the trend for people to rent will continue.

With this Osaka project and the location is very prime, the occupancy right now is 85%, we don't -- the vacancy rate in Osaka is 3%. So we don't think we would have any problems moving up to 100%. In fact, we think that the property is under rented by about 10%. So we see that opportunity for us to increase rent. And also like Sherman mentioned, Osaka has been awarded the World Expo in 2025 and is shortlisted to be a casino destination. So we think that capital values will continue to increase in Osaka.

In the U.K. for us, the main thing to highlight is that on 125 Old Broad Street, 65% of the leases that were expiring this year have been renewed, and they have been renewed at about a 35% upwards rental revision. So year-to-date, since we have bought 125, we have seen NOI income increase by about 6%. So if you capitalize that by a 4.5% cap rate, and you can do the math and you know the number is -- the value would increase by about GBP 25 million.

In terms of fund management, we have always said that we'll build the fund management both organically and through acquisition. This is a case where we have done it through acquisition. So like Sherman mentioned, we have taken a stake in IREIT, the investment rationale for us obviously is that it helps us build the recurring income because there's 5 existing campus-like property in Germany. It would help us increase our exposure in Continental Europe, firstly Germany and then slowly to places like France. It would also help us -- it also gives us the ability to recycle capital. So with this vehicle, we can then buy value-add opportunity, fix it and then possibly inject it into the REIT and it also helps us build the fund management business.

So our short-term challenge for IREIT is that obviously -- or what we're trying to do with IREIT is that we're trying to help it increase the profile because obviously CDL is a much bigger name in Singapore than Tikehau. We are trying to help it grow its AUM. The AUM has been flat since we've been involved, but that's not because we haven't been trying. We have -- we constantly look at acquisition opportunities in France and in Germany, but the last few times we have been outbidded. But eventually, we'll get there. So as the AUM grow, we think that the investor profile will also change. Currently, the investor profiles is very retail, mom and pop. I think as the AUM grow, we think that the investor profile will shift to a more institutional base. And that ends my presentation.

[Eik Sheng Kwek, executive]

Morning. Okay. Looking at the M&C trading performance in constant currency, the first half revenue was down by 3.9% and pretax also down by 31%, that's mainly due to the impact of the closure of the Mayfair hotel in London and the refurbishment works at the Orchard hotel in Singapore. There were also lower land sales in New Zealand as well. Couple of that the PBT was also affected by one-off gains this year, that was from the First Sponsor Perpetual Convertible Capital Securities whereas last year there were some gains of similar amount from the disposable of 2 Brisbane hotels by CDL Hospitality Trust.

In terms of RevPAR performance, the group was quite flat, constant currency, again. But in the U.S., RevPAR was down by 0.7%, of which New York was down by 1.5%. That was mainly from the first quarter, that was because they had the government shutdown and the polar vortex as well, which really affected the corporate transient and the group sectors.

London RevPAR was also up by 12.8%, which looks really good, but actually if you close -- if you take out the Mayfair impact, which we closed this year, it was up by about 7.4%, which is also pretty decent. This was couple of factors like the improved rate-driven initiatives in the second quarter. Singapore was down by about 1.4%, minimal rate driven than the occupancy, which was actually up by 0.8%. The main factor there again is the refurbishment at the Orchard hotel.

And here, we can see the Orchard hotel refurbishment actually completed early part of last month. So we should see the effects of that coming on stream this quarter.

We're also planning to do the -- reopen the Mayfair hotel that will be under the Biltmore Mayfair brand in collaboration with Hilton, and we should be using the LXR label. That's aiming to open about early part of September, and it will be the first LXR in Europe and we also have Jason Atherton, one of the celebrity chefs to open up the main dining restaurant there as well.

For CDL Hospitality Trust, both revenue and NPI were down by over 5%. A couple of factors, which were like the closure of the hotels in Maldives that was closed in June last year. That's going to be reopened in the later part of the year as the Raffles Maldives Meradhoo.

The results were also, of course, impacted by Orchard hotel and a weaker demand in quarter -- this quarter as compared to last year Q2.

New Zealand also had higher labor costs, quite high supply of limited service hotels in Japan, but also good performance from Pullman Munich and the U.K. hotels. And we also acquired new hotel in Italy, the hotel Cerretani Florence, in November last year so that increase the NPI.

Okay. With that, I will hand back to Belinda. Thanks.

[Belinda Lee, executive]

Thank you very much Eik Sheng and the executive team for the presentations. We will like to move to the second part of today's briefing, which is the Q&A. Please feel free to ask any questions that you may have. My colleagues are standing around the room with microphone. And if you have any questions, please raise your hands and they will come to you. For those who are on the webcast, you may also post your questions by clicking on the Question tab that's on your screen.

Now I saw a couple of hands. I saw Derrick's hand first, maybe we will take from Derrick first.

[Derrick Heng, analyst]

This is Derrick from Macquarie. A couple of questions for me. First on PPS 1. Could you just let us know what is the carrying value of the asset on your books now after you have bought back the commercial component? And what's the implied value of the residential part of it?

The second question is on rejuvenation plans. I'm sure you had some conversations with the government with regards to the incentive schemes. Could you just share a little bit more should we be expecting some redevelopment plans going forth?

[Yim Ming Yiong, executive]

The carrying value for the asset that were carrying the books will be at the valuation of $393 million. So if you recall, PPS 1 was the one where we did cash -- cash flows. So it's a little complicated. But at the end of the day, we bought back the instrument, which, of course, has debt element to it. But with that, the value of the property that we bought at valuation is about $393 million. Then the implied value for the resi doesn't change because I think the component -- the instruments were separated between residential component and nonresidential component. So the residential component just continues to get extended. So what it means is that it kind of really goes to the entire waterfall as described earlier in 2014. For the incentive schemes, I will...

[Eik Tse Kwek, executive]

Yes. So for the incentive schemes, the -- what we call the CBD Incentive Scheme that effects certain areas of CDL . It's certainly very attractive, I think, for us to take a closer look at it. We have already been starting our feasibilities. As you know, the government is trying to promote more so-called live and hospitality within the CBD. So you can get anywhere from 20% to even 30% extra so-called NLA on top -- extra GFA on top of your existing plot ratio. So the 2 of our buildings that are most notably affected by this scheme or at least so-called qualify for this scheme because there are certain requirements, right, your building must be, I think, 20 years and older, right, Mr. Chair? I think 20 years older. So it needs certain requirements. The 2 of our buildings that are prime candidates for this scheme are Fuji Xerox Towers, which as you know, it's quite aged building now and actually sits on a very irregular flop rate and the other one is City House.

I mean but we need to look closely. I'm not saying we're going to do both. We are taking a deep dive into them. We might do one, might do both, might do none. It just depends how the results turn out and obviously the things to consider are the leases in those buildings as well, as some of these buildings may have longer-term leases, so -- and this scheme doesn't last forever, right? I mean when it comes into effect, I think, it has not officially started yet, but when it comes in effect later this year, it will be a 5-year period from now where you not only had to get approval, you have to commence it. So you can't just get the in-principal approval and hang on to it after that. So we are taking a closer look, but I do think that there will be something exciting coming up from here.

[Belinda Lee, executive]

Okay, thanks. I'll take Donald's question here.

[Donald Chua, analyst]

This is Donald from BAML. Couple of questions. Also on PPS. PPS 3, could you remind us of the scheme in the past and how does the sale of Nouvel 18 affect your CDL on earnings perspective? And how do you get the upside? That's the first question.

The second question is more broadly on margins specifically for your legacy land bank sales versus the new plots that you've acquired recently. What's the range margin guidance that you can provide?

The third question is on the fund under management. Are you generating fund fees at this moment in time? If yes, where is it being parked under in the segments and how much?

[Yim Ming Yiong, executive]

For PPS 3, if you recall when we did it back in 2016, so we were looking at injecting the price at 2750 into the platform to a group of Singaporean. So that basically the QC has fallen away. So with that, we have mentioned that the capital deck of PPS 3 structure was a senior loaned followed by a true kind of mezzanine debt, mezzanine bonds of which CDL is one of the subscriber. So in terms of how we've actually got -- will get that in the future, we have recognized the gain back in 2016 about $27 million and with that -- and right now we will, of course, look at back-end fee that we have from asset managing the asset. So that will come progressively as the units get sold, but it would be in the form of asset management fee.

On margins wise, I think, the legacy assets, of course, are clearly higher margins. So typically I mean, if let's say, it really ranges from how long the asset you're talking about. I mean for our overseas Pasir Ris project, margins can be as high as, say, 50, 60. But of course, the more recent ones, the likes of the New Futura, Gramercy and the Boulevard, so definitely north of 20% at least. So for new projects, I think, typically we're looking at 10 to mid-teens at this moment, of course, looking at upside in selling prices.

Then lastly on fund management fees right now, and I think we are starting with fund management fee platform. So currently the fees that we earn are fairly small, the asset manager and the others is insufficient for us to warrant separately yet. So as it grows to be of skill I think we will segment it separately.

[Belinda Lee, executive]

Okay. Let me take [ Yongchang's ] questions first.

[Unknown Attendee]

[ Yongchang ] from Bloomberg News. Just a couple of questions. Just wondering if you can provide any growth guidance for the year since, I think, one of you mentioned for the rest of the year that you expected to recover or something like that. And also, the property outlook for the residential sector given that, I think, it was said that, we weren't expecting -- because the cooling measures are still in, but we're seeing prices rising and sales volumes also raising, so I was just wondering if you have any outlook on that?

Second point is on whether or not you see any movement or interest from Hong Kong or mainland Chinese buyers because of the protest? And then was also in the release, there was a statement where I think the company has said that you think the trade war is more -- will have more of an impact than Brexit. So I was just wondering if you can elaborate on that. And then just a final last point, just wondering if given all the central banks have been cutting rates and bond yields are at record lows if that is going to effect the group performance in any way?

[Leng Beng Kwek, executive]

First, the property outlook so far, it looks quite okay. We are the first one to recognize that the high-end is -- will be well in demand and that proves to be correct in terms of New Futura and Gramercy Park. So we're the first one that propel the prices from going up. And after that, we create the execution, which we have been known historically that we are very good in execution. Thereafter, we have mid-ends and lower-ends and generally speaking, we are doing quite well.

So I would think that the prices going forward, the government has cut down the supply of second half. I'm more concerned about the successful en-bloc sales that -- there were so many and once they get approval, if there is no measure of control in terms of release of these en-bloc development done by new developers then I'm afraid there will be a lot of price war. But I believe that government is sensible enough to think of ways and means of releasing in stages so that it wouldn't sort of overflood the market for the time. Don't forget those who are successful when they tender 1, 2 years ago, they will come out with -- as soon as possible when they got the approval, they will come out and sell and sell quickly. Otherwise, the penalty would be very high. So I'm hopeful that the government is aware that you cannot get all the approval at the same time and get it flood in the market. So in this respect, if they can already release the approval, we would have oversupply situation here.

In the case of the Hong Kong buyers, so far, I think there has been not too many inquiries, they are still fighting as of last night. They even -- heavy rains, they use umbrella, they meet in Macao, in Shenzhen or around there. They demanded the resignation of Carrie Lam and of course, they won the extradition act to be abolished. This trigger China from saying that, "You don't get too naughty," that you go. And I believe we're quite strong in the view, there's always One Country, Two Systems. Don't try to change.

Hong Kong, I think, at least for many months until the situation is stabilized and can be ascertained. Hong Kong will be getting not as good as before. But having said that, a friend of mine landed in Hong Kong quite peacefully except the airline was delayed for 20 minutes only a couple of days ago.

As regard the trade war, I have recently spent quite a bit of time in EU and see how the situation is, visiting few countries like Spain, Italy and so on. And I feel that EU is actually in more of a mess. It will have some impact on U.K., but with Boris Johnson, who is a very determined man and U.S. -- Donald Trump has offered him in collaboration, help, assistance and the trade between the 2 countries is quite huge.

The Brexit will create some problem for maybe 1 year or slightly more than 1 year. But my greatest fear is that Donald Trump and Xi Jinping, they are getting from trade dispute from bad to worse and accusation has been made of Huawei -- the accusation has been made of currency manipulation and so on. I have met Donald Trump during the time when I bought the Plaza. He can be a very nice man, he can be very tough too. I did predict that he will come into power. But having said so, I think today he is a very strong man in his words and he wants to help Europe, and then Boris Johnson accept it because the trade between U.S. and U.K. is quite a lot. And anyway EU is not as steady as it was before with so many countries with different opinions.

So my conclusion is that, Singapore, like many countries, will be affected if Xi Jinping and Donald Trump do not come to terms soon. And I don't believe they will come to terms very soon. It's getting from bad to worse. And I have no doubt about that the whole situation can last maybe more than 2 to 3 years. And I hate to think that the world is getting from bad to worse. And I think that there realistic fact with interest rate being cut everywhere and the hope is that this dispute will go on for a long while like Pyongyang has already solidified his relationship in Beijing and even then Donald Trump thinks that there is a chance he can talk to North Korea. I don't believe there is a good chance to. So the war, overall, I believe, the most important factor is how can China and U.S. come to terms because it's going to hurt the 2 biggest economies in the world. And that is no good because in U.S. -- certain parts of U.S., they're already experiencing, for the consumer at least, higher cost. In U.K., it is the farming that is important. But the whole situation is not going to be good because of accusation of currency, speculation of Huawei and -- being a spy and so on and so forth. You tell me which country, including Russia, has no spy, including England and MI5 and Saudis. So anyway it's question of decrees, it's question of to what extent and then you have now cybersecurity, which is another issue.

In my opinion, the world is upside down. In my opinion, many currency, they devalue. Interest rate has gone down quite low. That is good in some sense for the real estate people because you buy when the interest rate is low, you want to sell when interest rate is high. In fact, in U.S. now, there are tenants who form association to tell the landlords, "I can't afford to buy, you better reduce your rental or else I can't afford to pay you even the rental to you."

So on the whole, I'm not too optimistic at least for the next 2 years, but who knows because I know Donald Trump, the last votes he has in Florida was about 40%. If he doesn't get more than 50% this round, I do not know how long he can be in the office.

[Belinda Lee, executive]

Okay, let me just take at the back. I take Brandon and then I'll come to the front.

[Brandon Lee, analyst]

Brandon from Citi. Just a couple of questions. First one will be on M&C. Given that Sherman has said that it's probably going to be a done deal. So can you share us some of your medium-term and short-term plans for M&C. I understand that the search for CEO has already been suspended for now. My second question would be what are your plans for W Hotel and Quayside Isle, now that you have bought them back.

[Leng Beng Kwek, executive]

M&C is a company since more than 20 years ago in the U.K. Overall, they have not been making a loss, we have been making profit year-after-year. Sometimes, we do more, sometimes we do less. In the case of U.S., it used to be 1/3 by design, 1/3 of the profit contribution, 1/3 from Europe, including U.K. and 1/3 from Asia. Today, U.S., one of our main properties is the Broadway. It has not been making profit, but we have already tied out with Hilton on the special plan that we've tried to accelerate growth by way of affiliation, which means that we'll make use of royalty program and reservation system for a period of time. So I believe -- and also because of City. City has a different profile. We are both developers, we have built hotels, we have run hotels and with City coming in if we're successful in the privatization, I believe there will be very useful to M&C because M&C doesn't have that capacity as such. And we have land that has been rundown, not well maintained, the CapEx is going to be a lot and at the same time obviously you wouldn't do it for 1 year because the next year your depreciation will kill you. You need to face it up. We are not 5-Star deluxe operator. We have a Manchise. Manchise means that Hilton manage first under our name Biltmore. They got the LXR, the new sort of branding for Hilton. The brand we are going to use is Biltmore, they will manage first and then after that we takeover. We continue as a Biltmore. So this is one other models.

At the moment, we are not talking to allow international firm because this is a period where we should shut up and not talk. But after that, if the OIO approval comes about, which we expect should be in about 2 weeks’ time, it comes about and we can start to talk how we can work closely with U.K., we can then look at the different models that they are doing and how in collaboration with each other, we can improve the performance.

To me, performance can be improved very easily. All you need to do is identify the right people working in each of the hotels. But even international firm now because the world is building too many hotels. They don’t have a lot of fantastic talent, but I am personally -- I believe personally rather that you have some very good people, but you need to groom them up. Otherwise, they will be lost in the forest.

So I have -- I believe we have the potential, we have the financial power, we have the development capability, we understand hotels for great many years. I built the first hotel, King's Hotel in 1968 and I'm quite hands-on. The Hotel is a headache if you're not careful, you'll be taken for a ride. And I like headaches but I like not that people taking me for a ride. So anyway it's a exciting game, it's evolving situation. We created the first lifestyle hotel, M Social. If you have been to New Zealand, that is the most beautiful M Social we have created and it commands a good REITs. The M Social in Singapore is exciting, but it's not as good as in New Zealand. And in Suzhou, it's creating another one. I want to create at least 10 around the world. In Sunnyvale, which is near Silicon Valley, we're also creating another one, but we would like to do it in the very orderly way. We are looking at Paris now, which is under refurbishment and London, we can look at a nice reach. In U.S., we can look at the special -- what do you call the mix with probably special -- premium and so on. So when even in Hongqiao Leong earlier, which I think Sherman, I recall is 1 million square feet, the biggest shopping mall in the whole Phuket, not 750,000 if I recall...

[Eik Tse Kwek, executive]

Chairman, the number -- the 787,000 is NLA, net lettable area, so probably you gross it up probably about 1 million as well.

[Leng Beng Kwek, executive]

It was a joint venture with a private equity when terms expire after 5 years, 7 years we took over. Today, this is the best shopping mall, although Sherman is correct to say, it has bit rundown. But we can spend money at 2 hotels there and maybe, I will create one as a lifestyle hotel. And it's wonderful if you go to Phuket. We are near the seaside at the same time people go there too hot, they will go there to see different shops, different eateries and all these because I ask during that time when we bought it. I asked "Why do we need to buy when you have that household setting souvenir?" They said, "The tenancy is month to month." So we bought this joint venture with private equity and when the terms expire, they say goodbye, we takeover. So that's how we try to find opportunity to [ zero ] it.

But having said that, I just want to summarize and say that we have very strong execution power since historical times. We identify a situation. Most of the time we are correct, but even if we are wrong, we try to find angle to sell faster than what we can sell.

In other words, in this disruptive economy, we are trying to change that. For example, we didn't have fund management, we are now having fund management. So is diversification lumpy? Actually for half year, quarter year, you have to take into account by EC, you cannot book your profit immediately until the whole thing is completed.

In China, you sell your property, you get 100% payment, but you have to wait for 2 years before you can recognize the profit. So different countries has different. It's meaningless to me, I've said it many times in the past, for real estate company to say, "What is your quarterly profit? What is your half year profit?" I think you should look at it the whole year to balance the different type -- especially when you're diversified to so many places, including Australia, Japan, China and so on. Don't underestimate China. I think, it's a great potential if you find the right partners, the right project as you have seen in the past. We have been doing quite well making hundreds over million dollars profit since. So I'm a man who believe that China will be an economic power for sure. And it may become even bigger than U.S. It holds, if I recall, more than 1/3 U.S. treasury bills. And Donald Trump who want to fight Xi Jinping say, "Let's be fair," that is the statement he said. And his people say we are not speculating currency. We would not use currency to speculate it, hurt everybody and we have already financed Africa and we also finance -- they also force relationship with EU, certain countries. And they're doing quite all right, but maybe because it's different from the America where they use public relation firm to project their image that I'm doing all right or they may not be doing so, or I don't know. At this time, you need to go deeper, I know economies, but usually my prediction is my people saying correct. I think -- I hope I have answered your question.

[Eik Tse Kwek, executive]

Chairman, I just want to add on one thing. Okay. So Brandon, I have just got to say this because there's actually a financial adviser, FA, in the room. I'm saying that in my view it's a done deal, especially if we assume that the previous people that accepted -- accept now again, right, but please don't move away saying, "Oh yeah, he said confirmed, it's a done deal." I don't want to get in trouble. So then -- so that's the thing on M&C.

Secondly, for the -- your question on PPS, why did we buyback. I think we see a lot of value, I think, in W hotel And Quayside Isle. I mean W hotel is performing very well actually especially for hotel on Sentosa. Quayside Isle, not bad and we actually see opportunities for further enhancement. We're actually planning a small renovation, AI for W, especially the public areas and in some of the F&B outlets and it fits into our recurring income. I think ambition is where we are trying to grow, I think, our foundation of recurring income. And in future, I mean, I think the possibilities are all there, right, I mean, we could be a better sponsor for our hospitality REIT, we could lend so-called allow this to go to Frank for his fund management. There are various options that we have, but I think it's a good move to purchase this hotel back.

[Leng Beng Kwek, executive]

Don't forget that government has already stated that the surrounding islands they're going to do something to [ share ] with W Sentosa there. So we're looking at it maybe on the horizon, which not many people are looking at it. So some time we have to take a longer term for the gestation periods and some time we take a shorter terms like if you have no New Futura, you couldn't have recognized the profit, but the timing was so good in the sense that by the time we've almost finish, we launched and we are able to sell. So you recognize the profit. So in the case of profit, as I say, development, recognizing profit on a quarter-by-quarter basis depends upon the types of property you're developing like EC, as I said earlier, you cannot recognize the profit until it is completed in China within 2 years. But when you sell you get 100% on the cash because the bank will finance, but you cannot recognize the profit until you handover and that's usually 2 years compared with Singapore. It could run more than 3 to 5 years.

[Belinda Lee, executive]

Okay. Thank you. I'm going to take the questions from David, and then Michael. But let me just take the question that came in online those who are joining us on webcast, [ Anne Chen from EAW ] ask can the management -- what's the management's thinking on the gearing of the company? Our acquisitions in Sincere and M&C are outstanding and are not factored into our reported gearing numbers. So what does the management think is the optimal gearing level and how can we get to that level given that the current market uncertainty could throw up more investment opportunities?

[Yim Ming Yiong, executive]

The management is really looking at gearing in the range about 50% to 60% on a factoring in fair values of the properties. So I think this is very much in line. We've done actually benchmarking study against the peers in industry group in Singapore. That's actually quite in line in fact moderate. So in terms of the acquisition of M&C and Sincere, so for Sincere, I think, we have mentioned earlier that we extended some loans, but it will be factored in the entire M&C and Sincere right now, and still we didn't get estimated range that indicated earlier.

[Belinda Lee, executive]

50% to 60% is the comfort level. Now let me just take the question from Michael first.

[Michael Lim, analyst]

It's Michael from UBS. I've got 2 questions. The first question is on the fund management business. We've seen a lot of activity there. Last year, you spoke about launching a co-fund as early as 2019. So as market conditions outed time line or are we still on track? And my second question is on PPS 1. Can you just remind us what's the selling price of Quayside and W back in 2016 into the fund?

[Shao Khoo, executive]

Thanks, Michael. I think for us on the fund management side, we are looking to put Aldgate and 125 into fund whether that eventually goes to a private fund or it goes into a REIT, we're still debating that merits, pros and cons of both. So I think it might not be done this year, it might be done early next year.

[Yim Ming Yiong, executive]

Going back to PPS 1, it seems really popular. So I think PPS 1 the value was injected in the platform, it was at about $500 million price tag. So right now, I mentioned there is a value at the $393 million that's about 24% drop, thereabouts, yes. So I think I can just jump to the conclusion, I think, Michael is probably going to argue, "Oh, you still have a deferred profit, what really happened? So I think for this project if you recall back in 2014, we recognized a substantial gain from this. So we recognized about $330 million from PPS 1. And similar to what we're doing for PPS 2, there is actually only for the portion that we have realized. So the portion that's unrealized, I guess not talked today, which is why we still have deferred profit of about $7 million that's recognized this quarter. So I think Sherman has been saying many times that we have no further downside on PPS 1. So the same theory goes for the residential component. So basically we have no further downside for PPS 1.

[Belinda Lee, executive]

Okay, maybe David, yes.

[David Lum, analyst]

David Lum from Daiwa. It seems like you've done a very good job in launching quite a few projects year-to-date and gaining traction with the sales. But if I look at your -- what's left in your land bank, it doesn't look like you have much Singapore resi left. So how you're going to address that issue?

[Ngiang Hong Chia, executive]

Thank you, David. We have 2 more projects that we'll be planning to launch later this year and next year. And of course, you don't forget that our JV in the Leong [ court ]. If we proceed with it, we will have substantial residential element and that will, I mean that will be quite a rich one for us next year. And of course, we are looking at some of the new tender sites that are coming on stream. We are evaluating and likely we are going for some of the better located ones. So all this are in the works. So we believe that we want to maintain, that it is a series stream and new launches along the way. Thank you.

[Eik Tse Kwek, executive]

Just to add on Mr. Chia is saying, the truth is while land tender prices have moderated and if you look at post last year's 6 July cooling measures until now, I would say land tender prices have probably moderated maybe 15% to 20%. I mean, the truth is it's still not easy to get land, right, I mean, we all know we live in environment where there's high liquidity, every developer still wants to replenish land bank and the truth is we have to be more cautious. Our Chairman has spoken earlier about economic uncertainty and such.

Therefore, the fact is, David, while even if we don't go out there and acquire like another 10 sites or something, the fact is we still have a lot that we're sitting on. We are the most -- I think, we should be the most active developer this year. So far, we've launched 5 projects with another one coming up, which is Sengkang Grand Residences, which Mr. Chia mentioned earlier. So we would have launch by the end of this year 6 projects this year, and most of these projects are nowhere close to being sold out, right. So we still have a lot more of this inventory, I think, to run with, and of course, if we are successful, I mean, we will still try, I think, for certain choice, in prime piece of land, we are successful then obviously that continues to add our land bank. But we certainly still have enough, I think, to last us for a good 2 more years or so. Thank you.

[Belinda Lee, executive]

So let's see, any more hands -- Okay, Vijay. Maybe, I think Vijay's questions.

[Vijay Natarajan, analyst]

Vijay from RHB. I have 3 questions. Firstly on your U.K. residential sales. I think sales seems to have come to a complete halt. What's the strategy over there? And do you see more write-downs from this U.K. sales residential? Secondly, on Sincere portfolio, how has the performance been in light of current events? And when will the acquisition be completed?

Third on the fund management segment. For IREIT, is this investment a passive or an active investment at this point of time? And do you think you'll be looking at increasing the manager's stake or adding more stake into the REIT at opportune time?

[Eik Sheng Kwek, executive]

I'll just address the U.K. sales one. Actually this last couple of months, we have launched one of the high-end ones in Sydney Street. We sold one unit and we have another one reserved. So actually in the high-end, we have sold a couple. It has been kind of under the radar. For Teddington, we have been pursuing a leasing strategy more than a sales strategy. It is still underdevelopment for some of the blocs. So I think we prefer to just complete the entire development first before we push out the sales again.

[Eik Tse Kwek, executive]

In terms of Sincere, as we actually did mention in the deck, we're looking at potentially Q4 of this year to complete this acquisition if all goes smoothly. I mean -- and we're still, in the meantime, I mean, not resting on laurels and we are working actually very closely with Mr. Wu, Sincere's Founder and Chairman as well as his management team. Our team is interacting very closely with them to get to know each other better and the great thing is that actually everyone gets along all the way through the organization in terms of our people and there's.

And so I think it's been a great working relationship so far and Sincere has done well in the first half of this year. If I'm not wrong, I think, they have done in terms of contracted sales for the first half of this year, I think they did something at RMB 14 billion, right. So as I mentioned, first half was strong for many developers.

So, so far, I think, the company is doing well and obviously, Sincere, one of the key challenges is that they need to reduce their gearing. Their gearing is a little bit high. When we last had the analyst briefing, I think, all of you reported their gearing was, I think, about 220% high by our standards, maybe normal by PRC standards, but certainly something that I think we want them to reduce and we are working closely with them, I think, to get the housekeeping in order. So hopefully the next time around we present to you, you'll see that the company is certainly in a lot healthier and better shape. Thanks.

[Shao Khoo, executive]

On IREIT, we are definitely active. So we have presentation and IC representation. So definitely we're active. On the REIT manager side, currently we own 50-50 with Tikehau and so -- look, there is no real need to increase our stake currently, but on the REIT share side, we are looking to increase our stake if there is an opportunity to do so.

[Belinda Lee, executive]

Okay. I'll just take one question also from the live webcast for those who are joining. Richard from [ La Salle Hong Kong ] is asking given where the stock is trading and management is comfortable with levering up the balance sheet, what is the management's view now on stock buyback or dividend increase?

[Leng Beng Kwek, executive]

I never believe in stock buyback because it affects the liquidity and when you want to get out in this stock, liquidity is no good. But having said so, who knows maybe at a certain point of time, we may have to do it. And what is the other question. The dividends? We are already paying the same dividend as last year. What does that indicate? It indicates that going forward, we are confident that we can produce at least for this year good profit, if not better than the last year.

[Belinda Lee, executive]

Okay. We're open up to the floor...

[Eik Tse Kwek, executive]

Maybe Belinda, I will just add to that. So last year as you all know that we initiated our inaugural stock buyback program. Unfortunately, we didn't get finishing it because things became so turbulent in the global markets. And then our share price went all the way up and then also came all the way down. So unfortunately, we didn't get a finish doing our stock buyback program. But I think the Chairman is right, I mean, for now, I mean maybe we'll just take a wait-and-see approach to see how things pan out. Our share price has also been a bit turbulent this year going up and then very recently coming down a bit. So let's see where it is, but I do understand that investors obviously like it a lot when we get a share buyback program in place and the truth is there is no point in doing another small buyback program. If we're going to do it again, we have to do something with some scale. So I think we will wait and see to see when would be an opportune time if we were going to do a significant share buyback program.

As for the dividend payout ratio, I think, for last year, we did it at about 33%, right, Yim Ming? And so far I think for the last 2 years as shown that they are keeping at this 30% to 33% kind of a payout ratio. So I think that's very healthy and it's a way that we want our investors that go with us for this ride and we hope to continue maintaining it at this level, of course, subject to our Chairman and the Board's decision. So thanks.

[Belinda Lee, executive]

I should be bringing this to a close. But is there any other pending questions that I would just might open to the floor? Okay. If not any, final words from the management team. No? Okay.

[Eik Tse Kwek, executive]

Only one, which is Happy National Day.

[Belinda Lee, executive]

Yes. I'm standing in between the National Day long weekend. So on behalf of the CDL management team, thank you so much for coming today. There's refreshments outside, and we wish all Singaporeans a happy National Day weekend. Thank you.