Right. Good morning, ladies and gentlemen, friends from the media, analysts, bankers, investors, and also fellow CDL colleagues. My name is Belinda, and I am the Head of Investor Relations and Corporate Communications at CDL. On behalf of the CDL management and also my other colleagues as well, a very warm welcome to CDL's Briefing On Its Unaudited Financial Results For Half Year Ended 30th June 2023. Thank you very much for joining us here this morning. This is a hybrid briefing session. We do have guests that are physically here at the M Hotel, as well as those that are joining us virtually on the live webcast. For all of us at M Hotel, it is a pleasure to see you again. We have a full house in the room today, and we are delighted that you are here.
To all of the Singaporeans and PRs here and also virtually, I hope you had a very happy National Day celebration yesterday. For today, the briefing, in line with CDL's commitment to environmental sustainability, we will not be providing printed materials. As you can see, you do not have any on the seats today. We will encourage you to instead please scan the QR code that is on the screen right now to download the documents that were uploaded to SGXNet this morning. These documents were uploaded before trading, and they include a copy of the detailed financial statement, a press release summarizing some of the key highlights of our announcement, and also a presentation deck that we will be going through very briefly this morning.
For all of our guests that are joining us virtually, you would similarly be also able to download these documents, which are available on the CDL website. Now, I would like to introduce you to the CDL management panel. In the center, we have our Chairman, Mr. Kwek Leng Beng. Executive Chairman on his right, our Group CEO, Sherman Kwek. Mr. Sherman Kwek. On his left, our Group COO, Kwek Eik Sheng. And we have Mr. Chia Ngiang Hong, our Group General Manager, and the lady nearest to me is Ms. Yiong Yim Ming, our Group CFO. The format of today's briefing is in two parts. We will kick off with a presentation just highlighting some of the key highlights of our performance, then followed by, I hope, a rather engaging Q&A session.
Without further ado, I would like to invite Sherman Kwek, CDL CEO, to give his summary of the presentation, please.
Can I just use the laptop?
You can press here.
Okay. Here one. Thank you, Belinda. A very warm and engaging introduction. Of course, very nice to see everyone here today. Thanks for taking time out to attend this media and analyst briefing. As Belinda has mentioned, I will be doing a quick presentation. I will be covering the overview and strategic highlights. Then I will pass it to Yim Ming for the financial highlights. For the ops review, it is just for your reading. We will be covering it today. Okay. Let us jump straight into the key financial highlights. Not the prettiest set of results, I have to admit, and obviously it has already garnered some headlines this morning. But it is what it is. Revenue, as you can see, has jumped up tremendously.
That is mainly because we had a completion of an EC project, Piermont Grand in Punggol. So we recognize full revenue and profit upon completion. That greatly boosted our revenue. But when you look at the rest of the lines, obviously it is quite hard to compare against last year. Last year we had substantial divestment gains. These gains mainly resulted from the sale of the Millennium Hilton Seoul Hotel in Korea, as well as we deconsolidated our CDL Hospitality Trust when we distributed this in-specie, when we did an in-specie distribution of the shares.
We did show you, just as a basis of comparison, what it looks like if we include divestment gains and impairment losses. So I think the encouraging part is you can see that on the operational side, especially if you look at the EBITDA and the PBT, there has been a substantial jump in our results. So our operation is actually going strong. It is just that last year was a very hard year to compare against.
Aside from the divestment gains from last year, the two things that made this year extremely difficult for us, one was impairment losses. That is mainly on our U.K. investment properties. Right now, I think it is no surprise to everyone, U.K. investment properties are all going through a very rough time in the office landscape there. We suffered about probably 30- 50 basis points of cap rate expansion. Properties are doing well themselves, right? They are occupancy strong, rents are strong. But with a cap rate expansion, obviously that is going to lead to a drop in valuation. Hopefully that is temporary. I think we continue to see very bright prospects in future once we get over the current turmoil that we are going through. Something that has hit almost all companies and REITs has been financing costs.
Despite the best efforts of me and Yim Ming to try to lock in as much as we can and contain the net financing cost, our net financing costs have gone up probably close to four times what it used to be against the same period last year. Certainly putting a lot of strain on us. But again, the good news is that we see things as starting to stabilize and plateau. Next slide. NAV, RNAV per share are pretty much the same. Slight dip because obviously we have just done a big dividend for FY 2022. We did it in March, and we did take a small amount of exchange losses to reserve. But mainly it is the dividends, so that is why a slight dip, but more or less the same. Share price. I think all of you are aware. Thankfully, we are back above SGD 7.
There was certainly a period when it dipped below SGD 7 and certainly was not great, because we are trading at a great discount, a very big discount to be it, so-called RNAV 1 or RNAV 2, depending on how you want to look at our portfolio. But you can see out there, trading a substantial discount, and we are certainly working hard to close in this gap. Key operational highlights. I think all of you know that despite we have not really launched much in the first half of this year, mainly at Tembusu Grand, our JV project in Katong. But that has done well. We launched that last quarter, and we sold 53% of the units during launch weekend. The other great news, of course, is that we have finally fully sold out on three projects, two of which had ABSD deadline this year.
One is Haus on Handy, and one is Amber Park. Of course, there is Nouvel 18, where we manage it as part of this structure that we did called P3. That is also fully sold out. China, not much to report for now. Most of our residential inventory is sold out, and therefore, we are looking at further land replenishment there. Singapore, you can see our commercial portfolio of office and retail are still doing very well. In fact, our occupancies are far above I think the national average. Likewise, as mentioned earlier, office assets are actually very stable overseas. It is just that some are just facing a bit of a cap rate issue. For strategic acquisitions, I will touch more on this later. But we further expanded our living sector ambitions with more acquisitions in Japan as well as in the U.K.
All of you would have heard about our St. Katharine Docks acquisition. That has no impairment, obviously because we bought that well, and I had previously shared that that was trading at a very strong yield. I think we're very pleased with that acquisition, and that's brought our overall U.K. portfolio to slightly over GBP 1 billion commercial portfolio. Hotel side, obviously, it still continues to be a bright light for us. We've shown very strong recovery performance. Global occupancy up close to 12 percentage points, and our average room rate across the world has jumped up tremendously as well. I think we're very pleased with the hotel recovery, and we continue to be very optimistic about global travel. In tandem with that optimism, we have, of course, also acquired two hotels. I will flash it up shortly.
One is in Australia, in Brisbane, and the other is in Korea, in Seoul. On the fund management, I'll talk about that later as well. This slide, I think all of you will be very familiar with. We usually tend to break out our assets as well as if we had fair valued our IP and our hotels, what it would look like. So you can see on the bottom row that Singapore still accounts for slightly more than half of our asset value. But the other regions are also coming along nicely. As I've always said, I believe it's healthy to be well-diversified. Our GET, all of you are familiar with our strategy, growth enhancement transformation. On the growth side, we continue to deploy capital.
I think right now as the world is in a bit of turmoil, and under pressure, I do think it's a great time for us to deploy capital and get attractive acquisitions done. As mentioned earlier, one of the first big acquisitions we did earlier this year was St. Katharine Docks. We closed that in March. That is giving us a yield of over 7%. So it's a positive carry situation again, regardless of how U.K. borrowing rates perform. We're very pleased with that. Then over in Asia, we acquired Sofitel Brisbane Central in Brisbane. This is above Central Station, so arguably one of the best locations in Brisbane. Then we acquired this Nine Tree Premier Hotel Myeongdong II in Myeongdong. Myeongdong, as you know, is one of the key retail districts in Seoul. We anticipate this will do very well for us.
In Japan, we have two more PRS projects that will be joining our fold, our stable multifamily. So that brings us up to 10 multifamily properties in Japan. On Singapore, we continue to focus on executing well on our development projects as well as replenishing our land. You will see that in Q3, which is July, last month, we did launch The Myst in Upper Bukit Timah. Take-up rate was a little bit lower than what we would have preferred. I think that area because prior to our launch, there were two launches in the area that soaked up over 800 units. So at that point in time, there was probably a bit of buyer's fatigue. So it didn't do as well as we would have preferred, but still, we are around one-third sold right now. I'm very confident that this project will continue to do well.
It is very nicely designed and offers a great amount of amenities and also a lot of work from home spaces. With Newport Residences, as all of you know, we did announce that we are postponing the launch. We were just about to launch, and then obviously some new measures came out. Since this project is an ultra-luxury project located in the central region, therefore, we do feel that it will need to depend on some foreign buying interest. Therefore, I think we wanted to wait till the market stabilizes before we do this launch. We are still discussing internally. We review it often as to when we want to launch it. But the great news is that we are not under too much pressure. This project does not have ABSD considerations, but does have QC. But we have also gotten an extension from the government.
Our QC deadline to complete all sales will be in 2031. We actually got quite a lot of time, but obviously I am hoping I can launch it as soon as possible and not have to wait too long, but I just need to see how the landscape pans out. As mentioned earlier, in Q2, we launched Tembusu Grand, which is now 58% sold. We are very pleased with that project and the sales launch. All of you would have noticed that we also went into a tender for land in Katong that is right next to our Tembusu Grand site. We went in for that tender, and there were only two bidders, and unfortunately, we were number two. We lost by SGD 1 per square foot. That was certainly a very painful defeat. But that is the nature of land tendering, right?
Sometimes you win, sometimes you lose. Of course, we have this Bukit Batok West EC that will be launching in the first half of next year. Right now, the EC market seems to be pretty strong. In fact, the recent EC launch which I shall not name, and which you all know, has done very well notching up prices in excess of SGD 1,004 per square foot. I think the EC market continues to do well. Lastly, we have our redevelopment of Central Mall, Central Square. More on that later. Touching on the growth aspect of our overseas expansion, we have continued, I think, to acquire various new projects. Last year, we did our first foray, maiden foray into this purpose-built student accommodation or PBSA. We ended the year with six acquisitions.
So far, they are all doing really well for us with 98% committed occupancy and strengthening rents. We also have three multi-family PRS properties across the U.K. One of them is The Junction in Leeds, where three out of five blocks are already completed and in operation. The others in Birmingham, in the best location of Birmingham, right in the city center. The last one is The Castings in Manchester. That is a project by CDL Hospitality Trust. But we are helping them with the project management. We give you an idea of what this whole portfolio is worth by listing the AUM which is based on GDV because the PRS projects are development projects. Over in Japan, we continue to expand our PRS portfolio there. Really pleased right now.
We have 10 properties, seven in Osaka which obviously is going to have a major boost when the casino, the integrated resort comes into place, as well as three properties in Yokohama, which is a strong feeder market to Tokyo. People live in Yokohama and commute to Tokyo because of the high prices in Tokyo. I think we are really glad. The rental trend is strengthening substantially in Japan as high prices turn people off and send them more into the rental market. The portfolio is doing well. Obviously, still a bit small at the moment, so we are looking to really substantially increase our scale here, and we are currently looking at a few exciting opportunities and portfolio-wise, platform-style. We think this sector will continue to do well. A lot of capital has been chasing after PRS in Japan. Very positive about it.
Our style has been I think to avoid a hefty CapEx or repair and maintenance, we have tended to do forward commitments. Basically, we buy a property 6- 12 months before physical completion. Our portfolio is actually in really good shape. The average age of all of our 10 properties is about two years old. Very pleased with how the portfolio is performing so far. Over in Australia, we have a site in Melbourne and Brisbane, and both are also for multi-family, for rental apartments, but they are development sites, so they will take a while to come to fruition. The expected completion is 2025 for Melbourne and 2026 for Brisbane. Over to enhancement. How do we drive more from our existing asset and enhance their value? Here, obviously we have various asset enhancement initiatives.
There we listed Palais Renaissance, which we had completed earlier in the year, and it has been doing really well for us. Aside from that, we are also looking at redevelopment. I think on the right side, you already know Newport Plaza is already underway. This project we are targeting to launch it when market conditions are appropriate, as I have discussed, as I mentioned earlier. Then there is obviously the very exciting project of Central Mall, Central Square. We acquired Central Square from Far East Hospitality Trust, amalgamated the whole thing together. So it is actually three sites technically. We are targeting to get written permission or WP, as we call it, before the end of the year. We can then target to launch next year. We are looking to commence demolition by Q4. This is going to be a very exciting project.
Hopefully, by the next time we meet, I can unveil a lot of very pretty pictures to show you what this project is going to look like. It is certainly very iconic in terms of what we have designed. Over in Phuket, in Thailand, we have been making use of the fact that obviously during COVID, Thailand as well as especially Phuket, tourism has gone down substantially because borders were closed. Therefore, we made use of the time to put in place a very substantial AEI for this Jungceylon Shopping Center. This is one of the top performing malls in Phuket, and after our AEI is completed, we are very optimistic about how this mall will perform. So we anticipate to finish the whole AEI by the end of this year.
Touching a bit on the enhancement aspect for M&C, we continue to see how we can enhance the existing hotel portfolio. While we have done some divestments, at the same time, we need to ensure that the existing portfolio can continue to drive a strong performance, and we can derive good value from it. I think, as I mentioned before, M Social has been the brainchild of our Chairman, and he wants to really position this as a forward-looking, hip lifestyle hotel. We started with our M Social expansion, obviously, with the first one was in Singapore, and then the next one was in Auckland. The ones you see here are all so-called in the works right now.
One that's just opened is M Social in Suzhou, which is part of the Suzhou Hong Leong City Center, Suzhou HLCC mixed-use development project that we have fully completed a few years ago. The hotel is the last component to open, and opened in April. So far, we garnered a lot of positive feedback about the hotel. The last part of the enhancement is obviously how do we continue to hold up our commitment towards making this planet more sustainable. We continue to be very focused on our net zero carbon commitments for 2030 and 2050. We have two big milestones coming up and working hard to meet them. Of course, on the governance side, we are also very pleased that recently the new SGTI index ratings have come out for 2023.
We had a drop of one place, went from fourth to fifth, but still very pleased that we have continued to demonstrate our commitment towards governance and transparency. On to transformation. Transformation, basically it's how we continue to grow and achieve our fund management ambitions. How we continue, I think, to transform our hospitality portfolio, especially after our big privatization in November 2019 of Millennium & Copthorne, or M&C as we call it. Of course, we have also been inculcating a mindset of innovation internally for the last five years, and also making various venture capital investments in PropTech startups that we feel are very synergistic to our real estate and hospitality business. In terms of fund management, I think we try to grow it organically and inorganically. One of the ways inorganically is basically via acquisitions, where we acquire other fund management platforms.
We have acquired a 21% stake in IREIT, in the REIT units, and we are 50% of the manager together with Tikehau Capital, one of the largest fund managers in Europe. Together we manage this REIT, and very pleased with how the REIT has been doing. Obviously, the share price like most other listed company share prices are not doing so great, but the REIT itself I think has been performing very strongly. We have just had an equity fundraise exercise last week. Or, sorry, was it a week before? Time's blurring on me. Anyway, I think the EFR exercise was very successful. It was almost 135% oversubscribed. CDL was prepared to take up its excess rights, but we didn't get a chance because there was so much interest in it.
Basically, they acquired 17 retail assets across France, long WALE, and basically at a yield of close to 8%. We are very positive that this acquisition will drive more value for IREIT. On the right-hand side, we just gave you idea of how when we invested in the IREIT, and also in the manager as well as the units in 2019, how much the portfolio has grown. From GBP 500 million to now around EUR 1 billion. As well as from one to three countries, from five to 54 properties. And obviously, our initial stake was 12% of REIT units, now it is 21%.
I think we are very positive, and IREIT helps to not only complement our fund management ambitions, but also helps to fill in the fact that it is a pan-European REIT. Area where CDL has been light on its investment. This helps to give us exposure to a very key region of the world. Okay. At this stage, I will pass it over to Yim Ming, who will take you to financial highlights, and then we will open it up for Q&A. Thank you.
Thank you, Sherman. Morning, ladies and gentlemen. Let us start with this revenue by segment slide. Revenue increased 84% to SGD 2.7 billion for first half of 2023. All segments recorded increase in revenue, although the increase in revenue is largely due to the property development segment. Sherman has mentioned earlier, property development segment accounts for 64%, and this segment jumped 183% due to the recognition of Piermont Grand EC, which was TOP in January 2023. As we all know, revenue and profits for EC are only recognized in entirety upon TOP. Hotel operations also recorded an increase of 12%, in line with RevPAR growth, which is supported by the continued growth in international travel. More details on hotel will be shared in the next slide. Investment properties increase is largely due to acquisition growth from St. Katharine Docks, as well as the living sector PBSA acquisitions.
The opening of our Jungceylon Mall in Phuket, which Sherman also mentioned earlier, also contributed to this increase. On this slide, hotel operations segment performed very well from a RevPAR perspective. It is a pretty report card showing the strong rebound in hotel operations. COVID is a thing of the past, hopefully, but we have still shown the first half of 2019, as for better comparison. Room occupancy improved 11.9 percentage points across all regions, of which the rest of Asia has the most significant improvements in room occupancy, which is largely due to two hotels, our Grand Hyatt Taipei and our Grand Millennium Beijing, which are the shining star contributors.
I guess the second bar chart may have over-dramatized things, but average room rate has improved 18.3%, surpassing even COVID-19 levels. Increase in room rates is across all regions, and Singapore and the rest of Asia registered the higher increase. With the upcoming concerts, F1 and other major events, I think room rates for Singapore looks very optimistic. Accordingly, RevPAR went up 43%, GOP went up 7.4 percentage points, both surpassing 2019 levels. Next, let's go on to EBITDA by segment slide. EBITDA by segment fell 74%, as we all know first half 2022 was boosted by astronomical divestment gains.
Stripping away the divestment gains and impairment losses, EBITDA improved 48%, and this is a sign of improved operating performance across all our three core segments. Property development improved 63%, which is in line with the increase in revenue. Hotel operations increased 69% for EBITDA. This is a very optimistic sign for the hospitality sector. This is twofold, with higher revenues achieved with increased occupancy and higher rates achieved for all regions, as well as a higher flow-through to profits with improved in GOP margin to 30.8%.
The GOP margin is a very healthy margin and definitely a testament of our successful cost measures. Investment properties and EBITDA improved 22% in line with acquisition growth. EBITDA demonstrates strong cash generation. It's definitely one of the focus area the group looks at very closely. On PBT is impacted by financing costs and depreciation. Sounds like broken record, CDL accounts for our investment properties at cost and depreciates them vis-à-vis the fair value model. Again, first half 2022, boosted by divestment gains. If I were to exclude divestment gains and impairment losses, PBT actually improved 48%. Again, property development is the main constituent of PBT. On this note, hotel operations on PBT level recorded a loss of SGD 7 million. I need to highlight that this is largely due to financing costs for this segment.
When the group privatized M&C back in 2019, we took financing, and with the current interest rate hikes, that actually eroded the profits from this segment. However, I would like to focus that this segment, while it recorded a loss of SGD 7 million on PBT level, EBITDA was actually 69% higher at SGD 100 million for first half of 2023. This slide summarizes the three core segments. I can share a little bit of color. Property segment, again, accounts for 64%, largely due to Piermont. And the other projects that contributed included Amber Park as well as Irwell Hill Residences. Sherman mentioned earlier we have sold out Haus on Handy and Amber Park ahead of ABSD timeline. Accordingly, we actually also wrote back SGD 70 million of foreseeable losses in this sector. For hotel operations, I think I've spoken enough. 12% increase in revenue, 69% increase in EBITDA.
Investment properties, just a little bit more color. The increase due to acquisition growth, PBT has declined because in first half of 2022, there was also divestment gain relating to divestment of Tiger Warehouse as well as the CDLHT deconsolidation. Furthermore, in 2023, the group provided for SGD 33.5 million impairment losses. This is, of course, not relating to St. Katharine Docks, which was purchased with very good investment metrics. The group also impaired one of our property link notes for Australia, about SGD 20 million, and excluding divestment gains and impairment losses, actually, for this sector, PBT and EBITDA actually improved. Next, I'll move on to balance sheet and liquidity position of the group. The group has strong and robust fundamentals. Cash of SGD 2.1 billion. Cash and committed facilities of SGD 3.4 billion. Gearing stands at 57%.
Average borrowing cost has increased from 2.4% for FY 2022 to 4.1% for first half of 2023. Interest hikes continues to be on the close radar of the group. The group has increased our fixed rate debt to 46%. Loans denominated in yen and renminbi are less likely to have substantial increases. With this in mind, we feel that the current fixed rate debt is sufficient from a risk management perspective. We have a balanced debt expiry profile and debt currency mix. For the loans due in 2023, the group has made arrangements for repayments and refinancing accordingly. While 2024 debt constitutes about 27%, 32% relates to bonds and MTN, which are due in 2024. The group issued a very favorable five-year, SGD 470 million bond in April 2023, and we will look at a window to issue more bonds in the coming 12 months.
As for currency risk, the group adopts a natural hedging strategy. We do not take any speculative positions. This slide shows the FX exposure in the key geographical markets that the groups operate in, and we have a 71% natural hedge for all these key markets. Once again, thank you for the support, especially to the lenders in this room and online. With this, I hand over back to Belinda.
Thank you very much, Sherman and Yim Ming. We have now moved into the second part of today's briefing, which is the Q&A. Please feel free to ask your questions. My colleagues are standing around the room with a microphone, and if you have any queries, you may raise your hands. For those that are joining us on webcast, you may also post your questions by tapping on or clicking on the question tab on the screen. Before asking your questions, I request that if you could please introduce yourself and also the organization that you represent. So maybe I'll just open the floor up. Okay, I'll just take Mervin first, and I'll move to Brandon. Mervin.
Hi. Mervin from JP Morgan. The first question is in regards to hotel business. Congrats on the very strong RevPAR performance. Appreciate there's higher borrowing costs from here, which has impacted the PBT performance. But is there any other expenses that we should be aware of that's dragging the performance of hotels? There's some catch-up maintenance post-COVID. Going into the second half, should we be expecting like last performance still on the PBT level, given FX headwinds as well as impact of borrowing costs? Second question I have is in terms of share price. Obviously is a bit weak at the moment. Any thoughts on buybacks or things that you want to do to close the discount to RNAV as well as book? Thanks.
Thanks, Mervin. I will take the first question on the hotel side. I think on your question about other expenses, putting aside interest costs, if you look at the GOP margins, actually, we have improved, and done better than even the 2019 levels. I think short answer is no, although there have been some expenses that have gone up, of course. Utilities, electrical costs and the like. But of course, the group has also implemented things to try and save energy costs and all that. So that mitigates part of that. For the second half, I think we are expecting quite a very strong performance from the RevPAR point of view. And I do not think we expect anything to change on the cost side of things. I think interest costs will likely be the same trajectory as well. So yeah, it should be similar.
Yeah. And hi, Mervin. Good morning. On the buyback, it was something I struggled with the last couple of months, whether to initiate our big buyback program. But I think it is one of those things where, I was not able to see the floor at that point. Share price kept plunging over a certain period of time, and while it would have been great value, I think to pick up the shares at the sort of prices it was at, but in the end, I held off because I was not sure what were the trends in the share price. And in the end, actually, while I did miss that opportunity to really do a substantial buyback, but having said that, I think the share price found a natural floor and then started to rise again.
So we will continue to monitor. But yes, it is something I do want to do. Again, if I do a share buyback, it is not so much because I wanted to help the share price, but more because it is good value for me to buy back shares at that price, or CDL, at least to buy back shares at that price.
Okay. Maybe I just move down to Brandon, maybe.
Hi. Morning, Sherman and team. Just three questions. The first one is, one of you bought a site in Suzhou in this first half. Can you share with us as we go for the next 6-12 months, what is the strategy on China? Are you looking to expand more? Is there a certain number that we should be looking at? Which are the cities that you're looking at? That's the first one. The second one would be, I think it's been more than a year since you have deconsolidated CDLHT . I think back then the objective was really to monetize some of these assets, but it's still been a bit quiet.
Should we expect some activity here, in the near term? Second one. Third one is more on capital allocation. I think you have been acquiring quite a bit overseas, but should we be seeing a bit more domestically, going forward? Yep. Thanks.
Hey, Brandon. Morning. Yes, we did acquire a site in Suzhou recently. This is in the second half of the year, so it's not included there, as well as we've made a few other acquisitions in Japan and stuff. All that, I think we'll be sharing with you when we next do our quarterly reporting. Yes, the site in Suzhou, we managed to acquire it at a very good price. Actually bought from the government. We have big plans, I think, to do a nice sizable integrated development on there. We will unveil more at the next reporting season. In terms of the target cities, I think in China, we still continue to focus on the upper tier cities. Right now, for us, it's Shanghai and Suzhou, as well as we are also looking at potential opportunities in Shenzhen.
Really, Shanghai and Suzhou have been our key focus. I think notwithstanding everything that's happened, I think right now it's a good time for us to get back into China. Things can be bought at very good valuations. Parts of China are still doing very well in spite of all the bad news that you hear in the press. Various cities still have very stable and very strong performing residential markets. I think this is a really good time for us to, so-called, expand our presence in China. As you've seen earlier, we are more or less fully sold out of all of our residential inventory there. I think we do need to replenish our land bank just like how we do in Singapore.
Whatever projects that we do there would still be very much geared towards residential. It would be substantially residential in nature. We do not want to take up too much commercial. But again, with mixed use sites, you will probably have to bear with some element of commercial.
Deconsolidation of CDLHT and with-
I think on the second question, on the sponsor deals with CDLHT, I think that is something we will, wearing the sponsor hat, of course we would like to engage them, and we have been engaging them. But I think from their point of view, the market actually, there are a lot of opportunities in the market. They have been exploring very actively. I may not speak on their behalf, but there are a lot of deals that they are pursuing at the same time. I think the sponsor deals are always here. We can always pick the best time to time that.
But right now, they are quite focused on other deals and they have, of course, limited firepower. I think that they choose wisely how they want to spend it. I think it is maybe a matter of time before we do a sponsor deal, but they have to prioritize that themselves.
That was on capital allocation and whether we are putting into the local market.
Just to add on for the CDLHT, I am sure you are aware that for the hotel for Central Mall, there will be a Moxy hotel that we are building brand new and that will be injected into CDLHT upon completion. Sorry, Kenny, you want to say?
The allocation.
In terms of capital allocation, I think really where we are looking forward to, I think Sherman has mentioned, China remains a slightly open market. Of course, the living sector is the other area that we are looking at. I think the strategies that we have for capital allocation very largely is very similar to what we presented in the past. Of course, with our U.K. portfolio right now, we all know that the REIT market is not going to move off very quickly. That is something that we will just put on the side for a while. There could be some other private platforms. In terms of where we are going to allocate capital, I think U.K. commercial, right now for U.K., we are currently at about 19%. I think the living sector is a very resilient asset class.
That is something that we are still looking at. Japan is looking good because of the low interest rate environment, and that is one segment that we are also looking at. I think it is largely these two sectors that we are looking at the moment.
Okay. Maybe I will take Terence first. Yeah.
Hi. Thank you. This is Terence from UBS. Could you guide on the course of debt outlook for 2023, and also how much buffer there is to your current interest coverage covenants if there are? Second question is back to acquisitions. Perhaps if you could just help us understand management's view of which is most attractive in terms of geography and asset class, and what is the comfortable gearing range that the group will be playing within? Last question is, how should we read into the lower land bid for the recent Jalan Tembusu site? Any comfort you can give to the Tembusu Grand buyers, and how will you guide on the outlook for your Singapore residential margins? Thank you.
That is a lot of questions, Terence, but sure. Let us do it one by one then. Yeah. For interest outlook, I think right now we are about average 4.1%. I think we have indicated that initially when we budget for FY 2023, we were hoping that 4% was the upper handle. Right now, we probably are projecting it to slightly above, maybe about 4.25, thereabouts. From an outlook perspective, we do feel that it is going to trend down. The question is really when? I think we are prepared that by 2024 interest should normalize, of course not back to your 1% that we all love. Sorry to the bankers today, but yeah. I think we do hope that 2024, that is what we will project. For this year, we are prepared in terms of our land acquisitions, our land bids and our acquisitions.
We have pitched in a higher interest rate outlook for the rest of 2023, with a trending to go down for 2024. In terms of gearing, I think we've indicated from a group perspective, we do hope that the gearing upper limit is about 65%. Currently, we're at 57%. And mindful that we have projects that are still going to TOP by end of this year, like Amber Park. We do have some other projects. So I think with that, I think gearing in terms of an upper limit of 65% is definitely achievable. Oh, sorry. For interest covenants, happy to announce, the bankers can don't listen to this, but we don't really have any interest rate covenants.
Okay.
On the acquisitions, as part of my answer to Brandon's question earlier. So Terence, good morning. Basically, it's still the same. I think we continue to be optimistic on the outlook for the various overseas jurisdictions that we've been investing in. So aside from Singapore, obviously since 13 years ago, we really started to do a diversification push for our development activities. Besides Singapore, I mean, we are still positive about the U.K., but obviously it's finding the right acquisitions at the right metrics. We are positive about China, we're positive about Australia and Japan and Vietnam. So these are still our key overseas destinations. As I presented earlier, I think aside from our usual residential development for sale, as well as our investment properties, our office buildings or retail, one of the sectors that we've embraced over the last few years has been the living sector.
As Yiong Yim Ming had mentioned earlier, this is a very resilient and in fact, defensive sector, right? The living sector comprises of things like multi-family or PRS as we call it. So apartments or rental. Comprises of workers' dormitories, comprises of student accommodation, comprises of social housing, senior assisted living. All these asset classes are very defensive, right? Regardless of whether the economy is doing good or bad, whether there's COVID, people still need to go to school. In many cases, parents still send their kids overseas for a good education. In fact, around the world, as I mentioned in the previous briefing, right, as housing prices rise, and puts pressure on affordability, people turn to renting as well. Traditionally, I think we've always seen that rental has been more of a Western lifestyle trend. But, in Asia, I think people prefer to buy and own.
But these days, more and more people are turning to the rental market as because, again, for many people, if they want to buy their first property, it involves a huge down payment, and then they spend much of the rest of their lives paying off the mortgage. I think renting has been a very strong trend. Also, we see that with mobility. A lot of professionals are now moving across cities and across countries to work. Therefore, I think rents will continue to strengthen over time, and occupancies have remained very strong for our portfolio. I think for the living sector, we continue. I think we want to drive our expansion there. As mentioned earlier, I think we have been able to amass a reasonably sized portfolio, albeit still small in Japan.
We are now up to 10 assets, but I think we have substantial plans to drive that further. Right now, the borrowing rate in Japan is still sub 1%. Depending on how you play it could go as low as even 0.3%. It is actually still a great time for us to acquire, and there will be positive carry on anything as long as you acquire well and there are strong prospects in future. That is more or less I think our expansion plans. Of course, in Singapore, we continue to replenish our land bank. As mentioned earlier, we were a bit unsuccessful for that site in Tembusu, in Katong. But it is okay.
I think all of you have seen the confirmed list for second half this year as well as for. Most of those sites will be tendering out next year, early next year, first half of next year. But there are many, many more sites right there coming up, and I think we just had a bit carefully. Yes, prices have somewhat tweaked, have somewhat gone through a bit of an adjustment, especially with the recent cooling measures that have come out. Nonetheless, I think Singapore is still a very attractive market, especially for projects that are geared towards locals and permanent residents.
Sorry.
Yeah. Permanent residents. Now, yes, on the lower land bid, I thought I will turn it over to our Singapore Superman, Mr. Chia, to talk more about it.
Okay. I can attribute to four main reasons. Firstly, there is a change in GFA computation. As you know, the air-con ledge in the past was free areas, but now they change it, so GFA have to be readjusted. I think the difference between 5%-7%, so it is quite substantial, actually. The trend you can see in Lentor already happening in the last tender. The third site was lower than the previous two. Second reason, of course, the ABSD, the 60% for these foreigners do have some impact, like Sherman mentioned earlier. People are a bit, especially the more the high-end projects, they have to consider the larger units that to be built. Third reason is, of course, the construction cost. Earlier days may be lower. As you go ahead, there is still quite a bit of uncertainty.
People got to provide for the fluctuation in construction cost. Lastly, of course, if you look at locality. In this area, there are three projects that already launched, about 2,000 over units. When the market there is being absorbed by a lot of buyers, the new one coming up, they will be more competitive. We have to consider all these factors before we put in the bids. It is not surprising that it is lower than the earlier bids. Thank you.
Okay, thank you. I am going to go to David, then I am going to move to Rachel, and then I will move to Selina, okay? We will go that way. David.
David Lum from Daiwa Capital Markets. Is it possible that your hotel operations are over-leveraged structurally? Because your RevPAR is already above pre-COVID levels, yet you are still underwater at profit before tax. You may have gotten away with it when interest rates were low, but when they are around 4%, you are not profitable, and your RevPAR would have to increase a lot more for you to make any profits.
You want to answer?
Yeah. Thanks for the question, David. Definitely interest rates have eaten up a lot of that profit. I think like for like operationally, I would say the hotel operations would have still been profitable. There were a few other one-off costs that happened this particular half. Things like a union buyout, those are a one-off to reduce the overall cost in America. Somehow those are all factored into the P&L at this particular half. I think had it not been for all these one-offs, I think generally we would have been in line with the previous pre-pandemic kind of profits, if the interest rates had been similar as well. I think the short answer is, no, I do not think we're over-leveraged. Yeah.
Yeah. I think we must also be mindful that from a capital perspective, this factor in the cost of capital. Because I mentioned earlier, we do not want to adopt any FX risk. Effectively, if you see our GBP exposure in terms of our pounds denominated total assets, we are actually about 96% hedged in terms of GBP, which is why we chose to have an interest rate risk instead of having an interest rate plus FX risk for our U.K. assets. With that, yes, the incremental financing cost was actually a portion of it's actually equity cost as well. That's number one. I think number two, if you look at the yield of hotel properties, in terms of trending yield, they do not trend below a commercial portfolio right now. In fact, they are actually doing pretty well.
Chia did mention that for our hotel portfolio particularly, there were certain one-offs. Hotel operations is definitely not as predictable as investment properties. There could be things like where we want to do union buyouts, where they could have a payback of two to three years. They could result in some uneven profits, but generally from a yield perspective, it does not pale in comparison to investment properties.
Thank you. My follow-up question is, for Millennium Hilton Seoul, how much did it contribute to the EBITDA of the hotel operations in 2019? If you could provide a dollar value or a percent.
In terms of EBITDA perspective, the entire project has about SGD 911 million PBT contribution for 2022. About SGD 900 million.
I mean, not the divestment gain. I mean, just the operations. Yeah.
Operationally, the hotel was very, very little, I would say. I think as far as I could recall, it was at the most breakeven point, I think which is the main reason why we actually chose to dispose of the hotel anyway.
Okay. Let me move quickly to Rachel, and then after that, Selina.
Hi. Rachel from DBS. Good morning. Just a few quick questions from me. I think for Central Mall, could you remind us if there is any ABSD or QC?
Yes. We do have ABSD for Central Mall. And the QC is extended period. It is seven years. I mean, plus two.
Okay. ABSD will start counting from which year?
I think it's up to 2027.
Thank you. I was wondering whether you could share some operating numbers for St. Katharine Docks. What's the occupancy rate now? Has there been any subletting in the space, any tenant physical occupancy or anything you can share?
Rachel, maybe give us a while. We will get back to you before the end of this Q&A. Just need to dig up the stats. Okay.
Rachel, also at the back, the operational sites, which we did not present, some of the data points on the U.K. assets are as listed there.
Yeah. I think just a quick answer to that one is, it is about 90% occupied. And so far there have been no subletting. Yeah.
Let me move to Selina.
Thank you. Hi, I am Selina from Bloomberg News. Two questions. First, how concerned are you about the cooling foreign buyer demand for Singapore's residential properties and also the easing prices? Second question is, how do you expect these factors along with as the cooling measures set into the market as it stabilizes, how much do you expect it to weigh on CDL in the second half of this year? Thank you.
Mr. Chia, do you want to talk about this? Cooling measures and property prices in Singapore, and how concerned are we and how much will it weigh?
Okay. As we can see, the prices are still quite resilient at the moment. The cooling measure actually we can see is hitting the more high-end properties, the luxurious property. At the moment, about 80%-90% of buyers are still local. In fact, the cooling measure were to encourage local buyers to buy properties. As the minister put it, he want to encourage more local to continue buying properties. The prices we expect for those that in the lower and mid-range properties will continue to remain attractive and resilient to the buyers. For the higher end, we have to see how the 60% ABSD will have impact on the buyers. At the moment, of course, they take a bit of time to sit back and reevaluate the situation before they will come back to the market.
Also, we have to watch out the situation very carefully. I do not expect the prices to give it very significantly. At the moment, there's a slight drop in the Q2, and looks like the price will remain resilient for the rest of the year. Yeah.
Also, you have to remember, as I mentioned at our last analyst briefing, construction costs have gone up substantially across the landscape, across the world, actually, for most developers. There's only so much headway we have in terms of reducing selling prices, all that. It does help when land bidding prices can come down somewhat. But prices are not expected to fall substantially or go into a downward spiral, only because there is still healthy demand. As Mr. Chia has mentioned, I think people are still looking, I think, to upgrade or to buy their next dwelling or in a location that they prefer. Therefore, I think the market will still be well supported by locals.
But as has been mentioned before, I think all of you know this 60% ABSD plus the 6% of basic stamp duty, it's like 66% for foreigners, is pretty harsh and prohibitive. I would think that this would severely impact the buying demand from foreigners.
Okay, I'm going to start moving here. Okay. Wilson, let's take from the center of the room.
Hello. Morning. It's Wilson from Morgan Stanley. Just a quick question on the group level targets. Firstly, could you remind us what's your target ROE, the timeframe to get to that ROE, and what's the strategy to get there? Secondly, on your AUM target, SGD 5 billion, whether that still applies for this year, given that the current level is at SGD 3 billion. Thanks.
Okay. Morning, Wilson. As you will remember, I had previously flagged out that our midterm target is an 8% ROE. Much as I would like to get into double digits as soon as possible, I think we have to do it step by step. Obviously, to get to that ROE target, it depends on various moving bits, right? Obviously, we still have our share buyback on standby when we need to. More importantly, I think it's to really drive the returns from our operations as well as to ensure that we do efficient capital recycling. This year, you will notice that we haven't really done any divestments. I think one of the main reasons is that, we had some divestments slated, but I think it's not been a very good market for divestments, with the exception of a few specific geographies or asset classes.
Anything you sell right now, you are going to not realize the full potential of that asset, right? I think we've held off from making some of the divestments because we don't think that it makes sense for our group, and we would actually be giving up huge value if we were to divest it at these prices. I think we've been holding on for the time being to wait till the opportunity is right. I think we certainly continue to embrace capital recycling, and as we divest, we will continue to expand and acquire. It's just that we have done more acquiring this year than divesting, only because the climate's not been so good for divestments. As I mentioned earlier, even in the U.K., right? There's been cap rate expansion.
This has really hit, I think, the higher net financing costs have hit the whole world as well. Things are not suitable, I would say, at the moment, for any large-scale divestments. As we move forward, I am still very focused on getting us into the higher single digits for our ROE, but it will take a bit of time for us to get there. I do not have the exact timeframe, but hopefully, in the near term, I think we should be able to materialize that. As for the AUM target of $5 billion by this year. To be frank, I do not think that is achievable anymore. As many of you would know, and I spoke about it before, part of what formed a cornerstone for this AUM target was getting our REIT listed in Singapore for our U.K. commercial properties.
That listing did not go through last year. Hence, we subsequently bought St. Katharine Docks as well, right? Which now brings our portfolio value to about GBP 1 billion. We can do a re-listing of private fund in future, when the time is opportune. At the same time, we have set a new target for ourselves, and we think it is achievable based on some of the plans we have under works. That is actually by next year, we hope to exceed this $5 billion AUM. I will not mention the new target for now, but we do have some plans in place. We hope that we get our fund management growth back on track again, and we start to demonstrate our ability to really recycle capital. Thanks.
Okay. Come.
Hi. Morning. This is Tan Xuan from Goldman. Just two questions on hotel. Firstly, can you explain the gap between revenue growth and RevPAR growth? Is it just ForEx or are there other one-off items as well? Secondly, on operating margin for hotel, how high do you think it can improve to, or are we at the most efficient point already? Thank you.
I'll just do the gap first. In terms of revenue growth, it's really based on reported currency. In terms of RevPAR growth, I think what we have done is we have stripped out the currency effect. When you look at the RevPAR growth, it's based on constant currency, assuming the exchange rates were the same. Of course, I think pound and U.S. dollar has fallen. On a like-for-like basis, which is why the numbers looks better on the RevPAR basis. Of course, the other thing for total revenue includes other revenues as well. For example, F&B, banquet, et cetera. That has definitely vis-à-vis the revenue growth for rooms. I think the other revenues has not caught up as fast.
On the GOP margin, definitely payroll costs have gone up for labor. It's a very tight labor market. Most of the regions that we operate in, it is very challenging to get labor. I think one is that payroll costs will continue to increase. At the same time, I think what the group has done is really tried to reduce the reliance on manpower and try to be either more efficient or incorporate more innovations in a way to streamline the process. I think that's how we mitigate the GOP margins being compressed. I would say they would tend to be stable. Even if they change, it should be marginal.
Okay, Tan Xuan, that's all right? Okay. All right. Is there any others in the room? If not, I actually have one on webcast. It's actually from Felicia of The Edge Singapore. The question here is that there are some news that WeWork warned of bankruptcy, and we understand that the coworking company is a tenant at CDL's City House. Are you able to comment on this, please?
Yeah. WeWork is a tenant at City House, as well as our new acquisition, St. Katharine Docks. We are exposed to WeWork in both buildings. Having said that, I do think that the news about WeWork is, of course, attributable solely to WeWork itself. I suspect a lot of it has to do with the U.S. operations. Of course, the U.S. market is facing a very challenging time in terms of the work from home versus coming back to the office. But in our particular WeWork offices, both at City House and in St. Katharine Docks, we do find that actually occupancies are strong, and the local markets are pretty good.
So I do think that we do need to differentiate between WeWork and the operations. Number two is that actually WeWork has been very prompt in paying their rental so far. Of course, with the news, we will continue to monitor them very closely.
Yeah. In City House, yes, WeWork is a substantial tenant. But at St. Katharine Docks, it accounts for less than 10% of our rental there. So it's not something we are particularly worried about for now. But yes, we will monitor closely. But we are still comfortable at the moment, I think, with our exposure there.
Okay. Is there any more questions in the room? Okay, Mervin.
With respect to the hotel business, are you able to quantify for us how much this union payout actually impacted profitability in the first half? Are we expecting more payouts in the second half or next year? In terms of borrowing costs, has all the British pound debt associated with M&C privatization been refinanced to current spot rates, or is there still more to come going forward? Thanks.
I will take the first one. On the union buyout, typically, I do not think you will see the flow-through immediately. It takes a while for that ROI, and we do work out the ROI. Generally, I would say it ranges between the two to three -year payback, which is why we go ahead. Whether there will be more, to be honest, it is quite a lengthy process, as you can imagine with the New York unions. I think the recent one that we got, we managed to get pretty favorable terms in terms of the union payout, which is why we proceeded. It is a little bit piecemeal. I think as and when there is an opportunity for us to do it and it makes sense, we will proceed. I think maybe the two to three -year ROI is maybe the guidance we can give.
In quantum wise, I think it is about SGD 8 million for first half of 2023. As Ihas mentioned, these are not exactly the most predictable. It depends on whether there is a ROI and business case for that. There are other one-offs. I think we mentioned there was a hotel in Minneapolis, of which the lease was surrendered early as well. Accordingly, we also wrote off the assets there. That is also about SGD 8 million. I think that is the thing with hospitality business. You have such items that come in sporadically. In terms of borrowing costs, in line with our privatization of M&C, we have actually already refinanced the debt. If my memory did not serve me wrong, it is quite long. I think it is 2026. I think that is at a fairly strong margin.
That is something that we have worked very closely with our local banks. The only thing, obviously, the reference rate for SONIA is very high at the moment. As we all know, Bank of England has just given a 25 basis points increase, I think looking at high inflation numbers. That is one area that we are looking quite closely, whether we want to hedge further GBP exposure. That is something we are looking closely. In terms of margins, I think the banks have given us full support for this.
Okay. Thank you very much. I should be bringing this briefing to a close. But I just want to give one more last opportunity, anybody else in the room. Okay. If not, then would I open to the panel if you have any closing remarks to make. Chairman?
Well, I would like to give you some of my comments. I think we have journeyed through many years gaining the experience of up and down. This is not something new to us. It is something that we have gone through many, many years. And I would like to say that firstly, the interest rate is not going to go up any more, in my view, because there's no more much inflation around the world. The world has reached the limit of high interest rate. Secondly, we have for many years gone from one place to another. We try to find a niche, and this niche is something that you get it, you feel it, you cannot explain in so many words. And I would like to grab opportunities, whether it's in U.K., it's in Asia, or it's in America, and so on.
I would think that it is good for us that we have gone through so many areas so many times, and we makes mistakes sometime once in a blue moon. But that is good. We are not perfect. But having said that, I want you to bear in mind that I don't want to be going into too much, what is a RESPA? What is this? I'm a big picture man. I want to kill when there's opportunity to kill. I want to save when there's opportunity to save. So I will beg you that our many journeys over the years has given us so much experience that I can't tell you what I'm going to do, but I will do. Thank you very much.
Thank you very much, Chairman. So on that very positive note, we have come to the close of our briefing. So ladies and gentlemen, thank you very much on behalf of the team. Thank you for attending. Do stay on. For those who are here at the M Hotel, there are refreshments outside for some coffee and catch-up. And for those joining us on webcast, thank you for joining us, and we are grateful for your time and look forward to seeing you again. Thank you.