Good morning, ladies and gentlemen, friends from the media, analysts, and fellow CDL colleagues. A very warm welcome. My name is Belinda, and I am the Head of Investor Relations and Corporate Communications at CDL. On behalf of the CDL management team, I would like to warmly welcome you to CDL Strategic Review Briefing 2026. This is the very first time we are holding our briefing right here at the Union Square Residences Sales Gallery, and we are delighted to have so many of you in this room this morning. Union Square is one of CDL's major integrated mixed-use redevelopment projects, and it is perhaps a fitting setup as we share the next chapter of CDL's strategy roadmap. This is a hybrid briefing. We are also joined virtually via webcast by many members of the media, analysts, and the investment community. We thank you for joining us this morning.
For today's briefing, in line with CDL's commitment to environmental sustainability, we will not be providing any printed materials. Instead, I encourage you to scan the QR code that you see on the screen in front of you to download or view the strategic review materials. For those that are joining us on webcast, you may similarly be able to download these documents via our website. They include a press release summarizing some of the key highlights of our strategic briefing this morning, and also a presentation deck that our Group CEO, Mr. Sherman Kwek, will be walking through very shortly. For all the guests joining us, please similarly ensure that you have those documents with you. Today's briefing will be in two parts.
Our Group CEO, Mr. Sherman Kwek, will kick off with a presentation and delve a deep dive into the strategic review presentation outcomes, followed by later a Q&A session together with our management team. Without further ado, may I ask Sherman to please kick us off with the presentation.
I can use the keyboard, right?
You could .
Okay, great. Thank you. Morning, everyone. Wow, double mic. Yes. Thank you all to the media and analysts for taking time to come to attend our unveiling of our strategic review. I know it's been a long time in coming. As all of you would remember, I mentioned before we appointed Teneo, our global advisory firm that advised us on this exercise last year, probably about September. In the immediate few months from then ensuing, they basically did an investor perceptions audit. That was in order for us to garner as much feedback as we can from both sell side and buy side analysts. Once that was done, it was primarily much of this year, I think that the management team, the board, and many workshops that we've done with Teneo as well.
We have gone in to really do a deep dive into our strategy and to refine what we would like to achieve in the next three years. Without further ado, I'll take you through it. I'll try to be relatively brief and quicker with my presentation so that we leave more time for Q&A, which I'm sure lots of you have burning questions to ask. Okay, that doesn't work. Okay. Our GET strategy that's been in place since 2018. Some people may be a bit disappointed saying, hey, why did you go back to the GET strategy again? The truth is actually, when we embarked on this exercise, all of us went in with open minds. In fact, the overriding sentiment back then was to, I think, do away with the GET strategy and come up with something entirely new.
Throughout the past year as we've been working on this, especially during many workshops and during the ongoing process, I think we found ourselves coming back much of the time to these three pillars that we had originally arranged it in. Even for me, even though I was the original architect of the GET strategy in 2018, but I was very willing to say goodbye to it. Obviously, we want to do what's best for CDL and all the shareholders. But because of the relevance that these three pillars continue to have, and also don't forget it's something that all of our staff, all my colleagues at CDL, we are all used to this. We've been living and breathing this for the last eight years.
We actually ended up concluding that it was very apt to stick with this strategy, but refresh it and enhance it with further clarity and targets and outcomes. Just going through it again, as you all know, the three pillars are growth which talks about how we build our development pipeline as well as how we further expand our presence on the commercial side, the hospitality side, the living sector. Basically how do we invest and deploy capital, how do we grow CDL? There you will see some of the achievements we've done over the last eight years. We've garnered more than SGD 26 billion of residential sales and greater than 15,000 units. On the enhancement part, also very intuitive.
Basically it's how do we unlock value from our existing portfolio, whether it's through AEIs which we've completed five major ones including obviously the biggest one was Republic Plaza. We've done City Square Mall, we've done our other mall in Phuket, Jungceylon. These were all very big major AEIs, Palais Renaissance. We really pushed the envelope to get some of these major AEIs done and post-AEI actually all these assets have been performing very well. Rental reversions have been strong. The second part is obviously the redevelopments. Primarily this would comprise of two major redevelopments that I would say have unlocked tremendous value for CDL. All of you are sitting in one of them right now, which is this Union Square mixed-use development, which comprises of the residences, the office, and the retail which you can see from the giant model over there.
Of course, we also have Newport Plaza, which is integrated development, single tower. That one was the former Fuji Xerox Towers. We are also redeveloping that, and that should TOP by next year. We're actually very excited to see that project come along nicely. We've just done a site visit recently, so progress has been really well. Lastly, obviously we've also invested capital to renovate our hotels in order to strengthen their market positioning. So that's enhancement and the last part is transformation. Yes, in the past, I think for transformation we had a lot of different descriptions attached to it. But now I thought we'll just simplify transformation. Essentially, it's really our capital recycling as well as our fund management. These are the two things that will really drive and transform the company as we go along.
With that in mind, the original GET strategy, we then as I said, went through a very long and arduous process about what are the priorities that we want to get out of this. That will help us in terms of setting our future targets. Taking into account all the feedback that came from the investor perceptions audit, as well as obviously we have to make a lot of judgment calls in it as a management and as a board. After all, I would like to think that we know our business better than others. We have come up with these four priorities, I think so one of them is a sharper strategic focus. Secondly, we want to be more proactive when it comes to our portfolio management. Thirdly, there is a measurable implementation roadmap that guides us.
Okay, and we set it at a three-year timeframe because we believe that that is the right way to look at it. It is not too long and yet it is not too short as well, where it cages you in and you do not have much room to maneuver. Okay, I do not want us to rush to meet annual fiscal year targets just for the sake of it, when it may not be in the best interest for CDL. Lastly, a clear path to shareholder returns. This way, you can clearly see that if we execute on this, where will we end up and what will we look like three years from now. As you have all probably already gone through the whole deck, this is our GET+ roadmap.
Three, four, five, six, we did not intentionally come up with these numbers, but they just kind of fell into this nice sequence. As mentioned, three years because I think that is the right timeframe to look at it. I do not really like giving out annual targets even though the last two years or so I have given out annual divestment targets.
But I think it is better to look at it from a three-year timeframe, which allows us to plan better, not to leave money on the table, and to really ensure that we monetize our assets properly. Four sectors which will not come as any surprise to all of you. Residential, commercial obviously includes office and retail, hospitality, and the living sector which includes what we call PRS, private rented sector. That term actually derives from the U.K. It is known as multi-family in other parts of the world.
It is basically apartments for rent. The living sector would include PRS, would include student accommodation, would include retirement housing. Anything that is for rent, but for people to live in. Okay, so living sector. Then we come to the five, which is SGD 5 billion of new investments and we have to keep investing so that we ensure that we maintain our growth. Lastly, SGD 6 billion of divestments and that is our capital recycling initiative. Diving into more granularity, on top of our GET strategy, the plus stands for the four targeted outcomes for the so-called minimum of 35% or more in terms of the dividend payout on reported PATMI. That one we had announced earlier, so that will come as no surprise to all of you. The other three are targets that we are very focused on. For the L, it is obviously leverage.
We intend to hit 55% leverage or thereabouts net gearing by around 2029. We do need some time to delever, and you will be able to track our progress as we move along. As I have always said, I think any business needs a decent amount of leverage in it in order to enhance returns, especially for a developer. Much of our leverage comprises of development loans. This is very important for us because developments are bread and butter. I think if we are using pure cash and insufficient leverage, I do not think it is good for our business. When I first took over as CEO in 2018, our net gearing based on fair value of our investment properties was less than 10%. Actually, I think it was 7% exactly. I do not think that was an efficient use of our balance sheet.
Now I think if we can get it down to 55%. When we get it down to 55%, I think this will be a very healthy level for us. Thirdly, we have U, which is unlock. This is where we are projecting that we have greater than SGD 1 billion of divestment gains that will contribute to our PATMI, profit after tax and minority interests. Lastly, we have scale. Currently, I will go into this in more detail later, but we have SGD 5 billion of AUM, and we intend to double this and scale it up to SGD 10 billion by being much more focused on our fund management efforts.
In terms of the four sectors I mentioned earlier that we will focus on, residential, commercial, hospitality, living, this just gives you a snapshot of where we are currently and what are the priority markets that we intend to focus on. For the SGD 5 billion investments that we have mentioned of new investments, these are the four sectors that we are focusing on and the priority markets below as well. I think it is important to show you how we are focusing as well. There is one market where we are planning to do an orderly exit of almost all of our presence there except for hospitality, and that is Australia. I think it is not a market that has really worked out too well for us.
We went in in 2015, and in total, I think we have about seven development projects there and two more projects that we did not develop, but we have exited one and we want to exit another. So it is not a market that has worked out too well for us, and we have been unable to build scale.
So it is a market where I think for the residential and the commercial and the living, we intend to exit. Obviously, it needs to be in a managed timeframe so that, again, we do not leave money on the table. We ensure that we properly monetize the assets and do justice to them. That is one key thing on the cards. In terms of residential, I think the focus will be on Singapore and China, and I will go into this in more detail. Yes, I know when you put China out there, it has everyone spooked.
Again, we have to look at our business in the longer term. I have always believed in the value of being a well-diversified company. It is not good just to be exposed and fully concentrated in one market, no matter how strong you are in that market. Then there is commercial, where Singapore will be a key focus for us in terms of expanding our commercial presence. Hospitality, we will be streamlining the hospitality portfolio, and in future, if we do make investments in this sector, it will primarily be in key gateway cities. Lastly, the living sector. We have a really great portfolio in Japan. For instance, we have 40 operational PRS assets, multi-family assets in Japan doing really well for us. So there may be further expansion on that front. Of course, in Singapore, we have some new assets coming up.
For instance, we have the SA2 component, which is a standalone 35-story tower that is part of Zyon Grand. Newport will also have a new service department component. All these will form part of our living sector. When it comes to capital deployment, this is the SGB 5 billion I talked about. We are doing our best to give you more so-called transparency and detail. We have broken it out by geography, and you roughly know, I think, the sectors that we are looking at, and this is basically 60% in Singapore. There is another 30% that is shared between China and Japan, and there is a 10% for others. I want to emphasize as well that the SGD 5 billion of new investments is a capital allocation framework. It is not a rigid quota. Do we have to spend the SGD 5 billion? No. Could it change? Yeah.
For instance, a lot of these new investments will be opportunity-led, be it Singapore or overseas. In Singapore, no one can predict with a crystal ball how many land tenders you are going to win in a year. On some years, CDL wins one. On some years, we may win three or four. It really depends. Likewise overseas. We must find the right opportunity, and it must meet our risk-adjusted returns, targets, and other criteria before we will invest, be it in China or in Japan. If we do not find the right opportunity, then maybe Singapore might actually become a bigger part of this SGD 5 billion. Again, it is a framework to guide us, and it is our roadmap going forward. We know where we are willing to put capital to and to what sort of extents.
We know where we do not want to put capital to, but it does not mean that this is rigid and we have to spend this SGD 5 billion, right? Also, as I said, it will depend on how we do with the rest of our efforts. If our capital recycling goes a lot faster and stronger than we expect, then perhaps this number might even grow, bigger than that. In essence, this SGD 5 billion of capital is capital that competes against other priorities for CDL, such as de-leveraging, such as enhanced return to shareholders. So really, it is things that have to be measured accordingly. I come to the part that obviously a lot of people are focused on, which is the SGD 6 billion of divestments. I think many of you who know us know that we are pretty conservative when we put down our projections.
This is something that we intend to exceed, the SGD 6 billion of divestments over the next three years. Some of you may say, hey, in the last slide, when you talk about new investments, you broke it out by geography. How come this slide then you are breaking it out by sector or let us say asset class? Simple. I think again, at the end of the day, we have to do what is right for CDL, and I do not want to cause or trigger unnecessary market speculation. If I were to break this out by geography and let us say, I pluck a number from the air, I have 40% divestment coming out of Singapore, everybody will start speculating, oh, what are they selling in Singapore? Is it this building? Is it that? Is it this office? So I do not want that.
That's not good for CDL, and does not allow us to retain the flexibility as well in terms of our capital recycling. I thought it's better to break it out by asset class, basically by sector. But still, I think this should give you a lot more clarity and transparency than what any of you have previously gotten from CDL. At least now you know. In terms of our divestments, 30% will come from hotels, 40% will come from commercial. We have 20% from legacy residential. So legacy residential and others. Obviously, no prizes for guessing this will include that SGD 800 million portfolio we had talked about before, that U.K. so-called legacy portfolio, but it will also include other stuff.
Even in Singapore, we have some legacy residential that we need to get going when it comes to recycling the capital that's been trapped there for quite a while. So an example is, I probably shouldn't be quoting specific projects, but for instance, Cliveden. In Cliveden, as of the time when we created this slide, we still had 61 units there. We since sold two. So we have 59. But this is an example of stuff that kind of lingers along until you make a firm decision that we want to monetize it. So there's a lot of legacy residential that we can put to work as well. And then we have a small amount in living that we need to clear. So an example is like I mentioned earlier, we have a living project in Australia that we would like to sell. So these are the things we do.
In terms of the potential pathways that we could achieve this, one is an outright divestment, and the second part, which ties in with our fund management ambitions, is obviously to seed suitable assets into managed vehicles. Now, this is a one-off, okay? So please don't expect or ask us to repeat this disclosure again in future. This is something that I think we've certainly never done it before, and I'm not sure any other developer has ever done this before, where we've decided to disclose, at least for the next three years, what are the cash inflows we're expecting from our property development sales. These are existing projects. We're not forecasting ahead and thinking that we're going to buy some land somewhere we don't already own. So in terms of the projected cash inflows, as mentioned there, these comprise of three things.
One is future cash collections from contracted sales for our Singapore projects. As you know, we collect payment in installments based on percentage of completion, POC. So as it constructs, we collect more payments. So these are cash that we haven't collected from buyers, but sales that we've inked already. And this is from 2027 till 2029. We also have five unlaunched projects in Singapore, so naturally we've had to make some assumptions. And I believe these were conservative assumptions about sales velocity, about ASPs, average selling prices, about the construction duration and period. So we've had to make some of these assumptions. And it also includes our two projects in China, with a particular emphasis on Xintiandi, which I'll talk about more on the ensuing slides.
I think the reason we wanted to just show this slide as well is because the number just coincidentally worked out to be greater than SGD 6 billion, is just to emphasize that I think a lot of times people have asked us, why aren't your residential sales, strata title sales, let's say in Singapore and all that, why aren't they included in your divestment? I always tell them it's because it's not the right way to look at it. When you buy a piece of land, I've still got to spend a lot of construction cost and everything else to build it, right?
If I were to include it in divestments, that would, A, make our divestment figure balloon into a massive number, and B, it would not be apples to apples with investments, which is purely capital you put out to, let's say, buy a piece of land or something. Our divestment figure of SGD 6 billion does not include our so-called residential strata title sales other than when it's legacy, as I mentioned earlier. But for all of our existing ongoing projects, it does not. We thought it would be helpful to share with you what is our expected cash flow from these property development sales over that three-year period. Okay. Now digging deeper into what I talked about earlier from an investment standpoint in Singapore, obviously that's going to be our core market.
We've already mentioned 60% of our new investment of the SGD 5 billion will be focused on Singapore. Okay. That's primarily going to be government land sales, collective sales, off-market transactions. We've done all of the above. We could also potentially redevelop existing assets that may yield a residential component. Example is this very project, Union Square, as well as Newport, which was formerly pure office. We currently have a launch pipeline of 2,200 units, so I think we are very comfortable, especially after our land replenishment for Tanjong Rhu as well as for Peck Hay Road. I think we're very, very comfortable where we stand in terms of our current pipeline. But we continue to I think this is a moving target, and obviously we have Lucerne Grand, our project in Lakeside Drive in Jurong West. We have that launching this Saturday, so let's see how that goes.
If that substantially depletes our launch pipeline, then time for us to replenish. For China, again, this is going to be very much opportunity led despite all the noise about China. Yes, China's real estate market is not in good shape. It's under tremendous pressure. But there are still opportunities to be had, and the proof will be in the pudding. Currently, a lot of our hopes and expectations ride on our Xintiandi project in Shanghai. This is a 51/49 JV. We have the 51% and we're the lead development partner on it. This is a project that went through great lengths, great extent of effort in order to secure this site. Last remaining prime piece of land, last remaining prime parcel in the Xintiandi so-called boundary. We are very excited about this project.
As mentioned earlier, there are high expectations on it, so let's see how it goes. We are targeting to launch. There are in total 145 residential units. The number may not sound like a lot, but the quantums are not going to be small. Of that, we have 70 high-rise condo units in a single tower, and then we have 75 villas. Villas are basically landed properties, bungalows. As mentioned, the quantums are not small. For high rise, all units are above 400 sq m. So these are very luxury units. For the landed properties, they range from 250 sq m- 700 sq m. So these are going to be real trophy assets and iconic assets, and I am looking forward to the launch in December.
If all goes well, I do not like to jump ahead and make predictions, but hopefully we are launching the high rise in December and then the landed next year. The landed will be in phases. If all goes well, I hope to have a full sellout of our high rise when we launch it. Hopefully on day one or launch weekend. Let's see how it goes. Again, the China real estate market may be in very bad shape, but there are certain spots where the market is still doing very well and demand is still very strong. For key districts within Shanghai, and ours is in Huangpu District, which is arguably one of the most desirable districts, demand is still very strong for luxury residential. So let's see how that goes.
Just to throw out another figure from our Xintiandi project, if eventually when we are done selling all the residential, and this is just the residential component, obviously we have hotel and retail on it as well, but just from the residential component, I think we are expecting no less than CNY 15 billion of sales value. Okay? Let's see how that goes. The high rise will be the first test on the cards coming up in December. Okay. In terms of accelerating our exit, we have the legacy, the U.K. legacy platform that we described comprising of development sites and also completed residential projects. We had previously disclosed that is about roughly SGD 800 million. We have already disposed some from it previously, so this is what is left.
As mentioned in Australia, we currently are still left with two development sites, and we intend to proceed ahead to clear out the rest of our development portfolio there, because as I said, I do not think we can build sufficient scale in this market. In terms of commercial, as mentioned earlier, I think this is a key area of focus for us, especially in Singapore, where we intend to continue to unlock value through active asset management and also redevelopment. As you all know, we have other potential redevelopment opportunities that we can explore. We did through a collective sale buyback Delfi, which is next to Orchard Hotel and Claymore Connect. So there is a potential there to look at how that can all sync up under a Strategic Development Incentive Scheme.
There is City House, our venerable heritage iconic office building in the CBD, which could qualify under the CBD Incentive Scheme. There are various things that we are looking at. But as I mentioned in earlier briefings, don't forget, every time you embark on a major redevelopment of an existing asset, firstly, you lose all the rental income from that building, and secondly, there's a lot of capital put forward towards building out. Or you take on massive amounts of development loans to build out the project. You don't want too many happening at the same time, otherwise you'll just put lots of strain on us. My [inaudible] will go up further and everybody will complain. I think it's about pacing it out. Currently, as I said, we have two major redevelopments going on, Union Square and Newport, and I think that's good.
Okay. That's something that we're very comfortable with. Below you can see what's our existing NLA, net lettable area, as well as the development pipeline that's coming up. In the U.K., you will know that we previously tried to list our three office properties. Well, back then we only had two office properties, 125 Old Broad Street and Aldgate House, and we were teaming up with a third party to list a REIT in Singapore that was going to be comprised purely of U.K. office and commercial assets. But that REIT didn't materialize. Subsequently, we acquired St Katharine Docks, and it's a fantastic property, freehold as well. So we have three freehold office assets, commercial assets, sorry, because some of them include retail components. Three freehold commercial assets in the U.K. Okay. The value of that would be about GBP 1 billion .
We've been taking a close look at how we should proceed ahead with this, and I think at the end of the day, we have to wait till market conditions are appropriate. So for now, it's all about monitoring these assets, ensuring that we continue to optimize their performance. But we will let you know when we decide to do a big initiative involving them. As mentioned earlier, I think we intend to exit from the commercial side of Australia as well. Currently, we own this 50% direct stake in 330 Collins Street. We are co-invested alongside a fund that we also have a stake in. We are also an LP in that fund. So this one, I think we need to ensure that it's an orderly exit so that, again, we obtain the right exit price for the building.
This is still a work in progress. Moving on to hospitality. This is our Global portfolio, a total of 165 hotels, which includes two hotels that are coming online in the next 12 months. If you want more clarity, those two hotels are basically the Sunnyvale Hotel, that is a redevelopment of an old property that's in the U.S., and the Moxy Hotel, which is part of CanningHill Piers, our project there. So, 165 hotels, close to 48,000 rooms. If you include CDL Hospitality Trusts as well as M&C New Zealand, we have 88 owned hotels. Then we have 67 franchise hotels that primarily deals with the Middle East and Africa region where we have done a master franchising deal with a local party. So they are so-called franchising our brand and expanding it. So that's the 67 hotels. Then there are MHR-managed hotels.
These are hotels that we do not own but we manage for our third parties, and branded under our stable of brands, Millennium, all that. These are 10 hotels. As shown on the right, we have put there a tailored approach for each asset to maximize asset value. It is because as we look through our entire portfolio, and trust me, we went through every single hotel, there is no one size fits all. Every asset requires a different action plan when it comes to monetizing value, be it optimizing it, be it improving the performance, repositioning it, or divesting it. If I go into the next slide, just focusing on the assets that we own, and obviously, keeping in mind that CDLHT as well as MCHNZ are both listed entities on their own with their boards and management.
Let us focus on the ones that CDL owns directly. These are the 54 hotels. When I say directly, it includes M&C, which is also our 100% wholly owned subsidiary. Focusing on the 54 hotels. These hotels as of 31st December 2025, these hotels have a value of SGD 8.6 billion. Looking at it, we have decided that, okay, let us take some initial steps towards really trying to unlock value here. We have set aside about SGD 5 billion of assets that are actually doing very well. They could be doing better, but we are heavily focused on the operational side in order to ensure that these assets continue to perform better. Then we have the enhanced part, which is about 20% of the portfolio. These assets, currently they could be assets that are not in good shape, that are very worn down.
These assets need to have potentially more time, more capital spent on them. There is identifiable upside. After we are done with enhancing, you can see that we put two arrows there. Meaning that these assets could either go into the core bucket or they could go into the divest bucket. Then you have the last bucket, which is divest. That one is our confirmed we want to divest SGD 1.8 billion of currently mature non-core underperforming hospitality assets, which is the same description we use on the rest of our divestments, the other mature non-core underperforming. Again, some people may complain and say, hey, why not more? But as I said, it is a step at a time. This is a portfolio much of which we have held for several decades. Again, we do not want to leave money on the table.
We want to ensure that we properly unlock value and we optimize value for each and every asset. It really is a tailored approach. As mentioned earlier, the alpha lies in enhance as well. Because once we enhance it could go either way. Then comes the living sector. This living sector is actually a sector that we have built up a lot of expertise in. Yes, when we initially ventured into the living sector, it was meant also to form our seed assets for our fund management ambitions. It still currently is the case. It is just that some of them we may have to nurture for a bit longer. We may have to stabilize over a period of time before we eventually can turn it into a fund managed vehicle.
But you can see there, basically the two sectors where we have experienced strong results and we want to continue growing our presence is Singapore and Japan. In the U.K., yes, you can see there we have 1,505 PRS units as well as 2,368 student accommodation beds, or PBSA as we call it. That one, especially when interest rates were high, those came under pressure. So we're continuing to review the portfolio. In the meantime, we are obviously placing a lot of emphasis on the operational part of it. Because these assets, we really got to drive them to perform better. So, this is something where we need to enhance operations. And finally, as mentioned earlier in Australia, we intend to exit. Now we get onto the transformation part, which is our fund management. Yes, we've been asked this before back in 2018.
I said, okay, we'll set a target then. In five years, we'll achieve $5 billion d idn't happen. And I've already addressed this at the recent half-year results briefing where I took responsibility. I said that I think one of the problems is that we want to go into fund management, but yet we're kind of one foot in, one foot out. You know what? It's time for us to really be focused. If this is going to become a core part of our business and a key pillar, especially in terms of how we drive and accelerate our capital recycling, we need to make this a bigger part. Currently, what is our SGD 5 billion of AUM? It comprises of CDL Hospitality Trusts and IREIT Global. Those are the AUMs there.
We also have invested in some funds where we're part of the GP or fund manager. So we've taken in a little bit there. In terms of rules, I think this is how we will account for our AUM in the future. We're very strict with ourselves. So I think if we are 50% or more of the fund manager or we derive 50% or more of the asset management fees, we will count in the entire amount into our AUM. So, in the place of these two REITs, we are 100% of the manager for CDLHT, and we are 50% of the manager for IREIT Global. We take in the whole AUM. And if you are less than 50% of the fund management company or take less than 50% of the fees, we've just taken a proportionate amount of the AUM or the gross asset value.
That's how we choose to look at it, and I think we need to further accelerate, especially on the private equity side. I think we need more private funds to augment, and we have some coming up in the pipeline. I didn't mention this earlier, but some of you may say, hey, your divestment efforts are going so slowly this year. Well, it's been a difficult year. Again, at the half-year results briefing I mentioned. Look at what's happened throughout this year. It's been such a turbulent year. And we've had the Middle East crisis and that war is still going on today with retorts back and forth. So it's really not been an easy environment for us to get our divestments done. But very much like actually 2025, where you saw that in the back half we got very, very active.
I hope to see the same appear this year. We obviously have a lot of things that are in advanced stages of negotiation. With any luck, hopefully we will be able to make some pleasant announcements that hopefully will surprise some of you in the remaining months of this year, especially under this fund management part. I look forward to unveiling more as we progress along. We are going to have a dedicated platform for this fund management entity. Actually, we already have a wholly owned subsidiary. It is called CDL Real Estate Asset Managers. I did not come up with the name, so for short it stands for CREAM. We might actually use that entity because CREAM actually already has a capital market services license, a CMS license. It really will be a dedicated platform.
We will hire in a CEO and management team that will be accountable for the AUM growth, accountable for the P&L of that unit, accountable for the fee income and the investor outcomes. This is going to be very dedicated, and it will be governed by an investment committee at some stage. Will I be on the investment committee? Maybe, maybe not. We will unveil more as we progress throughout this year. It is something we want to focus heavily on. We believe that our inherent abilities as a developer, as an owner-operator, put us in a very advantageous position and gives us a proprietary pipeline by which we can approach this. The right side is basically the target. We intend to double our AUM from the existing SGD 5 billion to SGD 10 billion within the next three years.
If all goes well, hopefully we get there sooner than 2029. Again, let us see how things go. As I mentioned before in previous briefings, I think we will never be fully asset light. That is not the DNA of CDL. We are an asset owner. We currently have SGD 36 billion of assets on our balance sheet. We will never be asset light. We do need to make part of our company more asset light and more nimble. This will also help to drive growth in our return on equity, our ROE. Therefore, fund management as well as strong capital recycling are the key ways for us to achieve this. By doing fund management well, it would ensure greater capital efficiency. It will grow our recurring fee-related earnings, as well as it will give us a higher ROE as mentioned earlier.
Not going to go into too much detail on this slide, but as what I mentioned earlier, we have over 60 years of experience. CDL has been around a long time. We built up deep knowledge and expertise in all of these domains, right? Site acquisitions, property development from end to end, right? In terms of property sales and in terms of leasing, in terms of asset management, hospitality operations, we have certainly honed our skills over the last few decades, and I would say we are very competent at what we do. We have done many partnerships in JVs in the past. I think this lends itself very well in order to give a boost to our fund management ambitions. Again, this is more of a roadmap just showing you how it is going to be done, right?
We can originate deals either by seeding our own assets from our portfolio into managed vehicles or new acquisitions. The extra AUM that is going to come doesn't necessarily all come from CDL's own portfolio. It may be new acquisitions that we manage on behalf of others. If we do go into a fund, so far I've been very disciplined when we've been negotiating the current deals. I do not want us to be a substantial part of the LP stack. My personal preference is to ensure that we are 20% or less in terms of the LP stack for any PE fund that we set up and manage, right? Because this then is a true divestment, right? If you're going to be 80% of the LP stack of the fund, then you're just selling to yourself actually.
We can originate stuff, then we will syndicate it out to third-party capital. We will obviously earn fees, and then we release capital that we can then redeploy into higher-yielding investments, higher-yielding opportunities, or pay dividends, or pay down debt. Many uses for capital to be redeployed. This is something we just thought we would touch on only because there were a lot of questions on this as well, especially when we announced it at our AGM earlier this year. This is basically the CDL Performance Share Plan. It's a share-based incentive framework that aligns senior management remuneration with long-term value creation for shareholders. If you look at the so-called performance conditions, right, I would say they're very much aligned with our new GET+ strategy as well as what we need to do, right, in order to maximize shareholder value.
This is total shareholder return, earnings per share, ROACE, return on average capital employed, as well as greenhouse gas emissions reductions, right? Which is, I think, our corporate social responsibility that we have to do. I feel that our interests are heavily aligned, especially for management. On the last slide, just to recap, although I've spoken at length about everything earlier, this is what I think we want to focus on, the three, four, five, six. Three years, four sectors, SGD 5 billion of investments, and SGD 6 billion of divestments. Again, we want to put achievable numbers on there. Hopefully, especially with regards to the divestment, we can surprise on the upside. The plus part of the GET+ is the payout, leverage, unlock, and scale. Thank you very much. Sorry, I actually ran on for much longer than I should have.
Don't worry, there's no so-called cutoff time for the Q&A, so please ask all the questions that you have. Thank you. Oh, do I go? Okay. Thank you.
All right. Thank you so much, Sherman, for that very comprehensive. Wow. Okay. Commercial break while I see all your hands. Just give me a commercial break while we set the stage up for the Q&A. While we prepare the stage, and as we bring up the chairs, I mentioned that we are holding the corporate briefing here for the very first time at the Union Square in any of our sales gallery, actually. Because we want you guys to have a look at the mixed-use development that is coming up. Some of you remember many years ago, you were here at this actual show flat where we were showing you CanningHill Piers. At that time, it was only a vision, yeah? If you look at it on the right-hand side, you actually see CanningHill Piers in its full glory.
That is going to come up, and it should be completing some time end of this year. Can you visualize that?
On your left, sorry. On my right. Yeah. On your left and my right. But can you imagine what you see there eventually will come into fruition. That is the very exciting thing, and I think this is why it is very fitting that we are discussing CDL's next chapter of value creation in the heart of an area that we have been actively shaping and rejuvenating the cityscape, and in particular, the Singapore River. Yeah. Maybe I think I will ask the management team to take their seats. I see all the hands, very excited. Give me an opportunity to. Okay. I see all the hands. Yeah.
Belinda, hold on. Randy has requested to take one photo before we start.
Of course. Yes.
Okay.
Yes, please.
Okay, great. Thank you, Randy.
Thank you. Allow me to introduce the management team. We are all laughing because I did not know the people on webcast cannot really tell, but I have a lot of hands here already. But let me just quickly introduce the management panel for those who are here. In the center we have Sherman Kwek, our Group CEO. On the right, Kwek Eik Sheng, our Group COO. Next to me is Chia Ngiang Hong, our Group General Manager. Yiong Yim Ming, on my furthest left, is our Group CFO. And well, not new, but somebody that you may have seen, but we have asked him to join on the panel, is our CIO, Gerald Yong. Yes, I will start very shortly with the Q&A, so please stand by.
My colleagues are around the room, and also for those who are joining us on webcast, you too can participate in this Q&A segment by tapping on the question tab on your screen. Let us go. First then, I shall go in the third row. Let us start with Mervin.
Hi. Mervin from JPMorgan. Congrats on the strategic review. I think it was quite brave, ambitious to set a three-year timeframe instead of taking the easy route out with five to seven years, if you want to call it. And appreciate the details on the hotel business. A lot of investors thought that was a sacred cow that you would never touch. So congrats on that. Maybe can we start with the hotel segment? Obviously 20% looking to enhance, then 20% to divest, but can you give us some details in terms of the expected RevPAR increase, GOP margin improvement that you expect over that time period? Second question I have in terms of assuming you achieve all this in three years' time, bottom line, what do you expect in terms of uplift in profitability for the whole group? Potential dividend increase over the medium term from here?
I think everybody wants to see what the bottom line if you are successful with all these initiatives. Thanks.
Yeah. Morning. Thanks, Mervin, for your question. I will take the hotel piece. I think how we are looking at it is not so much on the RevPAR increase because we are wearing both hats. We are both the operator through our own brand, Millennium Hotels and Resorts, but we are also looking at it more specifically as the hotel owner. I think what we have done here is we have broken that down into different buckets, and we have stated here that there is a core segment that we intend to keep. The other two buckets, of course, to optimize, which may take a bit longer than the three years, depending on whether it is a redevelopment, further enhancement works. Of course, the last bucket is the one that we are all focused on, which is the next three years, which hotels will be in the divestment list.
How we are looking at it is more in terms of, we also shared our KPIs on this ROACE, which is returns on the capital employed. By selling these hotels, we do expect that that return will improve because some of these assets are, I would say it is a mix between mature assets that are already doing well and also some which are not pulling their weight. I think we have identified these, and it will be a process to sell these. Unfortunately, I cannot name which hotels they are going to be, but we will focus on these hotels over the next three years.
Okay, maybe I move down.
Maybe I just complete.
Oh, sorry. Okay.
I think Mervin also asked what kind of PATMI uplift we are expecting from this. The hotel divestment pool is two parts. One, of course, is more the mature assets as well as the, so to speak, the not-so-performing assets. I would say net-net, they kind of offset each other in terms of NOI contributions.
The overall group profitability?
I think overall group
Based off past time, sure.
I think overall wise, if you look at SGD 1.8 billion, clearly I think we are streamlining. With that, of course, I think we do expect decrease in central costs and, of course, decrease in financing costs. So that kind of offsets us, and we are not really looking so much into investment into new hotels. So in terms of PATMI uplift, I would record it will improve that segment maybe by about 10%.
How about the overall? Do you see the profit?
Overall to the group, I would think in terms of quantum wise, it should not be more than SGD 10 million-SGD 20 million.
Okay, maybe Xuan. Shall I take Xuan since she is next?
Hi. This is Xuan from Goldman. I have two questions on execution. First is on timeline. I guess some of these divestments are not new, so I assume that the team has been working on it for some time. Given that the strategic review is out, can we actually expect execution on the SGD 6 billion to be more front-end loaded? If not, what are the reasons? Second is on U.K. and Australia divestments. The market is quite challenging, so if this don't come into fruition by year three, what is your plan B? Thank you.
Xuan, thanks for that question. Look, this list of SGD 6 billion, something we've come up with over the past few months, and obviously there's been a lot of discussion and assets have moved around. I would say that
Some of the deals may be front-loaded, but essentially, we took a three-year timeframe to it. We looked at what we could reasonably divest within three years. I wouldn't necessarily say that everything will be front-loaded. There may be some big wins or quick wins early on, but we do need three years to divest SGD 6 billion. Unless you want me to just go on a fire sale and sell everything, which obviously nobody wants. It's not in the best interest for CDL shareholders. We will need time to get these divestments done. I do not believe, looking at the list that we have, that there is any divestment we can't do within the next three years, so there won't be any leftover that we can't do. Again, without revealing too much, because obviously management still needs to have some flexibility here.
Our actual divestment list is bigger than SGD 6 billion. Sometimes there may be a case where one asset is taken out and another is put in. I do not see us not meeting this SGD 6 billion target. Some of these properties may not be easy to sell in the current environment, but you never know. Sometimes, even in a difficult market, an investor may have a different intention for the asset, or they may want to redevelop it into another asset class which is faring better. You will be surprised. As you probably know already, even for our hotels, we have sold hotels away. I think at the briefing, I last talked about how we sold away our Millennium Hotel in Millennium Harvest House in Boulder, Colorado. That asset, almost long forgotten about, has been losing money, but someone wanted to convert it into student accommodation.
Yeah, we made a very substantial gain selling that asset. I think we sold it for SGD 85 million and made SGD 80 million. It goes on our books of five. As an example of, yes, conditions may not be great in certain markets, but sales can take place as well. Now, I obviously want to maximize the value we can obtain for each divestment. I will not sell at fire sale prices or prices that do not make any sense at all. But are we willing to take losses for certain parts of the portfolio, like the U.K. legacy properties, all that? Possibly. I think we have to be realistic. When we sold Ransome's Wharf, the previous site that we announced as part of the U.K. legacy platform, we took a small loss on that. I think it was about GBP 10 million or thereabouts.
Sometimes you know what, you got to take the good with the bad, and I think we are practical, but yet at the same time, we will not leave money on the table just so I can tell all of you, hey, I met my target. That, I think, would not be fair to CDL.
Okay, maybe Vijay. I take that first, and then I will come back to the media. Let us just go with Vijay first.
Hi. Morning. Vijay from RHB. I have three questions. Maybe I will take it one by one. First, in terms of the SGD 6 billion divestment target, is that a baseline or is it a ceiling based on your portfolio, which you have assessed at this point of time? How does this target compare with your FUM growth of SGD 10 billion? Suppose you divested an asset to fund management, would you count it as you have met the target of SGD 6 billion? Would you be growing your portfolio via REITs or private funds in the future with this?
Okay, so, Vijay, your. Sorry, maybe I should take a question at a time. Your first question was the SGD 6 billion. Actually, I had answered that to Tan when she asked earlier. The SGD 6 billion is something we see as very achievable. In fact, the overall divestment list that we have is bigger than that. So that, for me, is a floor. It is not a ceiling. Okay, so it is a target I have to hit. We have to hit. Okay? Hopefully far exceed if we can. Okay? We will hit it. Your second question is, okay, if we were to cede some assets in the fund management. As mentioned earlier in my presentation, not all of the fund management's so-called doubling in AUM will come from our own assets. Okay?
Some of them may be new acquisitions and without revealing too much, wait and see, because we have already been approached by certain parties that like what we have, our expertise, all that, and willing to do fund structures with us on new acquisitions, stuff that neither party already owns. We may be looking at that. So I would say that, yes, if we were to cede an asset into a fund vehicle, and as I mentioned earlier, we will not be holding too much equity in any fund that we invest in, preferably not more than 20%. So I will see that as a real divestment. We are divesting that, just that into a vehicle that preferably we will be managing. So that will count. But that will be a portion of the SGD 6 billion only. It will not be all of it.
Maybe are you planning-
What was your third question? Sorry.
How are you planning to grow your fund management? Is it like a REIT or a private fund, how you are looking at, and what does it mean for your existing REITs?
No, it just means that we're going to really form a proper fund management entity, although we do have a fund vehicle already, but we really want to hire, I think, a best-in-class team. A CEO and his team who's going to really drive our fund management ambitions. We're going to ensure that we closely monitor and add further value to the REITs that we manage, as well as set up potential private funds and when the capital market conditions are ripe, potential new REITs as well.
Just quickly, my second and third question in terms of commercial management and commercial growth in Singapore, the investments, would it be organic like Union Square Residences or you're looking at M&A? Lastly, maybe what's the board views on the overall strategic review? Any comments from the boards as it is?
Yeah. In terms of commercial expansion in Singapore, it could be both. It could be redevelopment of an existing asset. It could be acquisition of a new property. We are always on the lookout for creative deals that fit in with our strategy. In terms of the board views, this strategic review, the outcome of it, and everything you see here today, was approved by our board unanimously. Yes, this is something that management spent a lot of time putting this together, and as mentioned earlier, we are really grateful to our advisors, Teneo as well. Many workshops, and the process has lasted basically for much of this year. But, yeah, this is something that is board approved, so thank you.
Okay. I'm mindful. Let me just take one question from Pravika, and maybe if you could pose your question, please.
Hi. Thank you. I have a couple questions for you today from Bloomberg. The first is you've broken down the SGD 6 billion by asset class. How much of it will be sold to outside buyers, and how much seeded into your own vehicles to grow AUM? Also curious to know, CDL has fallen short of divestment targets before. What are the consequences if you miss the SGD 6 billion? A question for the Chairman. Does the Chairman want to lay out a succession plan, and can he commit to letting Sherman succeed him today?
Okay, so the first question was about how much of that SGD 6 billion will go into managed vehicles. Again, in my answer to Xuan and Vijay, we don't really disclose to that granularity. I think, again, we need to leave some flexibility for the team, right? We will shift and move according to market conditions. But part of that SGD 6 billion will definitely make it into managed vehicles, okay? But as I mentioned, not all. How much of it? Let's wait and see, okay? Anyway, basically what I presented today is like a report card, right, for management. You have the next three years to monitor our performance and hold us accountable for what we have said today. Again, we'll be releasing periodic updates anyway. Every half year, we do in-depth updates to the media and analysts.
You will be able to see, are we moving closer towards our targets? Are we executing the right direction? I think that is where we will be measurable. The second part of your question, I am so sorry-
If you miss your target-
Yeah.
What happens?
For divestment, again, I think the problem with that is when you do annual divestment targets, right? Yes, last year, we were able to hit SGD 2 billion, and everyone rejoiced, but it is not healthy, I think, to have annual divestment targets. Then you will be hard pressed to hit it. Again, I had some sales in hand, but I did not want to do them because I would be leaving money on the table. Those assets I felt were worth a lot more than the prices that we were getting. That is why we give a three-year timeframe, and as mentioned earlier to Xuan and Vijay, this is a floor, not a ceiling. This is the minimum that we are going to do over the next three years and fully confident that as a team we are going to make it happen.
Really apologize since our Chairman's not here, I cannot answer on his behalf about succession planning, but thank you for that question.
Actually, if I can just add on, the ex co is remunerated both on STI as well as LTI. The LTI slide was flashed earlier on with the four indicators for divestments is also part of our STI target. Yes, we will be penalized for not missing the divestments if that's the question.
Okay, let me go to the next row. Okay, I see. Ladies first. Shall we go with Rachel?
Hi. Thanks, Belinda. I'm Rachel from Macquarie. Thank you for giving such a detailed presentation. Just want to clarify a few points. In terms of your dividend payout, how should I think about it? You showed that you have SGD 1 billion of gains from potentially contribution to your PATMI, and your dividend payout is more than 35%. So should I just easily assume your SGD 1 billion then 35% will be paid out for dividend payout, or would you then prioritize your leverage first, before you pay out your dividends? Just a bit of clarity on that. My second question is really on the living sector. I remember you said that you wanted to divest, seed some money of your living sector into the fund, but when I look at your SGD 6 billion of divestments target, the living sector is only 5%.
Just wondering, was that seeding included in that 5%? It seems a little bit small. Yeah.
I will do the dividend one first. For dividend payout, I think we have put 35%. That is minimal. I know you guys are computing a SGD 1 billion divestment gains and imputing that to SGD 0.30. I will just give a few parameters to that. Number one, the SGD 1 billion I think is conservative if you ask me. Number two, if you look at divestment, I think we have already committed 35%. So in terms of divestment proceeds, which I am sure will come in as one of the questions later, of course, I think when we have divestment proceeds, our first priority will be to return debt, right?
Of course, to return debt, especially those in natural currency. Say I sell my U.K., of course, I will retire my U.K. debt. After that, basically because we do central treasury, everything goes to retiring net debt to start with.
No, we do not really need the divestment proceeds to pay dividends. Effectively, we always look at least a SGD 1 billion EBITDA. I think the operating proceeds from that would pay for rejuvenation of our projects, for financing costs, as well as for dividends. The proceeds is kind of delinked. I think really what drives us is the gains, where we want to really dedicate that we will pay a minimal of 35% of PATMI.
Hi, Rachel. On your question for living sector, good catch. We have allocated 5% of the SGD 6 billion. That works about SGD 300 million only, right? Alluded to your question. Yes, we have a portfolio of SGD 3.7 billion in green pipeline AUM, especially for some of the hot asset classes in Japan. I think we mentioned before there are a lot of interested parties. We may have done it earlier or during the three years. Just hear from us in due course.
Yeah. Rachel, in answer to your question, it's not included in that living sector part of it.
Thank you. Maybe just one follow-up in terms of the dividend payout, because you put more than 35%, right? Under what circumstances would you think about paying out more than that 35%? Any parameters?
Well, that will depend on various factors, including obviously our financial performance for that fiscal year. You may remember that last year for FY 2025, we paid out 40%, right, of PATMI. I think we had a strong tally of SGD 2 billion of divestments. Our operations were doing well. I think it really depends, and ultimately this is subjected to the approval of our board. So, it's something that we review annually, but we certainly want to reward our shareholders for coming along with us on this ride as we grow, as we enhance, as we transform, and with all the plus outcomes. So, we certainly will try to reward them as much as possible.
Thank you so much. I look forward to more good news. Thanks.
Thank you, Rachel.
Okay, Derek, then later I will come back to the rest. Derek, then Yew Kiang, then Thomas, then Brendan. Okay? All right. Derek, over to you.
Thank you, Belinda. Good morning, Sherman team. I just had a few questions. First one is on your hotels. I think you mentioned that about SGD 5 billion worth of hotels is well-performing. I am just wondering whether, could you give us a bit more color and metric around what you mean by well-performing, maybe ROACE or yields that you think you are fairly happy about. Then at SGD 1.8 billion that you would like to enhance, is it going to still be hotels or is it going to be a different type of asset class? This is my first question. Second question is on investment. You mentioned about SGD 5 billion that you would like to deploy, and a large part of that is Singapore. Can I assume that to be above what you typically do on a BAU basis?
For example, the group is participating in a lot of land tenders. This SGD 5 billion, is it on top of what you usually do? Could you give us a sense of where or what asset class is most interesting? Last and not least, I am just wondering whether, as you achieve all your targets, where should we be pinning ROE or your return on assets in the medium term? That would be very helpful if it gives us some guidance. Yeah. Thank you.
Yeah. Thanks, Derek. I will take the hotel question. You are right. Under the core portfolio, we have identified a couple of assets which are, I would say they are very hard to replace. They are assets which have generated very good income for us. If we were to sell them, I think naturally we also divest for very high profits. I think we are thinking of them in the long term, that they will continue to appreciate, and these are likely in very key locations that have a further capital appreciation ahead of them as well. I think that is how we are looking at it, and of course, they generate a key part of our recurring income as well. For the enhancement bit, I would say it is also a mix. We have some assets which we identified after we done the works, we retain as hotels.
In our slide, we have shown that it could go either way. It could either be then be divested or it could go back into our core portfolio. There is also a mix of assets which are earmarked for redevelopment. In those, it is still open-ended as to what they may become. Some of them may still have a hotel component, but with other asset classes inside as well.
Okay, on your second question, which was, sorry, what was the one? New investments. Yeah. For new investments, of the SGD 5 billion we mentioned, SGD 3 billion would be focused on Singapore. That is business as usual. That is us going for land tenders in Singapore. We anticipate deploying about SGD 3 billion into new land tenders slash, as I mentioned earlier, GLS, collective sales, off-market acquisitions. It will be a combination of these, but primarily it will be GLS driven. Lastly, I think probably we are not in a position right now to give any projections on our ROE. I know we have done so in the past, and we said we strive to meet our ROEs that are in the high single digits.
As things are still in flux, and all this is a work in progress, and we have got a lot to execute on over the next three years. Let us see where we get to before we assess again what is a reasonable and sustainable ROE that we can achieve for the longer term.
If I can just add, I think we have said that recycling gains is part of our PATMI. That goes forward because we are a real estate developer. You know for divestment, we have a long list of the SGD 6 billion, of which it comes in a few buckets. Of course, some are the legacy ones where of course you expect huge profit margins. Some are the non-performing ones. Obviously, I think Sherman alluded that we could possibly be willing to sell at a loss. So these recycling gains also have a big part to play in what the profit is for the year. It depends on what we recycle during the year. So the ROE is also cyclical, very frankly. Yeah.
Okay, quickly moving forward, Yew Kiang.
Hi, Yew Kiang from CITIC CLSA. First question, I hope it is not too sensitive. China investments into residential. Do you have any existing new partners that you can share? How will this strategy be different from the past strategies that you have employed? Are you putting in place any IRR targets or investment framework to give some kind of confidence to us? Second question is on the AUM target of SGD 10 billion. I recall that previous years you also had that situation. Unfortunately, there was a rate high environment and sort of thwarted everything. But right now it is a bit of a deja vu that we are also in this same kind of environment. So what lends the confidence other than the fact that we have a new investment committee in place? Yeah.
First part of your question on China. Currently for Xintiandi site we are JV with this Lianfa which is part of a bigger group, Lianfa, which is C&D. So a very, very big group. One of the largest SOEs in Xiamen. Okay. We have worked extremely well with them. They have been great partners, and given us lots of support, although we are the lead development manager, but we work closely with them. We tap on their expertise. In the past, most of our projects in China, be it Chongqing, be it Suzhou, and even now also our business park in Shenzhen, we are the sole developer there. We are the sole shareholder and developer. But I think going forward it will be more partnership driven. I think we will seek good partners that we work well with.
So already, even with our current partner, Lianfa, we have already talked about how if the proof will be in the pudding, right? If the Xintiandi project launches and sells well, I think we intend to do more partnerships together. After all, it's very expensive to buy land in Shanghai right now, right? One piece of land there can easily cost you SGD 2 billion and above, right? So I think we definitely want partnerships. And we feel very comfortable, I think with Lianfa. And of course, we have also partnered with other people in the past, right? In Chongqing, we had partnered with Vanke. Of course, they are now currently under a different set of pressures. But it won't be difficult, I think, to find a good partner, especially one that is well capitalized. As I said, Lianfa is one of them.
It's something that we will continue to embrace in terms of this partnership model. Again, as I mentioned earlier, let's look to see how our Xintiandi project performs before we take a firmer view about what we're going to do in future, right? Obviously, if the project doesn't sell well or tanks or something, then that's not going to be a lot of confidence for management, and especially not to the board, to approve future investments, right? Yes, we do have very detailed targets internally. IRR, risk-adjusted returns, profit margins, hurdles, everything governing both local and all of our respective overseas jurisdictions. We don't disclose these targets, but we do hold ourselves closely to them.
Are these targets much higher than in the past? Like maybe five years ago?
I would say so. These targets have to be higher than the past because obviously we're trying to lift CDL's performance. The targets, some of them have to be moderated a bit. Like for instance, in Singapore, right? If you're going to have very, very high expectations and targets, right, end up losing every GLS tender, right? So in some cases, targets have been moderated a little bit. In overseas cases, yes, because they're risk-adjusted returns. I think we have raised the bar for what would qualify for our investments. Again, the proof is in the pudding. Let's see what happens when we launch Xintiandi. As I said, in Australia, when things haven't worked out, we will take the bold move to exit from the development and the commercial side of the market.
I think these are things that we continue to monitor on a regular basis, and we will not hesitate to make the right decision for the group.
A question on the fund.
The fund management, he was saying, what gives us confidence now, if I can paraphrase it, if it can be.
Other than the fact that you have a new investment committee in place, dedicated one.
Again, back then when we embarked on this fund management thing, firstly, we didn't really have that many so-called seed assets on the balance. Sorry, let me rephrase that again. Back then we had not gone into the living sector yet, right? Now by going to the living sector and you've seen, right, we have built up, we have SGD 3.7 billion of AUM in the living sector. I would say that gives us a lot more seed opportunities than we previously had. So already we have a big basket to draw from. Then also when we first embarked on the fund management, we back then didn't have any clear divestment plans or targets. We didn't know what we could sell and what we couldn't sell within the group. Now we're very clear, right?
We have a detailed list, right, internally that we refer to that we know because we deliberated over all these assets over the last nine months, right? So we know what we want to sell and therefore we know which assets would be suitable to be seeded into managed vehicles. So I would say that right now we're in a much more advantageous position. We can draw on CDL's existing balance sheet. We know exactly what so-called we can play with. And we can also draw on the living sector, which we've built up over the years into a very sizable portfolio. And as mentioned earlier on the slides, which you have also reiterated, we'll be setting up a dedicated management team to really drive this forward.
So there will be full focus and accountability for getting us to our AUM targets, and making our so-called fund management ambitions materialize.
I'm mindful of the time because we're already one and a half hour in, but let me just quickly take one question from the virtual, then I'll come to you, Thomas. So we have Wan Chern from The Straits Times, two questions. Can we have some clarity on plans for M&C's leadership and growth? And the second question is, what are the hotels earmarked under the SGD 1.8 billion divestment?
Okay. I will take this question. For M&C, earlier what I mentioned was they remain our operator, our own subsidiary that will drive the operator hat. Regardless of the ownership of these hotels, the intent of M&C is of course to continue to grow. Our Executive Chairman has also been very vocal about this, that we want to expand our footprint across globally as well. Obviously we will continue to focus on key gateway city hotels, right? Those are really where we play to our strengths. We are not so much an island resort hotel, but we have several brands. I think going forward, we will focus on which of the hotel brands that we are strongest in. In terms of the leadership, actually over the last 15 months, we have hired a new CFO as well as a new Chief Commercial Officer.
We do intend to raise the bar in terms of where we can execute and to do that growth of management is not so easy, right? It is not tomorrow I can go and get 100 contracts in China. We do know that there are several things we need to do internally to structure ourselves for that kind of growth. Traditionally we have always been the owner operator, which is very different. I think that is something that we do have plans internally, how we will transform ourselves towards that kind of growth. As for the hotels earmarked, I think what I shared earlier is that I cannot share anything on this list. But we do have a list internally and we will work on this list over the next three years.
Okay, moving. Thomas, if you can take, and then after that, Brandon, yeah.
Thomas from Zaobao. I just have some follow-up question on your China project. For Xintiandi, you acquired the land in 2024. Do you have any timeline for the launch of this project? Do you have any fallback plan if the outcome is not that ideal? Also I noticed that you will focus on upper tier cities in China. Do you have any plan to expand to other cities in addition to your current portfolio? Yeah.
Hi, Thomas. Yes, we won the land tender in November 2024, but actually by the time we took the land was sometime in early 2025, last year, basically. Obviously, development projects, the most strenuous part is getting your permits, your planning permits, your construction permits, all that, right? We've been working on that over the last one year plus. As mentioned earlier, actually, we're planning to launch the high-rise residential tower in December this year. Should make it by December. Because we had to get the whole foundation, everything all done first, right? Get to ground zero, but should not be an issue. For the villas, because those will be progressively so-called attaining their so-called sales permit. So those will be released in phases starting from next year onwards. Do I have a fallback plan? No.
The reason no is because I'm still very confident and so is our JV partner, Lianfa, that we should see very strong sales. All you have to do is look at all the projects around us that have sold, okay? The more recent one was Shui On's Phase 6, right? [Non-English content ]. Right? You'll see, right? They also had record prices, full sellout kind of thing. So in one day I think. Let's see what happens. As I said, we'll know pretty soon in a couple of months.
What kind of buyers? We're expecting Shanghai high net worth buyers. You can't really take foreigners, obviously. It's still difficult for non-Shanghainese who don't have a Shanghai [Non-English content ] to buy, right? Because, to be eligible to buy, you need to so-called have evidence of pay taxes for one year or two years. There are various requirements. So primarily it'll be high net worth Shanghainese that will buy. Expansion plan, we kept it more broad. Initially we were going to say Tier 1 cities. But Tier 1 cities, which also now has become a murkier definition because Tier 1 cities is really just Shanghai, Beijing, Guangzhou, and Shenzhen, right? We made it upper tier, so just to keep it a bit more flexible.
Shanghai is still our key focus and because after we got this piece of land in Shanghai, I think we have built up a very strong rapport with the local government there. I think the Shanghainese government, we are very grateful. They have constantly showed us a lot of projects, some of which are very attractive. While the residential market has gone through a massive shakeout in China, it has also worked well for us, because firstly, there are a lot less so-called cashed up developers, going for land tenders. Now it is really a lot of state-owned entities, state-owned enterprises, SOE developers and all that. A lot of privately held developers, as you know, are quite cash strapped. It has made the tender environment more palatable, especially if the quantums are big.
Secondly, as you know, China has also been slowly changing their rules, but in a way these rules are becoming more like Singapore as well. Actually, it fits us very well because we have been living and developing in this manner for the last six decades, over six decades. Actually, it is an environment that suits us very well as well. The market is something that we still keep a close eye on. Again, let us see how our existing Shanghai project performs, our Xintiandi project performs before we make any further aspirations.
Okay. Later, I will just take Brandon, Alex. Brandon first.
Hey. Morning. Thanks for the opportunity. Just two questions. When we look at this SGD 1 billion divestment gains, and we compare that against this SGD 6 billion of sales, the divestment premium seems pretty modest. Can we take it that a lot of the gains will be coming more from your hotels, given that the U.K. assets are likely going to be divested either, like you said, at loss or even at carrying value? So that is the first question. The second question is related to hotel. I think earlier we did speak about this opco/propco strategy.
So during your analysis of your hotel portfolio, was there ever a possibility that you were looking to divest the M&C brand, or should we say now that you've decided not to do that, should we expect some CapEx that you need to spend on improving your loyalty program and things like that for M&C? Thanks.
Okay. I'll address your first question, Brandon, and then I'll leave poor Eik Sheng to address your second one. Very good questions, actually, I have to say. So, no, you cannot assume that much of those divestment gains will come from hotels because again, if you look at our divestment makeup, the hotels are only 30% of it. So there's a lot coming from other sectors that will contribute the gains. Yes, I agree. I mean, SGD 1 billion to you may not look like a very big number, but again, don't forget, as I mentioned earlier, I think we want to ensure that whatever numbers we put down are achievable. No point us over-promising and under-delivering. We did put there greater than SGD 1 billion, right? So I'll leave it to your imagination.
But I think we definitely want to ensure that whatever numbers we put up today to you, throughout the entire deck are achievable and it's strongly backed with concrete analysis, assets, everything behind it. But yes, the gains are not going to just come purely or substantial or the bulk of it from hotels. It'll be quite spread out. Yeah.
Yeah, on the second question about the opco/propco, that is indeed something that the board and the management have been looking into as well. What I shared earlier about the opco is that we are looking at it more from the structuring it such that there is an opco mindset. Because previously, it's kind of intermingled. So we can do really well in terms of our asset returns, but actually, if you strip out just the opco metrics of it, actually we may not be doing as well, which is why we always wanted that owner/operator hat, right? But I think there is an opportunity for us to improve how we are doing as an opco. Part of that is that we do need to scale up for an opco to make sense, right?
If our intent is to continue to manage our own assets, at least for the key ones, then we definitely have quite a bit to do. That was what I was alluding to earlier about the restructuring as well. We are looking at it from the operator lens. Whether we will exit or we will list an opco, that is all things which are not been considered at this point in time. I think that is always something in the future if we want to talk about it. As of right now, there is no such intent. We are looking at it firmly as an operator hat and how we can do better as an operator.
Okay, I am very mindful of time, so let us just try and keep the questions very tight. Alex, why don't you go, then I will take some at the back.
Okay. Hi, Alex from CNA. My question is for Mr. Sherman. Bigger picture sort of perspective, the strategic review promises sharper focus and greater accountability. What do you think shareholders should look at over the next 12 months to judge whether GET+ is actually delivering? How can shareholders be confident that any potential individual leadership differences do not get in the way of these institution-level priorities we have seen set aside today?
Sorry. I was thinking about your second question, I forgot the first one. My memory is obviously not that too good.
I would say a little bit linked. The first one is just the idea of the sharper focus and greater accountability.
Yep.
What should shareholders look at in the next 12 months, say, to judge whether there is delivery on these markets?
Got it. Thanks, Alex. As mentioned earlier, I think everything we put up today serves as a report card for us as well, right? We think that's fair, okay? All of our investors and shareholders and analysts should have a way to measure whether we're progressing in the right direction, whether we're on track to meet our targets. Anyway, every half year we make periodic updates, and we make announcements as and when we seal deals, whether it's acquisition or divestment. So I think as we go along, and especially at every full year, you get a lot of detail, right, from us and from our annual report. You'll be able to see whether we are moving in the right direction, whether we're executing on our strategy, whether we're hitting the targets that we put up.
Of course, the GET+ outcomes are all there, too. Some of those outcomes will so-called translate directly into maximizing shareholder value and enhancing shareholder returns. So I think let's see how we progress along there, and that will stand as our so-called assessment and report card year in, year out. On the second part, yeah, what happened last year was unfortunate. It's something that we hope not to ever see happen again. Right now, as I've mentioned earlier, the board is united on this strategic review. They approved everything I've shown you today. This is something that I know the board and management are aligned on.
I think we want to go forth and really focus on execution. As I made a quote in the press release, this is something where we really have to ensure we have unwavering focus on the execution because it is all fine and good for us to put up this whole thing up there. Assuming all of you are happy with it, or most of you are reasonably pleased with it, the next part is even harder, right? We have to ensure that we execute on it, and we deliver everything that we said we are going to deliver. I am confident we will. But let time be the judge. Thank you.
Okay. I am going to take Rayson then Wilson, and then I am just going to give the last question to Mervin later.
Hi, management team. Rayson from BofA. Just one quick question. In terms of scaling the AUM, how should we look at the REIT platform, given that it is a little bit hard to scale with the lack of the scale as well as maybe the cost of capital? Wondering if it is going to be largely a private platform-led?
Thank you, Rayson. Actually, REITs are very good vehicle to embrace as well, right? They are the public format, right, as compared to private funds. Yes, REITs have more constraints, obviously. REITs strive to do accretive deals and they may constrain on the leverage part as well. Most REITs try not to go above 45%, at least for S-REITs. Yes, different from private funds, but REITs also play an important part of the capital puzzle. We certainly want to see how we can further strengthen the two REITs that we manage and co-manage. We want to see how we can be more active sponsors, is something I mentioned before, right? Like for CDL Hospitality Trusts, how we can be more active sponsors to them. Some of the divestments may actually be very suitable for the REIT as well, so it is something that we will explore.
But in essence, I think we want to grow these two REITs. Since we have this valuable opportunity to manage the two REITs, right? I think there is a lot more growth that can come out from the two REITs. Maybe the REITs also do need some adjustment internally. Like for instance, IREIT Global is going through a fairly rough time right now, especially with their concentrated exposure in commercial assets in Germany and Spain, and retail assets in France. So, there is some portfolio adjustments going on. But ultimately, we want to work with the management team there to ensure that these REITs come out stronger and more resilient than ever. Again, it does not preclude new REITs that we could potentially do. Okay? But yes, we also need to accelerate the private funds part. We haven't really done any private funds in the past.
So that aspect, I think we really need to get going at a quicker pace.
Okay, thanks. Wilson.
Hi, morning. Wilson from Jefferies. Just following up on Yew Kiang 's question on fund management. Sherman, I think you mentioned you want the fund management to be a core key pillar of the business. What proportion of earnings would you envision this segment to contribute to the group? I guess nearer term major milestones to watch for this, I think you mentioned potentially a new private fund launch by end of the year, as well as maybe a new fund management CEO appointment by the end of the year. Are those things that we would be looking to watch for in terms of near-term milestones? Yeah. Thanks.
Yeah. I think a very good question, Wilson. A little bit premature for me right now to comment on how much contribution I can expect from the fund management. Obviously, we have some internal projections, but I think rather not share it at this moment. Needless to say, I think we certainly need to scale up the AUM, hopefully exceed SGD 10 billion before 2029. And we need to keep a close eye on the funds as well, on the fees as well. Currently, I would say for REITs, you are probably looking at anywhere between 30- 45 basis points on gross asset value as management fees. For private funds, usually it is done off committed equity. It is about maybe 80 bps for core, all the way up to 150 bps for opportunistic. But we will have to strike a balance.
In fact, our two REITs right now are around there as well. They are between 40- 50 bps off AUM or GAV. I think we have to ensure that as we move forward, the right fee structure is put in place, and this gradually starts becoming a stronger part of our recurring income.
Okay, I am going to have to bring this to a close. Mervin, if you could pose your last question, please.
Maybe two, if I may. Just in terms of the SGD 6 billion to be divested, what is the current PATMI contribution? Also for the hotels, the 20% that you want to enhance, what is the CapEx related to that? I presume the proceeds will be used from the divestment to fund that. The final question from me to Sherman. Thanks for the presentations, but you are independently financially well off. You do not need this job. But what keeps you, like the fire in the belly to be working so hard, coming up with these plans, receiving all the brickbats from investors, from the press?
Mervin, I hope that's not your subtle way of asking me to go into early retirement, right?
No, I can see the fire in the belly, the passion. What's keeping you so motivated to work so hard? If you can just share. People want to know what's motivating you and whether you can deliver, obviously.
Okay. Thank you, Mervin. Most interesting question I've certainly received in my career and on stage as well, in front of media and analysts. Again, I think I've always been driven by the fact that I want to perpetuate the legacy, our family legacy, especially my grandfather, who's had a very deep and meaningful influence on me when I was growing up. So you can see that even in Republic Plaza, when I did the AEI for RP, I've done a whole area on the ground floor, called the Founder's Gallery, right, which tells you about his life, how he's built up the Hong Leong Group, as well as correspondingly CDL, which he took over. And the principles and beliefs that he embodies and the values that he embodies. So that's been a key driving factor for me.
And obviously, for all of us, men and women, we are in a certain part driven by achievement as well. We want to have a certain career achievement. Does the career define us all? No, at least not anymore for me. Last time I used to think career was everything in life and it's the be-it-end-all, but after I think you start having family and kids, you realize that there are other aspects to life as well. So while I'm still unable to strike a work-life balance, okay, very bad at that. But I would say that certainly this is important to me. We set out on this journey before, and again, this is something that has a lot of meaning for me deeply, especially because of my grandfather's legacy. So this is something that I want to see through.
Maybe at some point I will take your advice and consider early retirement. Unfortunately, I'm not flush.
I trust when you deliver, people want you to stay in three years' time.
Unfortunately, I can't live up to the image that you painted. I'm not rolling in dough and flushed with cash and flying on private jets and yachts. No, I don't have that lifestyle and don't have the financial means to back that up. But it's passion for what we do. It's the mission that we all embody with us, and I'm sure ES is the same as well, being a family member. Even Mr. Chia, Eik Sheng, Gerald, they've all been with the group for a long time. I shall not mention how long, otherwise they'll scold me and say, hey, you reveal our age. But they've all been with the group for a long time, okay? We all care deeply and passionately about CDL, right? It's a company that we've come to regard as our house, as our family.
Our colleagues have become almost like family members to us. Yes, we only want to see the best happen to CDL. We want to act in the best interest of all shareholders and ensure that we continue to maximize value and returns for everyone. I'll leave the other questions, which arguably are as difficult as mine to Eik Sheng and Yim Ming.
We should have just ended there.
Yeah.
I can't remember your second question.
Yeah.
I think on the hotel, on the enhancement bit, the CapEx, we are of course still working on those. Some of them are redevelopments as well. The planning's still ongoing. I can't really give you an answer to those, but except we do forecast it will take longer than three years anyway. Once we have more clarity, of course we can try and share more details on those. What was the other question?
Yim Ming's one.
Yeah. Last question. Just for CapEx as well, I think we usually make it a good practice that they fund their CapEx out of their operating cash flow. Very frankly, that is not so big a concern unless, of course, it's a big overhaul. Then we are looking at refinancing CapEx. Usually it can be financed out of the free cash flows for hotel. As to the PATMI for the SGD 6 billion, I know it draws a lot of attention, right? But really if you look at it, you cannot really look at CDL in a very linear pattern. When I really look at the pool of assets that we have available for divestment, of which we selected a SGD 6 billion, which we are very confident of. It comprises many things, right? It can comprise like Moxy, that's currently still in building stage.
It can obviously comprise the U.K. legacy, which we know are probably at a slight loss-making. Of course it can comprise the Hotel SGD 1.8 billion portfolio, which has the NOI of, I mentioned earlier thereabouts, about SGD 30 million, SGD 40 million. It cannot really be linear across this way. What I'm trying to say is that the SGD 1 billion divestments that we have, definitely to me, is conservative. But the PATMI from the SGD 6 billion divestment, that number really does not make sense because some of them are from assets that's like land banks, like you-
Can we say it's minimal and actually to be EPS accretive because you're paying down debt, which is more expensive than earnings contribution? Can we say that?
Yes. That's a fair comment to say, yeah.
Thanks. Anyway, we look forward to the continued passion, and I hope in three years' time everybody wants you to stay on.
On that note, Mervin, the best is yet to be. Ladies and gentlemen, we have indeed had a very extensive conversation this morning. We have come to the end of the briefing. I would like to thank all of you for your patience. Thank you to all the webcast audience who have joined us. Refreshments are available. Please stay back. For those who want to tour our show flat, I have my colleagues at the back of the room who are more than happy to bring you around. On that note, stay watching on this space. Thank you, ladies and gentlemen. Have a good day.