City Developments (CDL), a prominent Singapore property developer, together with its two joint-venture partners, have postponed the S$2.5 billion high-profile South Beach project earmarked for a hotly contested site on Beach Road.
The consortium cited the economic turmoil and high construction cost as reasons for the move. It has decided to delay the project until building costs fall to “reasonable levels”.
The project was launched when CDL and its partners Istithmar (part of the Dubai World Group) and El-Ad Group clinched the 3.5ha site with an S$1.69 billion bid.
CDL said South Beach would elevate Singapore’s unique branding as a global city. The two towers of up to 45 stories were designed by renowned British architects Foster & Partners. The project – offering premium office space, two hotels, shops and city residences – include restored conserved military buildings of the old Beach Road Camp.
CDL executive chairman Kwek Leng Beng said there were already keen buyers in August, with intentions to purchase one block or one hotel. CDL had earlier said it expected to complete the 99-year leasehold project by 2012, thought it had until 2016 to finish it.
For its third quarter, CDL reported an 11 per cent fall in net profit to S$150.8 million and a 13.6 per cent decline in revenue to S$688.2 million. In the three months to 30 September, it sold over 330 units out of a total 724 units at The Livia in Pasir Ris, but prices and demand fell. Demand and rental expectations in the office market were also struck by the financial crisis, the group said.
Its 53 per cent subsidiary Millenium & Copthorne Hotels delivered credible results but its contribution to CDL’s revenue and pre-tax profit dipped due do the Sterling’s weakening against the Singapore dollar.
The property development business remains the highest earnings contributor but its third-quarter profit before tax fell from S$147 million to S$91.1 million. Hotel operations accounted for S$70.47 million of third quarter profit before tax, a dip from S$79.5 million. Rental properties contributed S$74.3 million, an increase from S$17.8 million.
Although CDL is holding back the launch of new residential projects, it is proceeding with construction of The Arte at Thomson and The Quayside Collection at Sentosa Cove. Both sites were acquired at relatively low land and construction costs.
CDL said its exposure to potential defaults was under control as it did not sell too many units under the deferred payment scheme and did not extend this scheme to sub-sales.
It also said its investment properties would continue to benefit even if renewed rentals were moderated as they would still be far higher than the previous low rates. Its hotel business had never operated at a loss since it went public in 1996.
CDL said it expected all core business segments to remain profitable over the next 12 months.
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