Asset recycling is CityDev's weapon of choice as property prices tumble

Experts are upbeat on its PPS scheme.

With residential sales stuck in the doldrums and asset prices on a steady decline, City Developments has turned to a crafty asset recycling program in order to fuel growth and drive returns.

Analysts at DBS believe that CDL’s Profit Participation Securities (PPS) scheme has a myriad of positives for the property developer, as illustrated by its new JV with Keppel Land subsidiary Alpha Investment Partners.

Under the JV, a joint investment platform by the two entities will acquire a portfolio of three of CDL’s prime office properties worth $1.1bn.

“We believe that this platform will enable CDL to better time its exit and obtain a fairer price for these properties in the medium term post the current downturn of the office market in Singapore. In the meantime, the JV will work towards optimising portfolio performance in the medium term, which should result in higher valuations,” said DBS.

The deal will also allow CDL to tap third party capital and redeploy cash into other sources, DBS said.

“Supported by a strong balance sheet and diversified earnings base, CDL should be able to weather the current uncertain market conditions well,” said the report.