‘My grandfather’s legacy’: Sherman Kwek lays out three-year plan for CDL to drive returns

[SINGAPORE] After nearly a year of scrutinising the sprawling portfolio of City Developments Ltd (CDL), group CEO Sherman Kwek has a clear idea of what the property giant should build on, what it should sell – and where it wants to grow next.

For him, the overhaul is also personal.

“I want to perpetuate the legacy of our family, especially (of) my grandfather, who had a very deep and meaningful influence on me when I was growing up,” said Kwek, who fielded questions at a briefing on Monday (Sep 28), when he unveiled CDL’s refreshed three-year strategy.

“This is something that I want to see through.”

Kwek Hong Png founded the Hong Leong Group, CDL’s parent, in 1941 and passed on the reins to his son, Kwek Leng Beng, in 1984.

Sherman Kwek, Kwek Leng Beng’s son, took on the mantle of CDL CEO in 2018, with his father retaining the executive chairman title.

With the strategic review – which Sherman Kwek earlier called ‘timely’ after the company went through “some difficulties” and internal disputes last year – CDL will divest at least S$6 billion in legacy and underperforming assets and invest S$5 billion in growth capital.

A good part of divestments – roughly a third – will come out of its core hotels business, and almost half – 45 per cent – from commercial assets.

Pulling out from non-performing areas in the UK and Australia, the group is training its attention on its core businesses in Singapore, and taking “opportunity-led” bets on China and Japan.

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It is targeting to maintain a minimum annual dividend payout ratio of 35 per cent, and record more than S$1 billion in profit from divestment gains.

It also hopes to cut net gearing to around 55 per cent by FY2029 from 75 per cent as at H1 FY2026, and double assets under management to S$10 billion.

Kwek said the three-year timeframe was deliberate, in that it would give CDL enough room to execute the changes without being forced into transactions simply to meet annual targets. Looking at the business over three years would enable the group to “plan better, not to leave money on the table, and to really ensure that we monetise our assets properly”, he added.

“We do need three years to divest S$6 billion, unless you want me to go on a fire sale and sell everything, which obviously nobody wants.”

S$6 billion is a ‘floor, not a ceiling’

CDL’s planned divestments will span several parts of its portfolio. Commercial properties are expected to account for the largest share, or 45 per cent, of the S$6 billion target. Hotels will make up 30 per cent, legacy residential and other assets 20 per cent, and living assets, the remaining 5 per cent.

Kwek indicated that CDL could offload more. Describing the target as “a floor, not a ceiling”, he said the group’s “actual divestment list is bigger than S$6 billion”.

CDL plans to accelerate exits in the UK and Australia, where some assets have fallen idle and others have not performed.

In the UK, the group identified around S$800 million in legacy residential assets for divestment, comprising three development sites and unsold units in two completed projects.

It also owns three commercial properties in central London – 125 Old Broad Street, Aldgate House and St Katharine Docks – collectively worth around £1 billion (US$1.3 billion). Kwek said CDL had tried to list its three UK office properties in a Singapore-listed Reit, but those plans fell through.

CDL will continue to monitor the assets and optimise their performance, and wait for appropriate market conditions before charting its course.

In Australia, which CDL entered in 2015 but had been unable to achieve the scale it sought, the plan is to exit most of its businesses. Kwek said: “It’s not a market that’s really worked out too well for us.”

The group intends to exit its residential, commercial and living businesses there, but retain its hospitality presence.

Its Aussie residential portfolio comprises two development sites and four completed projects, with a carrying value of around S$220 million as at end-2025. CDL is also targeting an exit from its 50 per cent direct joint-venture stake in 330 Collins Street in Melbourne when market conditions allow; its living portfolio in Australia comprises 563 units.

In its core hospitality sector, CDL eyes around S$1.8 billion of sales over the three years.

CDL directly owns 54 hotels valued at around S$8.6 billion. Of these, around S$5 billion, or 60 per cent by value, are considered core assets to be retained; another S$1.8 billion of these properties have been identified for enhancement, and the remaining S$1.8 billion of them have been earmarked for disposal.

Kwek Eik Sheng, CDL’s group chief operating officer, said the assets marked for sale comprise a mix of mature hotels that are performing well and others that are “not pulling their weight”.

“By selling these hotels, we do expect that that returns will improve,” he said, referring to returns on capital employed. He declined to identify the individual hotels that could be sold.

S$3 billion for Singapore

As CDL pulls back from some overseas markets, Singapore is firmly at the centre of its growth plans.

The group has earmarked 60 per cent, or S$3 billion, of its S$5 billion in growth capital for Singapore, where it plans to continue building its land bank.

CDL already has a sizeable development pipeline in Singapore. Five projects remain unlaunched as at Sep 28; these comprise sites in Tanjong Rhu Road and Peck Hay Road, as well as Wynwood Grand (about 430 units) and Solano Grand (about 300 units) executive condominiums, and Lucerne Grand.

Another S$1.5 billion is destined for China and Japan.

Together with two projects in China, CDL expects more than S$6 billion of cash inflows from property development sales through FY2029.

Xintiandi a test for China ambitions

China will be a key test for CDL, which in FY2020 took a massive S$1.78 billion impairment blow, effectively writing down 93 per cent of its total investment in Chongqing-based Sincere Property Group.

“Yes, I know, when you put China up there, everyone’s spooked,” said Kwek.

“Despite all that noise, and yes, China is not in good shape, under tremendous pressure, there are still opportunities to be had,” he added.

There is strong demand for luxury residential property, said Kwek. Its mixed-use project in Shanghai, Xintiandi, is pitched at this segment.

The project, in which the group holds a 51 per cent stake and China’s Lianfa Group owning the remaining 49 per cent, comprises 145 homes – 70 high-rise apartments of more than 400 square metres (sq m) each, and 75 villas ranging from around 250 sq m to 700 sq m.

CDL plans to launch the high-rise units in December, followed by the villas from 2027. Kwek said the residential component is expected to generate “no less than 15 billion yuan (US$2.2 billion) in sales”.

He added that future investments in China are likely to be more partnership-driven, with Shanghai remaining a key focus, although CDL will retain flexibility to consider opportunities in other upper-tier cities.

CDL is also stepping up its fund management business, targeting S$10 billion in AUM by FY2029. This is double the roughly S$5 billion it had as at Jun 30 – as it seeks to scale investments with third-party capital and release capital for redeployment.

For all the numbers attached to the three-year plan, Kwek returned to the point about the personal significance of seeing it through.

“We only want to see the best happen in CDL. We want to act in the best interest of all shareholders and ensure that we continue to maximise value and returns for everyone.”

The strategic review comes in the wake of a public falling-out between father and son in 2025 over control of the company. Both CEO and chairman have since resolved to put their differences behind them.

Asked at CDL’s briefing whether Kwek Leng Beng plans to lay out a succession plan, Sherman Kwek noted that the chairman was not present at the briefing: “I cannot answer on his behalf.”

On what kept the fire in his belly going since he is “financially well-off and doesn’t need this job”, Kwek laughed: “I’m still unable to strike a work-life balance. I’m very bad at that.”

“But this is important to me. This has a lot of meaning to me because of my grandfather’s legacy.”