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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, ladies and gentlemen, friends from the media, analysts, investors, bankers, fellow CDL colleagues. My name is Belinda, and I'm the Head of Investor Relations and Corporate Communications at CDL. On behalf of the CDL management, we warmly welcome you to CDL's briefing on its unaudited financial results for the half year ended 30th of June 2020.
This year, 2020, has been an extremely extraordinary year so far. The prolonged COVID-19 pandemic has caused tremendous restructures to governments, businesses and individuals alike.
Due to COVID-19 situation, as a precautionary measure, we have intentionally kept this to a virtual briefing. Attending today, we have friends from the media and our sell-side analysts joining us on a Zoom webinar. We also many of our bankers, investors, analysts, media and other stakeholders have joined us on our live webcast. We would like to take this opportunity to welcome all of you.
This morning, before trading, the CDL Group uploaded several documents on SGX and our corporate website. They include, firstly, a copy of our financial statements; secondly, a press release summarizing the key highlights of our results; and thirdly, our first half 2020 presentation material that we'll go through very shortly. If you have not already done so, please feel free to download these documents, which are available on our website at www.cdl.com.sg.
I would like to introduce you to our CDL management panel. We have Mr. Kwek Leng Beng, our Executive Chairman; Mr. Sherman Kwek, our Group CEO; Mr. Chia Ngiang Hong , our Group General Manager; Mr. Kwek Eik Sheng, our Group Chief Strategy Officer; Ms. Yiong Yim Ming, our Group Chief Financial Officer; and Mr. Frank Khoo, our Group Chief Investment Officer, and they are all joining us remotely.
The format of today's briefing will be in 2 parts. Our Group CEO, Mr. Sherman Kwek, will give a short presentation, followed by our group CFO who will share the financial highlights. Thereafter, we will be moving straight into a Q&A opportunity with the panelists.
Without further ado, I would like to invite Mr. Sherman Kwek, CDL Group CEO, to kick start the presentations. Mr. Kwek, please.
Thank you, Belinda. That's okay. Great. Slides are up. Okay, great. Welcome, everyone, to our 2020 First Half Analyst Briefing. It's certainly a very tough set of results that we have to present this time around.
If you can go to the first slide, please. Thank you. Yes. As you can see from our key financial highlights, it's certainly a very stunning set of numbers and stunning not in a good way in the sense that, as Belinda mentioned earlier, we are facing an unprecedented crisis that resulted from this prolonged COVID pandemic. And so you see that across-the-board we have been very adversely affected with a profit before tax down by 97%, PATMI down by almost 100%. So it's certainly been a tough time for us. We have been, obviously, due to our diversification, different segments have been affected to varied degrees with, obviously, hospitality bearing the brunt of it.
Next, please. Yes, this is just NAV and our NAV per share, which has been marginally up. And share price performance, I think, not much to be said there. It's been a very volatile year so far.
Next. Key operational highlights. As mentioned earlier, I think we've had different segments affected to varying degrees. Property development, I think, so far, has been relatively resilient in the face of such a devastating crisis. And what's been most encouraging is that in Singapore, we continued to move inventory this year. So we've sold a total of 356 units with a sales value of SGD 515 million. So I think that's been very encouraging. China, we continued to sell out the balance of our residential units for projects within CDL China. And of course, in Australia, we launched this project last year and we're now over 70% sold for this project in Melbourne.
Asset management has also been another bright light for us where our office portfolio has remained very resilient and we can still see that committed occupancy is high, certainly higher than the island-wide occupancy. Retail has been a tad unfortunate. It's the second worst-hit sector -- asset class after hospitality. And I think all of you have read in the press that we've certainly done our best to stand our tenants and been able to pass through property tax rebates as well as provide them with rental rebates as well.
In terms of hotel operations, I think we can go through in more detail later, but basically, the stats are what it is. It's certainly a sector that's been very hard hit. And many of our hotels have been closed. Right now, I think some of the hotels are starting to reopen, but still we have about 28% of our portfolio that's still closed. And the ones that are open are certainly still struggling, I think, to keep their results up. But the great news is that, I think as we gradually hedge towards a recovery, there should be a pent-up demand for travel and this will hopefully help our portfolio to start flourishing again when the whole COVID situation stabilizes.
And lastly, in fund management, our CIO, Frank, continues to aggressively push forward in order to hit our AUM targets. We have done an opportunistic buy of 8.4% stake in IREIT in April. And obviously, as we had alluded to before, we are exploring the establishment of a REIT listed in Singapore for our commercial assets in the U.K.
Next. This just shows you a breakdown. So on the right-hand side is total assets and how it's broken down to our 4 segments, and on the left-hand side is adjusted EBITDA. Adjusted because EBITDA is then the so-called a more accurate representation of cash and we have taken out in tenants from this -- mainly from the hotel operations category. So you can see here that property development has still continued. I think the drive is strongly for us. Hotel operations certainly has been a struggle. Investment properties are still very stable. And in this case, others was pretty substantial this time around because we have various things in others such as we sold off a technology subsidiary for $20-over million. And also, one of our social companies first sponsor, we derived -- they gave a larger contribution to our results. So others is fairly significant in this particular set of results.
Next. Our global portfolio overview. I think on the left side, you can see how the assets are spread out geographically, and on the right side, partially because our property development business has dipped. So recurring income has formed a larger chunk of our portfolio of 60%, but obviously, much of that is mainly M&C Hotels. So we will have to work hard on ensuring that we boost our recurring income.
Next, please. Yes. So I won't go through this again. I think all of you are very familiar now with our GET strategy: growth, enhancement, transformation. For growth, I'll take you through, over the next few slides, of what we intend to do.
Let me just move on to the next slide. Thank you. So this is the Liang Court redevelopment, I think we have announced a while ago. All of you should be quite familiar with it. It's basically where we've teamed up with CapitaLand to acquire the Liang Court shopping mall and we intend to redevelop that full precinct into a very, very exciting, integrated development. It's been a great joint venture with CapitaLand so far and it's not our first. We also had a joint venture with them in recent times in Sengkang where we are building another huge mixed-use development. So for the resi and retail, it's a 50-50 JV between us and CapitaLand. For the hotel component, we've done a forward sale. So when it's completed, likely sometime in 2025, the hotel will be sold to CDL Hospitality Trusts and will be operated under the Moxy brand. And Ascott will take back the serviced residence and operate that. For the residential and retail, we are probably looking at a TOP of sometime in late 2024. So -- and we're looking to break ground on construction probably by the second half of next year. We've got quite a lot of demolition work to do for this site.
Next. This is an upcoming resi launch by next quarter, and it's actually by our JV partner. So they are leading the effort. Hopefully, this project will do well. It's a very short walk to Aljunied MRT station and it's a very convenient location. So we're looking forward to the launch.
Next. This is our own project that we acquired. As many of you may remember, this was the first GLS tender of 2020, and unfortunately, right before all the -- before the whole COVID pandemic started to explode onto the global scene. But still, I think we're very, very pleased to have replenished our land bank with this iconic site. It's so prime. As all of you know, it's diagonally off Great World city within walking distance of the future Great World MRT station and within this walk the mall. So we are very excited. We're working with world-renowned architect, MVRDV. And we're looking forward to putting up an iconic design. And yes, we will likely launch this in the first half of next year. We initially wanted to launch it this year, but, as all of you know, there's been construction stoppages and lots of other negative repercussions from COVID. So likely the first half of next year.
Next. So this just gives you an idea of our launch pipeline. We have close to 2,000 units to launch in Singapore from the 3 projects that I just mentioned. So I think at least this gives us a nice pipeline going forward for the next 1 or 2 years.
Thank you. Next. This is our rented PRS, private rented sector, project in the U.K. This is in Leeds, one of the largest cities in the U.K. after London. And it's our project with 665 units. And when it's completed, all the resi units will be for rent and there's currently very strong demand in the U.K., so most of the U.K. actually for rental apartments. So we anticipate that this project will do well. We have already commenced construction and we anticipate that it will complete by 2023.
This is a new asset that we acquired in Yokohama. So as many of you may remember, we have mentioned previously that we have embarked on a PRS strategy in Japan as well, which Frank has been leading. And we have acquired several so-called PRS properties that are currently in operation already now in Osaka and we decided to diversify and -- so acquiring an asset in Yokohama as well. We have great confidence in Yokohama and it's a very strong satellite city that services Tokyo. And so we managed to buy this asset. We're getting a net yield of probably around 4%. And cash on cash, it's closer to 6%. So it's going to be a very exciting property for us, and we are completing this deal in -- by -- well, I guess this quarter by Q3.
This is one of our most exciting projects under enhancement where we try to reposition or redevelop so far some of our older assets to really derive more value. And we had alluded to this in the past, and now I think we're ready to unveil a little bit more. But we're still subject to authority's approval, so we still have to get it fast in terms of what we can share. But basically, we ran the design competition and have actually selected the prestigious Japanese architect, Nikken Sekkei. And this is basically our former Fuji Xerox Towers. It's going to be redeveloped into a 51-story, freehold integrated development, at least that's the proposal that we hope the authorities will support. Under the incentive, the CBD incentive scheme, we will get an uplift of 25% to the GFA. And so far, I think we worked hard on getting the right mix. So as for the requirements of the incentive scheme, 40% will be commercial, so continue to be office and give us strong recurring income while 60% will be residential for sale and serviced apartments for rents.
So as you can see in the design here, I mean it's really a stunning design. And I think especially in this era of COVID and potentially other pandemics, people want enough space and enough so-called distancing within the building. So there's a lot of open space. And you can see there's a real beautiful so-called terrace effect and cascading waterfall that comes down. In fact, this artist's impression was the picture that we used for the cover of our first half 2020 results. And yes, we're very excited to unveil more details as they become available.
And being, so-called, on the -- in such a prime position at the gateway of the future Greater Southern Waterfront where the government has announced such a huge plan to redevelop the whole -- entire area that will last over the next 10 or 20 years, I think this will stand to benefit strongly from the future growth trends.
This is another redevelopment we had also alluded to in the previous analyst briefing, so that's the Central Mall. As many of you who have been to that area would know, unfortunately, the areas with its sparse foot traffic at the moment and it's not doing too well. So I think making use of another scheme by the URA, we decided that we'd collaborate with our neighbor, which is Far East, and see how we could rejuvenate the whole precinct. So in the artist's impression, the building is on the right. The one closer to us is the so-called future CDL redeveloped mixed-use building that will comprise of predominantly office, but with also a small portion of our hotel and serviced apartments . And the building, the further building, the one on the left -- or the north, that one is actually by Far East, and that will be mainly a so-called residential and retail development. And so we're looking -- we're collaborating closely with Far East to see how we can really build an integrated retail to rejuvenate that whole area. And we're very excited. And due to the strategic development incentive scheme under the URA, we could potentially have a very big uplift in our GFA from the existing -- what we already have in existing -- in the existing property.
Next, please. Just like to show you how we've continued to drive forward and enhance our ESG integration. We recognize that climate change is a big problem facing the world right now and every corporate citizen has stepped up to do their part. So as you can see, despite the pandemic, we have not relented on our efforts. And we, in fact, continued to step up to ensure that we do our part to heal the world and ensure we have a sustainable future for many generations to come. We have -- a particular pride for us is what was recently announced just within the past few days, which is if you look on the top right, we have been ranked third out of 577 companies in Singapore for the Singapore Governance and Transparency Index 2020. So we moved up in our ranking and are now in the top 3 position. So this is something that we feel very humble, but also very honored that it recognizes our efforts.
And lastly, this is transformation. So the T has always been the most important part of the G-E-T because this is where we're going to derive our future growth, and this is where we're going to have a catalyst for our company. And this is where we're really going to transform ourselves and take ourselves to the next level. So under strategic investments, you can see that the 2 biggest acquisitions we've done within the last 12 months, one is M&C postprivatization. Albeit, of course, the timing was not the greatest because COVID hit shortly a few months after we had privatized in November last year, but still, we are very fortunate to have the opportunity to prioritize our hotel portfolio, removed the listing cost and really enable us to take a deep dive into how we can restructure the entire hotel portfolio by taking a holistic view and achieve synergies, cost efficiencies and profitability.
On the right-hand side is, as everyone knows, an acquisition that is also near and dear to us. In fact, I'm here right now in China. This is my second trip here since June. And so I'm glad they actually set up the green lane arrangements. And I'm in the Sincere office and we've been working hard. I think to drive things here, we are going to do a gradual integration, I think, over the next 24 months, between Sincere and CDL. We have onboarded a new management team: the CEO, the COO, the CIO. So there's a new team in place, young and ready to charge. And obviously, we had to do quite a bit of restructuring to the portfolio of Sincere. We had to restructure. I think their mix in terms of asset class is still a bit too heavy on investment properties, especially on retail, which, as I mentioned earlier, is the second hardest-hit sector amongst all. And then at the same time, I think we need to also optimize their capital structure. I think there's a bit of -- there's too much leverage in the system. So we are certainly looking at ways to do some debt restructuring and asset divestment. So all this will start to bear fruit, I think, from next year onwards. But we need to give some time because this company has 26 years of history, and you're not going to change and correct everything overnight. But we are very focused. We have already injected quite a substantial amount of CDL team into Sincere and we look forward to driving this platform as one of our key growth and transformational catalysts in the future.
And lastly, on the right side is our fund management. As mentioned earlier, Frank is working hard to drive this asset. And we are especially excited about the opportunity to potentially set up our so-called REIT in Singapore as and when market conditions allow it to turn favorable.
So with that, I would like to turn this over to Yim Ming to cover the financial highlights. Thank you.
Thank you, Sherman. Good morning, ladies and gentlemen. We agree it's tough times and this set of results is testament to that. So let's go through this with a little bit of color.
PBT fell by 97.2% versus first half of 2019. This slide provides a snapshot of the challenge we faced in each of our core segments at PBT level.
First, let's look at property development. Due to the timing of profit recognition, revenue and PBT for first half of 2020 is down $72 million and $65 million, respectively. JV projects such as Boulevard 88 as well South Beach Residences contribute to PBT but not to revenue, as there are equity accounted for. As we have reiterated many times, the timing of profit recognition makes this segment more volatile. Projects that contributed to first half 2020 are largely The Tapestry, Whistler Grand and Amber Park of which profits are recognized progressively.
For first half of 2019, the big contributors include completed projects like New Futura, Gramercy Park and HLCC in Suzhou. The profits from these projects are accounted for in entirety as they were sold as completed projects, and in the case of HLCC, recognized on handover. This is further exacerbated by higher financing costs as the group now expenses off interest expense for projects where revenue is recognized progressively. And with the several ongoing projects, there's actually more financing costs for the first half of 2020.
Next, let us move on to hotel operations. This segment suffered the brunt of the pandemic. As of 30th June, 28% of the group's hotels were temporarily closed. This was driven largely by occupancy decline. Global occupancy stands at 39.4% for first half 2019 -- 2020 versus 72% for first half 2019. Revenue fell $430 million, and PBT for first half of 2020 reverses to a loss of $208 million. This includes a $34 million of impairment losses provided on 8 hotels, of which 6 are in the U.S.
In contrast to the sharper decline in revenue, the pretax losses were mitigated by cost-containment measures as far as government support across various operating regions, for which the group is very thankful for. The second quarter of 2020, hopefully, will be the worst in the heat of the pandemic.
For first half 2020, U.S., Europe and Asia have all generated pretax losses with the biggest impact being in New York due to the severity of the pandemic as well as high cost structures.
For the Asia region, the losses are largely concentrated in Korea, Taiwan and Hong Kong. Actions taken by the Singapore hotels were swift and mitigated the situation with tactical opportunities. Notably, the July 2020 RevPAR and GOP performance surpassed that of June across most regions, and this is very encouraging.
Next, let us move on to investor properties. Revenue for this segment declined 11% and that's largely due to 2 parts, first being the rental rebates provided largely to retail tenants in Singapore, Phuket and Suzhou; and second being the lower rental from CDLHT hotels that accounted for as investment properties due to the pandemic.
PBT, in contrast, fell significantly due to the lower divestment gains. First half 2019 PBT was boosted by substantial divestment gains from PPS 2 of $197 million. There was also higher depreciation and financing costs incurred for this segment comparing the 2 periods under review. Again, we would like to remind that the group does not fair value our investment properties, but depreciates them instead. The depreciation for first half 2020 amounts to about $59 million.
Lastly, we cover the others segment, which includes basically everything except those in the 3 core segments mentioned earlier. This segment was the bonus, I call it. So Sherman mentioned earlier, its high PBT of $81 million driven by a few things: divestment gain from SHR; higher contribution from property financing business; as well as also higher interest income earned from loans and bonds issued by Sincere, which has since become a 51% JV in April 2020.
Next slide, please. Next slide shows the revenue by segment for half year for the past 3 years. Half year 2018 included contributions from Brownstone and Criterion EC, which is why you see an over towering blue bar on the left-hand side. Again, this display the volatility of revenue recognition for this segment.
For half year 2020, revenue fell 33% across all 3 core segments with hotel operations accounting for 82% of it.
Next slide, please. This is the EBITDA by segment for the half year for the past 3 years. EBITDA fell 66% comparing 2020 and 2019. This decline is much lesser than the 97% decline in PBT as the depreciation for the half year of 2020 being a fixed cost, so to speak, is about $141 million for half year 2020.
Next slide, please. This is the PBT by segment for half year for the past 3 years. All 3 core segments reported lower PBT versus 2019. And hotel operations, again, bear the brunt of it this time with $208 million tax loss -- pretax loss and this includes the $34 million impairment losses.
Next, let us move on to the financial metrics. Including fair value gains on investment properties, our net gearing stands at about 50%.
In tough times like now, we are thankful to the banks who have always stood behind the group. Liquidity is of utmost importance, and as of 30th of June, the group maintained a strong cash reserve of $2.7 billion. The total of cash and available undrawn committed bank facilities totaled $4 billion as at 30th of June. Ahead of time, the group has completed most of its planned financings for the rest of the year. And to date, the cash and available -- and undrawn committed bank facilities stands at $5.1 billion.
Average borrowing cost remains competitive at 2.1% with an average maturity of about 2.1 years. Notably, the interest cover stands at a low of 3.9x with the substantially lower pretax profits, as explained earlier.
Next slide, please. This is the last slide. We just want to assure everyone that the group continues to exercise discipline in capital management. We're also happy to inform that the group has always made it a focus to maintain a balanced debt expiry profile as well as the debt currency mix that evolves with all geographical concentration.
With this, I end my presentation. I hand over back to Belinda, please.
Thank you very much, Yim Ming and Sherman, for the presentation. We would now like to move to the second part of today's briefing, which is the Q&A. [Operator Instructions]
I see some hands up in the Zoom platform. I'm going to open up the floor to Louis to ask your question. Louis, please.
This is Louis from Crédit Suisse here. I got 2 questions. Firstly, I think you mentioned that you are looking at possible divestments of noncore hotels as well as some of the assets at Sincere. Are you able to give us a sense of the target in terms of value or number of assets that you are potentially exploring in terms of these divestments, some ballpark number on that?
Yes. Eik Sheng here. I'll take the one on the hotel, and then I'll pass it over to Sherman to talk about Sincere. So I think somebody also asked a similar question. We are looking at the portfolio, I mean, even after privatization. And of course, there are opportunities for us to repurpose some of these assets. We are continuously developing some of these. But I have to say that it's quite challenging for some of these markets. I mean we talk about London, even in the U.S., the process to change the use is quite long and challenging as well. So I wouldn't say that it's a focus for some of these assets. And predominantly where we have core markets, I wouldn't say that we are actively pursuing any of these. But we would definitely want to follow up on some of these opportunities within the portfolio. I can't give you a target number in terms of the value that we're looking at for time being. But as and when we are able to, we will definitely announce some of these.
Thank you, Eik Sheng. With regards to the Sincere investment properties, as I mentioned earlier in my presentation, a fairly large chunk of their properties are in retail as well as they have several hotels and serviced apartments are sold. And as we've offered, right, retail and hospitality has been very hard hit, still suffering from the aftermath of the pandemic. So we have more than 10 assets actually on the list for -- to be divested. But I can't give you a value there because that's, very confidential. But the truth is, it will be something that will likely take time. I mean I think now it's not the time for us to go out there and just do a fire sale, right? I mean many of these, I mentioned, the assets are still recovering from the effects and you do not want to do a fire sale and recognize such little value for the asset.
So while asset divestment is a key strategy of ours in order to straighten out the capital structure and reduce the debt at Sincere, but it will take, I think, the better part of the next 12 to 24 months as we start to divest the assets at the right time because we still want to ensure that we derive good value from this portfolio that was built up over time. Many of the retail malls in actual fact are some of the top-performing malls in their specific districts or sub-area. So this just -- as I mentioned, the foot traffic has been lower than normal. And as for the hotels, they are also slowly recovering. I mean some of the Hilton hotels, their occupancy have dipped to very low levels but are now recovering back to around 60%, 70%.
So again, I think, at the right time, I think we will push forward with this. But we are already in the process of discussing. We have gotten offers from some buyers. So we will certainly update all of you as and when things come to fruition.
Okay. And the second one is just a more straightforward question. I know that you provide in aggregate the carrying value of investment properties versus fair value. Are you able to share with us what these values are for Fuji Xerox as well as Central Mall?
Maybe I'll take that. So Louis, the values that we have assumed right now in this provision of the aggregate value was assuming that the investment property is currently [ at ] capacity. So -- I mean I'm sure you are able to check that proportion, our cost is a very low amount. It's about $150 million, which is evident from the financial accounts of which is a lot start with. But in terms of the fair value, I think what's indicated in here would have been if Fuji Xerox continues running on a DCF method. It has not really taken in the redevelopment potential.
Yes, I understand that. So basically, just wanted to get a sense of, as it is, the upside in terms of fair value based on current use, and of course, with the redevelopment, you will be even higher. So if you could share more color, that would be great. But I understand.
Louis, you are so-called more well-versed expert than all of us. You should know office capital values there. So you do the math after we redevelop. I mean our office, as we mentioned, is 40% ready. Then you apply your rough resi for sale as well as some serviced apartment value to the remaining 60%, and you should be able to derive what you think the fair value will be.
Thank you, Louis. I'm going to move on to the next questions that is going to come from Mervin.
Just got some questions for the hotel segment in particular. The first one was in regards to the loss, about $200 million, slightly bigger than the guidance you had of $120 million to $140 million a month back. Just wondering what's the difference.
And the second question would be how far are we in terms of a break-even level in terms of RevPAR? It's about $60 at the moment. How much further do you need to rise to get a break-even level?
And then my final question in terms of the dividends. I saw the interim dividend has been cut. Will you be still paying something at the end of the year? Or will you be suspending it for this year?
I will take the first question before reverting to either ES or Chairman for the hotel highlights. So in terms of the profit guidance, I think at that juncture, I think we were looking initially at looking at impairments of the hotels only at the end of the year. So there was actually uncertainty at the point in time. And of course, I think we wanted to be more prudent and so we have accounted for impairment losses of $34 million. That's one of the big variance between the profit guidance and the reported numbers. So the Singapore hotels, I think it has indeed -- did a little bit better than before.
So the other one I think I hear you was -- sorry, Mervin, can you repeat your last question again?
How to break even.
Yes. What's the break-even RevPAR, yes, given your cost-containment measures that you should enact already?
Yes. Actually, this question will be a little bit convoluted to answer. Because right now, our RevPAR, I think we also -- is really depressed because of occupancies. And of course, I think over several parts of the hotels, whether it's Singapore or overseas, I think there are 2 tactical opportunities, of which the rates were substantially lower as part of doing our part. So -- and of course, a lot of the cost containment that we are doing, I mean, of course, other than the government reliefs, a lot of the costs are also fairly variable in relation to the RevPAR performance. But typically, I think we do look at -- I wouldn't look at RevPAR, but typically, at normal rates-wise, I think we probably need about 50% occupancy in order to break even it. ES, what do you think?
Yes. I think that's right because every region is different, and they're all geared for different market returns. Example, in New Zealand, they have done quite a bit of retrenchment. And even though they have reopened some of the hotels, I think they are still geared for very low occupancies, probably in the low teens to 20% for the short term. So I think during this period of time, they are still GOP positive for at least the last -- recent months that I can see. But I think every market can gear differently. It just depends on what level of occupancy you are expecting to recover from this.
I guess they'd be a bit hard, I guess, your thoughts on occupancy levels. I think Sherman shared the Hilton hotel's occupancy is about 67%. Do you see that sustaining for the remainder of this year [ or as Sherman said, there are ] declines?
By the way, Mervin, when I just add -- when I mentioned about how the occupancy rose from the low 20s back to around 67%, I was specifically mentioning just 2 Hilton hotels in Sincere's portfolio. But obviously, the global situation now is still very, very weakened. But ES, do you want to answer this question on occupancies and where do you see that heading?
Sure. I'll just start off and maybe Chairman would like to add in as well. I think we've seen some recovery in some of the markets with bigger domestic base, U.S., Europe, even China as well for the regional cities. So once they do open up from the lockdown, these are able to bounce back a lot faster. And we're seeing strong occupancies in, say, regional U.S., almost 40%, 50% in the last, 1, 2 months since they started to release the lockdown.
So I think that recovery can come back pretty fast, but there's always the danger that you may go back to lockdown again if you look at Hong Kong and Melbourne. So -- whereas the other cities, example, where there isn't a domestic base, I think we're looking at low teens to 20% for the time being.
In terms of room rates, is there significant pricing power? Or it is discounting heavily just to get some business?
I think our Chairman wanted to make some comments. Maybe, Chairman, you can comment on where you see occupancy and rates heading towards?
In U.S., which is the hardest hit, we have come out with a strategy and the strategy is simple. We think we can turn around pretty quickly because we tell all our people to work hard. If they don't, they just can't help with RevPAR, don't know when is it coming up. Occupancy, when is it coming up. All we did was we make our purpose, strategy is how to improve and we believe we have done a good job there. I believe we can do a much better job than what is anticipated. So I would think that it will come back sooner than later.
And as regard Asia, of course, Singapore, generally is sitting, we are doing quite okay. And the government in a second also it has decided to discuss some more we faced the worst recession ever in the whole of Singapore for many, many years. But I just want to remind you that we have 57 years of history and track record. We have gone through thick and thin. We're much stronger and better and bigger and more experienced.
Yes. Our present strategy is cash preservation, liquidity and optimism.
Yes. I've got a question from a client come in terms of the -- I mean chairman is highly experienced in hotels, so maybe you don't need a CEO. But just your thoughts on the management structure of hotel business.
I think the hotel business, we have, in the past, Clarence, he has resigned and left. So we have decided this post should not be filled. I, together, with Eik Tse and the team, we can perhaps do it much better in the sense that we know the figures at our fingertips and we know for many years history how we can move. But if you have somebody, he has a different opinion then sometimes he doesn't gel with your foresight, that is going to be difficult. But anyway, we wish him well and he has resigned. So we are not going to fill in the post anymore.
Okay. Then just finally my last question in terms of the dividend policy. What's the plans for a final dividend? Is it suspended or you're focusing on cash preservation at this point in time?
What is the question, please?
Chairman, he's asking...
I was asking whether you'll be paying -- yes, I was asking whether you'll be paying a final dividend, given the pandemic.
We try our best to pay, but governments say you must think in terms of cash preservation. But I think we always like to pay dividends whenever we can. But I think, it depends on going down -- going forward how is the situation.
Thanks, Mervin. I want to quickly move on to the next person that will be asking the questions. Can we move to Vijay?
Belinda, I think you should also announce which firm so that -- not everyone here we know.
Vijay, if you introduce yourself?
Yes. Yes. Can you hear me?
Yes.
This is Vijay from RHB. I have 3 questions, maybe I'll take one by one. Firstly, I think what is CDL's outlook on Singapore property market? And how has COVID-19 changed CDL's strategy in terms of pricing, marketing or even acquisitions? Maybe can you just give some comment on that? Also, can you just give some comment on U.K. property and how the situation is in U.K.?
I can take the part about Singapore and then maybe pass it to Mr. Chia for some extra comments. But as mentioned earlier in my presentation, we still -- we are very encouraged and we see our property development business in Singapore, especially, as being quite resilient. So far, while sales volumes are down, but we've continued to move inventory and the pricing has remained very stable. In fact, for some of the projects, we've been increasing pricing as so-called we start to shift a greater amount of inventory.
So I actually still see that the outlook is pretty positive for residential in Singapore. It will just take a while to come back. And obviously, activities have been partially curtailed during the Circuit Breaker period. But we continue to drive our sales efforts in different directions -- in 2 different manners. So therefore, you can see that we mentioned in our commentary, in our press release, we use virtual strategies, taking them to virtual tours. We have actually invested in various innovative technologies that can actually help to drive even greater enhanced customer and buyer viewing experience.
So over the last few years, even before the pandemic came along, our strategy at CDL has always been to innovate, right? I mean we cannot keep doing things the same way just in case the world changes and with disruption in technology coming hard and fast. And it's a good thing. I think that we started this effort several years back because, as has been shown, the pandemic has rendered a lot of people very weakened and we are quite lucky to have pulled through it on the whole with the exception, of course, of the hospitality business, which still depends on global tourism. But for most of our businesses, we remain relatively sheltered, and as I mentioned, we have continued to push forward to put in place innovative technologies to really enhance the experience. Even on the customer service side, I think we come up with a portal, we come up with a mobile app where customers are able to track the construction of their projects. So it's really been a very -- a much more involved and sticky customer experience. Mr. Chia, do you want to add any comments on this?
Yes. Thank you, Sherman. In fact, the demand is definitely resilient, especially the pent-up demand after the Circuit Breaker was lifted. And then the good thing is government side also have pulled back on the land release for the second half. So at least supply-wise, it's controlled to some extent. So as you can see from the second quarter, the price inched up a bit compared to first quarter. So it looks like proposition in the categories that mass market and mid-market are doing quite well actually in terms of demand and the pricing. Like Sherman mentioned, some of the projects, in fact, was adjusted slightly because of the stock, they are [ going ] quite fast. So we expect the market to be -- continue to be quite resilient moving forward, yes.
Okay. Do you plan to adjust your price? Or do you plan to acquire land bank at this point of time?
We -- firstly, as I mentioned, we have not adjusted any of our prices downwards. If anything, for some of our projects, we have actually started to adjust upwards as we get stronger sell-through rate for the existing inventory.
So -- and as for -- what was your second part of your question? Oh, the land -- in terms of getting land. Yes, we were lucky. As I mentioned earlier in my presentation, to get the first GLS tender for the year, we are grateful to the government. We have actually moderated down [indiscernible] land. We [ did ] confirm this that we released for the second half this year. So I think it's only 3 sites for second half of this year. So we're grateful to them for realizing that there was a bit of an oversupply situation, and with the pandemic hitting, it's likely to worsen things.
So I think now as the developers start to space out their launches and with less supply coming in the market, it augurs well, for our business. And we continue to be on the lookout for the right land acquisitions. But at the moment, we are also very contented with the inventory that we have. Earlier, I presented we have over 1,800 units that we still have to launch over the next 18 to 24 months. So I think we're still sitting pretty fine right now. But obviously, at the right time and at the right price, we will replenish as and when.
I'd like to add one more point here. You will probably appreciate that there are a lot of wealthy people coming into Singapore to buy properties, okay? And I think this is a very good sign because of surrounding areas from them to come to Singapore. I think this is a very important factor that you have to bear in mind.
Yes, Chairman. Just to add on, during the CB period, we do sell new units in Boulevard 88 and South Beach Residences to foreigners, yes. Yes.
Okay. Yes. My second question is on Fuji Xerox side as well as the redevelopment of -- sorry, Fuji Xerox. Maybe what sort of ROI can we expect for this redevelopment, which you have factored in?
ROI. Yes. Okay. I mean, as you know, Fuji Xerox is held with the historical land cost. So the ROI, we look through the numbers quite attractive with the incentives given by the government, a 25% enhancement in GFA, which is quite attractive. But the actual figures, we don't have for you now. But probably once we are ready, we can share more figures in the future, yes.
Okay. My last question is on M&C. I think there were a lot of CapEx, which were required for New York as well as U.K. properties. What is the strategy now? Do you plan to deploy a lot of CapEx to upgrade properties, taking downturn in consideration? Or you would be deferring this CapEx at this point of time?
So here because in New York, we have Sunnyvale, we have Silicon Valley, we are almost finishing it. And we are going to get somebody to see whether we can sell off the apartments first, okay? And that seems to take out quite a lot of CapEx. Elsewhere, if there are problems like roof leaking and all this, we've got to find some contractor to go and rectify the whole situation. But I would think that it is very encouraging that many of the situation that can be contained and it's a good sign that we are working towards it.
Yes. I would just add that, yes, we did announce some major CapEx earlier in the year. This was initially before, of course, COVID. Especially in the U.S., I think we announced the Millennium Hilton Downtown renovation. Those plans have all been, I would say, put off for now. And like what Chairman said, it's just the emergency CapEx at minimum that we need to keep things running and safe as well.
Anything else, we've only announced 2, the soft renovations done at King's hotel and the Studio M. Other than that, we don't have any other immediate plans.
I'm sorry, Vijay. Frank here, I think you had some questions on the U.K., right? So I might as well just answer it while you're online.
Yes.
So I think on the U.K. side, we have 2 different portfolios. We have the commercial portfolios and the residential portfolio. On the commercial side, like everywhere else, very, very resilient. So on 125, we continue to sign new leases. Existing tenants continue to remain, and we continue to increase the existing rents. So I think that portfolio is very resilient.
I think on the property side, like everywhere else and given the geopolitical uncertainty, there's flight to safety and flight to quality. So I think on the residential side, we will still maintain prices. We are starting to see sales starting to come back. For units that we can rent, we start -- we try to ramp them up, yes.
So again, the message is both our residential and commercial portfolio, quite resilient in the U.K.
Thanks, Vijay. Can I just move on to the next caller, Brandon from Citi?
Yes. Want to ask a couple of questions. Could you give us the breakdown of the GOP or EBITDA margin at the region level for your hotel business? And also, I think, given what you've seen for July and August, what's our expectations for second half of the year?
Yes. Maybe I'll take the second question -- the second part first. I would say for July and August, it has been trending positively for most of the regions, especially for both RevPAR and GOP. I think the exception might be New York where we did -- I think during the pandemic, we did have a key business to support essential workers and medical workers. But since the lockdown has ended and things have started to go back to normal, under control, that business has kind of fallen away. So I think that's the only dip that we have in New York. But of course, we're actively looking at other ways to fill up the business, potentially looking for student business and alternatives as well.
So -- but for most of the other regions, I would say that it's been positive, partly because the markets has really started to open up; and secondly, being the cost containment have started to effect in as well. So I think that flows down through the GOP margins.
I think on the region, one, that's something we haven't disclosed by region as -- for now. I think that's something we can work on and look at whether we want to disclose that by region going forward.
Okay. My follow-up question will be on the single residential side, right? I mean, of course, the sales have been moving quite well for the massive projects. But I think given what you've seen for HAUS and Handy and Amber Park, right, do you foresee that we may need to do some form of write-downs come end of the year if the sales continue to be a bit weaker than the [indiscernible] segments?
At this moment, I don't think so. We -- both projects, especially Amber, was -- were off to very successful starts. But yes, because, obviously, we are testing a new price benchmark in both locations so the sales rate we anticipated was going to be slow anyway. For now, I don't see that we have to do any impairment write-downs. And I think we have the benefit of time. Both projects are at least about 3 years away from so-called ABSD and GOP time line. So we have the ability, I think, to monitor things. And as and when if we need to do any adjustment to our sales strategy or pricing, we will do so. But I think we're still fine from now. Mr. Chia, do you have anything to add?
Yes. I agree. I think with the extension to the ABSD, we have more -- 6 months more to sell. And as you mentioned earlier, these would need time to market and sell, especially the one in Amber Park and needs a new benchmark for both locations. So we are confident that moving forward, we should be able to push more units, yes. Thanks.
Okay. I just have one last question, right, on the capital allocation front. Obviously, we have done quite a bit this year. We have Sincere's $1 billion. But I mean given where we are today, do you foresee making further acquisitions? And are you seeing any distressed sales in the market?
At this moment, and maybe I should turn this over to Frank, but at this moment, we are not looking to make any big, substantial game-changing acquisitions, such as what we did with the privatization of M&C or the acquisition of Sincere. I think these 2 are huge growth catalysts that will hopefully stand our group in strong stead for the next few decades once we get straightened both ships.
But in terms of large-scale acquisitions, I think this is not the time to go out there and continue throwing firepower around. We need to conserve cash and ensure that we can ride out safely through the current pandemic.
But having said that, we still continue to keep our eyes open. And I think for small to midsized kind of acquisition as and when frank or the rest of the team locate such opportunities, we will still consider. But definitely, capital preservation -- cash preservation, sorry, is certainly a critical factor right now. Frank?
Yes. So Brandon, to answer your question, I think so far, we have not seen distress sale on the physical side. So I think on the physical side, because of the low interest rate environment, it's still holding quite firm. I think where we saw some distress, and like Sherman said, we managed to then pick up on the opportunities on the capital market side. So in April, when the capital market took a big, big hit, we then took the opportunity to increase our stake in IREIT term, and that's where we saw distress, Brandon.
Just one final point that you have to bear in mind. A few countries, we are starting to see, forget about every day complaining of pandemic problem, we want to move forward with the new economies, how to move forward back this business. If you don't move forward and change to a new business strategy, you are forever lamenting the problem of pandemic. I think this is wrong. Business has to go on. And when you go on, then new life is going to be forward.
So I would like you to bear in mind that I think Singapore is doing the same thing as in some country. If you don't move on, then you start every day complaining about pandemic. If you don't move on to a new platform, then we have something to look forward. Forget about pandemic. You have something to move forward with a new platform, we will do much better in the course of time.
Very good, Chairman. I'm just going to bring others online. I do see a whole slew of questions coming in that is in text messages -- text format as well. But we also have a long queue on the attendees list and we want to cover as many as possible. [Operator Instructions]
I'm going to bring [ Nadu ] from CNA ONLINE.
[ Nadu ] from CNA. I have some questions about properties in the pipeline now. Right now, are there any expected delays in the construction of these properties in the pipeline? And how is CDL going to perhaps deal with the construction delays, if any? And what are CDL's plans perhaps to cushion the blow for buyers who are invested in the properties?
Yes. So I will pass to Mr. Chia, but just to kick it off. Yes, there will invariably be delays based on what we have gone through, right? So firstly, there was a complete stoppage of work during the Circuit Breaker period. And as we started to reopen, I think in June, as you would have seen, we've continued to -- the whole construction industry is continuing to face a shortage, especially for projects in the private sector. But we're very grateful and heartened by the fact that the government has been expediting efforts in terms of testing all the migrant workers, clearing them and making sure that they remain COVID-free. And of course, for private developers, we also -- for developers in the private sector, we also had to put in place the necessary social distancing and safe distancing measures.
So going forward, I anticipate that our projects will all start to resume and hopefully get optimal capacity within the next 2 months or so. But yes, I will not deny that there will be delays. And we are working closely with our contractors, including also allowing for extension of times, EOTs and stuff because, as I've always believed, it's a partnership, right, between us and our partners and suppliers. And everyone is going through a difficult time, so I think there must be some understanding there. But if we can catch up, hopefully, these delays won't cause too much hindrance to our project schedules.
Mr. Chia, would you like to add on that? You're on mute, Mr. Chia.
Fortunately, the government, especially this year, has taken a very active role to coordinate the whole process. So now the approval is very fast and then the workers are coming out at a very fast rate. So we could expect that things return to, I mean, the normal level, probably like Sherman said maybe about 2 months' time, we hope. Contractors, we work very closely with them and also have them to more or less expedite the process to get the sites ready for construction.
And at the moment, both our sites already reopened and then workers are coming in slowly. And I think at the rate MOH is clearing -- MOM is clearing the dormitories, I think that things should progress quite fast.
So we work very closely with contractor to how to address those delay, for example, the extension of time that Sherman mentioned earlier. We are open to discuss with them on the win-win approach. And it is an industry problem and we have to work close -- very closely with our stakeholders. And we think the overall delay may not be as frightening as we first feared to be.
For those projects that are not launched or are not ready for launching, but tenders are not called, we don't see much problem. For those few projects we launched in the pipeline, those, I don't think, are much problem. But those projects already ongoing, we are working very closely with contractor to make sure that we are moving at a fast rate, so the delay is minimized. Yes, thanks.
But the latest news, I know the government say construction may do away with a lot of rate dips.
Yes. Yes, they are. Yes, they're working very actively on that to help the industry to move faster, yes.
And then how could these, like, delays affect your bottom line? And how long can we expect UPs to be pushed back?
I think the delay will not affect a lot the bottom line because the interest rate now is very low. And there's a pent-up demand here and there. I am confident that this will be good for the industry and for us in the business.
Yes. Fortunately, the government has extended the ABSD and the project completion period by 6 months. That helped to mitigate the delay. So I think it depends on the contractor. Some sites may be delayed for certainly longer than others, but we think the 6 months should be able to cover most of the delay by the COVID-19 CB, yes.
It's something that most of our projects are also going to TOP later. Most of them are still in the early stage of construction.
Yes. Yes. I mentioned that things -- I think Sherman mentioned earlier, there are still quite a few years to go for most of project, except one project where we only do [ initial lift ] and we are not worried. It should be off soon. Yes, thank you.
Okay. Thank you, [ Nadu ]. The next person I'm going to go to is [ Jobert ] from [indiscernible]. [ Jobert ], if you would like to ask your question, please.
Okay, maybe he's not online. Can I move to Faris? Faris from Bloomberg.
Just one question for Sherman. What's your outlook for the break in office demand, given that people are still largely working from home and that continues to be the government's directive?
And also, if the company can share like what's the breakdown in terms of how many of your tenants have returned to offices.
Yes. Okay. So as you correctly pointed out, it's been the government's directive for companies to have as many employees working from home as possible. I think even though so-called we're over Circuit Breaker, but we want to contain any potential spread of the virus. So we have been doing the same thing. Even at CDL, right now, we have only between 10% to 20% of our staff back in office on any given day and we are trying to keep it as low as possible. And throughout our buildings, definitely -- I mean, I'll defer to Mr. Chia in a sec, but for our buildings, certainly, we have a large proportion of tenants that are still working from home.
But having said that, I've always held this view and not just on the Grade A office sector, but generally for -- across all the different office classes, but -- I feel that there's still -- despite the pandemic, despite this working from home, this WFH trend, I always believe in the value of having a centralized office. Yes, the office model may change slightly. People may move towards more of a hub-and-spoke thing where you have a central office but lots of satellite offices as well. But I still see a huge so-called growth future. I still see a huge future for so-called centralized offices. I don't think -- for all of us that have worked and worked for many years, I don't think anything can ever replace the interaction that you have when you're in the office, working with the team, working with your partners, working with your staff. I mean it's something that, over time, people who are dealing in this, right, if you think about it from all of our life experiences who have you learned the most from, right? It's usually from your mentors, your boss or other people that you respect at work. And you will never be able to craft that sort of relationship by working from home, right? These sort of relationships and mentorships, I mean, are all crafted when you're in the office, working with someone and creating interpersonal relationships.
So therefore, I always will still see a strong need for office space. It may evolve. The model may change slightly. But all these reports that say that our office is going away and everyone starts working from home, sorry, I don't subscribe to this philosophy.
Yes. Mr. Chia, do you want to add? I mean what proportion generally across our office portfolio, what percentage of tenants in the buildings are back to work and what percentage are still WFH?
I think probably the range between the 10% to 30% already back to the office, but I think more are coming in as the day progress. But the things -- there are still quite a lot of inquiries for new offices that -- from reports we have. And because of the new requirements, probably they need more spacing within their office for -- to put in the same number of employees. So even though the lesser employees may work in office, but they need a bigger space because of the safe distancing requirements. So there's pros and cons, yes.
Thank you, Faris. Let me just try and see if [ Jobert ], if you can pose your questions if you're online.
Sorry, I was muted earlier. Yes. This -- on the Yokohama acquisition, could you give us a little bit more details about that acquisition? How much was the purchase of this project? And when do you expect it to be completed?
And also wondering whether will this be sold on to the market or are you going to hold it as an investment rental apartment in Japan.
I will take a stab at it and then pass it to Frank. Firstly, because the acquisition is not completed, we do not release the purchase price right now. So we would rather wait till we complete it.
Secondly, as I mentioned earlier, the completion is due for Q3 of this year. So it should be any time now within the next 30 to 60 days.
And lastly, I think we're trying to build up a substantial and decent-sized portfolio of rental apartments in Japan because this has been a very strong, resilient sector that has not actually suffered from any COVID fallout. And in fact, occupancy rates are still very high.
Frank, maybe you want to add more color to this?
Yes. So thanks, Sherman. So this is actually a completed project. So when we take it over, look, we will start leasing it out. And like what Sherman said, the leasing demand is very strong. In Yokohama, there's not much supply. And even if you see supply, the supply is all on the older units. So one of the things that we have done is, like what Sherman said, we have bought in Osaka, we have bought in Yokohama and these are cities where we continue to see population growth. We continue to see strong demand. And obviously, these are 2 cities that potentially might get the IR resort. So we are -- so we like these 2 cities simply because of the macro dynamics.
And additional question. I'm not sure if this was asked earlier, but really interesting that you're doing some redevelopment here in Singapore. Fuji Xerox is an example, Central Mall is an example. Of course, Liang Court is another example. Can you reveal the development amounts that you budgeted for these projects?
Sorry, [ Jobert ], -- at this stage, we're not prepared to release any of these estimates. Earlier you heard Louis asked about so-called the fair value or the GDV and stuff. And at this stage, because we are still undergoing planning and we still need permission -- planning permission from the government, I think we're not prepared to release any numbers.
And then in relation to those redevelopment projects, I wondered, since Mr. Kwek Leng Beng mentioned also mentioned that there's a lot of foreign interest in the market right now, in fact, a lot of institutional investors are looking for all their buildings in Singapore that they could redevelop as well, are you also considering potentially selling some of your older buildings in the CBD?
Chairman, do you want to answer that?
You sell but not fire sales, okay? Depending on the situation, we never believed in fire sales, okay?
Yes. To add on what Chairman mentioned, firstly, yes, we, at CDL or Sincere or anywhere else, we don't believe in fire sale and we do have the holding power. And secondly, for us, we especially like -- we would rather redevelop or reposition the asset ourselves, so like in Fuji Xerox's case, we see great potential. We're redeveloping it, getting a 25% uplift to the GFA and now having office, resi and serviced apartments in one stack. So stuff like that, I think we would embark to do ourselves. So -- and certainly, for our flagship buildings like Republic Plaza, I don't think you can ever -- we will ever see us selling that.
But potentially, if they are very -- much older, noncore properties, maybe even some of our industrial, if the right opportunity came along to collaborate with someone or to do a direct sale, we would certainly consider.
But there are still quite a number of investors looking for investment in Singapore commercial market -- commercial office market. So it looks like they do have a lot of confidence in Singapore property market, yes.
Yes. I get asked all the time whether I have any office buildings for sale. But -- yes at this stage, no, not right now.
Thank you, [ Jobert ]. Let's quickly move on to Rachel Tan of DBS.
Just a couple of questions from me. On [ retail page ], U.K. commercial assets, looking at the condition -- market condition now, do you expect -- are you still confident to do it this year? Or are you looking to delay it to next year?
Rachel, earlier, I think, I mentioned that we will be delaying the REIT listing -- the potential -- sorry, REIT listing to next year just because we don't see that market conditions will be favorable in 2020. I think it will take a while for us to shake off the jitters from the pandemic and move into a more positive and optimistic state of recovery. I'll turn over to Frank to shed light on that.
No, Sherman. So definitely, Rachel, we are looking for probably a Q1 listing next year. I think -- look, even though the capital market has recovered a bit, but the volatility is still there. So I think we are waiting for the volatility to subside. So I think we see that volatility right now is trading around 30% to 40%. I think we need volatility to come back to about 20%, 25% before we will go for the listing.
Okay. Got it. My next question is on the Sincere negative goodwill. It seems like it's substantially lower compared to your announcement previously. Just wondering whether there's any write-downs on the Sincere assets. And are you expecting any more impairments in the second half of the year?
Yes. There's no write-downs or impairments because what we're doing is that we're going through, what we call, purchase price allocation or PPA exercise, Rachel. So basically, we have actually -- after 12 months from the acquisition, so acquisition was completed at the end of April. So we've got 12 months to complete this PPA exercise, although we are likely to be done with it in the latter part of this year. And actually, what we want to do is just take a very conservative stance. So this is basically us writing the so-called -- us so-called adjusting the value downwards on our books to ensure that, I think, we have a sufficient cushion. So for instance, with investment properties, we know that so-called COVID has caused quite a lot of damage to officer -- I'm sorry, to retail malls, to hotels, serviced apartments. So for stuff like that, right, we would like to write down the value to ensure that no matter what happens, at least on CDL books, things are adequately provided for.
So in that sense, I think as you go through and adjust the value down, this is, again, just adjustments. They are made by us working in tandem with KPMG who's our adviser on this PPA exercise. And this doesn't actually mean that portfolio is not worth what it is. But it's more of a financial exercise.
Of course, I mean if the world continues to be really bad and that it drags on for the next 2, 3 years, the value of the company may need to -- and so the value of all companies, the deal in real estate that's susceptible to COVID. But again, I think it's us being prudent. Yim Ming, you may want to add on?
So if you were to look at -- Rachel, you are spot on. So if you were to look at the balance sheet of Sincere, even as -- the audited NAV was still, as we mentioned earlier, $16.1 billion. So included in there was some $27 billion of investment properties. I think the biggest adjustment to NAV was actually, as Sherman put it, investment properties. I think we're targeting to reduce it substantially maybe by almost 1/3, yes. So -- and of course, we've got that supported by valuations as well. And I think because the bulk of the portfolio is also in retail, and in the heat of pandemic in April, I think it also took the brunt of the valuations on the retail portfolio as well.
And I think just to allude to, I think, earlier on, we also mentioned that we also want to tighten the balance sheet a little bit of Sincere and looking at divestment of some of investment properties. So this is a more conservative measure that the group has put in place.
Yes. As Yim Ming mentioned, right, many of the list [ calls ] and REITs have a firm that they do not want to do so-called valuations right now, especially in the middle of the year because they don't feel as meaningful and may even scare investors, and valuations are all over the place now due to COVID. Unfortunately, we have had to engage external valuer to value the properties in Sincere's portfolio because we need the valuations for the PPA, right, PPA exercise. And now it's like the last at least 2 months have been the worst time to conduct valuations.
So in essence, I think we will bring down the value of the portfolio, and I'd rather reduce the negative goodwill but leave potential upside in the future if things recover as we anticipate.
Okay. Just on the impairments in second half, on your overall portfolio basis, especially hospitality, should we expect more impairments in the second half?
I think that's a magical question to do right now. In fact, I think we -- I would say we're fairly contrarian already to have provided impairment this time around. so I think you will have seen from all the REITs, I think what they are saying is to do -- to do valuations today is highly subjective, right? And to a certain extent, the assumptions are also arbitrary. And I think it's also highly dependent on macroeconomic factors, assumptions of cash flows, et cetera, which has forms basis of how valuations are formed -- are prepared.
So of course, we took a bold move, a conservative move to try to impair part of it. And I think it also looks at how cap rate movements have -- could potentially move in the second half of the year. So I think actually, right now -- really right now, I think it's the most uncertain time, right? I think valuers are also very apprehensive as well. So I think there will be better clarity at year-end.
For the bulk of our portfolio, for IP and most of the hotels, which is actually all at lower costs, I think we're typically very, very confident. So in fact, we took a good look at those within a 20% headroom. And I think based on that, I mean I can't really comment whether year-end we will have more, certainly not what we hope because we already took it upfront today and we wrote a 2-page essay in the announcement to explain the step that we have done to arrive at that.
So I think it really depends on market -- I would say it's really market, right? I mean you look at -- whether your valuers are adjusting category, is discounting, a lot of actually very macroeconomic factors. And I mean what we have done is we have adjusted it slightly. I think particularly in the U.S., we have listed out cap rates as well. And we think it's very, very reasonable on our end, but we'll wait and see how things pans out at year-end.
Yes. Rachel, just one more thing is that we haven't taken in our share for; any impairments at the CDL HT level. They have chosen to do this exercise towards the end of the year for all the reasons we mentioned earlier. So whenever they do that, and if they do take any impairment, we will, of course, have to take our share of it as well.
Okay. Got it. That's very clear. Just one last question from me. Looking at your redevelopment plans for Fuji Xerox and Central Mall and I saw that you -- a bit more percentage from hotels and service residences rather than residential. Just wondering what are your thoughts on that.
Were you referring to Fuji Xerox, isn't it, Rachel?
Yes.
No. 60% -- sorry.
So just to answer Rachel. 40% is office and that's the cap, right? We want to get this 25% because the whole purpose of the CBD incentive scheme is to encourage or more live -- or live related elements within the CBD. Therefore, 60% has to be resi. So -- or serviced apartments. No hotel is allowed there. So therefore, we have our own mix, but we're not disclosing it for now, but unfortunately, ready for sale. I think this will help to monetize the asset and then a portion of it will be serviced apartments for rent. So I hope that answers the question for how it falls out.
Thanks, Rachel. I do want to bring this to a close. I only have -- I only can take on another -- just 3 that's on queue at the moment. For those that have written in your questions, most of them, I think, has been answered. If not, we will come back to you separately in an e-mail.
So I'm just going to take the last 3 questions [Operator Instructions] I want to bring in Wilson from Morgan Stanley.
It's Wilson from Morgan Stanley. Yes. Just 2 questions from me. So Sherman, especially you're on the ground in China now, how do you see Sincere doing in terms of recent residential sales as well as, I guess, land bank replenishment?
Yes. Residential sales have been strengthening in recent times, and this is evident when you look across most of the developers. But I think Sincere is still weathering the effects -- the aftermath of -- as you know, there was a lockdown in China as well but it happened albeit earlier than our lockdown. But they went through about February, March and part of April going through a lockdown period. So a lot of construction delays, and hence, a lot of handover delays as well which has delayed us from actually recognizing our revenue and profit here.
So it's been quite a painful first half, I think, for Sincere, and hopefully, we'll hit our stride going forward. But I do see sales strengthening. It's just like in Singapore when the Circuit Breaker ended, we saw pent-up demand as buyers went out there and started purchasing property. Maybe they got really, really tired of staying so-called in a very cramped environment or staying with their relatives and they just wanted to go out and buy more property. But certainly, we have seen that resurgence here as well in China. Whole pricing is still not very strong right now, still a little bit weakened. I do see some developers doing discounting here and there in order to move inventory. So -- but again, I expect that as we normalize through the year, sales volume and sales prices should continue to strengthen barring any second wave.
China has done a very good job of locking down the whole country. As you know, China is very anti-foreigners right now. I literally had to go through -- this is my second trip here, but every trip, I would go through the most horrendous application process just to try to get to China. Even through the green lane scheme, it's very, very tough. I mean they are really worried about imported cases. And in that sense, they've actually kept China pretty much with the exception of -- with the exception of like Xinjiang and maybe some cities in the northeast like Dalian and Jilin. Actually, they've kept most of China almost COVID-free for the past few months. I'm actually very impressed with their lockdown efforts.
So -- and in terms of -- sorry, what was the second part of your question?
So really just on the piece of residential sales as well as any progress on land bank replenishment.
Yes. In China, land bank replenishment actually takes a very, very key role because it's what helps to ensure so-called your future sales for the next few years because they turn around very quickly in China, much faster than in other countries. So actually, land bank replenishment has been -- it is a very key factor for all developers here, much more so than in Singapore or elsewhere. Also, there are various financial issues affected by land banking as well, so for instance, matters like capitalized interest where you can allocate it to future new project pipeline. So all that gets a bit more technical.
So it is important. But at this stage, I think because we are in the process of retooling and really optimizing Sincere's capital structure and we are trying to get the asset divestment plan underway, so I think we have tended to pull on the reins to not to allow too much land banking at this moment. They have bought one new piece of land in Wuxi. The GFA is about 100,000 square meters, will yield about close to 1,000 units. So I think that's been a big victory for the team, especially since Sincere hasn't had much land banking. They only had 2 pieces of land last year whereas, in contrast, some of the big developers can buy usually maybe 100 to 300 pieces of land per year, right?
So -- but we have to be -- so for now, we are being more conservative on land banking, but we have to be careful because if we -- the moment we stop taking -- buying new land, the profits for the next few years will start to evaporate. So I think we have to find a balance to make sure that we maintain the momentum. But for now, yes, I think we're a bit more cautious on this. And it alludes to what I mentioned earlier, which is I think cash preservation is very important, especially in this kind of an era of COVID where there's still a great deal of uncertainty in the whole world.
If I could ask Mr. Chia a last quick question as well. So Mr. Chia, I think earlier you mentioned you said there were a lot of inquiries for office space from companies who need some space for safe distancing. Can you share some color on that? Like are these big companies, small companies, what kind of industries? And also like how much space are they looking at, like 10% more space, 20% more space?
Okay. I think recently, the report came that most tech companies, they are looking to expand, in fact, looking at big spaces in the buildings, yes. So I think the tech companies are the more active ones, yes.
Thanks, Wilson. Can we just move on quickly to the second last one from Derek of DBS?
Just 2 questions from me. I think the first question is on platforms. Just looking at your China recurring income portfolio together with Sincere, I'm just wondering whether does it make sense to think about doing a China-listed REIT, commercial and retail together?
Yes. We have been looking at this REIT proposal for the last few years actually. Right now, China is starting to allow REITs, but they only allow infrastructure REITs at the moment. So there's no news on when they will allow other asset classes to be listed. So that is not something we can explore for now. We looked at potentially listing a REIT in Singapore with China retail assets. We have some, and Sincere has a whole bunch and there are actually other retail mall players in China that have actually expressed interest to us to combine to do it. So we can easily put together a sizable portfolio, but the problem, their license, their yield. As you all know, yields are not particularly high for commercial properties in China. And in fact, with the high borrowing cost in China, right, many properties, including offices actually have a negative yield. And retail is even worse, right, I mean -- and especially after being hit by COVID. So at this stage, I think it would be -- probably from a yield perspective, it will be quite prohibitive for us to do a listing.
Sure. Okay. My last question is on this Central Mall. I know the last question been asked, but just curious that if you need parties to come together for this proposed development, I'm just wondering whether will CDL be leading the consortium?
Just to clarify -- sorry. Yes.
Go ahead. Ngiang, go ahead.
No. It's not a JV, actually, because the incentives for a precinct, so we collaborate with parties -- parties for a certain overlapping common areas, we work together. But as far as the shareholding is concerned, they each own their separate shareholdings.
But unlike Liang Court, it's not a JV. So it's -- we are mainly collaborating more on the retails to ensure that -- because the retail area will be linked and will be of much larger scale, so we want to ensure that the retail offerings are more coordinated. But yes, I mean it's totally not a JV. So everyone's responsible for constructing and developing their own portion of the project.
Thank you, Derek. I'm just going to move to the final question, and that is from Derrick Heng of Macquarie.
Just to clarify again on Fuji Xerox, it seems like the 25% JV upside is the number that you kind of have already locked in. What kind of DCDP are we thinking about to capture this 25% upside? If you may share for this as well.
The next question is on the fair value uplift. I realize that if you compare the RNAV and NAV, the differential today versus the end 2019, there seems to be an uptick in the embedded surplus. Could you explain the drivers behind this increase?
I think, Sherman, the first question first. The DC and DP will not intervene at this moment yet because the plans are not approved yet, the principal approval not on yet. So we will know later on when we actually do this approval, yes. The second question, please.
Yim Min, you're on mute. Sorry.
On the fair value uplift, I think you were comparing between the NAV as well and the movements as well. So I think for this time around, I think we also have included -- or not this time around. For investment properties, there's also increase in investment properties from, say, for example, the new additions like the PRS sector that Frank mentioned about earlier. So that's already included with a fair value uplift on that. So the rest of the capital values in terms of NAV are fairly constant. In fact, for -- particularly for RP, I think we are looking at a fair value potentially increase with the strong office market right now as far as we've been fairly conservative before. And also in postrental, we actually have positive rental reversions.
Okay. Maybe just one last clarification. The 60% GFA for services -- residence and serviced apartment, could you just give a sense or ballpark how much is salable results?
Sherman, you want to answer?
At this stage, as I mentioned, because our plans are not fully finite, and they are not approved yet, I mean we're still applying. We will need to apply for provisional permission. So we're not at liberty to disclose. But if you want to take a safe approach, assume half, half, half.
Okay. Thank you, everybody, for all your questions. We have a few more that was on Q&A that was typed in, but most of them have been answered somewhat. And those that have not been answered, we'll come back to you via e-mail separately.
Before I close, I just want to reopen the floor to our panelists if there's any other points that you want to raise.
No? Okay, good. If not, then let me bring this to a close. I just want to say thank you to everyone who has joined us. We've come to the end of our briefing. We hope that at some point in time, we will all be able to meet again face to face in the near future. But in the meantime, we wish you all well and stay safe. Thank you very much for joining us this morning. Thank you.