During a briefing on Aug 12, City Developments’ (CDL) management pointed out that its book NAV based on historical cost accounting stood at $9.22 as at June 30, 2021. If NAV were to include fair value gains on investment properties, it would be $14.22. If NAV were to include fair value gains on investment property and revaluation surplus on the hotel portfolio, it would rise to $17. Hence based on the closing price of $6.83, CDL is trading at 0.7 times book NAV, 0.48 times P/NAV including fair value gains, and 60% discount to revalued NAV (RNAV).

Now what if the freehold Fuji Xerox Towers - which can be assumed to be held at cost of say below $100 million - were to be redeveloped with a GFA uplift, and in the ratio announced on Aug 12? Assuming construction costs at say, $650 psf, and selling price of residential and valuation of commercial at $2,400 psf, the gross development value (GDV) could be at $1 billion -give or take. Excluding development charge, Fuji Xerox Towers could add as much as 80 cents to CDL’s RNAV. Much depends on how the collective sale of the leasehold International Plaza goes ahead. A buyer for the latter would spur interest in Fuji Xerox Towers' potential GDV.

During a results briefing, CDL group CEO mulled whether CDL could bring in one or more financial partners for parts of Fuji Xerox Towers during its redevelopment.  A partnership may depend on whether CDL could divest the Seoul Hilton. The selling price could be as high as $1 billion. Some hotels in Seoul are being redeveloped into other uses. Perhaps CDL could find a South Korean partner to redevelop the Seoul Hilton.

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