The Mysterious Woman Behind the City Development Ltd Family Dispute.

I was surprised to read that Mr Kwek Leng Beng, 84 years old, is still helming City Development Ltd ("CDL") as Executive Chairman- I would have retired at age 65 years old (if not 55 years old ideally) to enjoy my old age.  Worst still, Mr Kwek Leng Beng has brought a lawsuit against his son, Mr Sherman Kwek, for attempting a coup and wanting to remove him as Group CEO of CDL. This seems surreal and something that only happens in Hong Kong TVB drama. As a result of the chaos, investors are jittery over the future of CDL.

1. Mysterious Woman That Caused the Rift Between Father and Son
Since ancient times, disputes between human beings have always revolved around 3 matters, namely, (i)Money; (ii) Power and (iii) Woman. Mr Sherman Kwek had mentioned that Dr Catherine Wu, who had a "long relationship" with his father Kwek Leng Beng, interfered in matters "well beyond her scope". The attempted removal of Dr Catherine Wu seems to be the main trigger of the current legal battle between father and son as per Mr Sherman Kwek. 

2. CDL Share Price Disasterous Performance Over the past 5 years. 

CDL's share price has been a disaster for the past 5 years which saw it plummenting from S$9.77 per share in February 2020 to the current S$5.12 per share as at 27 February 2025. Mr Kwek Leng Beng has mentioned disasterous foray into China property market which saw the group losing S$1.9 billion dollars as part of a series of missteps of Sherman Kwek. The elder Kwek pointed to past business decisions under his son's leadership that have "put CDL in a precarious position", including a S$1.9 billion loss from CDL's investment in Chinese developer Sincere Property in 2020 and poor returns from UK property ventures.

Parting Thoughts

Interestingly, CDL net assets per share as at last publised 2024 results is S$10.17 per share. Hence current market price is 50.3% off its NTA per share. If CDL's share price crash further due to the current legal fiasco, maybe it will present a good opportunity to acquire some CDL shares with additional safety buffer. Afterall, CDL is a long standing organisation with well functioning internal structures in place. Once the dust is off the board of directors infighting, CDL will be up and running as per normal. 

United Hampshire US REIT Released Another Set Of Disappointing Numbers for FY2024.

I thought that United Hampshire US REIT ("UHREIT) released another poignant set of of 2nd half and also full year 2024 results amidst the inflation nightmare as well as the higher interest rate environment driving up financing cost. I am heavily vested in UHREIT, hence keeping a close eye on it. Despite grave disappointment over the past 3 years where we saw the market price of UHREIT as well as its distributable income dropping non-stop, there is still some consolation in that its latest balance sheet has strengthen with aggregate leverage ratio declining to 38.9%. This is certinaly remarkable given that it used to be towering near the 42%+ range. Let me just do a quick recap of the financial summary from FY2022 to FY2024 below.

1. 2023 vs 2022- Spike in Finance Cost Dragging Down Overall Results in 2023

2023 vs 2022

Finance cost was a major killer in FY2023 which increased by a whopping +32.2% from US$12.2 Mil in 2022 to US$16.1 Mil in 2023.

2. 2024 vs 2023- Spike in Finance Cost Gradually Stabilising and Hidden Unknown Downside Impact.

2024 vs 2023

For FY2024, finance costs of UHREIT continue to increase by +17% from US$16.1 Mil to US$18.9 Mil thus exerting downward pressure on Net Income before tax, fair value & gain on divestment of investment properties. If the 2 US rate cuts that was widely anticpated in FY2025 materialise, then rental escalation will finally be able to catch up to the higher interest rate environment.   

Nevertheless, there is one hidden downside from the back to office mandate from Donald Trump for government employees as well as US Corporate Bosses. On slide 8 of the power point deck, UHREIT management team has always been asserting that "On the other hand, the Strip Center sector has benefitted from the remote work arrangements trend as the additional flexibility has increased demand for the goods and services offered in Strip Centers, ranging from grocery shopping to dining. Strip Center sector values have increased 22% since June 2020".  So, does this mean valuation will head south soon given the back to office drive in US?

3. Distribution by UHREIT and Key Dates

For those still hanging on to UHREIT, do take note that the Ex-date of 2nd half distribution is on 26 February 2025 while the payment date is 28 March 2025. Distribution per unit will be US$ 0.0205 per unit.

Parting Thoughts

Well, 2025 may turn out to be the much anticapted "breakthrough" year for UHREIT to deliver better results and meaningful higher DPU to long suffering unit-holders. Let's keep our fingers crossed that UHREIT will roar back to life in this new year of 2025!

Pritam Singh Found Guilty of Lying- Looks Like Aljunied GRC Will Remain with Workers' Party.

First and foremost, I have originally no intention to comment on the guilty judgement by the local judiciary. But as a layman, I am just extremely curious on how the issues on hand can be decided by trial to determine whether something is a lie or not a lie. The only 100% certainty thing that can convince everyone is if there are videos taken or conversation recording to prove what he or she had said or not. Else everything becomes pretty judgemental albeit circumstantial evidences and witness statements, is it not? Anyway, I am not a lawyer, so I am resigned to being clueless on how these legal thingy works.  

Additionally, worst thing is does this issue even matter when there are larger issues at stake for Singaporeans such as high inflation effect on daily bread and butter matters. Personally, I thought that it is an enormous waste of public resources and time. Also, I read that Mr Singh is going to launch an appeal to the higher courts with regard to the judgement....so the soap opera continues. 

This trial of Mr Pritam Singh will only lead to more support and sympathy vote for him during the upcoming General Election. So looks like Aljunied GRC will remain with the opposition for another term.

US Office Commercial REITs Facing Bleak Future Outlook Despite Back To Office Mandate.

While many US Corporations have been increasingly forcing their workers back to office, it seems that the hope for US Office Commercial REIT to rally closer to their NTA value per unit relative to the current depressed market trading price maybe dashed soon. The upside factor of interest rate cut and back to office mandate by the US Federal government and CEOs of US global corporations are being offset by the termination of office leases from rapid downsizing of the Federal government.

1. Interest Rate Cut by the Fed in 2024 Reduces Financing Pressure on Commercial REITs 

The 0.5% cut in September followed by subsequent cuts of 0.25% respectively in Nov 2024 and Dec 2024 brought down US financing rate by about 1% overall. This also makes it more conducive to borrow funds either for CAPEX or purchase of commercial building.]

2. Weaker Bargaining Chip of Workers Due to Increasing Signs of Softness in US Labour Market

US labour market have been showing signs of weakening. US workers thus does not have the same type of bargaining power that they once did. So, when the head of various US Corporations start to exert pressure for staff to be physically back office to work, workers have to suck thumb and follow the new guidance. JP Morgan and Amazon are leading examples of corporations clamping down harshly on remote work and expected their staff to be back in office 5 days a week. The era of remote working may soon be a thing of the past.

Also, Donald Trump has ordered US Fed workers to be back office. This lead by govrnment example also boosted the ground for the private sector bosses to recall back their remote working staff. Therotically, this should drive back up demand for office space.

3. DOGE Targets To Cut Federal Government Office Leases

Recently, there was a discussion based on report by Trepp Research and Insights which mentioned that a sizable user of office space is the federal government which leased almost 150 million square feet of office space across the US and contributed rental income of $5 billion to the office commercial sector. While Fed workers have been asked to go back office, DOGE seems to be right-sizing the number of Fed employees. In fact, the federal government has already started terminating short term office leases and is eyeing for bigger lease cut. 

Summarising, the dark cloud surrounding US Office REITs will not be over soon. The drag on demand and occupancies for office commercial may last for 4-5 years.

Thoughts on Alibaba Surging More Than 50% Within 3 Weeks- Time To Sell Or Hold On?

I have been extremely busy with work these days with major projects coming in one after another and not really fully monitoring my various investment portfolios. It therefore came as a big surprise to me (Stunned like a vegetable) to find that Alibaba (HK9988) has surged by more than 50% within 3 weeks. My position in Alibaba is neither big nor small....my current cost quantum is around S$33K per record at an average of HKD77. Recently, I was astounded when I looked at my trading App. The sleeping giant had suddenly awaken.

1. Beneficiary of DeepSeek Rally and iPhone AI Partner in China

The mind-boggling spike in share price seems to be primarily driven by the DeepSeek AI rally and also the announcement of Iphone partnering with iPhone for their China market. When Alibaba unveiled its own latest version of AI after the DeepSeek announcement, it created quite a big stir for its incredulous progress. In addition, Alibaba has also invested in many AI firms. Simply put, Alibaba is now China's AI darling. It has morphed from an E-commerce company to an AI Tech company- at least, this is what the market perceive for now. 

2. Sell Immediately To Take Profit or Hold On?

Alibaiba (HK9988) seems to be a very volatile counter. In 2022, it dropped a whopping 30% from HKD100 to HKD 71 in less than a week- simply too unpredictable. It also has periods where it  languished for the longest time in the HKD70-HKD80 per share range. While it is tempting to just sell off to lock in the profits based on the historical lesson of huge rally running out of steam and then self implosion shortly, I think that I will be holding on to it for a longer term to see whether its AI transformation story can take it futher to become a multibagger winner. Its financial PE ratio is also still attractive despite the sharp rally in stock price this past week. 

Parting Thoughts

Since my stake in Alibaba is neither here nor there (not material enough), I guess I will just leave it in my portoflio without further action. The China AI rally has also helped breathe life into my other current China holdings such as Link REIT, Ping An and China banking stocks. This does somewhat helped to offset the disasterous performance of SREITs recently. 

The End of Paragon REIT- Eaten Up By Hungry Lions!

The seemingly wonderful announcement of an offer by Cuscaden Peak to buy out the minority unit-holders of Paragon REIT at S$0.98 per unit lead to a sudden surge in its market perfromance as at 11 February 2025. While Paragon REIT soared 11.2% in a single trading day to become the best performing SREIT of the day, some unit-holders are crying poignantly as they have bought Paragon REIT at S$1.00 to S$1.10 per unit before the high interest rate environment became the norm post-COVID that leads to the downward spiral in its market unit price.

1. Hungry Lions Butchered Retail Investors

While this latest offer of S$0.98 per unit is way better than the S$0.9372 per unit offered back in 2022, it nevertheless is way undervaluing the crown jewel, Paragon shopping mall. Furthermore, it is actually a free-hold property but financial engineered into a 99 years leasehold when injected by the then SPH into SPH REIT (currently renamed Paragon REIT) and we all know that it is sitting in the prime area of Orchard Road.  

I will take it with a pinch of salt that Cuscaden is playing hero to take up the extremely risky option (as per their insinuation) of major asset enhancement initiative ("AEI") of S$300Mil to S$600Mil over 4 years hence willing to buyout the minority unit-holders due to the execution risk. The truth is that Cuscaden is a commercial organisation that seeks to maximise profits for its shareholders. Their accountants, along with their commercial team,  would have done a detailed financial projection of the future prospect to recoup back the upcoming CAPEX to achieve a favourable reward to risk outcome.  

In view of Paragon shopping mall's future outlook post AEI, I thus think that a more reasonable price would be at least 20% in premium to its NAV of S$0.915, that is, at least S$1.098 per unit.

2. Will I take up the offer or vote against the offer if vested?

Note that I do not hold any units in Paragon REIT directly but my family members held around 11,000 units since 2019. I think that most REITs investors are more interested in a decent & stable distribution yield of 5% to 6% per annum. The AEI initiative will lead to a drastic plunge in distribution for the next 3-4 years as Clementi Mall will be left doing the heavy lifting during this period. I will probably be lobbying for my family members to just accept the offer and then move on to invest in other opportunities. The only issue is that of the late payment timeline of May 2025 (even if the EGM went through). Of course, if the REITs price crash further during this period, then Paragon REIT holder will benefit from the locked in S$0.98 per unit and vice versa if market price suddenly surge if interest rate decline more rapidly than expected.

Parting Thoughts

Personally, I do not like this deal as I do not find it very attractive or compelling enough for unit-holders. It would be great if Cuscaden can revise its offer upward by another 10%. But then again, there is a lack of clear direction for the growth of Paragon REIT given that its major unit-holders seems to have bought it to strip out its remaining investment properties. So, I am leaning towards the just sell and move on to other investment opportunities albeit the non-attractive offer. 

P.S: Please see my previous other post on Paragon/SPH REIT on 2 May 2022

Take It With A Pinch Of Salt-The Reluctant Half-Baked Chain Offer for SPH REIT By New Major Shareholder Cuscaden Peak And 3 Points To Note.