The sale is effectively at net asset value, says Hongkong Land chief executive Michael Smith
[SINGAPORE] Real estate group Hongkong Land will sell its Singapore and Malaysian property arm MCL Land to Malaysia’s Sunway Group in a S$738.7 million cash deal, the companies said on Thursday (Sep 18).
The transaction is Sunway’s largest deal to date, lifting the conglomerate’s Singapore investment to more than S$1.2 billion since July.
The Malaysian group will assume ownership of MCL Land and its subsidiaries, “including ongoing development projects in Singapore, as well as its portfolio of income-generating and development assets in Malaysia”, Sunway said.
The sale is effectively at net asset value, said Hongkong Land chief executive Michael Smith at a media briefing on Thursday.
Most of the proceeds will go towards building a “war chest for future endeavours”, such as growing its ultra-premium integrated commercial projects in Hong Kong, Shanghai, Singapore and other Asian gateway cities, he said.
About US$150 million will be used to extend the group’s share buyback programme, adding to the US$200 million buyback from a recent acquisition in Hong Kong.
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The deal brings the total capital recycled by Jardine Matheson-owned Hongkong Land since 2024 to US$2 billion, hitting half the company’s target of at least US$4 billion by end-2027.
The transaction is expected to be completed in the next one to two months, Smith said. “It really marks a further evolution of the strategic direction… (where) we would no longer be investing in the residential build-to-sell sector, not just in Singapore and Malaysia, but across all the regions in which we operate.”
In October last year, Hongkong Land said it was exiting the residential development business to pivot towards fund management and to focus on ultra-premium integrated commercial properties in Asia’s gateway cities.
Smith said that Singapore, along with Hong Kong and Shanghai, were still “absolutely core markets” to the group.
A strategic review done before the decision to make the pivot found that while Hongkong Land operated across many Asian markets – including Singapore, Malaysia, the Philippines, Thailand, Indonesia and China – it was lacking scale in a particular marketplace, said Smith.
Residential development, though only 20 per cent of the business, consumed significant management time and focus, he said.
“The conclusion was that the capital markets were not valuing the profits that we were generating… On that basis, we then decided, if that’s what the market wants, then that’s what we should give, and we should no longer invest in residential build-to-sell.”
Instead, the group would focus on ultra-premium integrated ecosystems combining high-end retail, Grade-A office and hospitality, he said.
As at Dec 31, 2024, development properties accounted for around 17 per cent of its gross assets, and investment properties, the remaining 83 per cent.
Development properties contributed around US$126 million in operating profit, or around 12 per cent of total operating profit, in that year.
In the latest half-year ended Jun 30, Hongkong Land’s build-to-sell segment posted a net profit of US$68 million, reversing from a US$269.5 million loss in the year-ago period.
Net investment in this segment was US$7.3 billion, down S$0.5 billion from the end of 2024. In H1 2025, US$0.2 billion in net cash proceeds was also recycled out of the segment.
In Singapore, Hongkong Land has attributable interests totalling 165,000 sq metres of commercial space in One Raffles Quay, One Raffles Link and City Link Mall, and Marina Bay Financial Centre (MBFC). In Hong Kong, its Central Portfolio consists of 12 interconnected commercial buildings holding over 450,000 sq m of Grade-A office and luxury retail space.
It is aiming to expand its assets under management from US$40 billion to US$100 billion by 2035, much of which will be owned by third-party capital. The new model is expected to double profits and dividends.
“We’d have liked to do more in Singapore if there were opportunities for us,” Smith added. “Obviously, it’s quite a tight market, (and) there’s a lot of strong or capitalised competitors. But we have been here a long time, and we’d like to do more of what we have done (with MBFC).”
Sarena Cheah, the executive deputy chairman of Sunway, which owns real estate, construction and healthcare businesses, said the acquisition “marks a decisive expansion of our footprint in one of Asia’s most competitive property markets”.
With the MCL Land portfolio, the group will hold over 10 residential developments.
Explaining the move, she said the conglomerate has historically taken a passive role in Singapore’s residential development market, partnering with local developers such as Hoi Hup and Sing Holdings.
Most recently, the group acquired two private housing sites in the Lorong Chuan area.
“We know the market, and have been very keen to grow our presence,” she said. “When the opportunity for MCL Land came, (we) thought it was quite timely.”
With MCL Land, Cheah said Sunway would have an immediate platform, complete with a strong management team and deep market knowledge, to help the group “scale with purpose” and play a more active role in future developments.
The acquisition will also provide Sunway with “immediate earnings visibility” and a more sustainable earnings profile.
She added that MCL Land’s Singapore and Malaysia projects complement Sunway’s own portfolio. For example, MCL Land’s Wangsa Walk Mall, an income-generating mall in Kuala Lumpur, has yields exceeding 6 per cent and substantial redevelopment opportunities.
Cheah said the site’s plot ratio could be increased by up to four times and the development later repositioned into a transit-oriented one, surrounded by smaller residential plots.
In the medium to longer term, it could transform into a township development, drawing on Sunway’s expertise and experience as a “master community developer”, she said.
MCL’s five residential projects in Singapore, comprising 2,700 units, are sited away from Sunway’s own Singapore projects, which would give the Malaysian group an opening to strengthen its urban footprint in Singapore.
The five projects are Nava Grove, Elta, Tembusu Grand, Copen Grand and Piccadilly Grand.
With these five, Sunway’s gross development value will grow from S$1.7 billion to S$4.5 billion. Unbuilt sales will also increase from S$611 million to about S$1.8 billion, said Cheah.
Smith said that Hongkong Land set “pretty bold” ambitions last October to create returns for shareholders.
In an interview with The Business Times last year, he said: “The ideal situation is that we become a much more investment property-oriented, high-quality income company,” with the setting up of a Reit a possibility in the pipeline.
On Thursday, Smith said: “I’m very focused on closing that gap between our net asset value and our share price, and these types of transactions will help demonstrate that. So (we will continue) doing more of these types of things and then (look) for opportunities to deploy that capital.”
As at Jun 30, Hongkong Land’s NAV per share stood at US$13.62. Its shares closed at US$6.65 on the SGX on Thursday, down 1.6 per cent or US$0.11. Bursa-listed Sunway ended flat at RM5.35, before the news.
