1H 2023 Financial Results Briefing

James go head of portfolio management. Today's briefing will consist of a presentation followed by a q and a session. Please note that today's session will be recorded and it'll be available via a webcast. Before we start, let me brief you those present on the fire evacuation plans. These are the fire evacuation routes for you to take to the assembly area.

The next slide shows you the assembly area. Besides this building, we'll now proceed with the presentation of our financial results for the first half period, ended 30th June, 2023. You'll be presented by Miss Yiping, head of Capital Markets and investor relations. Keeping please. Thanks

For capital management leverage was 36.7% and we continue to maintain a high level of natural hedge at 75%. Let's dive in. So this is first half, 23 versus first half, 2022. Gross revenue is up 7.7% to $718.1 million. And this is mainly driven by, um, the three acquisitions in Singapore in the first half of the year. So the three properties are to this topa, uh, property, uh, one borough lane, as well as The Shugart that was acquired in the first half. Right.

Uh, net property income increased 6.7% to $508.8 million. Um, and CO is correspondent to the grass revenue. Uh, however, uh, offset by slightly higher operating expenses, the total, um, amount for distribution declined 1%. And this is mainly due to the increase in borrowings costs on rising interest rates as well as a higher, uh, loan quantum as we buy more properties, D P U fell by 2% to 7.719 uh cents. And, um, this takes into account the lower distribution and as well as the enlarged, uh, unit base following the issuance of new units, uh, during the private placement in May.

So this is, uh, first half, 2023 versus second half, 2022. Same, um, same reasons here. So grants revenue is up 4.7% and that is driven by the contribution of the three Singapore properties and for net property income. Similarly, um, also driven by the new acquisitions as well as, um, partially offset by an increase in the operating expense.

So distribution, um, fell by 1.7% and mainly due to higher borrowing costs. D P U, um, fell in tandem. And, um, and of course, uh, due to the enlarged, uh, number of units following the private placement in May. Okay, distribution, uh, for the period of 25th, may to 30th of June, we'll be distributing 1.58 cents, and you'll be getting the distribution on first September.

Moving on to investment management. So these are the three properties, uh, that were acquired in the first half. Uh, they, they're all in Singapore. The total acquisition cost amounted to almost 515, uh, million dollars. Um, these are very well located and good quality properties, and very importantly, they are creative. Uh, so during the same period, we also divested, um, a property, uh, KA plays, uh, for $35.4 million and at a very, uh, high premium of 55% to the valuation. Okay.

So this is overall in line with our strategy to deploy capital towards value adding opportunities, thereby, you know, improving the quality of our portfolio. You have seen this, so capital management, okay? As we continue to acquire properties, um, the total debt increase to about $6.6 billion asset 30th, June, uh, 2023. However, gearing is healthy at 36.7%, uh, following the successful, uh, equity raising in May. Uh, so we raise, uh, $500 million. Um, our emphasis is to ensure a healthy gearing level during this uncertain business environment. Um, the, our debt, um, is well spread out in any one year.

We have 15% or less of our total borrowings that will come due for renewal in the next five years. Okay? The interest cost for, uh, asset June is 3.3%. So this is the same level as March, 2023 during our first quarterly, uh, business update. Alright. Um, compared to December, 2022, it was a 2.5%. So the high level of fixed rate debt that we have, 82% is circuit, 82%. Uh, that help us to maintain and, you know, have a, that gradual increase in the, uh, interest costs.

So the rest of the financial metrics, uh, at very healthy levels, um, exceeding, far exceeding the required, uh, minimum levels, uh, by bank s Okay. We continue to enjoy the Moody's A three credit rating, which is very important. It provides us with a lot of flexibility, um, you know, and, and also definitely stronger access to capital. Yeah.

Okay, so we have, um, two sensitivity table here on the left, uh, is on, you know, the percent of fixed right, 82%. So for the balance, um, uh, 18% that is on bearable rate. So based on a hundred percent increase, a hundred basis point increase in interest rates on the variable rate debt, then the impact on D P U would be, um, a minus, say 1.8% for distribution. Alright?

And on the right it is, um, on our refinancing for the second half of this year. So we have about $668 million that's coming up for a refi and assuming a hundred, uh, basis point increase in interest rates, then the impact would be, you know, a minus 1% on the distribution profile basis. Okay. Natural hedge. So to minimize any impact, uh, from adverse exchange rate fluctuations, we have a high level of, uh, natural hedge of 75% of, for our overseas investment, which accounts, you know, for, um, for about 40% of our investments, right?

Okay. Portfolio occupancy, um, very stable at 94.4%. So if you were to, um, look at all the other country, all the countries that we are operating in, they are all above 90%. Okay? Um, we have some details here for Singapore, stable at 92.3%, right? United States decline slightly to 92.1%, and this is mainly due to movements in Rally Business Parks Australia improved by 20 basis points to a high of 99.5%.

And this is due to the high occupancy at Cargo Business Park, which is a logistics property in Brisbane, Okay? UK Europe. Uh, happy to report that all our 38 logistics property and our 11 data centers are very full, right? 99.5%. Uh, in terms of new take up in Singapore, um, we saw demand from tenants in the logistics, IT and engineering financial services industry.

Uh, most of the leases that were signed, uh, are for three to five years, right? Although, uh, we had a lease that was as long as eight, nine years by a bank. Okay? Um, overseas, uh, new takeout, uh, we saw demand from companies in the IT data center, logistics industries. Uh, there was a lease in the data center space for as long as 15 years. So all these, you know, long business will certainly provide clear with a long-term stable income stream. Okay, renter reversion.

So in Tokyo, q we achieve an average renter reversion of 18%. So if you were to zoom in on Singapore, it is a 19.5%. Um, and, and you, and for us it's 11% Australia, 12.9%, uh, and with our full year, uh, half year halftime, uh, 14.2%, uh, increase in the, the rents we will be guiding for a positive high single digit range for this year.

Okay, so the whale is, uh, 3.9, uh, yes. Uh, for the rest of this financial year, we have 6.9% of our gross rental revenue, uh, that will be, uh, afford renewal. Okay. So then, um, I will come to this, uh, ongoing project. So we have, we are working on almost $800 million worth of, uh, projects that's undergoing development, redevelopment, asset enhancements, and convert, convert to suit.

So this quarter we have a new addition. So this is 5 Toh Guan Road East, okay, which is the logistics property. Um, here, uh, this property is, we are gonna be spending $107.4 million to redevelop five Togan Road East. Um, it is very strategically located in the prime, uh, Togan largest park with double frontage of the p i e, uh, and Togan road. Now, we will be maximizing the plot ratio and the G F A will increase by 71% to 50 920,000 square meters.

So quite a sizeable, uh, logistics property. So the new property will have a, will be six story high with ramp up, uh, facility. Some key features, uh, include, um, 82, uh, dedicated loading base, uh, power provision for cold storage usage. Very, uh, large contiguous, uh, floor plate, uh, with ceiling height of up to 12 meters. So, uh, we will also be adopting, uh, sustainable, uh, construction, green concrete and sustainable products that will be used, and it will be targeted to obtain the green mark go plus or higher certification. So the completion will be in 2025.

Okay, so finally, um, to conclude, um, our well diversified, uh, and resilient portfolio is generating a steady, uh, stream of income. You know, as you can see, we will continue to acquire quality properties with good returns potential. So given our very healthy gearing of 36.7% and our strong A three credit rating, we are confident to ride out this economic uncertainty, right?

So with that, I end my presentation. Thank you. Thank you. Keeping we'll now proceed to the q and a session. For those present, please raise your hand and my colleague will pass you a microphone. For participants via Zoom webinar, please type in the question in the q and a function box. Please state your name and organization before your question. I believe Mervin,

Uh, the supply demand imbalance is still there. Uh, there's hardly any supply right now. Um, you can see that even ourself, we have actually decided to tear down one warehouse and to rebuild into a new remark facility. Uh, the reason why we didn't disclose that earlier is because we are talking to our tenants to move them to our own facility, uh, and we have, uh, already landed the, the anchor tenant, uh, on onto our own facility.

Uh, it shows that logistics, um, is a movement from just in time to just in case. And I don't think it is stopping right now. I think it's probably still a need and many companies are still planning in terms of just in case, uh, that's actually driving the demand. And also coupled with that, the supply is not turned on that fast, uh, overall in the industrial in logistics and even BP market here in Singapore, uh, this year, another 500,000 square meter space to be available, another 1.9 million next year. Uh, but you look at the pre-commitment are all very high within 60 to 70%, uh, business park. If you look at the supply and demand, uh, for the next three years, actually, together with the sponsor, we are probably the one that is driving a lot more supply in, uh, uh, science park, uh, including our a, uh, transformation I b P. So if you see the chart, most of a 0%, not occup occupancy is 0%.

Pre-commitment is mainly from our own properties, uh, but there are still two, three years away to go. Uh, so we are fairly confident that we should be able picked up from there. And also mentioned, uh, previously that the business park space, uh, actually has surprised us a little. Uh, I guess all of us were concerned over the movement of food from home, uh, banks, uh, moving out, but we are not surprised that they're still downsizing, uh, which is a norm right now. Uh, but successfully first queue, we have brought in one new financial institution into C B P and, uh, second queue. We also brought in another financial institution, new financial institution into C P P. Uh, so we see this as, uh, B A U, uh, given the fact that there will be relocation, there'll be downsizing, but as well as expansion and new take up in our, in our space, uh, industrial has been doing very well, uh, which is also dreaming, driving the, the brand growth. Um, I would let James touch on maybe anything to add not electricity and the us.

Sure. Okay. Uh, thanks MPH for the questions. So first, first off, on the eli, uh, we see similar trends as well. So our second half, uh, uh, rates that we have contracted is about 9% lower than what we contracted for the first half for next year. Um, our formula has been locked in, but we have not, uh, locked in the contract. The, the base components of that formula would in, would include, uh, cause of your crude oil, fx, et cetera. So that tends to move, but, uh, based on where prices are today, we would see a further decline in next year's elect costs as well. So again, that's, um, just to provide some guidance. Uh, moving on to US office. Uh, I, I appreciate the concern about the US given all of the negative headlines that you have seen with, uh, COVID, uh, accelerating the work from home, uh, kind of phenomenon. But, uh, I just like to put things in perspective.

If you look at the US as a proportion of the entire portfolio, they make up about 14% of which are 2% of that. This is in a u m terms, but it roughly translates to N P I as well. About 2%, uh, goes to logistics. So we are, we're down to about 12%. Then out of this 12%, if we cover it up further, about 5% belongs to the SOMA properties. And those Soma properties, they're very good grade A properties with a fairly long will. Uh, one is leased for the next 10 years, another for another four years.

And for the building that is, uh, currently has four years to run, the tenant has subletted one of the largest IT companies, and, and they invested a substantial amount to retrofit the building to their requirements. So we are again, very confident that, uh, that that building will continue to be lease even after the fourth year. So if I take out Soma, which is another 5%, uh, we are down to about 7%. And so this 7% would really be the three, uh, uh, initial, uh, portfolio that, uh, we acquired when we went into us.

So that would be Raleigh, Portland, and San Diego. And if I were to break down the dynamics for these three, uh, three cities, uh, San Diego stands out. Um, it's high 90, uh, well mid nineties kind of occupancy currently. It's, uh, really anchored by your tech, your defense tech, uh, life sciences, uh, San Diego is one of the top three overall markets in the US for life science companies. So, uh, there's a lot going on. Um, uh, a lot of, uh, good that's coming out of San Diego. So we are fairly confident with San Diego.

Uh, next we move on to Portland. So Portland, I, uh, I, I think, um, many of you would have been aware that, uh, it's been a bit bumpy and that the occupancy has come down since our original, uh, acquisition. And, and that's sort of like a reflection of where Poland is. Uh, it's, it's never been a tier one, uh, kind of city, but it has its own charms and we continue to see, uh, deal flows in terms of leasing. Uh, but they tend to come from smaller, uh, kind of tenants. But, uh, we have, uh, if you just, uh, observed for the last two to three quarters, we have more or less maintained occupancy there. So, uh, it's, it's come off.

But, uh, I, I, I am still fairly okay with, uh, Portland. Next I move on to Raleigh. So Raleigh this year, there was a big chunk of our leases coming up for expiry, and, um, quite a few of them are it, uh, kind of companies and many of them have downsides, which again is no surprise. So I think for Raleigh, the, the worst is probably behind us. Uh, we are true most of the lease expiries for Raleigh.

So I think overall, the message that I like to just pass on is, well, um, US definitely isn't positive, uh, as you can see from the headlines, but, uh, on the overall impact to the portfolio, uh, that's, um, not too bad, as in we are not overly concentrated. And that's where the beauty and the advantages of having a very diversified portfolio with $17 billion worth of a u m 230 properties across four continents helps because at any point in time, there will be some markets that will be doing better than others. Uh, case in point being logistics in Singapore three years ago, rents were coming off quite badly and today is, is the darling of the markets, right? So, uh, while I'm not saying that that's gonna happen to, uh, us in three years time, but I'm just sharing based on past experience, at least we have gone through cycles like that.

And the other thing that we have, uh, going on, uh, for us, in US is currently our rents are still below market, which is why you see that in terms of renter reversion, even for business park space in us, we are still chalking up fairly healthy kind of reversion. So that helps to slightly mitigate some of the losses that we get due to the lower occupancy. So I hope, uh, I've answered your question.

Some of, in, in summary, the US office is probably rally, that's the one that is probably would need to do some work. Uh, first quarter, the week occupancy came down because of rally second quarter as well, not rally, uh, Portland. There is downsizing, but we manage to find new tenants, which is why if you look at our Portland, even for second quarter, the occupancy actually climb up slightly.

So all in all, I think that is the market that we find that the flight, uh, from, uh, C B D locations to our suburban location is Portland is still a appealing factor for people to move. Uh, rally being a more of a research it requires, uh, uh, if you like our state, uh, investment into rally, uh, which probably we need some time to work on those vacancies. Yeah.

Yeah. Uh, hello? Uh, Can you hear me? Yes. Just one question on the acquisition fund, right? Can you update us on the EU acquisition that, um, you were supposed to be doing duty? Or is that, is that still in a process or is that delay? What's the reason for the delay? Right? That's the first question. And also on the acquisition price that, that your prospective vendors are looking at, have you seen any, um, interesting expansion in cap rates that you could see more due flows coming through over the next six to 12 months? Yeah, so to my two questions, thanks.

We are still on track, no delay. Uh, just to update, the duty has been completed, so we are just finalizing the, uh, the documents and the rest of the details. Uh, we should be making announcements soon. Uh, in relation to, uh, cap rates, uh, actually in terms of, uh, various asset classes other than us, which we see some movement in caps, um, Australia, um, Europe, uh, the caps has been quite stable, uh, even for our own assets. Uh, you probably have some time to look at the valuation later. Uh, our valuation has been fairly stable, a small movement, one 2%, uh, each of the country, uh, Singapore, actually the valuation went up. Uh, UK also went up by about 3%. Uh, I don't see any big, uh, expansion movement, uh, in Europe.

Uh, we probably will expect more transactions, uh, in second half across the countries that we operate in. So that may give an indication to value us exactly where should the cap rates be, uh, in the next six month. Uh, so we will watch that, watch out for that in our December valuation. Uh, what we hope to see is that now when the interest rate is, uh, more or less at the, I would say for some of these, uh, countries that we operate in, it's probably quite ish peak really, uh, we do see more interest to transact, uh, which is why I think the market is expecting more transaction in second half.

Alright, Thanks Deal. Uh, thanks William. And, uh, keeping for the presentation, um, just, just two questions for me. I think, um, firstly, with regards to the redevelopment to one, uh, are you able to share, you know, what is the expected R o I, I mean, you mentioned about, uh, moving of the anchor tenant. Are you saying that you have an anchor tenant there already or the anchor tenant from the building relocated? You have to

You Wanna take a second question? Uh, for the first question. Uh, so that's the anchor tenants existing there. Uh, we have moved them to another location of our property, of our portfolio. Uh, What is driving the redevelopment is actually a transformation from a cargo leaf, uh,

Uh, you won't be able to, I mean, you will see half a million square feet building coming up, uh, and in that location is quite huge. Right? Uh, in terms of yield side, uh, you're asking about M P I U, we probably looked at, um, six to 7%, depending where we can land in terms of the interest. Uh, possibly higher if we can land a coal storage, uh, which we manage to get higher electricity, uh, to be able to fit a coal store if we need to. Uh, so just to close up, we don't have any tenants right now, uh, but there is interest out there. Uh, we know there's some R F P that we are working on, and we are able to, uh, improve the yield if we can land it a coastal.

Yeah. So on that 668 million of, uh, borrowings coming due, um, some of it is, uh, maybe August, September, and then some of them are in December. Um, so the average cost for, for these borrowings, um, currently is about two odd percent. So when they come due for refinancing, I mean, assuming the same 10, all right, all things being equal, then the cost could go up to around the five, five ish percent, right?

But put in perspective 6 6, 660 $8 million is, um, you know, 10% of our total borrowings. Yeah. Yeah. So for the full year, um, I think at halftime the average cost is 3.3%. So for the full year, um, we think it's, it's gonna be around this level could be 3.3, 3.5%, thereabouts based on current benchmark arrest.

Thank you there for your question. And David, Have you, uh, done a study, um, for your end tenants that move from just in time to, just in case, how much more space would they need? Do you have an idea? I don't think we have that idea. Yeah. Uh, but conversations around has been more on, um, meeting of more their own tenants or their, their clients are requirements.

And the, I would say even for covid, when during covid, uh, we do see some of this, uh, stocking up of inventory, uh, it has reduced in terms of number of providers to provide all this inventory, but the amount of space that were taking up for all this additional stocking up and, uh, just in case has been the same. So, for example, the number of people, number of customers who were given the mandate to help the government stock up, uh, at that point in time was about four to five, uh, logistic player who were supposed to help with all this national, uh, uh, uh, mandate. Uh, the four or five has reduced to one, but the size of inventory is still required, is still the same.

So I don't think we could clearly see whether, is it a just in time or just in case. Uh, but you do see that a lot more expansion requirements out there. Um, even like now, uh, dear, we're asking about whether as a tenant, I mentioned there's R F P out there, uh, we are responding to some of these R F P and half a million square feet is in a location of togan is very attractive.

I can't give you an exact number. Okay. Um, another question is, um, can you discuss why the N A V dipped half on half? Because it seems like your placement was way above both, But you look at The Adjusted N A V is actually quite similar. 2, 3, 2, 2, 3, 1. And I guess my, my final question is going back to the, the refi, um, ING mentioned that the, you know, you're, you're gonna refi from like two odd percent to, to up to five-ish percent. So when we look at your sensitivity table, do we use the, the 300 bibs as the best indicator for sensitivity?

No. That's all things being equal, right? So cannot, I mean, there'll be other moving parts, right? Yeah. And forgot, I, I think I should also add, um, uh, some of, some of these headline numbers, right? Uh, sometimes we, we have to consider what currencies they're in. Also, you know, uh, Singapore debt is, will be cheaper, maybe around 4% for five year. Okay.

And then maybe for the sterling bonds would be around a five, five plus. Okay. So it, it depends on what currencies we're talking about. Okay. And the 10. Yeah.

We are 1 billion of hit room, uh, which is quite good for us to be able to use when an opportunity to arise. Thanks. Um, second question is on reversion, right? Understand is on average,

Yes. Yeah. If we include that, does the number change materially, Uh, in terms of the market renter right now? Um, like Reversion number, Reversion number won't be that high. Yeah, won't be that high. Yeah. Okay. Okay. Thank you. So if it is new tender, who comes in? Uh, they'll be likely given the supply demand right now in Singapore, they're probably quite similar to where we renew.

So a new tenant that comes in is probably the same as, uh, where we renew, but our existing tenant, we compared to the previous lease, uh, average. Right. And it's three years, so it's last three years average. So a new tenant comes in, you're just looking at a market rate. But in terms of contractual, they're likely to be same as our renewed tenants.

You catch that? Yeah. There was one period, our renewal was stronger than market rent, but now they're more or less the same. Anything to add James? No. Yeah. Okay. Josh, joy. Joy from H S B C. Hi, joy. Uh, two question. Uh, first of all, in acquisition, would you be explored other new markets, uh, on to tap into, you know, yield spreads?

Um, I think we are fairly busy in our, the, the, the markets that we're in right now. Uh, I think we've been, I mean, we talk about, for example, other mature markets, which is what we've been more keen on, uh, includes say Japan, Korea, and all this. Uh, but we find that it's a very different market from where we are right now. Uh, while we may get better use spread, but we want to make sure that we are able to execute them, enter at the sizable, uh, a u m or acquisition, and then subsequently be able to scale up.

So that's what we want hope to achieve. Uh, some of these markets may not be able to allow us to scale up that fast. Uh, if you look at our track record from Australia to UK to us, once we enter, we are able to scale up. Each of the market now is between 1.5 to 2.5 billion, which is quite substantial for us, uh, to manage, and we hope to be able to deepen ourselves there.

Uh, and then second question is, uh, to follow up on Singapore, your redevelopment were the lend lease, uh, being able to extend it on the back of redevelopment Plan? Uh, not at this point in point in time. Uh, it's not part of consideration right now. Yeah. And, and just to confirm, uh, six to 7% is yield on cost? Yes. Okay. Cool.

And, and, uh, if I may just follow up, um, just amongst your market, do you think it is still more, um, higher return to redevelop or would it be more attractive to actually acquire? Um, actually I would say the redevelopment allow us if there's opportunity for us to unlock, uh, plot ratio or change the usage to be able to tap on the higher renter. I think that's probably be more attractive, uh, given that construction costs has, it's, it's still high, but it has, uh, more or less, uh, stabilized, uh, as well as, uh, uh, in the markets that we are in, uh, we have started looking at much more AEIs, uh, probably what, uh, James, uh, can explain also, uh, in us because of changes in, uh, occupancy. Uh, it give us more comfort to invest into a e i, uh, that also attracts tenants to come back. I mean, tenants at their employees to come back to work. Uh, it helps them when there's more amenities. Uh, we are doing more white boxing, as in preparing the, the, the space to be leased up, uh, so that it becomes cheaper for them, easier for them to decide. Uh, once that, that that is done, I think it's probably easy for us to, to get it lease up. Uh, that's primary reason because construction costs availability, contractor has more or less stabilized right now.

Thanks, John. Any further questions from the floor in the meantime? I think there were some questions that are posted online, but I believe most of the questions have been addressed. Does anybody else have any other questions? Ula? Hi. Yeah, thanks. Thanks for the presentation, William and Gipping. I'm just wondering, okay, so there's a large expiry coming up in the US in 2024.

Uh, just wondering what it is and whether you've started negotiating, because was this from the first, uh, acquisition that you made? Of those, those three in those three regions, and then also in Australia? Um, you've got a couple of expiries, so other are your passing rents or your inplace rents a lot higher than the market rents, because that tends to happen in Australia after a while.

I'm just wondering whether those things would impact those, um, expiries then, um, the three properties that you acquired recently, and I, uh, said this before, I mean, they're only on 20 year leases, so, you know, what do you plan to do, um, when BAAs table kicks in? I'm just wondering, because there'll be some, they'll, they'll, will they start to be written, you know, where the valuation starts to fall?

And, um, did the valuations that, um, M U S T make in the middle of the year this year, did that have any impact on your own valuations? Do you think that you should? And also in Australia, there was a large d um, there was a, there was, um, a transaction, uh, on the property, the Dexus one. Yeah. Does that, does that have any impact on your Australian value? I know, is it more or less a different, different, um, asset class?

And then the last question is, you know, keeping, when you said that there were, um, that you had two tables, one on the left side and one on the right side, would both of them kick in this year? When you, when you, um, because you've got some floating rates, right, that you said though, impact, and then you 600 million's gonna be renewed at that high level.

So the hundred basis points, there'll be an impact on like two to 3% of D P U over there. Take That one easy one. Easy. All right. Table. Um, well, okay, it's not meant to, you know, guide on D P U, you know, it's, it's really standalone, all things being equal that it's pro forma, basically. Yeah, it's pro forma f y 22. Yeah. So what possible impact might have.

Yeah. But I think the point is that we want to, um, highlight that because of the high level of fix, you know, uh, that will really help to, uh, minimize the volatility of our D P U. Yeah. And, and although, you know, uh, when this six, $700 million loan, uh, borrowings come due, there are many ways how we can save money, right? I mean, we are not limited to the same, uh, structure.

Um, for the existing ones. We can always look at alternative options, like, you know, take on a different currency and then you swap it to a, you know, another currency, you know, that result in a cheaper, more competitive rate, right? But this is just a very, um, ballpark guidance. Um, like for like, you know, the same loan. If it was a five year loan, then we, you know, apply a five year loan looking forward what the cost might be. Okay.

Yeah. So the, your, your left and right table, I think if you looked at the, the unfixed portion, uh, it's been moving up, right? So in terms of impact, uh, it's not that, uh, huge for us, given that we have been able to fix now at 82%, uh, the right table, yeah, seems like a giveaway, uh, what to look out for, but as a performer basis. And there's no surprise. I mean, just that what asked about the question about, you know, average, these were loans that were signed five years ago. I mean, they definitely were much lower. And then if you refi, uh, you will know the numbers, uh, what kind of rates that we will be looking at, and then you will know what's the term in terms of, uh, the, the change in interest rate. Uh, moving up to your valuation question, uh, if you look at our valuation, uh, our US is negative, uh, 2.8%.

Uh, so what we did is in-house, uh, revaluation exercise where we look at operational, uh, performance margin occupancy, the renter rates that we achieve, uh, without touching the other re other, uh, variables that the value was done, example, cab rate, discount rate, uh, this was done by third party. Uh, so this is a in-house valuation just to adjust the performance for the six months, right? Uh, with that US came up to be about 2.8%. Uh, we, we find that as we also have a conversation with our valuers, the indication to us, if we were to do a valuation exercise today, you know, evaluators will guide probably in the market is about 25, 30 bips expansion for the assets. Uh, the locations that we are in, uh, Dexus came up, okay, that's for Australia. So, uh, menu life came out much higher, I think in terms of numbers about seven five bips, uh, which I think they themselves will say that there's a surprise with the valuation. So we are quite different in terms of the locations that we are in.

Uh, occupancy has been fairly stable, uh, while there's movement, but yet, uh, rental rates has been, uh, strong at the, at, uh, for us, for Australia. Uh, the movement is about 1.2% down, which also adjusting for occupants are occupancy margin. Uh, the rest of the operation numbers, uh, if we talk to our, when we talk to our valuers for in Australia properties, they also guided, you know, if there's any movement in cap rate is probably about 25 to 30 bips.

Uh, Dexus has moved between 31 to 32 bips. I think that's quite in line. Uh, so no surprise there. Uh, and Australia is also as well as that we have a very strong, um, uh, logistics as, uh, offsetting the numbers that that came down from office. Okay. Uh, so I think we are fairly aligned, uh, in terms of where we see the numbers are, uh, if we didn't even without, uh, adjustments or a revaluation exercise by third party. Okay.

Um, maybe I'll touch on your 20 year lease. Uh, we are in a building that we bought at 21. I don't think there is. Uh, we looked at various factors. Uh, what it was used before this, it was also a Phillips factory. Uh, this is brand new. Uh, they rebuilt this. Uh, if you look forward, I think the land use has still been in industrial. Uh, the likelihood obviously may convert to residential, but as it is, when we looked at, uh, how the industrial landscape, uh, has been executed here in Singapore, they will always requirement for employment in the residential estate.

So they will not take out every single industrial site in the residential estate to convert to residential and simply put all the employment facilities out into the west or the east. So every, uh, residential estate, there will be employment requirements. Uh, if you look at, I think I was talking to David just now, uh, if you look at where there's a hint of any change in the land use is when u r a change and industrial or a site to reserve our site, right?

So chances are, you'll know there will be a change in time to come in the concept plan where 5, 10, 15 years, uh, this has stayed, been an industrial site and has been here for the past 30 years, 40 years. So we believe there's a good chance that we will be able to, uh, uh, talk to J D C when at least do expire, uh, to extend this, this, uh, space. Uh, but bearing in mind that, you know, while there is opportunity to extend, uh, G D C today for all, any new leases is 30 years.

So it will be a norm. I think it's probably at a stage where we are able to buy in the past, you know, 30 plus years, because the, the lease was 30 plus 30 as new leases now is allocated at 30 years, you will then be able to buy maximum 27 years. Why? Uh, sorry, 23 years. Why?

Because there's five years moratorium and two years construction. So seven years is taken out of the lease, so maximum is 23 years. So that will be a norm. I think we've gotta get familiar with that. Uh, we definitely want to be able to continue the, hopefully owning this site beyond that 20 years. Uh, but if there is another opportunity for us where there's a risk thus shows up that we can't renew or they can't extend, obviously we look at divestment.

And in Singapore, short leases also has a life of its own 10 years plus minus. There is still a buyer pool, uh, uh, small medium enterprises who are not able to find themself qualify for a direct line and location. They will look at secondary market and it probably will be a cheaper source to buy a short lease so that they continue operation for seven, 10 years. Uh, even at 10 years actually is a few, a few cycle of tenancy every three years.

So at least you'll be three years of tenancy. So even there is, there'll be good use for even a short lease, uh, au expiry. Yes.

We have much clearer visibility in terms of, uh, what's gonna happen in the second half. Um, besides Raleigh, there's also quite a few, uh, leases coming up from the other legacy cities, which is, uh, San Diego and Portland. Uh,

And if you talk about five year lease after that period of, uh, com, uh, of, uh, compounding increases, it will typically be, uh, higher than market. But what has happened over the last three years, uh, particularly accelerated by Covid, is that, uh, with the very tight, uh, supply and vacancies, almost at 0% in most of the major metro cities that we are in, uh, which is Sydney, uh, Melbourne and Brisbane, we, we've seen record high renters being, uh, being, being signed. And that is prevalent in our portfolio as well.

So while the in-place rents are no doubt high, but market rents have actually caught up. Um, the other thing to note is, um, the way we calculate our reversions is typically an average. So we don't take the, the ending rent versus the starting rent, so the ending rent from the previous lease and the starting rent. So we look, if you look at average to average, there would still be positive renter reversion for Australia. Yeah.

Movin, you have any question? Yeah, I just wanna follow up on my electricity question. I appreciate that you haven't locked it in, but, uh, what, can you log in if you decide to log in for 2024? In terms of sense? Per what our, Um, I, I can't give you, yeah, we can't give more precise. Yeah. Because until we lock it in, that number will move every day, depending on the FX and, and the CR price, Would it be below 30 cents at least?

We kind of guide you on debt. Um, historical, given historical, um, 2021, we probably was less than 20 cents. 20, 22, 20 9 cents. Yeah, less than 30 cents. Uh, now it's above 30 cents right now. So we are looking at lowering, uh, these numbers. Uh, from 2022 to 2021, it was about 60% jump, uh, based on our utility. I think you have, you know, the numbers, uh, 23 I mentioned, we probably look at between 30 to 50%.

First half is probably a 40 plus percent increase, uh, second half, uh, as what, uh, James mentioned is lower than first half. So we expect full year, maybe 30, 40%, uh, compared to 2022, uh, then, so sorry, 2020 to come back 2022. So 24, we do expect the numbers to come down further, but we have not locked in, so we hope to be able to catch that window, which we have done so for our second half as well as our first half.

Alright, Sure. This a follow up question on the US portfolio. Uh, can you talk about tis, are they starting to stabilize or still increasing in terms of the new leases signed? Are you still getting the inbuilt escalations of that three ish percent or has it flatlined or Yeah, what's happening in terms of escalations? Thanks. Yeah, okay. I'll take that question. I think generally tis have remained stable, even though I think that increasingly tenants are asking for more.

So I think it's, it comes down to the process of negotiation, how attractive your assets are, um, how much supply is there out in the market. So to, to cut the, um, the answer short is, uh, it's stable, but it's increasing. Um, sorry, you had a second question on In terms of the annual Escalations. All right. Okay. So the annual escalations, they are, they're more or less there still. So we are typically looking at about 3%.

I think maybe just to run out on us is, uh, and William mentioned this earlier, I think to keep our assets competitive, say even in like Portland, which is, like I mentioned, not a tier one city, we are trying to get the best bang for our buck. So we do very selective AEIs. One example is in Portland, there's this building we call Atrium, which is a multi-tenanted. Um, and we are putting in a new amenity center inside there.

So you're gonna get gym, that's gonna be a cafe. Uh, there's like breakout rooms, meeting rooms and all that. So that's gonna serve as an anchor for all of the buildings, which is around that, that park. Uh, we're gonna spend about one and a half million, uh, on, on that alone in US dollars. Then in Raleigh parameter where, um, the parameter park where our properties are, we're gonna spend about $900,000, uh, to build, uh, outdoor terrace amenity for our tenants again. So there'll be, uh, landscaping, there'll be barbecue, um, and we'll be bring in like food trucks, uh, during the day to, uh, encourage people to come and make use of that, uh, outdoor amenity space.

Separately, we're looking at spending up to like about 2 million, uh, US dollars on white boxing. So what white boxing means is, in the us typically in the lease, there's no reinstatement requirement for the tenant. They leave. When they leave, it's on the as is condition. They don't have to tear down the walls, they don't have to remove their feet outs. So, uh, in the past, what would typically happen is, uh, we'll try to lease it as is, um, maybe just shampoo the carpets, uh, maybe bring in some new partitions, but typically keep it the same configuration. And in the past, tenants are quite happy to take those. But, uh, as the market has changed and, um, tenants are a bit more demanding in terms of wanting more brand new specs, that's where we are putting in this kind of kickbacks to white box the space, tear it down, put in like, uh, new carpets, new lights and all that, refresh the whole place so that when people come in, you know, it would be a lot more enticing for them.

So those are the kind of things that we have been doing, uh, on the side as well, um, to try and improve and make ourselves more competitive. Okay. We have a question from Derek, from d b s. Will you be able to, will you be keeping your current interest rate heading strategy given that interest rates have likely picked?

Yeah, so yes, we will have to be very nimble, uh, on this, right? So now we are at 82%. Uh, so given that high level, we do have the flexibility to, you know, have it at a lower level. Okay. So we, we will have to watch closely and, uh, be flexible. Yeah. And while is picking, but we also see that the, uh, longer term rates are more favorable, Are cheaper than the short floating Yeah.

Ones. And we also, I mean, getting a cheaper loan or cheaper rates right now, despite being a five years or six year out, uh, also allow us to catch up in terms of, uh, revenue renter growth, reposition of assets, so that we can actually be able to sustain a higher rates for long, uh, kind of scenario. Okay. Um, maybe also understanding.

Okay.

Um, they did, um, so there were preliminary talks between, uh, outside and Pinterest. Um, but that didn't really go very far, uh, in terms of even coming to like the, uh, some numbers in terms of if they were to pre-term, what kind of compensation would they be offering. So we didn't even get to that stage. Um, and as of, uh, right now they continue to, uh, honor the obligations and they continue to pay their rents on time.

So our understanding is this is more of a accounting kind of treatment that they have because they need to put that out in order to do some write offs on their accounts. But, uh, legally they are still bound and, uh, they continue to pay their rents. So we don't think that that's a problem for us. So there's no predetermination rights, uh, and dimension in their filing.

They will honor that lease, uh, including potentially looking at subleasing of, uh, or then then mention about preterm is to raise us as a request to us. Uh, but we didn't have anything further to add on that. Yeah. Okay. Any other Things? Any last questions from the floor? Acquisition? Acquisition, divestment? Okay. I think acquisition I've answered, answered. Yeah. Uh, divestment will probably still opportunistic for us. Uh, as we have, you have seen, we have divested one property here in Singapore.

I think when there's opportunity to look at divestment, we will look at that. Uh, but at least in Singapore, we find that, uh, the question about redevelopment acquisition, I think in Singapore there's still more opportunity for us to redevelop. Uh, we believe that location that we are sitting on a very good location. Uh, and if we can find the right, uh, usage to be able to get a higher renter, uh, that will help us to reposition our assets.

Any further questions? If not, I think that concludes today's briefing for our first half 30th June numbers. Thank you for coming and have a good evening. Thank you.