# CapitaLand Ascendas REIT (CLAR) - 1H 2024 Financial Results Briefing - **Event**: 1H 2024 Financial Results Presentation & Analyst Briefing - **Date**: 30 July 2024 - **Webcast URL**: [CapitaLand Ascendas REIT Webcast Details](https://investor.capitaland-ascendasreit.com/webcast_details.html?videoID=992634052) - **Vimeo Video ID**: `992634052` - **Duration**: 00:00:01 to 01:02:42 (1191 cues) ### Panellists & Management: - Mr. William Tay - Executive Director & CEO - Ms. Khoo Li Sun - CFO - Mr. James Goh - Head of Portfolio Management SG - Andrea Ong - Director IR - Johanna - Moderator IR ### Participating Analysts & Journalists: - Mervin Song (Analyst, J.P. Morgan) - Dale Lai (Analyst, DBS Bank) - Vijay Natarajan (Analyst, RHB) - Derek Chang (Analyst, Morgan Stanley) - Joy Wang (Analyst, HSBC) - Tan Yew Kiam (Analyst, CLSA) --- ## Table of Contents - **[00:00:01]** Opening & 1H 2024 Results Presentation - **[00:13:39]** Q&A - Question 1: Rental Reversions & Financing Headwinds (Mervin Song, J.P. Morgan) - **[00:26:31]** Q&A - Question 2: Geneo Pre-Leasing & Singapore Business Park Demand (Dale Lai, DBS Bank) - **[00:39:13]** Q&A - Question 3: US Office Occupancies & Cap Rates (Vijay Natarajan, RHB) - **[00:45:35]** Q&A - Question 4: UK Data Centre Redevelopment Scope (Derek Chang, Morgan Stanley) - **[00:47:46]** Q&A - Question 5: Change of Use for Legacy Industrial Assets (Joy Wang, HSBC) - **[01:01:37]** Q&A - Question 6: Changi & Tuas Logistics Cluster Dynamics (Tan Yew Kiam, CLSA) --- ## Verbatim Transcript (Audited & Verified) ### Opening & 1H 2024 Results Presentation **[00:00:01] Johanna (Moderator, IR)**: All right. Good evening ladies and gentlemen. Welcome to the first half of 2024 Financial Results Briefing for CapitaLand Ascentas REIT, uh, CLAR for short. So we thank you very much for joining us in person today as far as online, um, this briefing will start with a presentation by management as far as a question and answer segment. So if you're attending this briefing online, you can submit your questions anytime during the briefing via the q and a, uh, function on Zoom. **[00:00:27]** If you are, uh, attending the briefing in person, uh, after which you can raise your hand, I will call your name and the microphone will be, uh, passed to you. So before we begin the session proper, let me introduce the management on the panel. So, first we have Mr. William Tay, CEO of capital Land Sanders suite. Second, we have Ms. ksu, CFO of Capital and Asanders Street. **[00:00:56]** Next we have Macing, head of Capital Markets and Investor Relations. And finally we have Mr. James go head of portfolio management. And with that, I will hand the time over now to K who will begin with the presentation. Thank you. **[00:01:22] Andrea Ong (Director, IR)**: Thanks, Andrea. Good evening everyone. Thank you for taking, uh, the time to attend, uh, LAN Ascent Re's First half FY 2024 results presentation. Uh, let's commence the key highlights for the first half of, uh, FY 2024 as follows. Distributable income increase 1.1% to 313.8 million. DPU declined by 2.5% to 7.5 to 4 cents. Investment properties held steady at $16.87 billion. **[00:02:07]** Our portfolio occupancy remain high at 93.2%, and we achieve a high renter reversion of 13.4% for leases renew in the first half. Gearing is healthy at 37.8%, and cost of debt is stable at 3.7%. Let's take a look at the details. First half, 24 versus first half. FY 23 gross revenue increased by 7.2% to $770.1 million, mainly due to contribution from the chess building in the uk. **[00:02:50]** The STUGA in Singapore, MQX four in Australia, 6 0 5 5 last Boulevard in the US just to name a few NPI increased by 3.9% to $528.4 million. Partially offset by higher operating expenses. Distributable income increased by 1% to $330.8 million on the back of higher revenue and MPI and despite higher interest expense, uh, resulting from the higher interest rates environment and higher borrowings as we acquired more properties, DPU declined 2.5% to 7.5 to 4 cents in first half FY 24 because of a larger unit base. **[00:03:44]** When we, uh, compare first half FY 24 to second half of FY 23, uh, gross revenue increase by 1.1%, mainly attributable to the chess building in the uk. And the completion of the convert, uh, to suit from Office to Life Sciences at 6.055 Last Boulevard in the US NPI increased by a higher 2.7% to $528.4 million partially. **[00:04:21]** Um, due to the lower operating expenses, DEI increased 1.2% to $330.8 million in line with the higher NPI and partially offset by higher interest expense DPU increase in tandem with D-E-I-I-E, uh, 1.1% to 7.5 to 4 cents, uh, distribution details. So we adopt, uh, semi-annual distribution frequency. So for the period of first January through 30th of June, uh, we will be distributing 7.52 cents. **[00:05:03]** Uh, and you'll be receiving the dividends on 2nd of September. Um, we continue to optimize returns from our existing portfolio by upgrading our properties. So in July and a EI and Pacific Tech Center, uh, was completed, uh, this is a 10 story industrial property located in the jalan bouquet mirror vicinity in Singapore. So to enhance tenant experience, the main lobby and the common corridor were upgraded. **[00:05:42]** Occupancy has increased to 92.4% currently versus 83.7% in December last year. Okay, moving on to capital management, gearing remains healthy at 37.8%. Um, in first half, we term out, uh, some debt, about $600 million worth. Uh, this comprised of a seven year bank loan and a 10 year bond. So as a result, the whale has increased to 3.7 years versus 3.4 years in December. **[00:06:25]** Um, so this is a summary of our financial ratios. I will just highlight a few. ICR is healthy at 3.7 times. Fixed rate debt remains high at 83% and de weighted borrowing cost is stable at 3.7%. So compared that with, uh, December 3.5. And then in the first quarter March this year, it was, uh, 3.8%. Okay, a three, um, uh, rating, credit rating by Moody's is maintained, and this provides us with a lot of financial flexibility and strong access to capital. **[00:07:09]** Okay. Natural hedge. Uh, yeah. So to minimize any adverse, um, you know, exchange rate fluctuations, we have been maintaining a high level of natural hedge. So currently it is, um, at 76% stable. Okay. Asset management as at 30th of June, the occupancy rate for the portfolio remains healthy at 93.1%. Um, you can see that the occupancy rates here for Singapore, Australia, uk, Europe, they are overall stable at 92%, 96.8% and 99.3% respectively. **[00:07:58]** Occupancy in US is lower at 87.7%. So, um, we have some color in the next couple of slides. So in Singapore, um, the occupancy rate is stable at 92%, and this is higher than jcs. Um, island wide occupancy rate of about 89%. In the US it declined to 87.7%. And this is mainly due to the aspiration of leases at two single tenant properties in Kansas City and Portland. **[00:08:41]** So in Australia, we improve further to 96.8% from the 96.6% in March. And the improvement is driven mainly by high occupancy rates in two business space properties in Melbourne and in Sydney. The new tenants have signed five to six year leases. Okay. Uh, so in the uk, uh, Euro, it maintained, um, a high, uh, level of 99.3%. **[00:09:14]** So where, where are the sources of new demands? So in Singapore, um, they were from the engineering, the government agencies, and the IT and data center sectors. As for the overseas markets, the financial and professional services, government agencies and biomedical, uh, were the largest sources of demand in first half rent revision, a positive rent revision of 11.7%. **[00:09:54]** The first column was achieved for leases. Um, both Singapore and the US recorded positive almost 12%, uh, rent revision while Australia uk Euro average of about 7.7 and 10% respectively. Um, so for the first half, the average rental reversion is, uh, 13.4%. So looking ahead, we will be revising upwards our guidance from mid to positive high single digit range, well stable at, um, 3.8 years. **[00:10:38]** So, um, on a portfolio, uh, level, uh, we have about 6.8% left, uh, to go for rental, um, for, for renewals in the second half. So in Singapore, it's um, 7.2% number in US as 9% Australia, 7.5% of, uh, gross rental revenue due for renewal for the remaining, um, FY 24 and then UK euro, um, less than 1%. **[00:11:17]** Okay, So in the second quarter we kickstarted, uh, two new AEIs to optimize the returns and to improve the value of the properties. The two AEIs are at a period and one at Chinese City. So all together we are working on six projects here, totaling $573 million, and they're scheduled to complete in three Q this year. And, uh, right up to like first quarter in 2026. **[00:11:54]** So some, um, information on the a EI and A period here. So $23 million will be utilized to upgrade the drop off point and entrance to enhance, um, the tenants and the visitor arrival experience. Importantly, uh, we are also, um, you know, uh, re re redoing the layout of the retail mall and tenant and tenant mix to increase the footfall even further. **[00:12:26]** Okay, so a EI is expected to complete in four q, uh, 2 0 2 5 OCC, 1.5 million. Um, some, some refurbishment here for the lobby and the waiting area. Okay. And it will complete in three Q soon this year. So in terms of, um, the, the last, so we are last slide. We are still faced with uncertainties surrounding, you know, the inflation trend, the geo political tensions and possible changes in administration, right? **[00:13:03]** So however we are confident to adapt to any of these potential changes and we'll continue to provide, uh, best possible returns to unit holders amidst these uncertainties. So thank you very much. Thank you. Thank you, kipping. Now we'll move through the question and answer segment of, uh, debriefing. ### Q&A - Question 1: Rental Reversions & Financing Headwinds (Mervin Song, J.P. Morgan) **[00:13:03] Andrea Ong (Director, IR)**: And may I have the first question from the floor, please? **[00:13:42] Mervin Song (Analyst, J.P. Morgan)**: Okay. We'll have a Mervin from J.P. Morgan. Uh, thanks William and team for hosting us today, and congrats on the quite credible performance, given the significant interest rate headwinds. Uh, maybe you can start with the occupancy question, some stupids. Uh, I think James is such an a star, a plus student. It's, he's got vailable task of maintaining such high levels, but any thoughts of whether we expect for this to be done in Singapore or US going forward? **[00:14:11]** Uh, second question, I guess, William, **[00:14:16] William Tay (CEO)**: you give me a background, probably best person answer. Uh, any threat from Malaysia with A SEZ, uh, in terms of any of the tenants perhaps moving there, giving a lower cost of operations. Thanks. Thanks. Uh, James can add on, I'll just start off first. Uh, we have actually performed fairly well, I must say, uh, overall portfolio occupancy now about 93 plus. **[00:14:48]** Uh, and this is first and second quarter. Uh, to be honest, uh, prior to this year we had seven quarters of above, 94%. It was very bullish. If you remember, at a point in time, logistics was full almost everywhere, every country. Uh, but we now start to see normalization of this logistic demand. Uh, it takes some time for us to backfill, uh, not because there is no demand, but I think, uh, customers are being more selective in where to choose, uh, their, their expansion. **[00:15:25]** Take us for example. Uh, we have, we had, we have customers who left us, not because they're downsizing, but they're expanding. It's just that we don't have enough space for them. They're expanding and they have to move up, right? Uh, that is, that is, uh, the trend for logistics in, uh, us. Uh, if you're asking about occupancy across, I would generally say that, uh, overall on a portfolio level, uh, we should still be very stable. **[00:15:53]** Um, 93, 94, uh, by year end is probably what we are looking at. Uh, that is probably what, uh, we can achieve, uh, is probably difficult for us. To move back to that. I think we had 94.5, 94.7 level. I think it's quite tough for us to move that, uh, move back that, uh, to that level. Uh, where the pressure is, uh, is likely to be from us. **[00:16:14]** Uh, as you pointed out, US business park, uh, today, we are still seeing negative absorption. While we lose some tenants downsizing, we manage to backfill. Uh, but you do see that the occupancy for US office is slightly trending downwards, and it's likely to be the continue the case, uh, for next, uh, two quarters. Uh, Singapore will hold up well, um, you probably heard some of the announcement by some of clients who actually announced they are coming in into CBP, uh, uh, way before we can make the announcement. **[00:16:48]** Uh, this will bring up some of our, uh, business part occupancy. Industrial logistics can, will continue, do well here in Singapore. Uh, if you look at UK Europe, we have hardly any, uh, expiry for the next half. So you'll be quite stable. Uh, I think I mentioned about Australia, uh, some vacancies, but we have to backfill them. **[00:17:09]** Uh, your second question, we are just take on that first before James. Uh, you want anything to add? Uh, SEZI think the key thing is it's a a few more years to go. Uh, the key thing, I think your interest is probably how it affects, uh, more towards our logistics. If there are free flow of cargo between the two countries, uh, how will three pls look at this, uh, network to be able to service their customers? **[00:17:39]** Uh, in terms of supply chain, uh, we do see that it's possible that there may be some flow of, uh, cargo to, to SEZ. Uh, but we believe that if it's time sensitive and critical, they will still hold it here in Singapore, uh, than to re crossing the border. Uh, other than that, perhaps where it will be interesting for us is, uh, whether there will be further growth in industrial, say in the northern part, uh, of, uh, Singapore near Woodlands. **[00:18:09]** Uh, if that will drive, uh, the, the growth of industrial, uh, movement from Singapore to to Malaysia and as well as, uh, growing the Malaysia part, I mean Singapore part in the north, uh, business part, I don't think there'll huge impact, uh, from the SEZ. Sorry. We'll move on to The next question. Oh, okay. You wanna add? Yeah. Okay. Um, thanks William. **[00:18:36]** Perhaps I just share my assessment of where the markets are and how we view them, rather than talking specifically about occupancy. I think first off, um, there's a big general macro trend in terms of global logistics. Uh, we are coming off a supercharged growth phase at that point. You know, we are getting very strong double digit kind of rental. **[00:19:04]** Reversions occupancy was a hundred percent because at any point we could back fuel a tenant that is not, uh, renewing their lease with a new tenant. Um, coming off that we are still in a very high and strong growth phase, but you will expect a bit more downtime. Uh, as William has mentioned, there's a bit more normalization in terms of for the logistics cluster, and that's globally, uh, we see that, uh, that trend in Singapore, in Australia, in US as well. **[00:19:32]** Next, if I were to touch on Singapore, um, and perhaps I would like to also talk about our business parks. There's been a lot of negative, uh, publicity and, and news flow in terms of, uh, our exposure to Chang Business Park. But first I'd like to just highlight to everyone that, uh, Singapore business part continues to be an integral and very important asset class for us. **[00:20:01]** If you were to look at Singapore, uh, BSP, it contributes about 30% of class total, a UM and NPI. And if we drill down a bit further, we break down the 30% figure. You'll see that one north and science park, they contribute about 75% of the total Singapore science park, NPI and a UM. And if we were to look at the performance of one North and science park on, on a blended average, we're looking at about 92% occupancy. **[00:20:32]** We continue to see positive render reversions and this 10 and the tenants that we have in science park and one North, they're underpinned by life science and government tenants. J but on average, just under half of our income are derived from these two large, uh, customer segments, which means that this cash flow is a very high quality cash flow. **[00:20:55]** There's a lot of sustainability in it, and we expect to continue to get organic and, uh, same store growth from one North and Science park. Now, let's look at CBP where there's been a negative news flow. As I've mentioned, we think that we have hit an inflection point. If you look at CBPs contribution to Class NPI, that is currently at 6%. **[00:21:24]** So it's not a big exposure that we have to CBP. And, uh, we did go through a difficult phase over the last 18 months. We had almost all of our major financial institutions leases coming up for expiry. A number of them did downsize and which is why you see that a slight decline in occupancy from your low eighties to where we are 76% right now. **[00:21:50]** But in that process, we did reset a lot of the rents. We secured much higher renters. If you look at Y two three renter reversion just for CBP, we clocked it in at 18%, one eight. That's one of the highest that we've ever achieved. So what that means is while occupancy did come down, we managed to partially protect the underlying cash flows because we did reset the rents, we brought it up to a much higher level. **[00:22:23]** Now, if I look at the next 18 months in terms of the visibility that I have, I only have one major fi lease that's coming up for expiry, that's coming up for expiry in about four Q next year. We are currently already in advanced negotiation to forward renew that lease. And that tenant has already indicated that they want to renew in full plus the positive news flow that you would also have seen that SIA, they have committed, they're coming in, that will be in the second half of this year. **[00:22:59]** You'll see occupancy start to ramp up. So we think we have hit bottom, at least for the next 18 months. Things are starting to turn. We have also announced, if you look at the slides, that, uh, Hanser point, which is also in CBP currently, or in March, the occupancy was in the thirties. Now we are in the high forties, right? **[00:23:22]** So we are starting to see a bit of that, that demand coming in, and we're hoping to capitalize on that. And the last point I'd just like to add on CBP is one of the flip side, and that was something that was kind of un unexpected, is that because of all of this negative news flow, we have decent that the regulators are a bit more receptive in terms of our requests to either for change of use or for relaxation of some of the restrictions. **[00:23:56]** I would say that this is very early days, but at least now they are a bit more open to exploring different ideas that we had. So these issues, to be honest, are not new, right? But they were picked up by the press. And because of that, I think all of that publicity that's now better alignment in terms of everyone wanting to turn around CBP. **[00:24:22]** So we think that we're in a fairly solid base right now, and that, uh, at least for the next 18 months, I've got pretty good visibility of where our cash flows are gonna be. I think the last point I'd just like to add for Singapore is we actually have a very stealthy underperformer, a very bright spot for us, which is industrial, right? **[00:24:44]** So logistics has been hogging the headlines for many quarters. Now, BSP is business as usual, right? Industrial. If you look at industrial, we are currently at about 95% occupancy. And, and in terms of reversion is about 14%. This is the highest that we have achieved in the last five years. Um, and we continue to see improvements in occupancy as, uh, KI had mentioned earlier, we recently completed the A EI for PTC Pacific Tech Center, and we spend about 2.4 million. **[00:25:27]** About a year ago. The occupancy was 75%. Today is over 90%, right? And we are seeing similar success stories across both our light. Our light is in fact at 99%. Again, another record for us, our high specs is at about 92%. So I would say that there's a counterbalancing some while logistics, I would say it's coming off a bit in terms of that super strong growth momentum that we had. **[00:25:57]** At least now we have industrial coming in very strongly to help to bolster our income as well, which is why if you look at our results, our NPI, uh, even over the preceding, uh, second half of last year, we're doing fairly well. So I think that gives me quite a bit of confidence, at least for Singapore, that we are, we're fairly well anchored and that, and we have got very defensible, very defensive kind of cash flows. **[00:26:23]** Thank you. Thank you James and William. So we'll move on to the next person. ### Q&A - Question 2: Geneo Pre-Leasing & Singapore Business Park Demand (Dale Lai, DBS Bank) **[00:26:31] Dale Lai (Analyst, DBS Bank)**: Uh, we'll start with Dale first from DBS. Thank you. Um, hi. Hi, William. And team, uh, thanks for the presentation. Um, just two quick questions from me. I think the first one being, um, just wanted to follow up on the US occupancy rate. Uh, you know, I think over the past few quarters we've seen, uh, single tenants, master tenants leaving. **[00:26:46]** So are we expecting, are we expecting to see more of, more of these, uh, conversions that something similar like what you did to the last, um, or, **[00:26:57] William Tay (CEO)**: or, you know, are we expecting, you know, more and more a EIS redevelopment within your, your, your US portfolio? Uh, James, have you saw the question online as well? Uh, also same thing on the us, uh, tenants moving up, uh, yes, uh, we are not ready to announce some AEIs, but yes, we are. There's some plans for a EI, uh, in fact, when we talk about a EI, we always constantly looked at whether is it overseas and Singapore. **[00:27:24]** Uh, and we do see traction that the a EI does benefit in bringing tenants, especially, and in the us uh, we do see that it's bringing tenants, uh, perhaps more because of, uh, flight to quality. And our locations are more suburban, uh, narrow to residential, narrow to schools. And with the amenities being renewed, it does help with, uh, tenant retention, uh, especially. **[00:27:49]** And then, uh, new take up from tenants. Um, maybe you wanna take on that question together with the one online. Yeah, so I don't think we are able to provide very specific guidance in terms of occupancy. Uh, however, what I would like to just, uh, add to what William has, uh, said is, uh, yes, we expect a continued pressure of occupancy for us. **[00:28:16]** I think this is a very macro structural trend. I mean, that work from home phenomenon continues to be, uh, washing through our portfolio. We have not seen the end of that, but there are some green shoots here and there. I mean, we are seeing a return in terms of, uh, tenant inquiries, particularly in Portland and in Raleigh. **[00:28:40]** Uh, I, I mentioned I think in last quarter that we did sign a pretty large lease in Raleigh, and that was one of the top five largest, uh, in, uh, in Raleigh for the whole of 2023. That lease will commence, uh, in the second half of this year. You'll see the occupancy, uh, going up slightly, but at the same time we continue to, uh, face pleasure. **[00:29:05]** So that's, um, that's, that's something that, uh, we try to counter with some of the AEIs as, uh, William had mentioned and also, uh, proactively doing white boxing, which is, uh, doing tenant reinstatement. Uh, typically what happens in the US in that, uh, is that when a tenant vacates, they do not have the obligation to have to reinstate into bare shell condition. **[00:29:32]** They typically leave their fixtures and all that behind, which makes it a bit more difficult to market. But given that we have got the financial cap capacity and capability to do it, we very selectively do white boxing so that we present it, uh, we give it a fresh coat of paint, new carpets, new lighting. You know, it totally change how the presentation of the space looks to a prospective tenant, and that helps us with our marketing as well. **[00:29:59]** So those are kind some of the things that, uh, we are actively doing right now to try and secure new tenants. Yeah. Okay. Thank you. Just, just wanted to follow up on that. Are we expecting any, um, drastic redevelopments or change of use for some of this older properties? Uh, at present development are mainly here in SI mean, development plans that we intend to do is mainly here in Singapore. **[00:30:26]** And, uh, the one that we mentioned in uk, uh, for us as we have done so with our life science conversion, uh, if there is a tenant that we can work with, it's probably more for us to be able to ensure there's a customer in place, uh, instead of any speculative, uh, redevelopment. Uh, I mean, office occupancy is not exactly great for us to capture. Right. **[00:30:48]** Okay. Got it. Got it. Okay. And, and just quickly moving on to my second question, um, I think, uh, James, you touched on, you know, um, CBP hitting the, the, the bottom and inflecting. Um, just wondering, you know, are we expecting something similar in, in one of science park? You know, especially with tech being, you know, such a big contributor with the past decade and now they look to be, you know, consolidating downsizing. **[00:31:08]** Should we be expecting when, when the first cycle of leases are, are due in, in the coming few years? I, I think we have plenty of lead time in terms of planning and marketing those spaces. Should the, some of the IT giants decide to downsize, uh, we have not get gotten very clear indication that they'll definitely downsize, but that's something that we are prepared for. **[00:31:36]** And, um, again, we think that that space, given the its location, its specifications, its proximity to the train station, uh, there'll be plenty of other users that would find that space appealing besides, uh, large IT companies. Okay. Yeah. Got it. Thank you. Actually, in terms of, uh, one of, I don't think is an issue for us in terms of the location, uh, you talk about tech tenant, uh, we don't have clear indication. **[00:32:03]** Obviously my top 10 tenant, one of them, there's consolidation of, uh, space in their plans, uh, but they have not given us clear indication that they will vacate. But I think we are, uh, prepared for that. Okay. Thank you. Thank you. We will move on to, uh, you can from CLSA first. Thanks. Thanks William. And team, uh, my first question is, uh, thanks for raising the guidance for rent reversion from mid single digit to high single digit, but what gives you that confidence to do that given that, you know, you still see occupancy? **[00:32:39]** I mean, it's, it's slightly, slightly dipping off a little bit. Um, so are you positive that your leasing spreads for the second half is gonna be at least high single digit? So you two questions. This, this is one is one. Okay. 'cause I'm trying, trying to gel the two. Okay. 'cause your occupancy is sort of like, I think overall, as you will see the occupancy even in Singapore and overseas, uh, while the key decline comes from us, uh, you do see some us, uh, softening in terms of occupancy, but the rest of the countries and asset classes, uh, you look, say Australia office, we've been pushing towards a hundred percent, right? **[00:33:22]** The rest of asset classes and country, uh, are doing fairly well. Uh, the occupancy is stable. Uh, even to your question of renter reversion, I would say that even for US office, we are expecting positive renter reversion. Why? Because like you mentioned, the spread to market, I think we are still under rented against the market even in just now we talk about business part in Singapore, uh, we had a high of 18% before. **[00:33:52]** Now we have normalizing to single digit. The next two quarters, I think we will still be looking at positive rental reversion, even for business part in Singapore. Uh, so he asked me whether confidence is mixed bag of the, the leases that we are talking to, uh, as well as where the market is today in terms of market rent. **[00:34:12]** We are still very much under rented Then for the business parks in Singapore. Right. Um, you're doing double digit positive reversions. How much is at least for 8.3. So how much is the uplift for the SIA that James mentioned? Is that, is it a strong w that's A-S-S-I-A is a new is a new lease, so it won't be here reflected here. **[00:34:39]** Oh, okay. But I think what James is trying to, to say in terms of our strong rental reversion and, and the occupancy changes, especially on fis, uh, we had experienced, uh, downsizing, but I did mention to you we have got it all renewed, right? Uh, in fact, we've got two new fis that came to CBP in the past 12 months, uh, 18 months, right? **[00:35:01]** Uh, while they have downsized ooc, they occupied space is lesser, but they've given us very strong rent version that leaves vacant space for us to feel, which is why occupancy came down, for example, CBP to 76%. But now if I can catch up in terms of filling this space back, take SIA, for example, Azu for example. These are non FI companies that we can attract and that is where we can get a better, uh, uh, uh, property income. **[00:35:35]** Okay, thanks. My last question is on the gearing right? Um, does it include the, how much of the five 17 million a EI has drawn down for the debt? Progressive, Progressive, but the major 300 million? Uh, many. Uh, if you're talking about 300 now, we are probably about close to 90% completed. So if you go by Scur, uh, that's probably where we are. **[00:36:00]** Yeah, we are approaching because the, uh, TOP is, uh, first Q 2025, so we are approaching the end of, uh, construction. Thank you, William. And you can, we will move on to Chen from Goldman Sachs. Hi. Hi William. Um, first question is on, I guess acquisitions gearing is pretty comfortable right now. Um, what, how are you thinking about acquisition or divestment at this point? **[00:36:30]** Or is to focus more towards AI and redevelopment given the better yields? And second question, um, if I can, is just that if we were to include the leases that are not renewable, so say backfilled, uh, would the reversion number be still in line with what's reported? Uh, your second question is whether we are getting the same renter, uh, com compared to for the new leases compared to renewed leases? **[00:37:00]** Yes. Um, about similar, maybe slightly lower if you, because new leases you gotta give rent free. Yeah. Yeah. So that's probably the difference. Okay. Yeah. Okay. Thank you. Uh, on your first question, uh, yes. Activities for acquisition and divestment for first half is, uh, nothing much to shout about. Uh, but we are still, we are looking at some opportunities, uh, whether is it acquisition, uh, incurring divestment, so we hope that we can make some, uh, announcement, uh, if you like, for second half. **[00:37:36]** Uh, but those are still well in progress. There's no guarantee, uh, but you're right, emphasis is very, very much in terms of, uh, AI and redevelopment. Uh, why so is because, uh, as I mentioned before, we are sitting on very good location in terms of our a uh, of our assets. Uh, take a appear, for example, I think, uh, over 20 million spent intended to be spent, but that will change the way we lay the, the layout. **[00:38:04]** It will be changed, uh, if, you know a period, uh, we have a, a b one space as facing the road, and it has been very difficult to lease. And we use it as, we use our workshop as a means to get tenants in, uh, in those space. Uh, but they're ground floor space, uh, we are moving them up to third floor retail and moving the retail down to first floor. **[00:38:31]** So there's some change in the configuration. And if, you know, retail on third floor doesn't command good renter, it's probably same as my BB one space. Uh, so three, $4 for example. But I bring the retail down to ground floor. I possibly can push to high single digit, double digit rent, uh, retail renter, and yet the B one space go up to third floor. **[00:38:54]** No change. It's probably still the same renter. Uh, and that's where we want to be able to sharpen in terms of monetizing the assets. Uh, for this, we are looking at seven and a half to 8%, uh, uh, return on the, uh, investment. ### Q&A - Question 3: US Office Occupancies & Cap Rates (Vijay Natarajan, RHB) **[00:39:13] Vijay Natarajan (Analyst, RHB)**: Okay. Thank you. We will move to Vijay from RHB. Yeah. Hi. Uh, I have three questions. Maybe I will take it one by one. First question is, again, on the US properties and, uh, some of the US properties that has been vacated has been recently acquired in 2021, was this something which was factored in during the acquisition as a base case, or things have changed since then? **[00:39:40]** Uh, and, uh, since you're expecting some more pressure on us, what could be the occupancy floor, which we should watch out for? **[00:39:53] William Tay (CEO)**: You wanna take the second question? Um, just to answer your first question, quite easy. Uh, if you're referring to what we acquired in 2021, which is the San Francisco properties, uh, they're vacant, but they are leased, uh, tenants are renting, uh, are rent still paying us renter? Uh, both have been sublease, uh, and they still have long will. **[00:40:14]** So there is no issue with, uh, uh, the quality of the income, uh, to us. And the Kansas Logistics property was that acquired in 2021? Uh, largest a cancer property. Uh, Chicago still a hundred percent cancer is the only one that has, uh, recent, uh, some, uh, tenants who have vacated, but it's because they wanted to expand. **[00:40:34]** Uh, but we couldn't, uh, accommodate expansion. Uh, they have to, they moved out. Yeah. Yeah. Um, as I've mentioned earlier, the downtime for logistics assets will normalize. And in the past, from our experience, it would take about six months to 12 months on average to lease up the space. But like I mentioned, uh, earlier on during co during covid and immediately post covid, we were able to backfill all of those leases. **[00:41:08]** But, uh, that, that phase has been transitioned out and we're now into this normal, more normalized space. So I, I don't think, again, there's any issues with those assets, uh, locations or specs given that they were previously leased and the lease just recently expired. So, uh, we would expect to, uh, be able to release this, uh, in the next few quarters. **[00:41:31]** Okay. Maybe what kind of occupancy should we expect after the pressures or bottom out? Kind of, would 85 be a level below, which we would not expect in uk? I mean, us, Yeah. I, I don't think we're able to provide guidance at this point in time. I think there are still a lot of moving parts, so, um, I can only tell you to watch this space. **[00:41:54]** Okay, thanks. I'll just club my second and third questions. My second question is, in terms of, uh, UK data center redevelopment, can you provide an update in terms of, uh, have you gotten some approvals and what kind of, uh, cost we are looking at for this property? And my third question is, I think, uh, operating expenses seems to have, I mean, margin seems to have picked up slightly half and half. **[00:42:16]** Uh, what is the guidance moving ahead? Should we expect operating expenses to be slightly lower? Uh, there's also a question online on, uh, our data center in Europe. Uh, in terms of progress, uh, we have dcom, uh, means that we are in the process of demolition. Uh, that means that actually we have, uh, planning permission, uh, which is we are going to decom, uh, next 6, 7, 8 months. **[00:42:48]** Uh, progress wise, we are still waiting for the, the, uh, power allocation. As I previously mentioned, we have put in the request, uh, we have paid a deposit for the power, uh, but we are waiting for the confirmation of when, uh, the power, uh, will be allocated. Uh, so that if you, if you like, in the past few months, um, there was slow down in the government sector in terms of responding, uh, to such, uh, requests. **[00:43:21]** So we are hoping that, uh, in the next six months or so, uh, they should give us an indication. Uh, so we will not talk, we will not give you, uh, guidance on CapEx or exactly how much, uh, uh, uh, megawatt we'll be building until we got, uh, better clarity of how much power we can get. Okay. I thought the recent government has promoted something in, in, in data structure front. **[00:43:47]** Yes. That was most recent. Alright. Yes. So we hope that that will actually, uh, propel and progress the, the case. Okay, thank you. Vij, sorry, margins, can you give a guidance in terms of The Yeah, You want to take that? Um, yeah, I can take that. I, I think that, uh, the biggest influence on margins typically would be because Singapore is such a large base contributes so much of the income that the, the OPEX in Singapore would affect overall clear. **[00:44:20]** Um, and for the last two years we have seen, because of the high utilities cost, the unit rates, uh, plus uh, increase in consumption, particularly post covid by our tenants, um, has had led to a compression in our NPI margins. Now, um, as I've also flagged out, I think about two quarters ago, that uh, we have re-contracted some of our, uh, electricity rates and that has come down significantly. **[00:44:51]** Um, and we continue to forward lock some of this and hedge some of this electricity costs. So I would say that, uh, our first half would be a very good indication of where the second half would be. Um, and even looking forward into next year, I think we have only locked in a couple of months for next year, but that is, uh, is in itself also lower than where we are currently at, at in two for, so I would say that it's quite benign, uh, in terms of the outlook for our opex and that bos well for NPI margins. **[00:45:26]** Thank you. Thank you. Thank you. Thank you. ### Q&A - Question 4: UK Data Centre Redevelopment Scope (Derek Chang, Morgan Stanley) **[00:45:35] Derek Chang (Analyst, Morgan Stanley)**: Now we will move to uh, Derek from Morgan Stanley. Thanks. Just wanna follow up on, uh, the UK data center redevelopment. I think six months ago with em, you mentioned a 60 megawatt number in terms of power. Is that still accurate? I mean, did you submit, uh, power plans for that? Yes, yes. Based on 60, so it's still 60. Okay, cool. **[00:45:53]** And, um, just wondering, I know you can't share a lot of specifics, but do you intend, is this meant to be, uh, **[00:46:01] William Tay (CEO)**: an asset which you operate or which you have someone do the operations for you? Like a, you know, coin shell power asset? Uh, we are open to customer's requests, uh, but if you let us make a decision, we still prefer to just be a real estate player. Uh, we are not gonna operate so unlikely to do a co-lo, but if there's a request for for that, uh, that's something that we are look into. **[00:46:25]** Okay, understood. And um, I guess, you know, you mentioned, um, AI previously talked like 5,000 million dollars this year. Do you have a number in mind for redevelopments, how much you gonna put into this year? Uh, we will wait for the, frankly speaking, we wait for the 300 million that you can mention, uh, to rural first. Uh, then we will make announcements to any development redevelopment or AEIs. **[00:46:48]** Okay. And just lastly on these expiries, um, do you see any, um, any tenants at risk of, uh, leaving departing the portfolio For the remaining second half? Uh, year next year? Yeah, for next year, um, next year. Big one as mentioned is probably the tech tenant in Gala Galaxiss because its top 10 and they are, they're due for, for renewal next year. **[00:47:17]** So that's probably the one that is, uh, of interest. But I don't think there's any big tenants that we are concerned with. So we will watch that space because even the tenant has not given us any clear indication. Uh, but having, but having seen they have another space to consolidate to, I think we are ready for the versa. **[00:47:39]** Alright, you Thank you. We will ### Q&A - Question 5: Change of Use for Legacy Industrial Assets (Joy Wang, HSBC) **[00:47:46] Joy Wang (Analyst, HSBC)**: Move to Joy from HSBC. Thank you. Uh, just a few questions. First on, uh, change of use. You mentioned about change of use. Um, how, uh, are we likely to see a more significant change of use? See for example, like, you know, BP to a data center type of change of use and also, you know, in that regards, do you, have you done some power studies on your existing land, any access capacity on your existing land from a power perspective? **[00:48:14]** Okay. Um, I think firstly we can go into the specifics **[00:48:23] James Goh (Head Portfolio SG)**: because a lot of these are confidential, um, discussions that we're having with the regulators. Um, so change of views to data center is one of the options that, uh, we have, uh, we are looking at as well. Uh, and again, i, I can't share too much. Um, but uh, beyond that we are looking at other users as well besides data center for conversion. **[00:48:45]** So, uh, again, I can only tell you to watch the space, but I, I, I would just like to add also that I think based on our preliminary discussions with JTC, they are in principle quite supportive, but some of these proposals that we have would require other agencies buy-in as well. So it's not as straightforward as just getting one regulator's uh, approval to proceed. **[00:49:10]** So there are a lot of, um, granular details that we need to go through in order to, to get the buy-ins of uh, all the other agencies as well. Okay. Um, and then, uh, just uh, in terms of uh, you know, your earn, if we look at your earnings, do you still think rental reversion is actually the best indicator of how your portfolio performs? **[00:49:36]** Or should we look at alternative sort of trends? Have you looked at, you know, like for like NPI growth? 'cause that would take into account, you know, the multiple factors, right? I think renter reversion is quite clear indicator given that the key concern is always the expiry that is due for that year. Uh, and typically we have like 15 to 20% up to 20 plus percent, uh, which means that these expiry at risk, uh, the rest of the leases are business as usual. **[00:50:15]** I mean, they continue to lease our wheel 3.8 years, they continue pay us renter. Uh, our renter collection has been very strong, 95, 90 900%, uh, hardly any arrears. Uh, so the space to watch is really whether there's rain growth coming from a renewed lease. Uh, and that's probably a key indication. Uh, our retention ratio hasn't really changed very much. **[00:50:36]** Uh, maybe it fluctuate quarter on quarter, but by and large, over a longer term over a year is about 60, 70%. Uh, and with a back feeling of those that's re not renewed, uh, we managed to maintain occupancy means we are able to back fuel, uh, those uh, uh, vacant space that's, uh, non-renewed. Uh, in terms of renter, uh, I think I've mentioned, I think you heard me mention previously we do get very strong new leases with higher renter, but now it has normalized, you do need to attract them to come in, which means that we are prepared to go slightly lower than renewed space. **[00:51:18]** So I think reversion is probably one that give us a good indication whether is it a new lease or the, uh, existing renewal leases. If I may just ask one last question, uh, we've not seen a significance or a sizable build to suit or convert to suit for a while, uh, yet we are seeing quite healthy FDAs. **[00:51:39]** Is there a change in end user preference for the real estate? Good question. We haven't seen such demand, uh, for a while. Uh, primary reason is obviously for bill to suit end, end of the day is their cost of fund versus our cost funds, Right? Construction cost is high, right? The land continue to be a, a good price from JDC and they have option, uh, to do, uh, land rent. **[00:52:08]** Uh, but if you do use a build to suit the dynamic change, right? So they construct at their own course versus we construct obviously with profit. Right? Definitely makes a difference. So we haven't seen, we haven't seen that we are able to price competitively for built to suit. Uh, and it's not that there's, I mean you mentioned there's FDIs yes, but nobody actually, I don't think we have any, uh, breakthrough in terms of getting bill sued. **[00:52:41]** Thank you. We move on to some online questions first. Uh, the first one will be the cost of debt guidance for FY 2024, FY 2025. Okay. So for this year, FOI 24, um, we're on track, right? Uh, we guided the last meeting we had, uh, 4% or lower. So this, um, first half we achieved a 3.7% number. **[00:53:07]** So I think rest of the year we only have one more refi to go and that's in December. Uh, and all the other fixed fixed float ratio and all is still the same. So therefore we, we think it will hover at around this level. We should finish the year at current levels 3.7 thereabouts. Okay. Uh, next year is, is a bit, um, a while away, so maybe we will review that the year FY 25, um, at the full year results. **[00:53:42]** Okay. Thank you. The next question would be management's view on the latest MES proposal paper on the 1.5 times ICR level and the increased gearing of 50%. Okay. Um, so MAS proposal, um, will certainly provide the Singapore reads, right, with more financial flexibility. Um, so for, for CLAR, um, for the, the past, what 21 years that we have been listed, we have always been very disciplined and very conservative in how we do our financial management. **[00:54:19]** And I think going forward there's no change to that. So for the past 21 years, for example, our gearing has always been, you know, uh, at below 40%. Okay, Maybe adjust, add on. Um, it does look attractive to take on higher leverage, but there are other metrics that we looked at, for example, that EBITDA and all this. **[00:54:48]** So we want to watch all the different metrics to make sure that if there is a need to take on more debt, uh, to grow, I think that must be for a good reason. Uh, we have done well in the past. Uh, I don't think it's immediate change in our way. We look at acquisitions and the way we run the read, so that will be our guidance. **[00:55:06]** And, and even At this gearing levels, we have a big head room, that head room, you know, easily what, 600 million to hit 40% and then to hit like 45% is a few billion dollars. So we still have the dead head room. Thank you. We'll move back the questions to the floor. So we will hit to this gentleman first. **[00:55:30]** Uh, thank you. This is Krishna from Maybank. Just a couple of quick questions. Uh, for your UK data centers, have you, uh, have you, are you speaking to some hyperscalers and all? Uh, if you can, I mean, what's the sense of demand there and would you prefer to have first secure a demand and then, uh, do the development? **[00:55:51]** That's one. And, uh, coming back to Singapore, uh, if you can give some pre-commit levels for the asset announcements that are due for 2025. I think the one, the logistics assets and then the science, the life sciences one. Thank you. Um, um, we are talking to a few prospects, uh, for UK redevelopment, uh, but nothing concrete. Uh, and there is no preference whether we, um, obviously okay, I'll say that the preference will be to build with someone in mind, uh, but if it's, uh, required for us to do speculative, we may consider that. **[00:56:33]** Uh, but 60 megawatt is interesting because now hyperscalers, uh, they, if you look at hyperscalers today, uh, they have enough development on their, on their plates, uh, and they don't mind, um, taking on leases or, uh, powered shelf, uh, with a different developers, uh, that actually give them a better, effective or efficient way of, uh, managing the CapEx. **[00:56:59]** So there are some interests, uh, but nothing concrete right now. Uh, and I mentioned, uh, last is last meeting. They also want to know whether we are able to secure the 60 megawatt and when before they make any commitment. So it does, uh, it's important for us to, to be able to achieve that. Uh, in regards to the other AEIs and redevelopment, I think you're referring to say gen and our logistics assets, uh, the under construction right now, uh, we will make known any pre-com commitment, uh, towards the TOP period, not, no. **[00:57:38]** Okay. Okay, thank you. We will move on to the gentleman. Hi, this is Terence from UBS. Um, you mentioned that the portfolio is under rented to date. Uh, any rule of thumb, uh, to what degree the under rented ness look like? Rule of time, maybe we take our guidance, uh, for this year in terms of leases that is due, I think against the market is high single digit that we are looking at. **[00:58:13]** Uh, next year we will watch whether how the market behave. Uh, I think James has, um, briefly mentioned, um, we do see that some of the renter are picking, uh, for logistics. In the past we have seen from a low base, from a low base to uh, to a new lease that was signed the past 1218 months, we have seen as high as 60% rent. **[00:58:39]** Reversion probably because it came from lower base, uh, that was signed during CID. Uh, but today in terms of, uh, the rent growth, we do see that it's probably picking, it's not as, as aggressive as what we have seen in the past. Uh, but even if they are holding steady today, uh, in the market rent, uh, we are still at least, uh, in our view, uh, high single digit away from where they are Just to see if I got a message right. **[00:59:09]** If I think about 2025 lease expires, um, expiring versus market, would that also look like high single digit reversions in the making making, Uh, I can't tell you exactly where the market is. If I assume everything constant today, right, it should be slightly lower than the high single digit each year. If you catch up, the tail end of rental review should narrow, right? **[00:59:37]** So I hope you you get that. Yeah. So is it fair to say that this thing, this uh, gap to the market or rather your leases will mark the market in the next three years? Uh, typically yes, because the wheel is four years. So if, if continue on a, on a trend, uh, we have demonstrated in the past there's double digit, uh, and then it fluctuates from quarter to quarter, right? **[01:00:03]** Uh, but by and large, I think we have demonstrated in the past even double digit now we are guiding, uh, high single digit, at least that shows our confidence for 2024, uh, 2025, we will look at where the market is if economy is still doing well and if there are still, uh, good supply demand, uh, balance, I think we should still be seeing positive rental reversion next year. **[01:00:34]** And, uh, shifting to acquisitions, um, can you just walk us through your thought process on which markets look interesting? Uh, yeah, just, just that's the last question. Thank You. Okay, thanks. Uh, maybe one market I'll say doesn't look interesting is Australia. Uh, I think I mentioned this a few times. It continued to be tough, uh, given the fact that the, uh, the mismatch between cap rate and interest rate, uh, is still a gap in Australia. **[01:01:03]** Uh, we do see us coming in to be a creative right now. As I mentioned, uh, previously, uh, Europe is slowly cripping up, uh, to be able to make a creative acquisition, but it's still a bit way off for us, so likely to be more US and Singapore if there's any acquisitions. I'm very aware of the time, we're already passed the hour, so I guess we have just the time for one last question and I'll pass it to you. ### Q&A - Question 6: Changi & Tuas Logistics Cluster Dynamics (Tan Yew Kiam, CLSA) **[01:01:37] Tan Yew Kiam (Analyst, CLSA)**: Yew Kiam from CLSA. Thanks. Uh, just so you mentioned that there's the, in the last 12 months you signed two fis in CBP, I just wanna know the kind of rans versus what the existing fis they are paying. Like is it very materially different? Uh, cannot disclose that later We have dinner. **[01:02:00] William Tay (CEO)**: Um, and, and then to the other point on longer lead time to feel right, how does it compare with the past cycles and what kind of period are we looking at? Like does it take 12 months, 18 months? Yeah, so this, the comment was specifically for logistics, not across the board. And yes, that's reverting back to Norm. **[01:02:18]** So in the past, even before covid, for logistics assets typically takes about six to 12 months to lease an empty space. Okay, thank you. The last call for any questions. If not, then we will end this briefing. Thank you everyone for joining us physically today as well as online. We wish you a pleasant evening ahead. Thank you.