# CapitaLand Ascendas REIT (CLAR) - FY 2023 Financial Results Briefing - **Event**: FY 2023 Financial Results Presentation & Analyst Briefing - **Date**: 1 February 2024 - **Webcast URL**: [CapitaLand Ascendas REIT Webcast Details](https://investor.capitaland-ascendasreit.com/webcast_details.html?videoID=908926641) - **Vimeo Video ID**: `908926641` - **Duration**: 00:00:00 to 01:06:20 (1188 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) - Derek Tan (Analyst, DBS Bank) - Tan Yew Kiam (Analyst, CLSA) - Joy Wang (Analyst, HSBC) - Dale Lai (Analyst, DBS Bank) --- ## Table of Contents - **[00:00:00]** Opening & FY 2023 Full-Year Financial Presentation - **[00:31:17]** Q&A - Question 1: Global Valuation Trends & Cap Rate Expansion (Mervin Song, J.P. Morgan) - **[00:38:28]** Q&A - Question 2: Property Tax Increases & NPI Margins (Tan Yew Kiam, CLSA) - **[00:46:25]** Q&A - Question 3: Science Park Data Centre Developments & DPU Headwinds (Derek Tan, DBS Bank) - **[00:54:03]** Q&A - Question 4: Cost of Debt Trajectory & Swap Expiries (Joy Wang, HSBC) - **[01:03:35]** Q&A - Question 5: Exploration of New Geographies & Capital Recycling (Online Questions) --- ## Verbatim Transcript (Audited & Verified) ### Opening & FY 2023 Full-Year Financial Presentation **[00:00:00] Johanna (Moderator, IR)**: Good evening, ladies and gentlemen. Welcome to the FY 2023 Results Briefing of Capital Land Asanders re All. CLAR, for short, we thank you for joining us in person and online today. But before we begin, let me just give you a few housekeeping notes. This briefing consists of a presentation by management as well as, uh, a q and a session. **[00:00:22]** If you're attending this briefing online, you may submit your question via the q and a feature on Zoom anytime during this briefing. For those in the audience, you may raise your hand during the q and a session and a microphone will be brought to you. So before we begin the session proper, let me just introduce the management on the panel. **[00:00:50]** First we have Mr. William, TCEO of capital land, asanders re Second we have Miss Il CFO of capital land, asanders re. Next we have Miss Yaki, head of capital Markets and investor Relations. And finally we have Mr. James go head of portfolio management. **[00:01:31] Andrea Ong (Director, IR)**: And with that, I'll now hand the time over to Micing, who will begin with the presentation. Thank you. Hi. Good evening everyone. Thank you for attending, uh, this briefing. Okay, some highlights. Um, first before we dive into the details, portfolio occupant occupancy remain high at 94.2% and we achieved a high rental reversion of 13.4% for leases that were renewed in FY 2023. **[00:02:09]** Gearing is healthy at 37.9% and we continue to have a high level of natural hedge of 81%. This Distributable income declined 1.4% to $654 million, and DPU declined by 4% to 15.16 cents. Investment properties grew 3% to $16.9 billion on the same store basis. Property valuation declined about 1.8% to $16 billion. Okay, financial performance, um, full year FY 23 versus the previous FY 22. **[00:03:01]** Gross revenue increased 9.4%. Driven mainly by full year contributions from new acquisitions in FY 23. Uh, IE the data center in Warfarin uk, UK, one Borough Lane, Toyo, Lauren one, and the Stuga, uh, in Singapore. So four year contribution from, uh, properties acquired in FY 2 0 2 2. That is the seven logistics properties in Chicago also, uh, contributed and as well as better performance from existing properties. **[00:03:41]** NPI rose 5.6% to $1 billion despite some cost pressures. Total amount available for distribution decline, 1.4% through $654 million due to higher interest expense resulting from the high interest rate environment and higher borrowings. As we acquire more properties. DPU declined 4% to 15.16 cents because of lower, uh, distribution and a larger unit base. So when we compare second half, uh, business, first half performance gross revenue increased 6.1% to $761.7 million. **[00:04:34]** And this is boosted mainly by the newly acquired data center in Walford uk as well as full period contribution from newly acquired properties in the first half of the financial year. IE the Stu Guard one borough lane, and six, uh, six two to one At the net property income, it was flat due to higher operating costs and, uh, property tax distribution income is stable at $326.9 million. **[00:05:13]** DPU declined 3.6% to 7.44 cents due to a larger unit base, Second half, uh, 2023 versus second half, 2022. The growth in the gross revenue is largely driven by the new acquisitions in 2023. So, um, the four properties that we mentioned earlier, as well as better, uh, performance of existing properties. So net property income increased 4.6% to 514.3 million. **[00:05:56]** Uh, despite higher operating expenses, distribution declined 1.9% to $326.9 million due to higher interest rates and borrowings as we acquire more properties. So in the second half, DPU declined 6.1% to 7.44 cents. Uh, some distribution details. We adopt a semi, uh, annual, uh, distribution frequency for the second half of the year. A distribution of 7.44 cents will be made. **[00:06:33]** You'll be receiving your dividends on the 6th of March. Investment highlights. So despite the challenging market, we were able to expand the business. This table, um, shows a series of acquisitions and development during the year. Um, three acquisitions in Singapore, um, were made as well as one in London, the chess building, which is the data center in Walford uk, uh, development in Australia, MQX four was also completed. **[00:07:12]** So all together, um, the total value is $885.3 million. Um, we continue to ensure right that we acquire only quality properties with strong tenant base and have promising long-term potential. The NPI use for these, um, acquisitions range from about six odd percent to as high as 9.4%. We also continue to optimize, um, the returns from our existing properties, uh, by repositioning and upgrading them. **[00:07:57]** So take for example, 6 0 5 5 last boulevard, which we have completed. Uh, we converted the property to a life science, uh, property. So not only the rents are higher, the valuation of that property also increase divestment. Um, so during the financial year, we divested KA place, which is an industrial property in Singapore at a 55% premium to the market value of the property. **[00:08:29]** Um, you have seen these two slides already. Um, and more recently in December, we continue to, um, streamline our portfolio. Uh, we announced the divestment of these three logistics property in Brisbane for a total of $64.2 million at 6.2% above valuation. Uh, we receive a good offer for them. The exit cap rate is about 3%. It is attractive. **[00:09:06]** These three properties, if you remember, uh, they were part of a portfolio that we acquired in 2015. So after stabilizing the portfolio, um, it is opportune time for us to sell them as their returns are not expected to improve much further. Okay, capital management. Uh, total debt, you can see it has increased to $6.7 billion as we continue to acquire new properties. **[00:09:45]** However, with the equity fundraising in May last year, we raised, um, $500 million. Um, gearing is maintained at a healthy 37.9%. So our emphasis, uh, in this very uncertain business environment is to ensure that our gearing levels are healthy. Okay, that maturity, uh, last in financial year 2023, we, uh, term out almost $1 billion worth of debt with fresh tenor or five, seven years. **[00:10:26]** Okay? So the debt maturity profile can see is quite spread out, uh, with less than maybe 15%, uh, of the debt due for renewal in the next, um, three, four years. So despite the high, uh, interest rates globally, uh, the gearing is 37.9%, and and a high proportion of, of the fixed rate that is 79%. So that helped to moderate rate our interest expense. **[00:10:57]** The rate average or in that cost is 3.5%. Um, the strong balance sheet standing also provides us for buffer against uncertainties, ensuring resilience of our financial ratios and compliance with bank governance. The A three credit, uh, rating by Moody's is maintained, and this is very important. It will provide us with financial flexibility and strong access to capital. **[00:11:36]** We have here, um, some, um, interest, uh, sense sensitivity table. So on the left is, um, sensitivity table based on the proportion of, uh, borrowings on fixed rate debt. And then on the right is a sensitivity table for the refinancing in FY 2024. So in this coming year, we have about 900 million of borrowings that will be due for refinancing. **[00:12:09]** So if they are, say, refinanced at 50 basis points higher, then the impact on distribution will be, uh, 0.7%. All things being equal. Okay? Okay. Natural hedge continues to be high at 81%. So for our six odd billion worth of investment overseas, okay, valuation. Okay. So, um, as at 31st December 23, we own 227 properties, and the value is $16.9 billion. **[00:12:52]** Now, on a same store basis, the valuation is 16 billion. So when we, uh, compare with the year before right, the value was $16.3 billion. So the difference is a 1.8%, uh, decline. And this is mainly due to lower valuations in the US and in Australia. However, the decrease in these two countries, uh, were offset by higher valuations in Singapore and in the UK and Europe, right? **[00:13:30]** Uh, by segment, the decline in the same store property valuation was mainly due to lower valuation for business space and by partially offset by higher valuations for industrial and data centers and logistics. So although the valuations of the business, uh, space properties in the US and Australia decline, this properties only account for about 14% of our total asset value of 16 billion this install basis. **[00:14:03]** Moving on to our occupancy, on the extreme right, you can see that the portfolio occupancy is stable and high at 94.2%. Um, so on the left you will see that Singapore, Australia, and the UK Europe portfolio, they are all stable at above 90% occupancy in the US is lower at 90.4%. Okay? Some details follows. So, in Singapore, uh, very stable at 92.7%, and this is higher than JDC island-wide, uh, occupancy rate of 89%. **[00:14:52]** Also, very pleased to highlight some notable, uh, improvement in the Singapore portfolio, uh, particularly in some industrial properties, uh, such as uix. Uh, it is now 96.5% occupied, 10 Toh Guan Road, 92.1% occupied and tame business hub, 98.1% occupied. So these three properties, we saw a sizeable car, uh, and the signings, um, are for like five year lease term, right? **[00:15:24]** So pretty good tenure in the us. So, um, there is a decline to about 90.4%, and this is due to lower occupancy rates in Portland and largely attribute to the downsizing by Nike. So Nike reduced their space by about 10,000 square m, but it remains a tenant in some of our other properties in Portland, right? So we will continue to source for new tenants, and in the meantime, we are improving the amenities in the area to retain and to attract, uh, new tenants. **[00:16:04]** Okay. Um, Australia portfolio occupancy remains very high at 98.7%, uh, UK Europe, similarly, uh, 99.4%. Moving on to where demand, uh, came from during the financial year. So in the fourth quarter in Singapore. Um, it's tenants in the engineering electronics, uh, industries, um, for the overseas market, um, tenants from the biomedical and government agencies on a full year basis, uh, for both Singapore and overseas properties. **[00:16:48]** The tenants are mainly from logistics engineering, uh, and biomedical industries rental reversions. Um, the portfolio achieved a 13.4% positive rental revision for ffy 2023. So that, that beats our guidance for the year. Um, you can see that we achieve positive rental for all the markets and also all the segments. However, perhaps, uh, for data centers, you see, um, a minus 5.1% for the FY 2023. **[00:17:27]** And this is, um, refers to the four Q. That is, um, 6.6%, uh, decline. And that's mainly due to a data center in UK whereby, uh, it was over rented. It, it had a very long lease, and during that long lease period, there was, um, 3% escalation throughout. Okay, so now, um, it's renewed, uh, at a slightly, uh, lower level. **[00:17:57]** Okay. Yeah. And also want to highlight that the retention rate, uh, in FY 23 is higher than that in FY 22, we'll, uh, steady at 3.9 years. And in terms of expiry, uh, on a whole portfolio basis, we will have to work on about 15% of our grass gross, uh, rental revenue this year. And in Singapore, it is also about 14.5% due for renewal in the us also about 14 or 15% Australia, 21%, uk Europe is about 10%. **[00:18:43]** Um, there are a total of, uh, five, um, ongoing developments or redevelopment AEIs worth $551 million, and they schedule to complete between 2025 and, uh, early 2026. In the fourth quarter, we have kick started, uh, some AEIs at two industrial, uh, properties, specific tech center and 18 emia, uh, road. We will continue to add to this list. **[00:19:22]** Um, in fact, in the first quarter this year, we will be decommissioning a data center in the uk, uh, welding Garden City. Uh, it will be redeveloped into a 60 megawatt powered shell data center and targeting hyperscalers. Okay. Um, most of our business based tenants are on this, uh, work from home policy of, um, two or less days. **[00:20:00]** So to support our tenants, we try to improve the experience and the work environment with us. In Singapore, we organize community engagements such as octoberfest, health talks, wellness talks, and treats for tenants. In Australia, we upgraded, uh, tenants, uh, the, the manatees such as, um, terraces, pool, tennis cards, barbecue area. And in the us uh, we are constructing, uh, an manatees center in Portland. **[00:20:35]** Um, to conclude, um, the uncertain inflation trend drove political tensions and weaker than expected. Recovery in China continued to pose some challenges to, um, tenants, businesses, and class operating costs. Um, we cannot stand still. We were proactively, uh, reshape class, uh, financial and, um, portfolio management and to adapt to the changing market and tenant requirements. Okay. So with that, thank you very much, and, uh, on behalf of the management, I wish you good health and a successful year ahead. **[00:21:22]** Thank you. Thank you. K. So now we'll head into the q and a session. Okay. Let's start off the q and A by getting some questions from the audience. And we have the first Marvin from GPN Hi, with the team. Congrats on the very strong mentor versions. Um, few questions. Uh, Mary Kay, start off with Singapore business parks. **[00:21:57]** Uh, I know it's been an investor concern given the increased supply, but can you talk about, uh, your outlook for occupancies, uh, for the coming year? I mean, we've seen job losses within the tech sector, and unfortunately our finance industry is not doing so well at this point in time. So we can touch on that. Uh, us probably a victim of your James', uh, success. **[00:22:20]** In the past, we saw some slippages. Are we expecting for the slippages ahead? Um, in terms of borrowing costs, it's picked to about 3.5. Uh, are we expecting for the increases for this year? Um, any guidance on that? And this terms of refinancing, can you give us some details in terms of split between the different currency for that, seeing us, uh, euro pound. **[00:22:42]** Thanks. Thanks, Mavin. Uh, first I'd like to, before I start, I just want to, uh, thank you for taking time to attend, uh, this briefing in person. Uh, we have quite a number of people who are actually dial in, uh, for the webcast. Uh, thanks for joining us. Uh, the questions about Singapore Business Park. I think there's no surprise, as you have Riley pointed out. **[00:23:09]** Uh, it's not here in Singapore alone, it's almost everywhere that we see. There's no tech demand, uh, any tech demand that comes in, comes in very small quantity or if you like, very small space and very, um, I would say, uh, specialized tech. Uh, they are not your big tech companies. Uh, the big tech's also looking out for shadow space to be desktop, uh, in Singapore. **[00:23:34]** Uh, looking forward, I think the occupancy or likely to be similar to what we see today. Uh, while there is new supply coming up, no doubt we are a contributor. We actually are built contributor as a group, a built contributor to the supply that's coming up the next, uh, two, three years. Uh, as I mentioned previously, uh, our genome development of our million square feet, uh, we do have, uh, some inquiries and interests. **[00:24:05]** Even when we, before we started work, it continued to be there. Uh, we are progressing well towards pre-commitment. Uh, I can't disclose it right now, uh, but we are progressing well. And it also helps that, you know, the new development that comes on stream that was completed last year, uh, they were well occupied, uh, from a biomedical, um, some innovation company, but mainly from the biomedical industries. **[00:24:33]** So if you ask about that, the, these are the replacement, uh, coming from biomedical engineering company. Uh, we also saw some success to find helping tenants to find replacement tenants, uh, if they want to give up space. Uh, preterm. Uh, we do see some tenants, uh, uh, new tenants that came in from engineering, industrial engineering companies, uh, who took up the, the predetermination, in fact, higher end than previous, as well as longer lease. **[00:25:05]** So we'll likely to see some music chair, no doubt. But that will probably be what we'll see here in Singapore. Uh, your boring course, maybe let, Okay. Um, this year's refi, um, it's for, it will be in same dollar and USD. A lot of it will actually be in the second half of the year. Um, so based on today's benchmark rates, right, just today's rates, um, it is expected to gradually increase, um, possibly 4% or lower. **[00:25:45]** Yeah, yeah, I mean, I think what, what is important is that we do have, um, uh, a healthy gearing and a lot of it is fixed, 81%. And yeah, so I think that that is very important to help that, to moderate that interest expense increase. James, Um, okay, before I go to us, perhaps I can also provide a bit more context, uh, for the Singapore BSP occupancy outlook. **[00:26:17]** If we rewind back about 12 months, uh, ago, and we look at what was the lease expiries for 2023, uh, you have seen that Singapore, in Singapore, about 55% of our gross rental income was due for expiry and or at least 50, 55% of the leases they're expiring would have come from the BSP sector. Um, and you see that we held our occupancy relatively well. **[00:26:48]** In fact, we, uh, clocked in rental reversions of about 13% for the full year. So I think this is a very commendable, uh, results, um, from the team, the SM management team. Um, we've done pretty well. If I were to look forward into 2024, um, many of the leases actually comes from the one north and science park, uh, clusters. **[00:27:17]** So, um, I would be less concerned this year. In fact, compared to last year, because last year we did have quite sizeable leases that were coming due from CBP and, uh, in certain cases IBP as well. Um, moving on to us, I would say that, uh, we continue to face headwinds. Um, this is a very market wide macro trend that, uh, we, uh, continue to face the same challenges as our competitors. **[00:27:49]** Uh, but I would say that, uh, we are not standing still. We are quite proactive. Um, and this is something that I mentioned before, we, we invest tactically, right? Um, so we are not putting in flashy big bang kind of AEIs 15 million in one goal. Uh, we put in very small amounts. So for example, the outdoor amenity in Raleigh, that costs us about 0.9 million. **[00:28:15]** We help a broker event. It helps to create the marketing bus, uh, separately. I also mentioned before we do like, uh, white boxing. So in Raleigh we did white boxing. We spend about 750,000, uh, again to explain what white boxing means. Typically in the us, uh, tandem wouldn't need to reinstate their premise when they vacate. Uh, and usually it's marketed, uh, on a ses, uh, basis. **[00:28:39]** Uh, we took the decision that will will tear down all of the cubicles. Uh, we replace the carpet towels, we refresh the pans, uh, maybe do a bit of, uh, upgrades to the lobby entrance, et cetera. Um, and, um, we were very, very happy that, uh, that particular space that we did the white boxing, we actually secure a tenant, and it's a very substantial one. **[00:29:07]** It's about 41,000 square feet, is a biotech company. And if you were to pull out the statistics for Raleigh, uh, for the whole of 2023, that ranks as a top five largest lease that was signed in Raleigh. So that lease hasn't commenced. Uh, it will likely commence between two Q to three Q next year. So it hasn't showed up in our occupancy, but this is just a demonstration of the kind of things that we are doing that, uh, to try and improve, uh, our occupancy. **[00:29:37]** I think lastly, uh, the last point that I'd like to add, uh, I don't want to belabor the point on us, but we continue to, uh, clock in very healthy rental reversions as well. I think this year we clock in about 10%, uh, again, in the tough market. And if you look at our lease, which are expiring in 2024, they continue to be under the market, and we, we expect to still get, uh, close to double digit kind of reversions. **[00:30:07]** So while, um, it might be difficult to protect occupancy at the NTI level, there will be, uh, some sort of moderations because, you know, we'll be either signing new leases at higher rent than, uh, the preexisting leases, or we are renewing leases at higher rent. Thanks for that. Yeah, The operational performance are very strong, right? Thanks. Okay, we'll move on to the next person. **[00:30:42]** I, yes, I saw your hand earlier. Derek, Derek From DS Evening, uh, William and team. So I think a commendable effort last year, like you did close to a billion dollar worth of deals, right when the market was so tough. So my questions on acquisitions are, so I think, William, your thoughts on whether you think it's, it's time to get more active again, uh, this year, is yields expanded to a point where you think you should be a bit more aggressive and maybe wish part of the year and wish jurisdiction then? ### Q&A - Question 1: Global Valuation Trends & Cap Rate Expansion (Mervin Song, J.P. Morgan) **[00:31:17] Mervin Song (Analyst, J.P. Morgan)**: That's my first question. My second question is on leasing spreads. I think James did give a good sense that us, you know, we have a 10% kind of, uh, catch up. How about in Australia, uh, in, in your, your suburban office and and logistics? Is that still that gap that you can capture? So just these two questions. Thanks. **[00:31:34]** Thanks, Eric. Um, acquisition this year we did about seven oh, more million. Uh, we did the, including the development 885 million, uh, compared to 2022, we did only about 200 million. Uh, we are still not back to the level that probably where, **[00:31:57] William Tay (CEO)**: you know, us, uh, when we first started going overseas, we only want to make sure that we enter well and scale up fast. So at one point in time, we were buying about two over billion, uh, in a year. Having said that, having said that, we have evaluated many deals. In fact, in 2023, uh, the investment team has evaluated over 6.5 billion of, uh, deals. **[00:32:22]** Uh, we are selective looking at deals that make sure that is accretive to us, uh, good quality tenant, good, uh, location. Uh, because over time we make sure that we wanna make sure that the portfolio is strengthened. You know, our strategy, we want to diversify across mature markets and focus on the asset classes that supports the driver in that economy. **[00:32:45]** And we have been doing well, as is shown in our valuation. Uh, while there's a lot of stress over valuation, uh, our numbers do held up, uh, operational metrics are strong. Uh, occupancies are good. We continue to deliver, uh, rental reversion, what I mentioned is high single digit is we achieve, uh, double digit. Uh, in regards to where, uh, you look at what we have done in 2023, Europe, Singapore, we completed development in Australia, but that was because it started two years ago. **[00:33:26]** So I would say it would be the countries that we are in specifically accept Australia. Uh, given the fact Australia, uh, you talk about, you talk about you spread, uh, it hasn't come to a level that is accretive for us, even if you do development. Uh, we are prepared to look at development right now, um, in Europe, in, uh, us, uh, that actually give us an opportunity to gain, um, into certain cities or certain locations that we feel that there's growth potential. **[00:34:02]** Uh, as you heard from, uh, Qing, we are now evaluating a redevelopment in land, uh, in a uk, uh, to convert one of the, uh, data center. Uh, from currently we have about 25 megawatt. Uh, we have put in applications and the in principle, we have about 60 megawatt on hand. Uh, we are depending on the final, uh, uh, letter of award if you like, uh, before we start work, uh, that will actually give us, uh, opportunity to further increase our, our revenue in those, uh, countries. **[00:34:39]** Uh, in terms of, uh, catch up renter, uh, you're seeing that our guidance towards rent reversion is mid single digit. Uh, as of now, obviously I've seen some leases that's been renewed right now. Uh, you look at expiry trend, we have some leases that's renewed that give us some confidence that we are still, uh, able to catch up to the market. **[00:35:00]** Uh, I've mentioned before, uh, we are very strong rental reversion, uh, all thanks to the team. Uh, but it also started because of lower base, uh, two, three years ago when leases was signed. Now with a higher renter, higher inflation, naturally the gap is huge, uh, to the extent that the team actually surprised me, uh, with a huge renter reversion in logistics in the fourth quarter. **[00:35:30]** Uh, so if we believe that that will continue to be a trend, we still will be in the catching up and hopefully, uh, that actually will translate to real results that we won't disappoint you. Um, Thanks, Derek. I think again, um, I'd like to mention that Australia, if you look at our numbers for FY two three, which is about 19.4%, um, that is actually the highest that we've, uh, ever recorded since we acquired the portfolio. **[00:36:02]** Um, and this stellar results, um, I'm not sure if we can repeat this in 24, but I am definitely confident that we'll continue to get the positive reversion. Um, similarly, if you were to look at, uh, I just digressed slightly to Singapore. So Singapore, we, we locked in about 13.8% rental reversion for the full year 23. This is the highest, uh, on record since, uh, March, uh, 2014. **[00:36:31]** So, uh, I would say that, uh, in 23 we put ourself on a very strong footing. Operationally, I think if you look at, uh, our occupancy and our rental reversions, we are firing on all cylinders. We are very well poised to take on, uh, the challenges in 24. Um, hopefully the economic conditions continue to remain benign. Um, there's no, uh, downturn or ne negative sentiments so that we can continue to, uh, carry forward this strong positive momentum into 24. **[00:37:01]** Maybe I just add one more point. Um, our retention ratio came in very strong, uh, compared to 2022. That also shows that the, the quality of assets that we hold, as well as our ability to retain our tenants by way of whether is it true community development, uh, engagement. Uh, but we also realized that over time, as occupancy crips up to a level that we are comfortable and we're happy with it. **[00:37:35]** That also means that what is left as vacancy are quite stubborn. It gets tougher to lease up that will actually, uh, uh, in, in this market today. Uh, while we still see good demand, especially in industrial and logistics, that we're seeing that our occupancy is very strong, we still see good demand. Uh, but you will get increasingly challenging to close that finer gap of that one 2%. **[00:38:01]** Uh, but over time, uh, with our ability to look at, um, because we've got big portfolio, if we can, there's unled ratio, redevelopment opportunities, uh, AEIs, we hope to be able to continue on a better trend to retain attendance first and then of course to increase occupancy. ### Q&A - Question 2: Property Tax Increases & NPI Margins (Tan Yew Kiam, CLSA) **[00:38:28] Tan Yew Kiam (Analyst, CLSA)**: Okay, with that, we'll move on to Yew Kiam from CLSA. Hi, uh, William and team, um, when I look at your responses, right, I mean, you, you're still guiding for mid single digit rental reversions for this year, and then you're also gonna benefit from all the acquisitions you've done last year. So, and then in terms of cost pressures, these are also stabilizing utility costs are stabilizing, refinancing rates is also peaking, right? **[00:38:59] William Tay (CEO)**: So can we expect performance fees for this year for FFY 24? That's the first question. And then second question is on, um, acquisitions. Um, you mentioned you wanted to do more, but given that your gearing is also, uh, trended slightly higher, but at the same time, you're still trading well above NAV and then some of your peers are also tapping the market. **[00:39:20]** So what are your thoughts in terms of funding reference, whether it is that or equity? Thanks, you can, uh, the renter reversion guidance of mid single digit, um, you, I suppose you acknowledge that's possible to achieve. Uh, perhaps you think that it's very easy to achieve. I think we still feel that the market allow us to be able to increase over time our gross revenue, uh, with higher rental reversion. **[00:39:58]** Uh, what we are facing right now is also increased in cost. While we say that cost is stabilized, uh, but it's still on the up trend if you look our margin in 2023. Um, primary reason because higher inflation for our maintenance costs, which is dragging down in terms of our margin. The other point that is probably not very well known as we move towards better occupancy and, uh, rental reversion or prop tax went up. **[00:40:29]** So that actually drags down whatever that we can. Uh, uh, on MPI side, obviously under the line is interest costs still going up. As skipping mentioned, we hope to close the year we low fall based on today's rates, right? That will continue to drag. In terms of numbers, uh, definitely I hope to be able to do performance fee. **[00:40:56]** Uh, and if you know our numbers, it has to be 2.5% and above with, in terms of DPU growth, uh, before we can get performance fee, uh, I'll be your comment in mind. Uh, we work towards that. Uh, with regards to fundraising acquisition, uh, to hit 40%, right now, we are about 600 million. Uh, if you wanna push forward to before beyond 40%, uh, which we do hear noises that, you know, it becomes a norm right now that you can live with 40 ish. **[00:41:33]** Right? But our, our guiding principle is that we still want to maintain below 40%. So depending on acquisition target ability to get it a creative and how a creative, uh, or the pace of acquisition, I think we will leave our options open. Uh, whether is it debt or equity funded? Uh, we definitely has a need for more CapEx, of course, for a EI for redevelopment. **[00:41:59]** We continue to look at opportunities here in Singapore. So that would actually take up whatever, some of these, uh, debt heat room that we have. So we'll leave our doors optioned our options opened, and make sure that we are able to continue deliver the results, uh, that, uh, investors expect from us. Okay. May I invite more questions from the floor before we head onto the questions online? **[00:42:25]** We have, uh, joy from, yeah. Thank you. Yeah, thanks. Uh, William and team, uh, just question, following up on your comment on development in US and uk, uh, would you be doing these on a spec speculative basis or you will source, uh, tenants first? Um, and what sort of return are you looking at for the respective markets? **[00:42:51]** Um, and if you can just, uh, also elaborate a little bit more on the development CapEx you will be looking at for 2024. Thanks, joy. Um, development CapEx as in a EI, uh, typically we do about 50 to a hundred million. Uh, I think we can push for more, uh, given the fact that construction costs has gone up quite substantially. **[00:43:16]** Uh, the two new a EI are small by quantum, uh, but I think this is, uh, a start in 2024. Uh, we hope to be able to do more. So 5,000 million is probably what we will work towards. So each year we probably look at six, seven projects, uh, to do. Uh, in regards to development, uh, perhaps I would say, okay, I, I won't touch on the DC yet. **[00:43:45]** First, um, uh, data center for development, for example, if we would be able to do, um, we want to make sure that first priority of course is tenant. Uh, as I mentioned, we are prepared to do some development right now because we want to get into certain cities that we feel that there is a growth potential. Uh, some cities that has presented themselves to have almost no new build in the past three, four years. **[00:44:17]** And yet demand has escalated to a level that there is shortage in the market in those cities. Uh, so we can take some risks if you want to, uh, in terms of speculative development. Uh, but actually it actually comes with very high level of, uh, conviction that it may be pre led even before, uh, completion. As for the data center, uh, in Europe, uh, as we now mention it upfront, right now, even before we start, uh, we, we have not even seen a decom, a decommission of the site. **[00:44:59]** Uh, we obviously hope to get the word out, uh, and then we get ourself, uh, call up, uh, for potential inquiries. Uh, so if anybody who is hearing this, uh, interested in the hyperscale data center in uk, do give us a call. Thanks. Still early to tell. When I get a numbers end, as we make a formal announcement, I will share with you the returns that we expect. **[00:45:27]** But if you look at our track record right now in today's context, uh, we also look at it as, has to be accretive, has to be at least in the, in the context of what we are seeing in Singapore, 78%. Uh, we probably look at that, uh, probably more given that there's higher costs in, uh, overseas. Okay. If there are any more questions from the floor, okay, I'll have attention from Goldman Sachs. **[00:45:54]** Hi. Hi William. Um, can you talk a bit more about assets that's sitting under CLD? Do you think those will be potential acquisitions this year? And then, uh, second question is, uh, can you share more colors on the US valuations, uh, which specific assets and what kind of cap rate changes? Um, last question is on fundraising 20 20 23, we saw forward fundraising ### Q&A - Question 3: Science Park Data Centre Developments & DPU Headwinds (Derek Tan, DBS Bank) **[00:46:25] Derek Tan (Analyst, DBS Bank)**: and that actually did track down DPU, uh, before acquisition came in. Is that something that you think could potentially happen again this year, or will you think about it differently? Thank you. Thanks Tan. Um, CLD has interesting and attractive assets. Yes, I mean, science park data center, but if you look at their assets, unfortunately, for us to make it accretive, given the land tenure that they have, **[00:47:00] William Tay (CEO)**: is probably still not accretive for us, easily 50 years and above. Uh, so it is probably a stretch for us to be able to acquire from them. Uh, I would say that, uh, if there's opportunities, third party, we'll probably be where we be looking out for in terms of our, our, our hunting ground. Uh, looking at other assets that is owned by other, uh, uh, owners will probably give us. **[00:47:28]** And, and there's a, a range of very good assets around in the market, uh, that we can look at. Uh, US valuation. Hi, Chen. Okay. So, um, regarding US valuations, it's largely a function of, uh, increased cap rates, slightly tempered by higher assumptions for market rent and a slight decline in occupancy depending on the assets. So, uh, the, the biggest declines, um, as, um, you expect came from the office, uh, uh, assets. **[00:48:04]** And on average we saw about 120, uh, basis per points, um, expansion in cap rates for, uh, US offices, um, for, and in terms of the actual number in move from like a six handle to a seven, mid seven kind of handle for US offices, for US logistics, uh, there was a slight expansion, uh, less than a hundred basis points. **[00:48:37]** Um, and it moved from about five, five-ish to six-ish kind of cap rates. And again, um, the value was also increased the, uh, assumption for market rent as well. Okay, I think we'll move on to one question online first. One More question, Sorry. Um, I suppose you, we are referring to our last EFR, uh, that we upsize, uh, and we raise about a hundred million, a hundred million, uh, a hit. **[00:49:11]** Uh, it came from a point that, uh, It was primary reason because we actually lay up all our projects upfront. Uh, we believe that that's also a good thing for us to communicate the action plans, our business plan forward. Uh, we are happy that, you know, we are able to get it through, uh, to investors and, uh, they understand what we are trying to do, uh, redevelopment opportunities here in Singapore in terms of logistics. **[00:49:42]** Uh, but we obviously want to be able to strengthen our balance sheet, uh, so that we are, we can, uh, remain nimble. Uh, when there's opportunity that arises. Uh, will we do that again or will we look at how we fund our future acquisitions? I think it's still a little bit early to tell, uh, at a point in time if we do have an acquisition, then we definitely look at our options, uh, to see whether there's opportunity to, to, to raise equity or what other ways that we can do to fund those acquisitions. **[00:50:14]** Thanks Tanja. Okay, we'll move on to one question online. Um, is asking about which data center in EU or UK has a cap rate of 10.21%? Any particular reason for the high cap rate? Um, so it's the Watford, um, data center that we just acquired. Uh, while we can't speak on behalf of the valuer, but uh, this cap rate as, um, it's not too far from the entry N-P-I-I-O that uh, we have mentioned as well. **[00:51:00]** So that's roughly in line with our own internal valuations as well. Lemme just to add, uh, we mentioned that IPI is about 9.4% post transactioned. Uh, the implied cap then at the acquisition is about nine, about close to 10. So this is not far from where we have, uh, acquired. Uh, the valuer this time around is, has applied at 10.2, so it's very close to the implied cap that we had during our acquisition. **[00:51:35]** Okay. There are a couple of questions online about one science park, so we'll just group them together. Basically, the questions are asking about the pre-commitment at one science park and achieve a rich rent. And if there's any guidance on ROI for this development, Uh, we have actually announced the ROI for development is about 6.1%, uh, when we did the investment. **[00:52:01]** Uh, I can share more details in regards to the pre-commitment, uh, and the achieve rent. Uh, at this point in time, we have had easily another 12 months to go before completion. Uh, we do not want to disturb all the negotiations and the finalizing of details without customers. Uh, so bear with us. Uh, uh, there are actually strong interests even when we, before we started the construction, I think we are now close to signing, uh, this as we, uh, go towards closer to the F-R-T-O-P. **[00:52:37]** Thanks. We will just do one more question online. There was a question about the valuation decline for US and Australia. What drove this? I think the one for us has been answered, so perhaps we'll just answer the one related to Australia. Okay. Um, to provide a bit more context and background, uh, it's, it was a mixed bag of results for logistics and, uh, business park slash uh, suburban offices logistics actually went up. **[00:53:08]** Uh, that's, uh, not withstanding the fact that cap rates did expand, it expanded about the 90 basis points. It was, uh, about 400 previously. It went up to about five plus. I think that's a very in line with, uh, market transactions and the kind of trends that we see. So, um, and even though there was the expansion, um, like I mentioned, the value has actually increased market rent by a lot, and they actually marked it to market. **[00:53:35]** So as a result, that was able to largely offset the effects of, uh, expansion in cap rates for offices. Uh, in Australia, we saw a similar increase, uh, expansion in cap rates, but this time round, uh, the value was didn't move the market brands by much. Neither did they really adjusted the occupancy. And as a result, you see the decline in overall office, ### Q&A - Question 4: Cost of Debt Trajectory & Swap Expiries (Joy Wang, HSBC) **[00:54:03] Joy Wang (Analyst, HSBC)**: uh, values. Okay. We Just add, um, if you look at our slides and, uh, all the details, uh, there is no surprise that Cabri expanded across the board. Uh, it all goes down back to your performance of the asset, uh, the ran occupancy, obviously, uh, to be able to push valuation up. Uh, as uh, James mentioned about our, uh, Australia logistics, our valuations still go up. **[00:54:35] Khoo Li Sun (CFO)**: Still went up given the fact that yes, uh, since 2022, we've been looking at strong occupancy and rents were pushing and we were looking at good renter reversions. So that actually helps in terms of logistics. In fact, logistics, slight decline in the US logistics. But throughout where we have, they're all on the uptrend. Uh, as the press release or even the announcement that we have made, uh, business plan was the one that actually drags us down. **[00:55:05]** Uh, given coming from US and Australia as a bucket, as a segment, industrial logistics are all higher valuation. So we take comfort that this construct and this diversified strategy works very well in our favor to make sure that overall and over time we continue a resilience in our portfolio and the assets that we have acquired in the past or continue to do a EI are the right assets that we have picked are right locations that we are picked to be able to attract these leases. **[00:55:39]** Occupancy. As James mentioned, they're all time high. And in this environment we do expect the occupancy to be very stable. Uh, and we hope to be able to push the rental reversion, uh, towards positive region as again. Okay. We will hit back to the floor. So can I have Xavier from Morningstar? Hi, uh, thanks William. And team, uh, my question is, uh, on your 60 megawatt data center, you kept, uh, saying hyperscale, um, tendon, right? **[00:56:10]** I'm just wondering why you aiming for hyperscale? Why not, uh, ai, you know, is there a difference in the service standard, uh, that might be more challenging to fulfill? That's my first question. Uh, no particular reason actually, given the fact that the, we use, probably use hyperscale too loosely. Uh, given the fact that today we have about 25 megawatt, if we can push towards 60 megawatt, uh, that from a enterprise company, so the previous tenant was enterprise financial institution, uh, if we can push towards 60 megawatt, the market opens up for hyperscaler. **[00:56:50]** Uh, to what we understand today, if the data center will be used for AI consumption, the power requirement is much more, uh, which we don't have the ability, uh, given the fact that what we have been talking about in terms of uh, getting an additional power is up to 60 megawatt. Uh, we will still have to so bear this in mind. **[00:57:14]** This is not a certainty we have put in application. We have, uh, we have been able to get some confidence that we can get the 60 megawatt, uh, but the authorities need to study this, uh, how they will get the power to us. So we still need to need time to be able to finalize the details. So far AI is 60 enough or they need more, uh, To what we understand is more than that. **[00:57:38]** Okay. Uh, thanks for my second question. It's on the Singapore business part. Um, obviously it's very challenging. Is there a reason why you are keeping these assets and is it because they have redevelopment potential or are you so confident that you can continue to lease it up and improve the performance? Okay, uh, thanks David. Very good question. **[00:57:56]** Uh, over time we realized that we are sitting on locations that are value valuable. For example, in International Business Park, uh, we have to down a building iquest now under redevelopment, uh, there be no surprise that we have plans, uh, for the buildings that two more buildings that's next door is uh, and creative why so is because when the new RT comes in in 2027, it just opens up the opportunity. **[00:58:33]** So we let go of that when we have more than 30 years of lease right now. Unlikely. So we have definitely have to make sure that we continue to make meaningful leases, uh, because we intend to redevelop some of these opportunities. And if you look at it in science park, uh, over time, whether is it CLD or us, uh, we do have plans to increase plot ratio redevelop, which our general project has shown right in front of Mr. **[00:59:09]** RT station. Uh, we manage to convince the authority to award to us more plot ratio. Originally the site was 1.2 plot ratio and we managed to get, uh, 3.6, uh, and now we are building 1 million square feet. Uh, and CLD has actually over time redeveloped the assets around there. Uh, I think these are all value, value assets like Ascent. **[00:59:36]** You probably know that they own that. Uh, there's also a new building, uh, uh, that comes next door to our general asset, generic development. So we will look, look at all this as opportunity and science park. We are still sitting on 50 over years, right? And science park is still in demand given the ecosystem around life science near one north. **[01:00:02]** And there'll be new trend that comes along for us that we can redevelop to suit the new specs and the new development or new, uh, requirements of the, the clients today. So that leave us some good opportunities, which is why I wouldn't say that we are hanging on to them, but they are really valuable as sets and locations. **[01:00:22]** So you're just kind of like waiting to see if there will be an opportunity to redevelop. If not, you just hold on for a while longer. Right? Um, there in our evaluation there are opportunities is being able to phase out to time the development. And having said that, the occupancy is 80 over 80% for business plan. So they are not terrible if you give the context that, you know, even, uh, the, the JDC statistics about 80, 80%. **[01:00:57]** So we are doing very well. Um, and this is probably only a, a, a phase of time where there's no demand from tech tenants, but it's replaced by other industries. So there are still a good asset class that makes sense for industry players, whether is it from engineering, whether is it from industrial, uh, uh, uh, r and d. **[01:01:19]** So these are still good assets, uh, to own on. Thank you. Uh, we are very aware of the time. It's already six minutes past six 30, so perhaps we will have one last question from the floor. I think, uh, Derek, you raised your hand earlier, correct? Yes. Thanks. So, William team just wanted to follow up on the data center project. **[01:01:47]** What is the expected cost of a rough gauge? 'cause 60 megawatt sounds a bit pricey. I wanna keep that as a suspend. I mean, for new goods it could be north of 500 million, Uh, possible, but I don't think it will be at that kind of size. Uh, depends on how we end up building it. Uh, whether you wanna include the m and e or its coin and shell. **[01:02:17]** So these are still early stages. Uh, okay, I didn't know that this, uh, announcement of, uh, potential, uh, brings so much attention, but I hope you do feel that, uh, what we want to put in place is a lot of proactive, um, in, uh, asset management. Uh, we know ahead the expiry of the tenant. Uh, we know the potential. **[01:02:42]** So just like Geneo, when before we tear it down, we went to, uh, apply for higher plot ratio. So in this case, same thing. It took us a while, uh, to put in application and to talk to the authorities for higher power. So we have to plan ahead to give us time. And I think we are very comfortable that, that at this point in time, uh, seems to be that the plan that we have in place are positive. **[01:03:10]** Uh, so right after we are able to get confirmation of the size or the power that we can get, uh, we should be looking towards, uh, further down the evaluation to look at construction costs and what we want to build for if as a tenant on SNR tenant. Thanks Derek. ### Q&A - Question 5: Exploration of New Geographies & Capital Recycling (Online Questions) **[01:03:35] Johanna (Moderator, IR)**: Okay, we will move to the final question online. Um, there is this question on will CLAR explore new geographical regions for acquisitions to grow the portfolio? For example, with Mr. T's strong background in South Korea where the current fundamentals look strong, not withstanding local funding costs, will there be opportunities? **[01:03:57] William Tay (CEO)**: Uh, thanks for mentioning South Korea. Uh, I think we've been asked a lot about Japan, Korea, given that they're also mature market. Uh, yes, we do see that there are some, uh, it's interesting. Uh, but at this point in time, I think our focus will still be where we are right now in terms of, uh, US, Europe, Australia, and Singapore. **[01:04:19]** Uh, while I say there's no investment opportunity in Australia, I think we are still sitting on very good product and asset class in Australia. Uh, occupancy for office. Uh, despite all the negative news about of, uh, vacancies in, uh, fringe of, uh, CBD, um, we are in southern location. Occupancy are strong. Uh, in fact we have a few new builds. **[01:04:45]** You know, uh, MQX four is new, uh, Margrave in Melbourne is new, so we are attracting good tenancy and inquiries, uh, logistics as, uh, we have mentioned, uh, they continue to give us, uh, a lot of confidence, uh, to continue own and hold on to these assets. Uh, selectively and strategically, we have done some divestment, which we have picked three assets, uh, three lo three logistics assets in Brisbane. **[01:05:15]** Uh, since we got a good offer, uh, the MPI that based on the offer price, the MPI is looking at 3%. So even if we've ran growth, we believe that it probably can push towards four, four ish since we get a 3% right now. I think it, it does make sense as a responsible manager to accept this kind of, uh, pricing and we look for better yielding, uh, assets to acquire, uh, whether is in other jurisdiction, uh, to be able to supplement and, uh, uh, build up a better portfolio. **[01:05:49]** Okay, with that, we have come to the end of this briefing. Thank you everyone for joining us in person as well as online. And thank you for submitting your questions. Um, we hope you enjoy the evening. Thank you. Thank for coming. Uh, before we sign off, maybe I just wanna thank the team. Uh, it's not an easy year, uh, but we have done very well the asset managers, portfolio managers, leasing team, uh, property management. **[01:06:16]** So I just wanna thank the team here. Thanks.