1H 2024 Half-Year Results Presentation

Good afternoon and welcome to the Cromwell European REIT's first half 2024 results call. We will begin with a presentation by the Cromwell European REIT management team followed by Q&A. During Q&A, please click the raised hand button to be placed in the virtual queue. Alternatively, you can submit text questions via the Q&A feature. Now I will hand across to the CEO of the Manager of the Cromwell European REIT, Simon Gering. Simon, over to you. Thanks, Kyara, and welcome to everyone dialing in this afternoon. We appreciate it. It's a busy time. So thank you for joining us from all European REIT's first half briefing call. So as a reminder, CREIT is the largest diversified pan European logistics and office REIT listed here in Singapore,

attractively priced at around a 35 percent discount to our recently announced NAV, and a 10 percent annualised DPU yield based on the dividend that we announced today of 7.05 cents. CREIT's portfolio comprises of 107 properties across 10 countries, valued at over 2.2 billion euro dollars. The portfolio is now 54 percent weighted to logistics, with 44 percent to office, and with a 90 percent allocation thereabouts to Western Europe. Recalling that the predominantly freehold nature offers value add opportunities throughout the portfolio and is managed locally by a team of more than 200 on the ground Cromwell team members across Europe. Turning to page four to set the scene.

So over the last two and a half years, a perfect storm was caused by high inflation, rising interest rates, slower economic growth, heightened geopolitical conflicts, which all put pressure on Singapore REITs, as well as specifically our REITs, both operational performance, increasing cost of capital and stunting growth. Now, two and a half years ago, we took several significant actions to protect CREIT's balance sheet that we forecast could be impacted from all of these elements. So we paused acquisitions, we divested non-strategic assets at a premium to val, we deferred non-essential capex and minimised the portfolio valuation downside. The impact over the two and a half years, as we announced a couple of weeks ago,

is only three and a half percent over that two and a half period, which has kept NAV relatively high at 2.09 euros per unit. We completed all of our debt refinancing due in the last three years, leaving a very long runway to our next debt maturity in November next year. During this period with valuations around the world falling, we maintained net gearing below 40 percent and managed the rise in interest costs and margins, with our all-in debt costs increasing 144 basis points from 1.7 percent back in the beginning of 2022 to 3.2 percent today. Unfortunately, all of these measures had a negative impact of DPU of approximately 2.5 euro cents

annualised as compared to before the cycle turned in beginning of 2022. However, we weathered the storm without raising diluted equity or expensive sponsor debt. We increased the portfolio weighting to a majority to logistics and light industrial. We've improved the overall asset quality. We've delivered on the 60 million euros of AEI and development projects, all while maintaining a 100 percent distribution payout ratio for you, the investor. So now with the storm largely behind us, we can take a more balanced approach and look to take advantage of opportunities over the next 12 months with greater confidence. And this is really reflected in this next chart where the market has recognised our strategy and coupled with the stabilisation in the European commercial markets,

as well as the beginning of the interest rate cuts from last month in Europe, the positive impact is starting to be reflected in Seawrits unit price performance shown in this chart. And so, again, we're pleased that we're the second best performing Singapore this year, again, being endorsed by an increase in inflows by institutional investors, which now make up 23 percent of the register. And that's at a time when you've seen from SGX that typically institution investors have been leaving Singapore rates. But in our case, they've been building, which is quite pleasing from an endorsement perspective. So looking more broadly on the macro picture with ECB cutting rates for the first time in five years last month and expecting to cut twice more for the remaining part of the year,

European real estate fundamentals should gradually improve in the second half of this year. The left hand chart shows the three month Euroboard trending down. Five year euro swap rates are even lower at two point four percent, which will help stabilise the real estate cap rates with the positive spreads to finance costs now very constructive for European assets as shown on the right hand chart. So underpinning our greater confidence is the resilience of the portfolio occupancy remaining high at ninety three point six percent, even in the times of the softer economic conditions caused by the rise in rates. Our teams on the ground released over one hundred thousand square metres or five point eight percent of the portfolio in the first half,

adding to the already high fifteen percent that was renewed last year. And you'll see in the appendix, appendix to the slides attached in our SGX announcement, a further 70 percent of lease expiries, the remainder of this year, have already been de-risked. This is at a far, far higher proportion than this time last year. The whale has extended out to a long four point eight years, again, giving us that confidence of the resilience. The five point two percent positive rent reversion was again well above the Eurozone inflation of two point four percent for the period. And this continues to reflect that SeaReach's portfolio is generally under rented by around six percent and coupled that with low vacancies.

Again, that gives the valuers more confidence in our cash flows. And therefore you saw that reflected by the lift in our valuations that we announced last month. One of our key strengths in the portfolio is the size and scale. We have over a thousand leases over 850 tenants across almost two million square metres. There's no concentration risk in any one particular country, building, industry sector or tenants type. Most of our top 10 tenant customers are either global MNCs or government agencies with high credit ratings. Our top 10 tenant customers also account for less than 23 percent. And therefore, again, that diversification underpins the security of our cash flows.

So turning to slide nine, high ESG standards attracts tenants and capital. SeaReach is fortunate that we've been recently rated by MSCI AA. Only one of three Singapore rates pertain this high level of rating. Almost half of our debt now has the sustainability linked KPIs, which are shown on the right hand side table, to which as we outperform, we get lower interest rates. We are ahead of these targets. I'm especially pleased that in the first half of the year, 82 percent of our portfolio is now Bream or LEED certified, while exceeding the 20 percent or so average certification across all of Europe's office stock. And this is really borne out by the next chart, where we show here corporate commitments to ESG targets

are accelerating the demand for quality green certified office space, further validating our strategy. The left hand side chart shows over 3000 European corporates have signed up to SBTI targets in the last two years, a four fold increase. Tenants are reorientating their office space requirements towards ESG certified office space that helps them fulfill their own targets. And in some cases, they're willing to pay us higher rents. This resulted in a large gap between prime ESG certified office space demand and the availability of the supply in the market. And on the right hand side, based on Jones Lang's research, there is 1.7 million square meters of available supply,

compared to over 3.9 million square meters of tenant demand for this type of space. So we're very well positioned to benefit from this supply demand mismatch. And so I'll now hand over to Shane to cover the financial result highlights. Thank you, Shane. Thank you, Simon. It's pleasing to resort report a resilient operating performance has continued into the second quarter, reflecting stabilization in the European market, albeit we still feel the impact of both rising borrowing costs and our defensive actions and selling assets in order to keep the gearing below 40 percent. This resulted in a 9.5 percent drop in DPU to 7.05 cents for the first half year.

A couple of highlights for the period include firstly, the MPI, which was up 2.3 percent on a like for like basis. The rent reversion was a pleasing 5.2 percent, taking into account the benefit coming from new leases signed in VESA 21. And thirdly, from a capital management perspective, net gearing has been maintained below 40 percent, actually at 38.9 percent now, due to 260 million euros of investments that have taken place in the last two years. So if we turn now to the P&L, this slide shows the key line items that form the distributable income. The first half, 24 MPI, was 4.4 percent below the first half last year, mostly due to the divestments,

in particular two large assets sold in Italy last year. Firstly, Bari Europa in November and Piazza Afari in June. As I mentioned, on a like for like basis, the MPI was 2.3 percent higher. Finance costs were 14 percent higher than last year, as the average all in interest rate increased from 2.58 percent to 3.23 percent, driven by higher rates on floating borrowings and higher margins on refinance loans. It was pleasing to note that other expenses and income tax were both lower than last year. All in all, due to the asset sales and higher interest costs, DPU, as I mentioned, 9.5 percent down. It is best to see this described on the waterfall chart on the next page. This really shows the key drivers to the results.

What we've done is we've split the disposals to show the impact of the Bari Europa sale. As a reminder, this was a large police academy in Bari, Italy, which was on a six-month rolling lease, and it was sold in October last year. Although the yield was high, the risk was very high too, and if the tenant left, it would have been a very difficult property to release. So this was an important sale at a significant premium to its valuation. Asset sales and the higher finance costs are the key items driving the DPU, almost 1.5 cents impact on this first half-year result. There was a one-off item that was already mentioned in the first quarter,

being 1.2 million euros of reinstatement income from Padova, a property that we owned previously in Italy, providing some positive offset. The MPI, on a like-for-like basis, grew modestly in the first half due to revenue growth from indexation at around 3 percent, and income from new leases signed, particularly in hug support in the Netherlands. Operating costs, once again, have been well managed this quarter. For the half-year, total expenses were flat compared to the previous year, and if we look on the like-for-like basis, the net non-recoverable expenses were 3.3 percent lower than last year. Also, cash collection remains high at 97 percent over the period. This chart highlights the consistencies in our DPU during COVID and during the current

interest rate-induced recession-like period. Although we do expect a lower DPU going forward based on re-pricing the bond at today's market rates compared to the existing 2 percent coupon that we enjoy. However, today's result annualizes to a yield of over 10 percent based on today's unit price. This page shows the distribution timetable for the half-year distribution. Important dates are the last day of trading, come entitlement to the DPU of 14 August, and a payment date of 27 September. Also, as a reminder for those investors electing to receive the distribution in euros, election forms need to be sent in by the 10th of September. And we have kept the DRP turned off again, given the discount between the market price and the

asset value. Now, turning to our valuations for 30th of June, which were actually announced to the market on the 3rd of July. The headwinds of high interest rates that have affected asset valuations over the past two years have abated somewhat. It is pleasing to report a 0.6 percent increase in the portfolio valuations for the first half of this year, and that's prior to taking into account capital expenditure. And this is the first like-for-like increase in the last two years. The strategy to pivot the portfolio to logistics and light industrial sector has benefited the portfolio again for another valuation round, with this sector recording a valuation gain of 23.4 million euros, which is 2 percent up on the December valuations.

The improvement was primarily due to the approximately 2 percent market rent growth across the sector, while cap rates have stabilized, reflecting the continued interest from investors. Also, the office portfolio valuations, the pace of decline has moderated substantially to just 1 in the last six months, compared to a 4.6 percent decline registered in the December valuations. And two of our five office markets actually registered slight valuation gains this time round. Over the last six months, the terminal cap rate, exit yield and discount rate for the total portfolio have remained relatively flat. The portfolio's initial yield is 6.3 percent, while the reversionary yield is 7.7 percent. This reflects the value as views that over the

medium term, there will be rising rental income. Turning now to the balance sheet, which remained in a good liquidity position, with cash high at 63 million euros and with the 26 million euros drawn under the 200 million RCF being repaid during this quarter. As mentioned, no debt expires until the end of next year, and asset sales of more than 260 million euros have provided the funding for developments and capex. The NAV was slightly lower due to the marginal loss after taking into account the capital expenditure and the balance sheet. So after all of the refinancing last year, we now have a long runway to the maturity of the bond in November 2025.

We are actively engaging bond investors ahead of next year's maturity, while we're also having ongoing discussions with both existing and new lenders on alternative facilities. With the RCF being repaid, the all-in interest rate actually dropped a little from 3.23 in the first quarter to 3.16 percent at 30th of June. In line with the recent MAS consultation paper that was released, we have shown a scenario here where interest cover may only fall to 2.6 percent on the scenario proposed by MAS, which is a 10% reduction in EBITDA and 100 basis point increase in interest rates. So this provides a significant buffer to the proposed limits. And we have been

actively managing interest rate risk with both hedged and fixed rate debt, which helps to shelter the full impact of interest rate increases. As you can see, the all-in interest rate of 3.16 percent is only 144 basis points higher than it was in June 22, whereas you can see the three-month Eurobore has increased by 400 basis points over this period. The forecast for interest rates to drop, as you can see in the chart, should coincide nicely with the timing of our refinancing needs in early 2025. And lastly, for me, the capital management metrics remain comfortable with plenty of buffer to the covenants within our EMTN program and debt facilities. We have 63 million

cash and 200 million of committed, undrawn facilities available, providing substantial liquidity. While the board takes note of the additional flexibility that MAS is proposing in amending the LTV and ICR limits, it has not changed its policy of 35 to 40 percent gearing. As an indication, valuations would have to drop by 450 million Euros or 20 percent to get even close to the 50 percent LTV. And with that, now I'll pass to Andreas to tell us more about portfolio and asset management. Thanks, Shane. Good afternoon. portfolio occupancy was at 93.6 percent at the end of the first half of 2024. The occupancy of core countries such as the Netherlands, Italy and

Germany were above 94 percent. This is underpinned by more than 100,000 square meters of leasing completed so far in this year today, including fully leasing out in Avisa soon after completion. Series check and wait in portfolio occupancy increased by 4.4 and 4.1 percentage points, respectively, due to a new seven year lease totaling 3,400 square meters in our development project, Lovers, it's a one and the new six year lease totaling 3,700 square meters in our development project, Lovers, Mesto, one. Key focus is on the lease up of circa 10,700 square meter remaining vacancy in Sonowee in Denmark. However, part of this vacancy are office units, which are more difficult to lease out. For Lovers, it's a one and check the public, the lease up of

two vacant units would contribute 33 basis points to series occupancy rate as improvement. In fact, we recently signed a lease for one of these units taken up by an existing tenant who wants to expand with lease start in September 2024. So that would impact Q3 occupancy rate. This tenant also extended existing lease to reset to a five year lease term. In our logistic light industrial portfolio, we continue to see good rental version of 4% in the first half, reflecting a low vacancies and limited supply and sector across Europe. The portfolio is slightly under rented with passing rents 7.4% lower than market rents. 43,000 square meters of new

original leases were signed in the first half, while tenant retention was on the lower side with 32% in the first half, which is two primarily to two lost logistic light industrial leases in Denmark, one retail lease in Italy and one logistic lease in the Czech Republic. Various new leases in units smaller than 1000 square meter attracted even double digit rental versions in Denmark, brands and developments. Sector will remains unchanged at 5.1 years versus the pre-acorder.

Talking about the occupancy in the logistic light industrial portfolio, which improved in previous quarter by 0.3% to 94.8. Now this is still well below the record occupancy level seen in the year before. As I already explained in previous results presentation, the inclusion of the two new developments, Lovers et.1 and Czech Republic, Nov. 1 in Slovakia until occupancy statistics in the fourth quarter, 2023, resulted in a drop of occupancy since they were not fully leased up by delivery. However, we are progressing well with the remaining vacant units as mentioned before. The initial occupancy rate dropped by 5 percentage points, mainly due to one rent guarantee ending in our pre-oparking 800 asset and another tenant reusing space in the same

asset. On the positive side, the occupancy rates in Germany, France and Slovakia are well above 95% and for UK and Italy, all assets are fully leased. We are targeting to bring occupancy for the logistic light industrial portfolio back to 95% plus by the end of 2024. Now talking about the market, European logistic market was less active in the first half, in particular if compared to the extraordinary active years in 2021 and 2022. Strong occupy activity in recent years triggered a substantial supply response, which is now completing. Coupled with lower leasing activity during the soft economic lull, market vacancy across Europe has drifted slightly higher to

approximately 4.6% compared to the 3.9% in 2023, but this is still at a very low level in historic terms. More specifically, logistic vacancy across series 8 markets is only 3.2%. In the short term, vacancy may rise from further completions, but the development pipeline is now falling and as occupied demand rises again with economic growth and nearshoring, the long-term trend is likely to be for lower vacancy as the chart shows on the right hand side. Rents were flat or rose across the main European markets in the second quarter. The key leases in the quarter were the 9 and 10 year leases signed in Park du Pronet in France

with a planar random version of 8.4%. Our wheel marked assets in Amsterdam is in prime location and continues to enjoy 100% occupancy with a waiting list of tenants who want to come in. Now moving to the office portfolio, leasing activity in series office sector in the first half totaled 59,000 square meters with new leases and renewals signed at a positive 5.7% random version. This was driven primarily by demand for our great air offices, including the new leases in Nivisa 21. Their portfolios under rent with passing rents 4.1% lower than market rents. Tenant customer retention rate for office was at 86% in the first half and we already deal with some

of our large office leases with 20-25 expiries. Rail improved to 4.5 years in the first half up from 3.6 years a year before mainly due to the renewal with a large agate tenant at HAC support in Nivisa. The overall office occupancy increased by 100% to 90.7% compared to the first quarter which is mainly due to the full lease of the redevelopment in Nivisa 21. One new year, one nine year lease of 1,000 square meters in our SACO asset also located in Milan and one new five year lease 1,600 square meters in Baszkjorn in the Netherlands. Opiumency in Poland stabilized at just under 90% due to the sale of the weekend office

asset Koyetka 5. While we are in discussions for renewals with our larger tenants with 20-25, 20-26 expiries for our Krakow asset screen office and Avatar. Opiumency fell slightly again in Finland explained by structure, transit office and the higher share of working from home in Finland from which our assets are more impacted due to their peripheral location and higher building age. We continue to settle down our Finnish exposure with one office asset sale close in the second quarter and one more is in advance stage of negotiations.

There has been a lot of press about the US and Chinese office markets. For comparison, the left hand chart shows the recent take up of office space in Europe. So while last year's leasing was lower than in 2022, it was still a substantial 22 million square meters of office take up. The CBR8 data indicates that European office take up in the second quarter rose by 2% quality and is expected to be similar to the last year. Overall vacancy increased by 1% to 8.6% in the second quarter with a two-tier market of prime offices in strong locations and secondary and tertiary stock in weaker locations. The three-year forecast bar chart for 2022-26 shows that

CBRE expects activity to pick up in the next few years in part in line with the recovery and economic growth. The right hand chart shows CBRE's forecast of peak in vacancy this year around the current 9% mark. Moving to the next slide, office leasing highlights. Pleasingly, we have renewed our largest tenant portfolio for a further five years in the Hague. We are very progressed in our plans to undertake a major repositioning project to lift hard support to a Paris-proof energy rating and other attractive amenities. We are working with our key tenant at HUG support in a unique partnership approach as we share a common vision to improve

energy efficiency, reduce carbon emission and improve staff amenities and the local environment. We expect to see substantial uptick in rents and valuation as a result of the steals. The visa21 is now fully led in the first half of 2024 with three new leases signed in the second quarter at the planned rental version of 74% reflecting the pre-moor repositioning of the property. The visa21 has also assisted driving up the Italian office portfolio to see to now 93.7%.

The visa21 has been the first office redevelopment project in serial portfolio and we deem it a success story. When the single tenant announced to leave in December 2020, we assessed various strategic options and concluded that an office hard refurbishment would provide the best returns for unit holders. Our repositioning strategy included very high ESG aspirations which proved to be the key success factor for the quick visa with 100% tendency achieved just a few months after delivery. Return-wise, the rise in construction costs in an overheated Milanese construction market and the market yield shift ate up part of the underwritten development profit, while market rents increased significantly at the same time to levels far above underwriting

which has protected the other part of the development profit. More importantly, serial unit holders now enjoy a fully leased, great-year office building and a co-location with a comparatively high 6.6% yield on costs. Coolers to chroma, assembly, development and local asset management teams, the project was delivered in time and in line with the final budget that series board had approved prior to start of construction. The visa trend was also a testimony for series high ESG aspirations. The building was certified with a LEED Latino rating and the 91 points ranked it a second best in terms of LEED certified office buildings in Italy. Energy intensity based on design is deemed to achieve at least 40% energy reduction

compared to pre-referishment level but we aim to implement more measures such as smart building technology to move towards 5% energy savings. Energy purchases 100% renewable which is another try to comply to the current carbon pathway. During demolition and strip out, material cycle was around 90% to mitigate embodied carbon from this project. Looking ahead, we have a 200 million plus euro of short-term medium-term development pipeline opportunities in the series portfolio. As mentioned earlier, we are very progressed in our plans for HAC support targeting plant concern in the next 12 to 18 months. We are in discussion of various pre-led tenants at Maxima in Rome which is now fully stripped

out and ready to redevelop into a LEED Latino building which is a premium positioning in Rome that meets a high demand from international corporate occupiers but also from public authorities given Create A, we can see in Rome, is only around 1%. The remaining two projects, Røderkarden, Amsterdam and Park de Dok in Paris, are more complex and require longer consultation periods with Mouliliars of improving stake holders and political agendas. We expect the Amsterdam project approvals to be ready in 2026-2027 for construction while the timeline for the larger scale Park de Dok project remains further out. In the meantime, we enjoy high levels of income returns from both assets. Now I will hand back to Simon for economic and market or

view and conclusion. Thank you, Andreas. So turning to page 37, while the economic picture for Europe has improved, the recovery so far has not met expectations, particularly in the cyclical sectors. Real wage growth and easier monetary policy are expected to aid recovery. The Eurozone's GDP grew by 0.3% in the quarter and is projected to rise by 0.8% for the year and 1.7% in next year. A significant recovery is expected only after further rate cuts, according to Oxford Economics. On the financial market side, credit spreads have compressed from the beginning of the year and have stabilised after the short-term volatility caused by the recent French snap election and the recent BOJ move. The Eurozone inflation was

2.6% in July, slightly up from 2.5% in June, with the cost of services rising slightly faster than food and energy. The ECB cut rates by 25 basis points for the first time in five years in June, with the next rate cut expected in September followed by a further cut in December. This is also implied by the forward curves that we can see. So looking at the transaction market activity on page 39, volumes have declined in the last few years in response to the rise in interest rates and the geopolitical uncertainty as shown in this slide. European transaction volumes were 44 billion euros in the quarter, comparable to this time last year. Pre-quin

estimates that 350 billion euros of private equity funds were committed, but not yet invested dry powder will also help stabilise the market more than one times annual volume worth of equity available. So before I move to the conclusion, I'd like to highlight Cromwell Group's announcement on the 23rd of May. Cromwell Group has agreed to sell its 28% stake in C-REIT units, 100% of the manager of C-REIT and 100% of Cromwell European's business to Stoneveg. Stoneveg is a global multi-strat real estate experienced advisor and asset manager with 4 billion euros in assets based in Geneva, Switzerland. It has significant real estate investments and funds that it manages

in Switzerland, Spain and the US, including managing a listed Swiss real estate company of around 1.5 billion. At completion of the sale, Stoneveg will manage around 8 billion of AUM and this provides C-REIT and new as the unit holders with complementary asset, transaction and capital management prowess and bringing deeper banking and capital market relationships to complement and supplement what we already have here. I would like to reiterate that Stoneveg have committed to support C-REIT's investment strategy and longer term growth aspirations while maintaining the high level of corporate governance, including the board independence that C-REIT is renowned and we recently received the top six ranking in the STI governance index for that. There are no anticipated

changes to the C-REIT management team and the independent directors. So we look forward to working with our new sponsor once all the customary closing conditions are finalised. So in conclusion, with interest rate cuts underway in Europe, improving credit market conditions, stable cap rates, continued rent growth and the proposed amendments back here in Singapore to the MAS, LTV and ICR limits are all contributing to stabilising operating and valuation conditions both in Europe and here. This should lead to improving investor confidence in European focused rates. So as a result, we are well positioned for the next stage of the cycle. We can now take a more balanced approach and look to take advantage of opportunities for growth over the

next 12 months with more confidence. We are nearing the end of the current investment strategy because of this extra confidence and comfort we have in our current portfolio and the valuation outlook with approximately 90 million euros still to go of non-strategic investments over the next one to two years, which will also increase our weighting to logistics and light industrial and recycle into our development and AEI programme. We continue to stay laser focused on refinancing the November bond and minimise the negative DPU impact from the transition from the old zero rate environment. We believe C-REIT offers a compelling investor proposition with a resilient high yielding logistics focused portfolio and experienced local

asset management teams with sustainable ESG plans and within comfortable gearing levels, all at a 35% discount to NAV and a 10% annualised DPU yield and soon with the new strong dedicated European sponsor. Exciting times for us all ahead. Thank you for your time. Chiara, there ends the pre-prepared remarks. If you'd like to turn over to investors and unit holders for questions. Thank you. Thank you, Simon. We'll now begin the Q&A session. As a reminder to the audience, if you'd like to ask a question, please select the raised hand button to be placed in the virtual queue. For those of you who have dialled in, please press star nine to raise your hand and

star six to mute or unmute. Alternatively, you can submit text questions by the Q&A feature. Both options can be found at the bottom of your Zoom screen. Our first question is around the new majority ownership and sponsorship that's recently taken place and the question comes from Michael and one from Ramesh. Can you please guide on the implications from the recent change in majority ownership and sponsorship? Will there be any change in leadership and will there be any name change for the reach in the near future? Thank you for the questions. So as I said in the pre-prepared remarks and Elena has put up here on the screen. Firstly, Stoneveg is a very

experienced hand of managing and investing on behalf of their unit holders and their investors throughout Europe and the US. So as part of a very long and detailed due diligence period, at the end of that, as obviously part of the transaction to acquire the units and the management company, they themselves have come out publicly to say that they support the strategy of the REIT, they support the governance structure of the REIT and they support the current management team and independent directors. So we certainly don't expect any of those changes. So the changes that we mentioned today around our greater confidence in the outlook relative to

the last 30 months which has been about weathering the storm, it coincides now with the cut in interest rates stabilizing valuations, slightly improving economic growth that coincides with the changing of the pattern of sponsor from Cromwell Group to Stoneveg over the coming months. So we look forward to that. Thank you. Our next question comes from Felix and from Ramesh. Can management please talk to any cost cutting exercises in the near term and if you could please talk to any cost structures and whether they've stabilized, especially around the OPEX, maintenance, labour and interest rates please. Sure, thank you for the questions. So almost 95% of our leases in Europe are leases where we're able to recover any operating costs directly from the

tenant. So we've in a slide that Shane showed earlier that's now up here, we were able to reduce our OPEX and also recover that OPEX from our tenants. And so that's what we mean by non-recoverable operating expenses. So this is for areas that perhaps are vacant where we don't have a tenant to pay for the security or the insurance in that particular part of the building. So we've been very focused in cutting these expenses at a time of rising inflation and rising costs as implied in your question. So we're really pleased with this slide, with this outcome, that our tenants have benefited from our cost cutting and focus, particularly on energy

efficiencies, water reduction and waste disposal programs that we've been implementing throughout our portfolio in the last few years. So we're now starting to see some of those benefits. So ESG is in part about reducing our footprint, in part about reducing carbon emissions, but it also has an economic and tangible impact of actually making the buildings more efficient. And once the capital equipment is installed, then obviously the operating costs should come down as well. And that's certainly what's born out here. Thank you. Our next question comes from Michael, which is a follow-up. Does Stoneveg have any experience sponsoring any listed REITs or unlisted REITs? Can you name the REITs its sponsors? Yeah, good question. Thanks, Michael.

We're really pleased that this particular sponsor does have a public listed company experience in Switzerland, a very similar regulated environment as to here in Singapore, in very similar cultures with regards to the due diligence and the fiduciary responsibilities to investors. And so, yes, they manage a quasi REIT. They don't actually have a REIT structure per se in Switzerland, but it's a very similar vehicle. Theirs is called the US Varia V-A-R-I-A REIT, and that's about 1.5 billion worth of US multifamily or residential apartments listed in the Swiss market. So they have all of the fiduciary responsibilities. That was a portfolio that they put together with their investors back in 2013. So you could probably imagine how astute

they were going into the US market at that time. And again, we welcomed them onto our register, potentially at the same sort of astute time with regards to our share price and the future outlook of Europe. But yeah, they manage in total about 4 billion euros of assets on behalf of third-party investors, both institutional investors, as well as Swiss private and high net worth investors as well. Thank you, Simon. Just as a reminder to the audience, if you would like to ask a question, please use the raised hand feature to ask any verbal questions. Those who would prefer to submit text questions, you can use the Q&A box at the bottom of your

Zoom screen. We have another question from Michael, and Michael asks, do you have any updates on the $450 million bond? Will management be doing more buyback to reduce the quantum of the bond?

Thanks, Michael. Yeah, so the bond market in Europe is quite active. We have seen a lot of real estate issuers in the market. Of course, the current level is much higher than what it was when we did the bond back in November 2020. So we're watching closely, we're engaging with investors, as we mentioned in the slides. And we're also giving ourselves some optionality in discussing with our lenders on alternative facilities as well. So, you know, as we've said in our notes, we have a long runway and we will continue to look and see watch market conditions. And see where is the opportune time to refinance. In terms of buybacks, we don't have any plans yet,

but you know, it depends on what happens going forward. Thank you, Shane. I'll just pause to see if we have any additional questions from our audience today. Just as a reminder, you can ask verbal questions using the raised hand feature, or you can submit text questions using the Q&A box.

It looks like we don't have any additional questions. Simon, I'll hand it back to you for closing remarks. Thanks, Kara. And so in conclusion, our focus is clearly going to remain on asset management. This is the lifeblood of the REIT. We've maintained very high levels of portfolio occupancy. We secure long-term leases. We drive the positive rent growth. We take advantage of the under renting nature of the portfolio. And we'll progress our key development planning permits. We've again successfully demonstrated with the recent completion of a number of our projects that the team and the conditions on the ground are conducive for us to undertake these AEI's and the tenants are there to pay the rents that are required to

deliver those high returns for investors. From a capital management perspective, continue to focus on that last remaining piece of the old legacy debt, which is due for maturing at the end of next year. And we'll maintain our focus on the investment grade rating within the portfolio and keep that gearing in the medium term between that 35 to 40% level. We'll continue to recycle capital, albeit at a softer pace because we no longer feel that existential issue around drop in valuations that we've seen in the last two and a half years. And so therefore, we'll be more selective and that capital will then be recycled into lifting our light industrial logistics

exposure, as well as to fund our AEI programs in addition to our sustainability mandates that we have as well. So with that, we look forward with a lot of confidence into the next 12 months, both from an operating perspective and from a valuation perspective. And so we are delighted to speak with our investors today. Thank you for your time. And we look forward to catching up next time. Thank you very much.