3Q 2024 Business Update Conference Call

Good morning, everyone. Welcome to Fraser Centre Point Business Update for the third quarter and the 24th of July, 20th of June, 2024. Today, we are very happy to have the management team here to give you an update of the progress that we have made in the last quarter. And so with us, we have the CEO, Jia-Nu, we have the CFO, Audrey Thao, and our head of investment, NSF Management is calling me. I will be your host today and I'm happy to hand this over to Richard to kick off the presentation. Richard, please. Hey, thanks. Thanks, Fanling, and good morning, everyone. Thanks for joining us bright and early today. Hopefully you had the opportunity to look through our deck. So as you know, this quarter is more on the business update, looking at the operations and how have we felt so far this quarter. But before I proceed further, I just wanted to note that Audrey, our CFO,

will be joining us for the last analyst update session before she stepped out on the 8th of August. All right, okay. So coming back to our deck here, as you can see, we have done some changes. Fanling has also created a little bit more of a dashboard look, and that is fundamentally to help in terms of visual aspects so that you guys could really see not just a number, but a trend in terms of where we are, how we have been performing so far. Okay, so in terms of the overall operational update, you can see that occupancy remains very healthy, 99.7% overall. And what's also more important is we have a couple of 100 pointers and all our more achieve at least 99% in the third. Shocker traffic, tenant sales, we will go into more detail later on where Fanling will share. But just a very quick snapshot, we are still ahead if you compare year on year

in terms of sales, it fluctuates a little bit quarter to quarter. But nonetheless, I think, you know, it's still on a positive trend. Similarly for shopper traffic, we are probably about 5% of pre-COVID. Some of our malls, the more dominant ones like Cosway Point, not Point CD, has actually achieved pre-COVID level. So something we continue to focus, something we continue to work on. Financial position, our gearing is at 39.1%. Again, this is partly due to some drawdown as we pay off the keybacks for our T1 AEI. Average cost of debt is of this quarter, it came in at 4.1%, but you can see that for year to date, essentially at 4.2%. So it has been moving down marginally from 4.3, the peak of 4.3 in first Q2, came down to 4.1 for the last two quarter. We're gonna be giving you an update of the T1 AEI.

We are very excited about this completion because it's gonna be something new for T1 AEI. We are able to bring in 68 new to mall and 46 new to SCT retail concepts. For those of you who had the opportunity, I would like to invite you to take a look at some of the new brands that we have brought in for this mall. It's still very much on track to complete fully by September. Most of the work has already been completed actually. It's now some of the tenants are doing a fit-down and so on, right? And happy to also share that the ROI, as we mentioned before, it's about 8% on the cost of the work, on the AEI work, but we are likely to outperform that. In terms of our ESG front, we continue to do our best where we can, focusing on the environment and also not forgetting the other element as well.

Specifically in this particular update, we'll focus a little bit more on our social aspect of the ESG. All right, Monday. Microeconomy, I'm not gonna touch in greater details, probably you guys have all the same details as what you're seeing here, but there's just some key points. Wanted to highlight that the GDP actually grew to 0.9% in the second quarter. And also this is very much in line with what NDI has earlier maintained, the forecast of 1-3%. More importantly, also looking at co-inflation is more dreaded to 2.9%. So I think we are seeing signs of this coming down, which bodes well for both our consumers and also our retailers. So there's another space that we continue to watch and continue to focus on. For retail sales, from the RSI for May, that is actually a flat number, no change here,

but actually for FCT portfolio has seen an increase. Similarly for FNB sales, for May 2024, for the broader market perspective, we saw a 2.9% increase here a year, but our own internal numbers actually surpassed that figure. RAN's Suburban Prime retail 0.3% QAQ and 2.6% year on year. So in the last quarter, we actually shared that our reversion came in at 7.5, again, happy to say that we are very much on track at that level. New supply, not much has changed since our last discussion. So very much, again, very limited supply. We're expecting to come on stream for the next three to four years. So that again helps underpin the demand, which is why we are seeing all our most, at least 99% occupied.

Audrey, I'll hand that to you now for the financial highlights. Thank you, Richard. Good morning, everybody. I went through the financial metrics. aggregate leverage is up to 39.1%. This is because of the loan that has been drawn down to finance the KPAC's requirement and for the ongoing AEI at 10.1, and also for working capital purposes. The ICI is stable at 3.26 times, and our cost of debt is about 4.2% average for the nine months and the day of June. So for the quarter itself, we registered 4.1%. This has come down as compared to the first Q where we registered 4.3%. About 67.2% of debt is hatched to fixed rate interest and 68% of our loans are actually green loans. We have un-drawn facilities about 546 million

and rated by S&P and Moody's. Coming next slide. So this shows you our debt maturity profile. We all spread debt maturity profile and there's no refinancing in FY 2024. Now we are looking at the refinancing on FY 2025, and we are already in talks with the banks for the refinancing requirements. With this, I'll hand over to Paulin who will share more on the portfolio updates. Yeah, thanks Audrey. Good morning, everyone. I think Richard had given a little bit of a preview on the good self-results that I'll be sharing and going into a little bit of details in the subsequent slide. I believe that this is a fruition of the hard work that collectively the team had undertaken and also together with the tenants as well. And it is a testament to the proactive asset management and portfolio management for the portfolio of assets.

Right, going into committed occupancy, a very strong set of occupancy, which underscores the quality of our malls. We're looking at 99.7% as at the end of the third quarter. It's a 1% point increase on a year-on-year basis. And across all our malls, occupancy has actually maintained at a very good level of more than 99%. And in fact, there are a few malls, the likes of Crossway Point, Waterway Point, North Point City, Tongbao Plaza, these malls have actually hit 100% as at the end of this quarter. And what is worth mentioning is also Tampanese One. So Tampanese One has been undergoing AEI for the past year or so. And it has, at the conclusion of the AEI, it is actually coming back with 100% committed occupancy,

not just on the spaces that are affected by the AEI, but across the mall. Now, I will talk a little bit about the portfolio football and sales. So we do see football continuing its recovery trend. It has actually reached a level that's very close to pre-COVID overall across the portfolio. And in fact, a few of the malls have exceeded the FY 2019 football numbers, right? So very close to full recovery to pre-pandemic numbers.

On the sales front, we do see that sales continue to increase and that's despite coming off a higher base. So if we look at sales levels now for our portfolio compared to pre-COVID, it is at 20% higher than pre-COVID levels. And notwithstanding that, we do see that the upward trajectory is maintained over the course of this year.

On this note, we would also like to acknowledge the support of the Singapore government with regards to various payouts from the assurance package, course of leaving supporting package. And on top of this, we are looking, they have also dispensed a fair bit of CDC vouchers and also climate vouchers. And that is with the intent to support the general populace that is facing a higher inflation, higher cost of living. But what is worthwhile to note is that the beneficiaries of this government support, the bulk of these beneficiaries are actually the mass market consumers who spend at our suburbs. So this has actually also helped to support or sustain the sales of our jobs. And there has been several rounds of pop-ups and what has been announced to date actually extends into 2025.

Next slide, please.

Our belief is that retail is about remaining relevant to our catchment. And it's also about delighting shoppers. So our focus remains on continuing to bring in new offerings, concepts, and brands to excite our shoppers. We do see new tenants or new brands and new concepts coming in across various trades. I think FMB has been doing very well, but the new entrants to our most have not just been limited to this particular trade. So the various aspects of retail, as you can see from this compilation of samples or examples of new to portfolio. So the takeaway is that the Singapore retail scene still remains very vibrant. Retailers have come out stronger from the pandemic and they are constantly reinventing, improving their offering and their concepts. Okay, next slide.

Now we have always mentioned that we position our most to be relevant to the community heartland, right? We want to be the heart of the heartland. So there's a lot of focus on place-making and programming to engage our shopper community tenants as well as various stakeholders. And over the course of this quarter, we have actually carried out various thematic programs as well as events. And this is with the objective to bring food form from a wider catchment and also to continue to instill the shopper loyalty such that they continue to come back. So the focus on returning or recurring food form. Next slide, please. All right, Tempanease 1 AEI. I'm very happy to share the outcome of Tempanease 1 AEI. I think it has been a long one year plus or so

of remaking the more, repositioning the more and it has ended well. We are all track to complete by September this year. And I mentioned earlier that notwithstanding the disruption of the AEI, we are looking at 100% committed occupancy across the entire mall. In terms of value that has been crystallized through this AEI, there's additional 9,000 square feet of NLA, which we have realized through the CSFS scheme. And this additional GFA has been largely deployed to the prime retail floors to bring in the ROI that I mentioned earlier. When we announced the AEI, the target ROI was at 8% and we have exceeded that target. In terms of the retail positioning, I think one of the key objectives and focus of this AEI

is to strengthen Tempanease 1's positioning and also competitive strength within a very competitive Tempanease hub market. So with the AEI, we have brought in 68 new to mall concepts of which 46 are new to FCT portfolio. Now, the initial response from both retailers as well as shoppers has been very positive. So we are very, very much heartened and encouraged. And this is also a demonstration of our commitment to unlock value from the existing portfolio to our investors. Next slide, please, Fungi. So some pictures to show what are some of the key areas of enhancement and changes. So one of the focus is the rejuvenation of the common areas, the walkways, the toilets,

the entrance to the mall, enhancing the overall lighting to improve the shopping ambiance within the mall itself and refreshing some of the key shopper touch points. We brought in a myriad of new FMB options. So Hawker Street, some FMB and also retail options. And through the AEI, we have actually right size, some of the spaces, and this has resulted in an increase in the retail offering and also the strengthen the ability of the retailers to trade more productively. Next slide, please, Fungi. Yeah, all right. With this, I will hand over to Fungi to take us through the ESG segment. Thank you. Thank you, Pauline. Happy to share this section on the ESG, in particular, emphasis on the social part of the ESG.

We have been constantly and continuously strengthening our bonding with the community and the stakeholders. And a lot of activities that we do actually at the mall level, reaching out to the mall shoppers, as well as through the partnership with our tenants. So on the picture on the left, you can see that we have a retail sponsor, WOT. That's basically to recognize the efforts and the support from WOT. And it's supporting our food waste valorization as well as the inclusion champions program. And on the right, this is part of our program to train retailers as an inclusion champions. And part of the reason is also to, and I'll reach out to our shoppers who have a disadvantage, for example, those with autism, dentures, and also with disabilities. So this has also been very strong in attracting this self-participation from retailers.

We have just concluded our painted forward and annual program that attracted a lot of participants, both from the stakeholders, as well as the tenants alike, across the nine business property malls and example, we'll invite the tenants. So this example also helps raise funds to support community chat and also to support the upper programs with persons with disabilities. Right, with this, I'll hand this over to Richard to wrap up the presentation this morning. Richard. Yeah, hi, thanks. So a very quick wrap up before we can move on to Q&A. So again, just reinforcing the fact that the performance at our mall continue to remain very healthy. We see improvements across the various metrics that we focus on. As I mentioned, property management, again, are very key focus on driving some of this performances. As also what Olim mentioned, part of that includes the AI that we undertook.

And what we intend to do is to target to announce in another upcoming project in due course as we go through some of the processes that has been put in place. So the idea is for us to complete one AI and then the ability to roll out another AI. So this is where we always talk about three key pillars of growth. One is organic, the other one is AI, and then the third one is of course inorganic growth. So we have the ability to continue to channel AI that will again add value to work in terms of the valuation and also the overall performance for our portfolio assets. The other two aspects is of course, in terms of the contribution to our bottom line. This year is so we wouldn't see the full year of contribution, but it's gonna come from, for example, for the next 24.5% acquisition is gonna come in for the full second half or 24

and then the full year of next year. Similarly for the 17.1 AI, the full up-live or benefits will then be solved in 2025. With that, I'll end my presentation and happy to take any questions. Thank you, Richard. We are now ready to move into the Q&A session. So we have the first question coming from Terrence, from JP Mobile. Terrence, please unmute yourself and go ahead with the question. Hey, thanks so much, Richard and team. Congrats on the results. I just wanted to ask on two aspects. Firstly, on a pass-through small, there's been a lot of a distance on pass-through small and I understand it just opened. Could you give us a sense of how the impact is, especially on white sands? Second question, just wanted to ask a bit more on the interest costs, whether Audrey could give some guidance on our expectation for this year.

I guess this year is almost up. So how are you seeing interest costs for next year? Yeah. Yeah, thank you. Let me take the first part of your questions and then I'll be in the second part. The PRM opened in June and they just had their official opening about too long ago. So far, what we are seeing is that our theory, our initial theory, which we shared with all of you, is that we always felt that white sands being a more than 150,000 square feet size, was not able to provide very holistic clique to people living in the series, which is why you get people going to downtown East, people going to other parts of Singapore to shop. And with the opening of PRM today, the total space available, retail space available is in excess of 400,000 square feet. So that's about the size of Coaseway Point. And with that, we feel that collectively

both white sands and passivis more can then be providing enough options for passivis residents to really shop at passivis. And happy to note that the traffic has gone up. In fact, that's what we have anticipated. The sales is pretty flat and I think for the month of June, generally the market has seen a pretty flat sale. So far, from what we are seeing is our effort to kind of refresh on more a little bit, our effort to put in different, revisit our trade mix and improve our trade mix. And at the same time, the focus of being complimentary to PRM is bearing through. So, but this is something that we continue to watch and continue to work on any areas of improvement. And then in due course, you have a better sensing on what's the overall impact, but the initial impact has been positive as far as we are concerned as of now.

Audrey, you want to take on the second part? Okay, so Terrence, for this FY, we maintain that the interest rate should be at the low pause. As for next FY, I think we have a very good chance that we'll maintain at the low forward level. Okay, thanks so much. That's all I have for now. Okay, Terrence, next question from Jeredine Wong, DBS. Please go ahead. Hey, thank you. Yeah, good morning, Richard and our management team. Yeah, so my first question will be on reversions. I think last quarter, the reversions was a positive surprise. Just wondering how this quarter stacks, if you are able to share some color. My second question will be on these negotiations. So has the upcoming RTS to JB actually appeared in your conversations, potentially still early? And if you are able to share some feedback from tenants to give us some guidance on what to expect. Thank you.

Okay, reversion, very straightforward response to that. In the first half, without announcement, we shared that we achieved 7.5% average reversion. And happy to say that we are still hitting that kind of number as of now for this quarter. So we have another quarter to go through in the full year, we'll be able to share the full results, but we are on the same trajectory. Coming back to RTS negotiation of our retailers so far as what you really pointed out, there hasn't feature in our discussion with our retailers thus far, but maybe, and we know that this is a topic that is much talk about because there's a lot of publicity around the construction of RTS, when is it going to be ready? We have ministers visiting the sites, et cetera. And I think this will continue. The focus will be there as we near the completion of RTS.

So if you ask me, what's our perspective, definitely something we are watching very closely. We try to also look at what are the things that we can do before the RTS is completed. So for my own perspective, I think a couple of things that comes to mind. Firstly, we also recognize that the travel between Singapore to Malaysia is nothing new. I mean, today we have various mode of transport. You have the, you can go by car, you can go by bus, you can go by train. It's really there. And we have also recognized that there's a lot of cross border, a lot of people are going to Malaysia, in particular to JB. And this has been ongoing, I mean, since the day they started the three quarter tank, if you recall. So what's new and what's coming out is this additional link, the RTS link that maybe perhaps we actually make it slightly easier

for people who wants to go there and also vice versa for coming to Singapore. So from my perspective, I look at it from two angle. One is the overall economy. I see that as a big plus for Singapore, because what it means is that probably we can expect to be able to benefit by having more people from Malaysia coming over to Singapore to work. And as we know that the productivity of the Malaysian worker, it is higher than what we typically get elsewhere. That's one. Secondly is if we can get more people working on a transient basis rather than having to stay in a working Singapore and stay in Singapore, that also will overall perspective help to reduce costs, because then you don't have to factor in lodging costs as well. And also to help the overall market perspective in terms of the pressure on rental properties. So from that perspective, we see it as a benefit for the overall market and retailers

may also benefit as a result of that because this man-bought crunch is here to stay. And if they can get better quality and even potentially more people coming through from Malaysian side, that's gonna help overall. So that is from the overall market perspective. The other view that we are focusing on is the potential or likelihood, what would be the impact to the retail market per se? And that's where we look at various aspects. Firstly, trade mixing, where we understand that people are going there for certain services, people are going there for certain purposes. So we have to review our own assets. We have to, in a way from now to the time when it's fully completed to make adjustments to some of our trade mix, focusing more on areas where we believe we'll continue to generate good sales, generate or attract traffic to come to the mall. So this is an ongoing basis for all our assets.

Retailers action, we have also spoken to retailers who, especially those who have bought businesses in Singapore and Malaysia. So we want to understand what they are thinking, how do they differentiate. So by and large, we are comforted by the fact that a lot of these retailers, again, to them, is this nothing new. They've been doing this for a long time. They just said now the publicity becomes more prominent, but otherwise it's an ongoing thing. And they do internally have different ways of differentiation. I mean, for example, we spoke to one fashion retailers. They told us that generally in Singapore, the latest trend, the latest product will be launched in Singapore first before it goes to Malaysia, for example. So that's how they differentiate. And in terms of pricing, typically they see very little differentiation. So we know that, so it's discomforted by the fact that when we talk to these retailers, they know what they are doing and they are able to differentiate.

And it's something that we continue to work with them. And so the other thing is we also look at it and analyze the impact and recognize that it's not going to be a zero sum game. So while we expect some leakages to happen, or a little bit more leakages to happen as a result RTS, we also see this as an opportunity, right? Because what's going to happen is the whole area around Woodlands, being a regional center is also going to be rejuvenated. So there's a lot of plans, a lot of development that's going to happen around then. And we see ourselves as potentially a connecting hub, right? Because this is where we serve as an interchange node where there are two lines, MRT lines that comes to this place. So one is where potentially if you take the red line, if you need to change RTS, you will stop here and make that switch. And also the passing the change is also

gets a step away from cost way point. So we see cost way point being a connecting hub and likely to see more traffic actually coming through the mall. At the same time, with all the developments that's coming around, Woodlands area, as I mentioned, business park and so on. So again, we expect to see a group, the overall catchment market for cost way point. And not forgetting that there's going to be about another 10,000 units of apartments, both PTO and also one private apartments that's going to be coming on stream in the next five years. And as mentioned about 10,000 units. So if you work out and stream, you're expecting another 30,000 people to come and leave very close by to cost way point. And so the other aspect that we are working on is also trying to expand our catchment market. This is what Pauline mentioned just now, in terms of place making, creating activities. So we hope to also expand our current catchment market

beyond the immediate catchment market that we are expecting to date. So we hope that can also make up some of the potential decages of traffic over the next few couple of years, once the RTS is completed. The other positive signs that we are also seeing is that Malaysian retailers are also taking interest in Singapore, so that's the irony, right? We're talking about people going to Malaysia and why are they coming to Singapore? So you're really seeing Brez and Pauline, for example, the one that sells all the snacks coming to Singapore, you have your bakery brand, the vendor, is really open in Singapore and we understand people like, even the- Orantar copy. Orantar copy is making interest in Singapore and then because of you have gone there, you probably would have tried anyway, right? So that is where we see opportunity. Not only are we looking at it as a negative,

but we are seeing, you know, even retailers in Malaysia recognize the fact that once they become known to Singapore, they also want to have a presence in Singapore because you don't have to wait for a weekend to just have your orantar copy, or you can have it every day if you're in Singapore. So we see those as positive signs as well. And finally, what I would also add is that it always has this equilibrium, right? I mean, today we say that it's a lot more affordable going to JB because of rental, because of cost of labor, but if everything goes up, the demand goes up, landlords in Malaysia are not going to stay. As it is today, the staff being able to come to Singapore to work, they're not going to demand the same level of salary. So there will be another round of equilibrium. But by and large, what we are focusing on is what we think we should do. We continue to work on our assets, continue to work on retailers, right? I hope, Chary, I give you a broader perspective

than what you have asked. Yeah, thanks Richard. Hope to see you all at the KOP at Crossway Point. Thank you. Okay, thank you. For those who are just busy trying to catch up with what Richard said, happy to say that there will be an archive playback right after the call so you can listen to the response again. All right, we have next in the queue, Derek from DBS as well. Derek, please go ahead. All right, thanks, Fungling. Can you hear me? Yes, yes, Derek. Hi, good morning. Hi, Richard and Tim. Hey, good morning. Congrats on a strong result. Just two questions. My first one is on talent sales, right? Notice there's about 120% and it's sticky. I think this is probably the new normal. But I'm just wondering whether, given where we are now going forward, right, RTS, et cetera, competition from other malls, are you on a more defensive stance to keep this 120% talent sales versus pre-COVID? Or do you think there's an avenue for your malls to let's say hit 130, 140? I'm just curious your thoughts on that. That's my first question.

Second question is on Ulemo. It's available for sale. The pricing may be expensive, but just curious whether does Bida Dari estate make you excited, like just curious? Yeah, just is too casual, thanks. Yeah, hi, yeah, Derek. So to answer your first question, simple answer is we will always look at improving our sales beyond what we have today. So the team is tasked to, again, look at how can we continue to drive sales and that is our aim, right? Because the higher the sales level we can drive, the higher sales productivity our retailers can do, they will translate to a better version for us down the road. So our focus is, no, we're not gonna stick to the level we are today. The focus is, again, to continue to see how can we drive traffic, how can we drive sales? So as I mentioned, there's now some of those activities that's making a very targeted focus on driving sales events. We'll continue to take this. And as I also mentioned, we are also looking

at not just keeping to our immediate catchment. We are focusing on how can we also attract catchment market beyond our immediate catchment. So by and large, the focus is driving sales, right? So that's the first question. The second question is really more, yes, yes, it's in the market and it's a model of more than 200,000 square feet. It's got connectivity to key transportation notes, et cetera. So definitely something that we will look at, you have to review and see whether it makes sense, right? It is in Vida Darvi estate, a growing estate. Today, it may not be that it's full capacity that are still potential for growth. And at the same time, we also look at it and say that it's one station away from NEX. So NEX is 635,000 square feet, it's three times larger than Woodlane. So all this, we will bear in mind as we look at sales opportunity. Okay, thank you, excellent, Eric, thanks.

Great, thank you. Moving on to the next question from you, Kiel, CSA. Hi, hi, congrats Richard on a good set of results, but set the CIO of the going. Just a few questions. On the tenant sales right, the 20% higher than pre-COVID, does this include online sales as well? Then the second question is on, I see that some of your falls in the past three is dampening, so slightly dipping in terms of occupancy. Would you attribute this to PRM? And then lastly, the question on companies one, what's the average rents that you signed for the new additional 9K offers in LA? Yeah, okay, you can have first question then sales. Yeah, it does include online sales and this is something that we also talk about as part of our strategy, right? Is to create a environment where we see only channel going forward. That means our retailers also participate

in online sales as well, right? So here online sales, if it happened at the mall, if the transaction is recorded or the pickup is done at the mall, it will be registered as a sales. So that's also one of the reason why we have seen an increase in our sales. So that goes into a GPO, it is done at the mall? That's right, that's right, it does. So it's a question of now, it is not just brick and mortar, so it's a combination of both online and offline, right? So and this is something that we continue to try to get out as many of our tenants to come onboard or to also look at other channels because at the end of the day, we recognize that the fact that our mall is so close to its cashman market, it makes sense to also be used as a fulfillment hub for some of these retailers, right? Whether it be FNB, especially FNB, I think there's no brainer, right? It's easier for delivery, it's easier for click and collect to pick up and so on, right? And you also seeing that as part of our rejuvenation

in companies one, we brought in quite a few retailers who used to be online dealers, but today they're also taking onboard brick and mortar. So it's really about Omi channel marketing. All right, so that's the first question. The second one is dipping in occupancy in companies. I don't actually see a dip in occupancy. Century Square, what? It's like deep, like deep. Is this the style or something that we should expect? Actually, Century Square, we are also quite happy with some of the things that we have worked on. For example, we have changed out the anchor tenant, we brought in NTUC finest, a lot more stable today. We have changed out the cinema operator, brought in cafe as well. So those changes, we actually have been getting more inquiries, more demand for spaces. As you recall, maybe even 12 months or 24 months before the occupancy rate was much lower.

So we have progressively been able to increase occupancy for Century Square. So that's on Century Square. For companies more, as Pauline mentioned, it's 100% committed. So we don't really see that as an impact, but being retail malls, we always have to look at improving, trade mix, creating interesting ambience and activities around it. So it's an ongoing basis, whether it be PRM opening or any other malls opening and so on. So that's something that's ongoing. But the long and short of it is we don't see PRMs opening having an impact on their occupancy so far. Okay, so the third question was, sorry, can you repeat the third question? Did the average signing render did for the new AI companies? Oh, it varies, right? Because depending on the size of the tenant, so some of them could be as low, I mean, as small as a kiosk, and as large as some of the F&B spaces.

So by and large, I would only add that it's an improvement to an overall average, meaning that whatever we sign has come in higher than what we were previously able to achieve. Okay. Which if I may add on to that, right? So you can recall when we announced the AI, we had a target 8% ROI. And today we are saying that we are looking on track to exceed that target. Some of that has actually come true from the higher rents. So when we set that 8% ROI, there were a certain set of rents that were packed to the new spaces that comes back from the AI, as well as the affected spaces. Those rents have actually come in higher than target. And that's slowing down to the higher than targeted 8%. Okay, thanks. I just want to slip in one last one. Any guidance for rent reversions in FY25? FY25, what we are seeing so far on the back

of the first half is we still see very strong demand for spaces and our more, which is why we are doing 99.7, 100% and you're seeing on the slide, it's actually a lot of couple of hundred pointers in there as well. What it boils down to is that means that the ability for us to negotiate rent is there, is positive on our side. And at the same time, if our focus on driving sales continue to bear fruit, I think it gives us a good opportunity to continue on track online with what we've been achieving so far, but that's very unforeseen circumstances of what's happening potentially in the market next year. Okay, thanks, that's it from me. Thank you, Yuciang. Next question from Terrence. Terrence, please go ahead.

Terrence, you're up. Hi, hello. Just to follow up, so is it a problem that the tenant sales growth is lagging your reversions currently?

I remember your reversions is what you're saying, it's close to 7% now. Yet, if I look at your tenant sales trend, it's somewhere in the low single digits. Okay, not so much as a problem. This is where we also were responding to various questions from you guys, even one or two years ago, and say why is it that sales has been increasing but the rental is below? Right, and usually there is a lag time, right? Sales will move first before the rental recovery comes in. And this is where we are picking up some of the lag before, when sales were going up, double digit, but the rental reversion was losing the digit. So I think this is where we are catching up from some of this lag. And this is where we hope that we can continue to drive the sales, right? So that we can then look at the reversion to also improve at the same time.

So there's always this lag time. Sorry, when does this like, when does this thing catch up? Is it a cycle of one year, two years? Not really, it depends on the occupancy because at the end of the day. So like what we say, we have to work on the sales in order for us to continue the positive trajectory of a rental reversion. So it's not really about, there's a big cycle a year or two, right? Depends very much on how can we continue our rental reversion. What's important is also to look at what's occupancy cost today. Where we reported 15.6% occupancy cost at the end of last year. As of now, occupancy cost is still below 16. So that kind of give us a bit of runway before occupancy cost could go up, right? So this is where we feel that there's still opportunity for us to continue on the same trajectory. Got it. And just looking at potential acquisitions, what's your take on the asking prices

of some of these retail assets on the market? Does it suggest that it's harder for you to acquire from sponsors slash elsewhere? I think what the first reaction I have is firstly, this category of asset is very highly regarded and very much sought after by investors. And one of the main reason is also because you have always this issue of limited supply of good quality suburban mall, right? And we are fortunate today that we have either fully owned or partially owned nine of which, you know, for 10 of the largest malls in Singapore. So for me, it is a testament that this sector, the investors expect this sector to continue to do well. This sector is resilient. And also this sector has got the opportunity for growth, right? So that's how I view it.

In terms of our own trajectory of growing a portfolio, we have our own strategy to look at. We believe that we still are able to grow and we have identified, you know, we shared before, you know, we have our sponsor assets, North Point City South Wing with its partner. We have other partners in Waterway Point and also now we have a profile for next. So it's a case of over time working through these numbers and be able to grow our portfolio. Got it, thank you.

Thank you, Harris. Moving on to the next question from the city, from the Biscuit. Hey, my name is Chien-Yi. Just three questions, right? I think just for next, right? It's been about one and a half years since you own this asset. Can you sort of give us an update on what's the latest for the corporate tax transparency, that 80 million AEI, which you sort of pointed out, I think, when you acquired it. That's my first question. The second would be, do you think that in this current environment, where we are seeing a bit of a tenant sales slowdown, should we still expect FCT to have its occupancy costs normalized to the 17 to 19% level that we saw in the past few years? That's my second one. The third one would be, are you able to share any rough estimate of whether there's been any leakage from this whole job or trade? Yep, from your boss. Yep, thanks. Okay, next update, tax transparency.

We don't have any update from there. We did share that this is a process whereby both, all partners in this investment company has to agree on any changes. So there's no update on that. AEI, we are currently going through the process of getting authorities approval. So we are engaging them and it's progressing in terms of we need to get through this field levels to know that they are doing how much really can we build and to what extent can we do before we can then specifically come up with, to share the plans for that. But it's ongoing. It's in a way as far as we are concerned, timeline-wise it's on track. As we've mentioned before, the gestation period for this AEI would take a while. So at the same time, while that's happening, which is why we're also focusing on doing AEI for our existing portfolio, right? So that is gonna continue. So that's for next update.

But I'm happy to say that as you really pointed out that we have own at least the part of the next longer than the full 50%. We are very positive on that because we are seeing better performance than what we have underwritten. So effectively the underwriting, it has a pass on underwriting in terms of entry versions, in terms of performance over performance of the more. So that's an update on next. But then sales, yes, you already pointed out that we see that the current occupancy cost of under 16

is an opportunity for us. And at some point in time, you should then normalize back to your 17 to 19. Or we always say 16 to 18 kind of range. And what that means is actually it gives us opportunity to further, as we progress in the inventory version cycle to again capitalize on that, to help us with our rental reversion or positive rental reversion, which is why I alluded to the fact that we hope in terms of the trajectory that we expecting will continue. So that is to respond to your questions on sales. The third one is drop estimates on leakage. At the moment, honestly, we don't really feel the leakage because I wanna say this thing about people shopping in JB is nothing new. It's been there for a very, very, very long time. It's just that because of publicity, because of what's happening around RTS, it kind of being elevated in a way because start talking a lot more. But what we're seeing,

the sales performance from cost rate point continue to remain very resilient. Shoppered traffic is back to pre-COVID. So the short answer is we haven't really seen significant difference in terms of this leakage. All right, thanks so much, Richard, thanks. Thank you, Brendan. Next question from RHP, Vijay. We have about approximately seven minutes left. So we'll probably take just one more question after the last one. Thank you. Vijay, please go ahead. Yeah, hi, morning, Richard, Pauline and Franklin. Just two quick questions. I think the first one is again, a bit on the tenant sales perspective. If I look at the last few quarters, there has been some slight reversals in the trend. I think earlier tenant sales used to go up much higher than the shoppers traffic. If these last two quarters, it seems like shoppers traffic is going up a bit more and tenant sales is growing slightly lower. Is this a broader trend of built tightening by buyers,

suppose this GST increase, et cetera, or your curation of mall mix towards slightly different brands? How do you see this? And what would be the trend we can expect? And my second question is on Central Plaza office, maybe can you give a bit more color in terms of the occupancy dip? Has there been tenant downsizing or tenants moving towards CBD? And earlier you mentioned that this is a asset which you'd like to stabilize and take a long term call on this. What should we expect as a long term stabilized occupancy rates? And what is the long term plans for this asset to keep it or to sell it? Thanks. Yeah, hi BJ. I'll take the first question and then maybe a little bit on the second question if I pass to Pauline in terms of the trends and the occupancy for Central Plaza. So tenant sales trend, you are right in the sense that we used to see very strong double digit growth, you on your sales, but I think the reality is we are now coming up on a very high risk.

So the sales cannot possibly continue on a 15%, 18% growth. But what we are seeing now is a little bit more stabilized per se, but it's still, if you compare to 19, it's 20% growth for the last couple of years. Every year we've been achieving that. So if you compare that, it's still very, very strong, but of course you compare year on year where we have been progressively increasing 15%, 18% and so on. That definitely will see a taper rate because you are on a high base, right? So it's a question of, just like a question of when you do an exam, you know, if you keep 90%, every percentage increase is gonna be harder than if you were doing 60% before that. But by and large, what we are seeing is that we wanna make sure that this growth continues for retailers because that's important. That kind of supports the underlying occupancy cost.

And that's where we'll be refocusing our efforts in getting also at the same time, you're right. Looking at trademarks, getting with our tenants, non-performing tenants who is a drag to our sales. We wanna bring in tenants that can generate sales because if they can generate sales, meaning that they are actually attracting people. If they are losing sales, that means we are also losing customers. So all this has to come into play and we are doing both front in terms of leasing, in terms of trade mixing, and at the same time in terms of again, emphasis on place making, marketing, drive for traffic and for sales. So that's the first part of your question. The second part on Central Plaza. What I'd like to share with you is the view of us for this asset, as mentioned before. This asset is an integral part of Tiambora Plaza. It also kind of provide customers going into Tiambora Plaza for lunch, for dinner and et cetera. It is an integral part of it.

And at the moment we feel that it's important for us to keep it as a whole. It's doing well. I mean, following the share with you in terms of occupancy and where we see this asset going forward. Until such time that we really see that there's a better option for us to review that, then we will review it at that point in time. But as of now, we felt that keeping it as an integral part of Tiambora Plaza makes sense for us. But I believe we can chip in in terms of occupancy. Yeah, sure, Vijay. So actually in terms of the occupancy for Central Plaza, it's still trading well. I mean, it's still doing well at above 90%. And in fact, when we look at the commitments to date, we are seeing the overall occupancy increasing come next quarter, right? When we update our next quarter. I would like to say that in terms of its positioning or rather that the segment of the office market that it caters to, it is quite unique.

It's different from some of the retail space in the city area. It's in the city fringe. It's very well connected to some of the amenities. Like the mall is just next door. And also the fact that it's within a very strong residential catchment as well. And I would say that one of the differentiating factor is although it's not grade A, the rents are palatable and it does cater to a segment of the office users. Yeah, so I hope I address your question. Thank you, Justif. I may slip in. What is the rent regression on this? Is this still positive, much positive? Yes, it's still holding up. Yes, the rent. Okay, thank you. Thank you. Moving on to the second last question. Please go ahead. Yeah, this is a question of valuations coming to the year end.

Should we be expecting high valuations and the changes in REIT regulations? Will you, we will FCT be pushing gearing for 40%. Thanks. Okay, valuation, by and large, we don't expect any adjustment to cap rate from what we're seeing in the market. Probably as well conversations we have in value. So that will likely remain. So we will probably see some positive valuation because our MPI, our numbers have grown. So that's what we are seeing and that's what we hope to also achieve. In terms of gearing, I think the fact that whether it be 45, 50%, at the end of the day, I think as REIT manager, we will remain disciplined to kind of keep to the level that we are most comfortable with. That's the 36 to where we are today, right? The kind of level.

We are not looking at pushing our gearing unnecessarily high to 50%, unless, you know, with this investment opportunity where we think it's a temporary thing that we can do. And then before we adjust the balance sheet again. But otherwise I don't see that as a change because even in the past, right? You could go up to 50% so long as you have your ICR supported with that. So to us, it's actually nothing that changes. Sorry, just one more question for me. Let's push you on terms of the mixed-reting floating and fixed rate debt. So why not just take more fixed rate debt today to achieve your interest cost savings? Because even if the Fed cuts, let's say 100, 150 bibs, the Singslura may not necessarily fall by the same amount, maybe 100 bibs. So actually you really achieve the same outcome by waiting for the floating rates to come down. Yeah, you're right. I think that's something that Audrey and team is managing very closely, which is why, you know, the last couple of weeks

when there's opportunity for us to go into the market, we actually take the market, we put in 100 million to secure a pretty active rate. So the question is not that we don't want to do it. We are just looking at opportunity because we still feel that, you know, we potentially could have a little bit of savings before we kind of put in the, or increase in the need of the hedging, right? We will be increasing our hedging. That's something that we are looking at. But it's a question of whether we want to do it today, we wait for another week to see, you know, opportunity because it's been a little bit volatile. It came down from three to almost 2.7 plus, right? So it's like 20 bibs, you know, if you can catch it, 20 bibs over five years, it's quite significant for us, right? So this is where we are watching the market very closely. I wouldn't say, you know, that we are not doing anything, but we are really focusing on that. Okay, look forward to Audrey,

she gave us a farewell present, 20 bib savings, hopefully soon. Yeah, and then she can beat that. He can beat the 4.2. I'm still volunteering the market, yeah. All right, thank you, Merins, for the very heartwarming comments as usual. Okay, last question from Derek, Morgan Stanley. Please go ahead. Thanks, Fenning. Just wanted to follow up on RTS. Sorry to hop on it, but I guess investors such as concerned drawing parallels between, you know, Shenzhen and Johor. So just now, Richard, you mentioned that you're looking to reject some of the tenant mix. Could you share more details around that? I mean, are you looking to lower exposure to say, FMB beauty? I mean, given that these are, that's half of your current rental income that could be significant on the road. Yeah, I mean, we are still working through the plans, but by and large, I think a couple of areas that it's a bit of everybody expect this to happen.

But for FMB perspective, we don't really see it necessary to be choose. In fact, I think as FMB will continue to do well, it's a case of, say for example, right, I mean, we did example of a rental copy from Malaysia, we are looking at coming to Singapore because you can eat every day in Singapore, right? You don't have to wait until you go to JV to consume that. Even for food, again, the casual dining that usually you see in our suburban house, something that you eat on a big day basis, you don't have to wait for a weekend to go. So I think FMB will continue to thrive. It's a question of maybe we find interesting FMB concepts to bring in so that we reach a limit, giving something new to our cashman market. But that's an eight days to stay. Beauty services, yes, we want to be a little bit more selective, maybe instead of having five nail color today, we may reduce it. We may look at different type of offering services, massage and full reflexology, again,

instead of having three or four, we may reduce that and give the space to something else. So those are the things that we will work on. We will look at it, but even as we look at this, as I mentioned just now, so when we approach our tenants and say, hey, look, maybe you guys don't need so many, right, but the reality is they actually told us that for some of these, even some of these services, the services that they provide there is different from what you can get in Singapore. So they are differentiating their product. So, and they know what they are doing. So this is where we have to work through the process with them and understand how that differentiation would continue to allow us to bring in more sales. But this is an ongoing basis. And again, coming back to the same point that it's nothing new about people shopping in JB, it's just that, you know, your three hours, jam, four hours jam, it's gonna be a little bit easier. We potentially see more people going on weekend or on weekday, mainly. I don't see a significant impact. Even in Hong Kong, the experience,

the general experience that we have been touching base and understand from some of the consultants says, really the weekend, right, Saturday is the one that a lot of people go there, but generally on weekday, there are some vacations, but not significant, right? So that's where we are right now. Right, thanks, Richard. Yeah. Thank you very much. We have come to the end of this quarter's briefing and we'd like to thank everyone for your time and your patience for being true. So you have missed any of the part of this conference, this call, please be assured that we have put up the webcast.

With this, we'd like to thank everyone and have a good day ahead. Thank you, bye.