3Q FY2024 Business Update Conference Call

Good morning, everyone. I hope you guys can hear me loud on Twitter. And thank you for joining FLCT's 3Q FY24 Business Update and the List briefing. I'm CK, the investor relations for FLCT. And today I'm joined by members of the FLCT management team. I trust there are all familiar faces, including our CEO, Ms. Antion Lee, our CFO on my left, Ms. Tricia Yeo, our head of portfolio management, Mr. Jay Spong, and our deputy head of investments, Mr. Jacob Toh. As per usual, today's session will start with a page turn of our business update presentation found last evening, followed by a Q&A session. We are adopting a Q&A format for today's briefing, so you may not be able to use the open chat function that you see there. It might be grayed out. For any queries, I recommend that you either use the raise hand function, which some of you have already done, and I will unmute you in sequence to ask your questions later on. Feel free to punch it into a Q&A box or you can also email it to me or send it via text.

So I think I've said a lot. Without any further ado, let's begin. May I please invite Antion to kick off today's session? Antion, over to you. Yeah, thank you, CK. Hi, good morning, everyone. So thank you so much for joining our third quarter FY24 Business Update webcast. So in this quarter, FLCT continues to deliver a robust operating performance, and by good leasing momentum, portfolio rental reversions came in at a positive 1448% on an 8.2% on the capital management front. FLCT continues to make it a healthy capital position with an aggregate of 3.2%, remaining the lowest year amongst the planned largest assets. So I think it's like many of us are very familiar with.

So just in brief, our portfolio stands at 112 properties of which the LNI accounts for over 70% of the portfolio composition by value. So we are now heading over to Tricia, who will walk you through the capital management side. Thanks, Antion. Good morning, all. So MCS mentioned that our aggregate leverage as of 30 June 24 is standing at 33.2%. So this continues to leave us with Emperor hit room before 40% gearing ratio is reached. So we do have a hit room of 793 million before that 40%. And 72.6% of our borrowings are currently hatched at fixed rates.

And 77% of our borrowings comprises of green or sustainability-linked financing. On the debt maturity and refinancing front, we have no interest that it's used for the rest of the year. So facilities are already in place for these borrowings. And we are also commencing refinancing for the debts that's coming to you the first half FY25. So I'll hand over to Jay, who will cover off the portfolio updates. Thanks, Richard. Hi, everyone. Let's start with the leasing summary for Q3. We leased a total of 90,000 square metres. So it's been a pretty big haul from the leasing front. And this brings year-to-day leasing to around 233,000 square metres, or over 8% of the portfolio area. In Q3, we secured 22 deals in total. And as I mentioned, the overall reversion position was a 25% lift on average versus average places.

We looked at each thing, but LNI, there was 60 that was secured. And that's actually the 40.7% average versus average reversion, with some really strong results achieved in New South Wales and Victoria. Commercial has seen some positive leasing activity in most of our buildings. 16 deals all up. And the overall position was a negative 1.9% reversion, again, on an average versus average basis. Looking at the occupancy review and what that then results in is a total portfolio occupancy rate, which has improved to 95%. The commercial has improved up to 87.6%. The logistics has dropped slightly to 99.4%. And you can see here that we have one additional vacancy in LNI, which is the ex-Gudia facility, a charitable part in Queensland. Looking at the individual commercial assets, you'll see some positive uplift in occupancy at Amazon Botanical Park.

We were at 78% last quarter. We're now just under that 86%. And in terms of the Google space, we've leased 25% of the first branch, and we've already pre-connected 30% of the second branch. The 3.57 has seen a slight increase as well. This is on back to retailers who have been secured. We've also made an adjustment to the land tax, which we received this quarter as well. So slight adjustment to the GRI. Farnborough in the UK has seen some strong leasing over the quarter and quite a good uptick from 75% up to 84%. That's on the back of a number of deals at Building 110, which now brings out buildings that are fully occupied, as well as Building 150, where we completed a reversion of that building. Maxis, the slight increase is due to a market revenue and the new service charge you're kicking in.

At Beliah, we have recorded a slight decrease. This is on the back of a downsize of one tenant and another tenant exiting the building. Looking at this expiring profile, it's reasonably well spread out to no more than 20% of expiring any single year. You'll see that FY25 includes the Commonwealth of Australia, and we continue negotiations for at least renewal. 84% of the portfolio is embedded with CPI linked indexations and fixed escalations. And the whale call for the fruit segment currently stands at 4.8 years for L&I, which is pretty healthy and just over three years of soil commercial. Tenants are the base. There's actually no change to our top 10 tenants this quarter. Six of our top 10 tenants are within the L&I portfolio and five of the top 10 are multiplied by multiple assets within the portfolio to provide further diversification.

We secured a lease replacement for the Tektronic Industries in New South Wales and that led to that positive rental reversion that we talked about earlier and zero doubt time on that building. As mentioned, ATP has, we secured 25% of the first branch of the Google space, 13% of the second branch. Moving on to the tenants' top edition, you'll see that 55% of our QRA is contributed to by the L&I tenants, of which 48% is linked with the 3PL distribution consumer and retail sectors which have approved the various earnings over the last few years. We also noted here that 83% of our QRI is contributed to by government-linked and new economy sectors. The final slide is just an update on our project at Mass Drift in the Netherlands. You'll see from the images that the construction is progressing very well. We're currently on track to complete within the line in the first half of Earthway 25.

The asset you remember is fully leased on a 10-year term and we're tracking well to achieve a very good certification. I'll hand that back to you. Thanks, Jay. The city remains focused on our sustainability initiatives, achieving notable advances across multiple fronts. The portfolio also remains strong sustainability credentials, which have achieved a five-star recipe rating since 2017 and are the highest three-star rated industrial portfolio in Australia. And as of 30th June, 75% of our portfolio by GFA has green certifications. So on the last slide for today's update, just sharing some of the key observations and key trends and developments affecting our operating environment. In general, we have observed a sustained demand for quality and core properties. In the current market, where transportation costs are the highest cost component for any 3PL operators, occupiers continue to navigate towards prime locations.

Properties with strong sustainability credentials are also more future-proof as the world continues its transition to a low-carbon future. Your political considerations remain key, relating towards economic resilience over efficiency. This in turn supports maintaining higher inventory levels and just-in-case operations. Two key mega trends that will influence the wider economy, and LNI, digitalization, and AI, and we should be closely watched. The Inter-free Environment Regents Elevator, gradual monitoring is seen as inflation and recession-risk subsides is expected to boost investment market confidence. So lastly, potential shifts in foreign trade, monetary and fiscal policy might also support the strength of the foreign exchange rates. So with this, I've come to the end of the presentation. I will hand the time to go back to seeking. Thank you very much, Andrea, Jay and Tricia, for the presentation. With this, I would like to kickstart our Q&A session.

As mentioned, the function to adopt is to either use the Q&A box that you see on the bottom right-hand corner of the interface or the raised hand, and I will assist to unmute or read out your question. I see that we already have some hands up. So first, I'm going to unmute Mervyn from JP Morgan. Mervyn, over to you for the first question.

Yeah, congrats, Antia and Tim, for the strong performance again. I think you should never let CK leave because once he came back, Google has been back built in some way. He's seen me the lucky job. I just want to double check, clarify comments. Is it 25% of the first tranche has been backfilled and 30% of the second tranche has been backfilled? 13, 1, 3. Oh, 1, 3. Yeah. So the committed occupancy does include the 13% of the second tranche? No, it doesn't. So that will only apply come December once Google exit that second tranche. Okay, excellent. In terms of effective rental re-versions, how are we seeing it? I mean, I presume you had to provide some fit-out support. Yeah, we have fairly market levels. We're not in Australia. We're in as simple as I thought we would have to have such considerable incentives as we've seen in the likes of Perth, etc.

So I'd say fairly standard incentive levels at ATP. But what we have achieved is sort of a lack of good quality offering that we do have, a bit of flexibility in terms of how we can configure the space. I think it's been very helpful. And there's also the from our tenants. We obviously have quite an attractive price point as well in the location. So it's been a bit of a mess from a flat quality, but also a tenant's right sizing and looking for more cost effective options as well. So we've taken advantage of that with the tenants that we have. Yeah, so on a face-rent basis, is it minus 4%? And if you include incentives, this will be what? If you include incentives, what, 10%? I don't know. We, yeah, I mean, I think it's a little bit sensitive to the law scene for the go-trader and the son of a, not only existing tenants, but with other tenants as well. I'd say it's pretty much at the market level.

Yeah. And then any progress on other discussions that you're having, how close we are? Does CK need to buy Lucky Rabbit's foot to help you along? Google. Yeah, I think what I'd say is we've created the momentum that's continuing and we've got a healthy pipeline of inquiry and discussion and progress. So pretty hopeful that we can continue to make some good in-rows into that people's face as well as the other banks in the building.

Okay. I'll hand over to Rush. Thanks. Thanks very much, Colin. Next, I think we have Dale from DDS. I'm going to unmute you right now. Over to you, Dale. Okay. Thanks. Thanks, CK. Welcome back. Thank you, Antia and team for the strong results again. I just just wanted to follow up on this Google's list. You know, I was just wondering, you know, which, which sectors are these tenants coming from? And at the same time, right? I noticed that there has been negative reversions in ATP as well as in Perth, right? So could you talk a bit more about this negative reversions? I'm sorry with the sectors. This is a pretty broad mix that we're talking to. So some of the standard groups we've secured, we've got engineers, we've got life science groups, we've got logistics groups. It's not one single tenant sector really dominating at the moment, which is probably a nice thing to reposition the asset and have diversity of tenant base. So

we probably encourage that sort of trend. In terms of reversions, yeah, as you pointed out, so on an average versus average, we're running about 4% negative reversions at ATP. The other one you mentioned is Central Park. So I think in the past, we have had a few of these situations where we've had a legacy lease that's been offered for quite a long time. And that's the situation here that we've had a lease that was offered since 2014. We've fixed all the same in precincts. And that was actually a bit of a piece of fire here with what's there. We've now seen that reversion downwards. I would mention it's only a part floor in the building and it referenced about 1.4% of the property GRI. So it's not a huge exposure there. But I also comment that this is the last remaining lease of our nature in the building where we see this sort of sharp erasure. And I think that's an adjustment. All leases now have flushed through and are on a whole sort of market level.

Okay, got it. Jay, just wanted to follow up on this Google space, right? This backfilling, is it more a function of lowering rents to attract tenants or just general increased demand for the EDP. I think, hi, Dale, I think there is a combination of different strategies that we've adopted. Of course, the team remains very, very laser focused in terms of whenever we have a few weeks and all. I think we've also give much, we do provide higher increasing comms to the marketing agents to get them really motivated to a season. I think we have also been very flexible in a way we can allow facility for larger space, smaller space, and not exactly being restricted to any particular size. I think it also presents itself a rather unique kind of offering because it is not too far away from the city center and yet it has an ample compacting space that is very regular and also very near to the hot part at all.

So I think in terms of the rents, I think previously Google's rent is also not quite as high as some of the nearby business parks rents are falling for. So I think from that angle, I think we didn't have to, I think it's really just remain very focused and to restart the space as quickly as possible. I think that what Jay mentioned, I think the incentives that we offer is really very much in line with market. Not so much, I think, but one that is maybe not so much in market is probably the leasing comms that we offer in a bit more incentives with the agents. Okay, okay. Yeah, anything else to add? No, I think that what we talked about in the past about the strategy that the ourselves, you looked at, maybe you've become a larger task to take out space, but we're still pursuing that with the space of time back in the second tranche. But the floor play is pretty fast forward, it does something quite well. We already have units already in there which are ready to go, so we don't have to spend too much money, some of the money was the floor. You do have five variables already in space so actually some of the lines quite need as well.

But it has been a big effort by the team really positioning the asset, really pushing the marketing and really pushing the key actually to the building and I think we just sit quite nicely as Anthony said in terms of location and price point as well. So hopefully we can continue that on that subject. Okay, okay, got it. That's clear. Yeah, thank you for the details. Yeah, looking forward to more updates. Thank you. Thank you. Thank you, Neil. So next, I think we have questions from Donald from OFA. Just let me quickly provide you have new function. But do you, Donald, for your question? Yeah. Okay. This is working. Okay, hear me. Thanks. Thanks. Thanks all for the opportunity. A couple of questions here. On ATP again, sorry, the audio wasn't really good, but could you disclose which tenant, which industry that you've managed to backfill and what sort of rents that you can kind of?

Yeah, so we've got a pretty broad sectors that we're dealing with and we've seen the inquiry come from. So the kind of groups I mentioned were logistics, engineering, life sciences as well. So not one single tenant that's the kind of sector that is dominating the inquiry at home, which is encouraging, you know, it's a broad and broad set of needs. And the rents, I think the way it's talked to the rent, as we've published here, is a 4% average versus average negative reversion against the previous rent. So not a dramatic draw. But a slight adjustment. Realistically, how long would you be able, how far would you be able to backfill? The market rate. Yeah, so I think so just on those essentials again. So the first draft that we got back in February, we're 25% through that. And we've got some good momentum continuing to lease up space.

I won't commit exactly to what we're going to achieve in the next quarter, but I think we will be very confident that we'll continue to improve as we go forward. So I think what is pleasing is the space that comes back to us in December. We've already got 13% pre-committed and there's no downtime in Australia, so we're certainly pursuing both tranches and hopefully we'll continue that. Would it be appropriate to say that the leasing conditions have improved? I don't think so. I think with the competition or some of the lease spaces are both high-tech business tax obligations and I know what vacancy is standing at 22%. I don't think we can say that leasing conditions have improved, but I will say that particularly for a space that we have, I think it helps that we have the space back to us.

We're able to allow the lease very readily and I guess the marketing approach that we have seems to be working. Yeah, we've got leasing momentum, like Jay just mentioned, we will just continue to convert these inquiries and viewings into leases. I understand. Speaking with backfilling, a couple of my efforts, specifically Commonwealth, what's the progress there and realistically should we be expecting some vacancy renewal? That's the first one. Again, it's tectronic, some improvement there. How much left in terms of space that needs to backfill? And also LNI, I want to touch on LNI as well because occupancy dipped by one percentage point. Is there some risk that we could see more vacancies?

Yeah, I'll say that. So yeah, CCC and Canberra have said this in the last few quarters, we're getting closer, working very hard at securing a renewal with the government, the go-to trade can continue, we can have some good news for you, building. With TTI, yes, we had TTI in two buildings in Sydney. It's actually the first expiry or exiting tenant in Sydney, we've had in quite a while. So it has given us the opportunity to want all that positive reversion, which is showing those results. As for Sydney, we had a 55% average versus average reversion. So it was a really good update there. We do have another building with TTI and they will be exiting. They're actually consolidating into a purpose-filled mega facility. That's a 42,000 square meter facility and we do have a number of runners on it. And it's a really good quality facility, well-located. So we'll hope we have good results there.

LNI as a whole, yes, you know that we've got one base seat there, it's been the first time in a while that we do, we don't have 100% occupancy. We have had a pretty good track record of duct-tailing in new tenants as tenants in Sydney. That's not always possible at a timing point of view, I think we've had a pretty good run. So the base thing we have up at Queensland is good quality asset. We actually took the opportunity, whilst tenant was in Sydney, to refurbish that asset.

We do have some expiries coming up in New South Wales and Victoria. Again, we've got a good sort of headway or a runway in terms of those expiries coming up. We are aware of what the tenant intentions are. So we are preparing those assets for release. Campaigns are underway for quite a few of them. The LMI market in Australia, the demand is still reasonable. It's probably slightly in the last six months or so, and there is supply, something to come on. But we're still seeing some good levels of inquiry. So we're certainly striving to get up to 100% as soon as we can. But we do have some work to do. And just sticking to this, and looking at expiries and what's the under renting at this point? So I think we've talked in the past on our LMI portfolio as a whole, sort of big teams. That's including Europe and the UK, which is probably a bit below Australia's, relatively higher than that.

Boston is a bit above the... Yeah, it would be above that. The numbers we've shown here are these results. They're great numbers. Sydney and Victoria. But we would still hope to be able to achieve some pretty good reversions going forward as we catch up with the market. The rental growth has been significant over the last few years. We've not had that level. It's certainly tailored, but we're still a lot of catch up to go over the next few years. Understand. One last question, sorry. And related to this topic, how are we thinking about valuations come September? Yeah, so from an LMI one of you, the market rent growth certainly helps. So since September 23, we have seen rent growth kick off. So we're certainly catching a higher market rent.

Yields have softened slightly as well, but that should be partly offset by that rent growth. So I think on an LMI front of you, we're looking really good. From a commercial point of view, we did take a fair heap last year, as most people did, with softening calf rates. And this year round, I think most of that pain's already flashed through. We are keeping an eye on some transactions that are coming through the market now to give us a feel of where yields are. So that's pretty consistent across all our regions. But we're not seeing more transactions in Australia, particularly. You probably would have seen a fair bit of capital being deployed in Sydney in particular, and some quite sizable deals actually occurring in Sydney. So there's plenty of signs that activity is picking up, and that will give values of better products or where the market's at. Yeah, but we have taken about 50 basis points for offers. In fact, for industrial as well, the negative re-values are ranging from single digits.

It is the number that we should be looking at for FLT. Yeah, I'm sorry. Did you say sorry? It was a double digit. Single digit. Single digit. Yeah. So some of the REITs have taken about single digit, right? Single digit negative REEVEL for industrial and for office 50 basis points of Cambria expansion. Is this something that we should be looking at for FLT as well? For us, we don't expect any significant revaluation loss. But of course, at this stage, we will have a few changes of value value us. So we do want to get some indications from them first before we can actually give any guidance. But we don't expect any major ones. Because last year, we did pick a big six.

Global commercial and some of the logistics as well. But of course, for the logistics, the strong regular versions actually helped to keep the value emissions up. I think going forward, I think that what Jay mentioned, I think we don't expect surprises. I think from we've been monitoring. In fact, we also do our own in-house valuations every quarter to see how values have gone based on all the existing market metrics as well as the existing research that we have achieved. So I don't expect any major for any even any one single asset to no major revaluation losses. But I think I think we are just very close to being able to get the final results very soon because that's an end-september anyways. Awesome. Thank you. Thanks, Donald. Thank you, Donald. So just a general reminder, if you'd like to ask questions, either use the raise hand function or you can type into the Q&A. What I can do now is to move on to some of the questions we have received.

A quick one is, perhaps, I mean, probably may have really been addressed, but the question sits around what's the potential for further commercial occupancy increases across the portfolio? And maybe a little bit of guidance on LNI. The follow-up to that question is, can you perhaps also share guidance on the one-year reversion we are seeing on industrial? Yeah. OK, so I think that's just touch on occupancy. For the commercial ATP, I think I mentioned we've seen some good results this quarter and we hope that momentum will continue. And we do have reasonably healthy pipeline inquiry that we're working with. So I hope that will continue. The other big one, I think it's 357 Clon Street. It's probably one of the most challenging markets at the moment. I think Melbourne is still, it has reached the peak in terms of vacancies and a bit of a regular hike. So there are signs that some, there are some inquiries starting to pick up.

But I'd still say that Melbourne is probably in Australia one of the more difficult markets that we're dealing with. But I don't think we've heard that peak in science come up. I think some of the more encouraging science is the shadow space has definitely reduced significantly. So that's the amount of space available to select. And there's also, from a supply point of view, we're seeing the number of projects have been either directed in a different use. So it might not go to commercial, it might go to alternative use, or they're just being put back on the shelf at the time being. So supply is maybe a little bit more controlled than we, with the story of Miami, Clon's, so there is still risk of downsizing terms of Melbourne. I think that's something we do need to be cautious of. There is still a little bit of a difference in terms of how companies deal with the market working and what is the right size they need. So that's something we're very conscious of.

Farnborough, as I mentioned, is probably the one where we, in the UK, have seen the best results. Farnborough has really seen some healthy demand and the deal that we secured there, building 110, I think it's one of the biggest deals in the back of the world about this year. And we are seeing some more inquiries coming through. I think the one thing with Farnborough is deals are starting to transact a little bit quicker. Some of these deals have taken quite a while, but we're starting to see a little bit more momentum there. As I said, we haven't seen that slight decline in occupancy. We already does see quite a lot on that market, but Soli

as far as the UK portfolio, I've mentioned the price is probably the most challenging asset. Bracknell, in the past, had been a bit of a tech other, and with the reduction in tech, it has seen that market shrink a little bit. It also competes with the likes of Reading and Farnborough, and they're probably more sort of like tech. So Maxis is certainly a challenge for us. So that's sort of a bit of an idea. I think Elle and I have touched on that we do have some social agencies coming out. We do have a good runway in terms of preparing those assets to release and we're hoping we'll get some positive results that we find details for those spaces. I think we'll get to those questions. I think that was one surrounding commercial. There was sort of a re-mergence when you're a bank of this. Yeah, so I think just in terms of the numbers that we've published, this is safe for the Elle and I. I think that's especially in Australia.

We hope to maintain some good positive reversions. It's been a particularly good quarter. We are certainly trying to keep that consistent kind of trend. For Jeremy, we did have one Lisa's project mentioning that was an option that was exercised, that was CPI indexation. So it's only a marginal reversion there, but that's probably not reflective maybe of the market. Having said that, the portfolio is pretty passive. So we don't have the huge market's fire coming up. Thank you. I see a number of hands up. I'm going to unmute in sequence. Apologies to Dale and Mabine, probably left home where to go first. It's been the first time asking questions here. Hi, I'm over to you. Oh, hello. Can you hear me? Okay, so just one question for me. So we've proposed a change in the MES consultation paper regarding a great leverage in ICR. Would that be a change in the capital or no management policy? That's one. Maybe another question will be in terms of acquisition. What kind of areas we'll be mainly looking at currently?

I'll ask you to take the first question first. Yeah, sure. So in terms of ICR, I mean, I think where we are currently about 5.7 times comfortably above what MES is proposing for an aggregate leverage of up to 50%. But more in terms of within the kind of gearing levels that we have spoken about, we do present that the headroom to that 40% gearing ratio. And that's probably how we will work, the balance sheet. But ultimately, I think we have said before, once we are close to that level, we also look at potential investment to bring down that hearing. Yeah, thanks, Richeal. So on the question on acquisitions, we remain focused in developed markets and we are referring to our existing developed markets, which is actually the five existing countries that are currently located. So I don't think we at this point are looking at anything that is outside of where we are with that section, perhaps potentially Japan. I think that's all the markets that we are looking at. I think within asset class, as we have previously shared that we are focused on logistics and industrial, we will not be looking at any more commercial properties, including business parts.

Thank you, MTS. Thank you, Richeal. I will just quick check if any other questions on your hand. That's all. Thank you. I'll perhaps move on to Dale. Dale, over to you. Okay, thanks again, CK. Mahai, just two more questions from me. I think firstly, with regards to borrowing costs, so that 20 beeps increase Q&Q, I'm assuming is due to the refinancing done during the quarter. So, as well as we do have floating rate debts, we still have floating rate debts in our borrowings. And the last thing is actually because of the reboot acquisition. So we did share that we raised the bonds, $16 bonds and swap to Euro. So the cost there in singing terms was 3.83. So I think the last I checked the trading yield on that one is still just above par. So I mean that transaction actually did bring that borrowing cost slightly up as well.

And with regards to the remaining $400 for the rest of the year, what should we be expecting? I do think that trading bond yield that we have on that bond that's outstanding will provide a good indication of our current refinancing rates. So I think even if you sort from sing to euros, it's about the same now. Okay, thanks, Richard. And then going back to the acquisition, Antia, I think it's been a while that you mentioned, you know, you're looking at LNI like you mentioned, some of the markets as well as Japan. Just wondering, you know, given that there hasn't been anything major so far, is it more a matter of pricing or finding the right one or how should we be looking at it? Sure, it's been a matter of, I guess, a combination of different factors. We are very selective on what we want to buy to make sure that it's complementary to the portfolio that we have. So we do still see good opportunities in the market. But I think some of these opportunities will probably take a bit longer to materialize.

Okay, okay, got it, got it. Okay, that's all from me. Thank you. Thanks very much, Leo. I know if you have Mabin and Derek, if it's okay, Derek from Mabin Stanley, I could let you go first. Okay, just one question on a dividend pop-up. Can I confirm that you will be looking to defend the BKU such that we should be expecting similar, you and your growth vis-a-vis first half? I'm afraid it won't be so in first half, April. Thanks, Erin. I think this example has always received very diverse views from investors, some telling us that they don't want any discretionary divestment gains, the top parts to the DPUs, some of us that is essential and very important. I think although this quarter, we don't have any BKU announcements, but I think generally our guidance would be that we would still want to keep the DPU fairly simple.

And investors, because there is still quite a bit of divestment gains that we have accumulated over the years, and whilst there are still some, we believe a bit short term in terms of environment such as the high interest rate environment, such as the weaker foreign currencies that we are deriving revenue from against $6. I think these and of course, they can see we've seen amongst our commercial portfolio that we believe are really challenging the release period, and probably this is a good time for us to make sure we take some of the best decisions to keep the DPU fairly stable. I think this approach would generally guide us forward. Okay, Terry, I hope you've caught that. Thank you.

Okay, I think that's it, Nong-san. Mavit, over to you again.

Yeah, just want to follow up on the question on borrowing costs. What's the guidance for the fourth quarter? Are you going to subball the euro debt into single debt? No, so the refinancing will still keep it at euros, just because of the natural hash, the natural hash function of that currency. So, but I think right now, between the, I mean, if we did raise things and swap to euros, it's about the same. Okay, so the borrowing costs 20 bps for fourth quarter? The fourth quarter, I think, that current, yeah, I guess with that bond, yeah, I think it's probably going to be around there. But I think we did always provide on the full trading 12 month basis that the guidance that will remain below that 3%.

Any guidance for next year based on the debt mix you have and your thoughts on floating versus fixed? We are at about just below 73%. So, I think that we probably would stay around there to give us the flexibility to fully still benefit from fixing at a later stage. Benzo, the next year, what mid threes would that be realistic? Maybe we will give guidance at the next quarter, we have a bit more than we think. Okay. So in terms of acquisitions, what's the cap rates for Aussie logistics, European logistics? What are you seeing today?

Yeah, I think the Aussie logistics are still quite sharp. I would say that for Aussie logistics, it's still around, I think, around five, four, five, or the prime prime good location logistics assets. And I think in terms of European ones, I think that is quite a wide range, depending on the future, I think depending on what type of assets, whether they are a little bit more specialized, like coastal or cross-dock. But I think generally we do see it's around between the five to six percent kind of a cannabis is generally within markets. So which means you still can't buy Australia, I presume. I think Australia is just using pure equity will be quite difficult to find it to make it your duty.

So should we be seeing more European deals like you did for your sponsor? I think we are pursuing both on both fronts, both from real first as well as from third parties. And on the other centers, how are you seeing things? Data centers is also adjacent sector to LN9, so I think there are also some opportunities in the market, which we will see if it makes sense for us. We will definitely still look soon. Is it generally too expensive? I mean, like, cable DC paid three half for Japan. I don't want to comment on my previous short run, so. But generally, I think data centers are really very well sought after. And I think that it's also a very tight market, I would say. But to be able to get a hold of data center assets, I think it would be good for the wheat.

I mean, for question for Trish, I mean, the only dollar dropped again. But in terms of FX hedges you have in place, are they close to market or above market? Yeah, so we have actually looked at, we have always had about six months forward, right? I think this year we changed it such that we also had a portion that's up to 12 months forward. So there is a portion that we have already had when we had the opportunity to do so about two or three weeks ago when it was higher. Okay. But then, Ned, the FX headwinds largely over, I see the pounds strengthening against signal. Yeah, I think for euros and pounds we did see quite a strong recovery. Okay. But Aussie, we shouldn't materially see major changes in those headwinds going forward. Can I say that? Yeah, I mean, hopefully, unless the AU strengthened again, because it's been quite volatile.

Yeah. This is on the tin cap rules for Australia, for the commercial side, any additional guidance on restructuring the structure and tax leakages? Yeah, I see the one. The commercial assets, the one that is probably most impacted would be Caroline Chisholm's center, which we are also putting in place some other, I guess, we're putting some additional, mostly restructuring, but we are doing some work to also reduce the impact there. For the other two commercial assets still held under the F- card structure, essentially there are still tax losses and CA that would actually kind of offset that impact from the new thin cap rules. And Jay, the Canberra renewals, the previous state, would it be a positive recovery version?

Probably more. I hope you can give me the result. I think the comment there is that Canberra regrowth has been reasonably steady, but we haven't seen huge variant growth at the time, it's just the nature of the market. And the current lease has had a fixed increase throughout it, reasonably long lease. From an average versus average, we should see a positive addition. Excellent. And in terms of divestments, is there any properties that maybe hit the maturity or any commercial properties you think there's time to let go and recycle into industrial logistics? I think our gearing levels are still pretty low at the 3%. So the priority is really to pursue very high acquisitions, use our debt hit room, and when we have visibility that we're going to be using our already used up, we would then pursue divestments.

And the key priority would be to divest some of the commercial assets. That is how I guess we can reduce and reduce, further reduce the reliance on the income coming from the commercial assets. In terms of your comments about a fairly stable DPU, should we be seeing a similar moderation that we saw in the first half? I think we haven't exactly the numbers yet. I think what we don't want to see is a huge sudden withdrawal of capital gains and causing the DPU to have a sharp draw. I think that's something we will see ourselves swing that path. One more question. Sorry. Okay. There should be some moderation, I guess, similar quantum, I guess.

We don't look at quantum. I guess we look at overall DPU from the last half year to the next half year. In terms of the DPU, we don't look at quantum that we have put in. So I guess a bit different from some of the other risks have done, which is they fix the problem regardless of the underlying performance of the assets. But we believe that because of the amount of divestment gains reserves that we have, we have the ability to, and also quite sizable debt, we have the ability to make the top ups, to keep the DPU fairly stable. Okay. I'll hand over to others. Thanks very much, Mervin. Sorry, I know it's a very busy day for everyone. We do have time for one or two more questions. And meanwhile, I have received one more here. It continues to be a segue on the business market in Singapore. I think the question says that there are comments that from our peers that the business market in Singapore is bottoming out.

So is there a trend that we are seeing? And do we have any comments around it? I think thanks for the question. I think we don't have that many business parks. We only have 80 p.m. We have been very concerned in sharing what we have achieved or not. So I don't think having one asset in the portfolio, we are able to speak of trends of business parks in Singapore. But I would just say that with the amount of space that is available right now, there is still a lot of competition to fight for tenants to backfill business parks. I would say that we are seeing good progress in terms of the leasing momentum, and we are hoping to continue to push forward and to show continued leasing progress for the space that is backfilled by Kuntung. Thank you very much, Andrea, for that. I think that's all for the virtual questions. Sorry, I think we do have a couple more minutes. So one last round of check. If anyone has any burning or last questions for us, feel free to raise your hand.

Or if not, you guys know how to reach through. So we just want to quickly chat around the room. Any final queries? I think we're good. So thanks everyone for attending today, and thanks to the management team present as well. As always, look forward to catching up with you at the next briefing. Thanks, everyone. Thank you. Thank you. Thank you.