# Frasers Logistics & Commercial Trust — FY 2023 Full-Year Financial Results Webcast Briefing

Event: FY 2023 Full-Year Financial Results Webcast Presentation & Analyst Q&A
Date: 9 November 2023
Issuer: Frasers Logistics & Commercial Trust (SGX:BUOU)
Provenance: automated speech recognition (asr) of the issuer's public webcast recording
Source recording: https://webcast.openbriefing.com/FLCT_FY2023/
Official record: https://flct.frasersproperty.com/financial_information.html
Presenters: Anthea Lee (Chief Executive Officer), Tricia Yeo (Chief Financial Officer)
Words: ~10,930

Unofficial machine transcript. Prepared by SMID Research from the issuer's public webcast recording by automated speech recognition, without a full manual check: expect mis-heard names and figures. There is no speaker attribution: the source recording carries no diarisation, so cues are shown as timestamp and text only; timestamps refer to the recording. Not a company publication. Frasers Logistics & Commercial Trust's own investor relations page (https://flct.frasersproperty.com/financial_information.html) is the authoritative record. Copyright in the briefing rests with Frasers Logistics & Commercial Trust; contact contact@smidresearch.com for corrections or removal.

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[00:12:35] This is Delsin, from LLC2.

[00:21:40] Sorry, we're facing some technical issues.

[00:22:51] So we will give us a few minutes. minutes.

[00:26:37] Recording in progress. Hi, good morning everyone. Thanks for your patience. Welcome to Fraser Logistics and Commercial Trust Pool Year 2023, results of our own webcast. Today we have with us Ms. Anthony Lee, CEO. We have our Ms. Tricia Yiu, CFO, Ms. Jaye Spong, our Head of Performance Management, and also in attendance we have our Head of Investment, Ms. Chiu Inhui. So without further ado, I'll just hand over the presentation to Anpia to start us off. Thanks, Alfine. Good morning, everyone. I'm Anpia, and thank you for joining our FY2023 Financial Results Webcast presentation. So let me begin by thanking our FLCT team for their support rendered to me since I'm joined, and together with the Fraser's group team members in Singapore, Australia, UK, and Europe for their dedication and hard work

[00:27:40] for the financial year. So despite challenging headwinds and market volatilities, we have managed to pull in a resilient set of results for FY2023. The underlying fundamentals of our portfolio remained strong, driven by sustained demand and a continued lack of availability. And this is especially so for the L&I portfolio, which will continue to register full occupancy for the fourth consecutive year. We are also proud to share that we have maintained a five-star rating for our, and then we are market-leading ranking of second position among our peers in the latest Graspi 233. So for the full year, 2023, our L&I continues to deliver a strong performance On overall portfolio basis, we have achieved a significant positive render reversions of 7.8% on an incoming rent versus outgoing rent basis and a positive 18.9% version on the average of preceding lease versus average of new or renewed lease basis. For our

[00:28:44] balance sheet, FLCT continues to hold prudent capital structure with one of the lowest gearing amongst assets at 30.2%. And this October, we have also expanded our footprint in the Netherlands with the acquisition of an LNI development, and this marks the seventh one in the Netherlands. This deal is deeply lucrative and will enlarge the contribution from the Netherlands and was concluded at a 13% discount to its valuation. Earlier in the year, we have also completed the development of two UK logistics facilities, Connection 2 and Wooster, and we are on track to complete another logistics facility in Port Ellesmere, Chinese December. So on the next slide, it's just a quick snapshot on the portfolio here, a portfolio of 107 assets anchored by L&I assets, which constitute approximately 70% by asset value, a total of 99 assets. And for the remaining 30% of the portfolio, it comprises commercial assets

[00:29:46] and has an occupancy of 90%. On to the next slide. So in October, we FLCT strengthen our foothold in the Netherlands with a freehold of forward fund logistic assets in the Aviation Valley business part in Maastricht in the Netherlands. So the purchase price of $14.5 million represents an approximate 30% discount to the valuation of $16 million at the gross initial yield of 6.3%. So this is an off-market deal from the seller and the rent escalation will be based on CPI for a long lease term of 10 years. In terms of the development, it's strategically located to the Ma Street App Walk, which is the second largest park for cargo flights in the Netherlands, is after the Amsterdam Skippel App Walk. There are savings of red state transfer tax because we are buying on a forward fund basis and we'll be funding the project progressively during the construction period and the vendor will provide a coupon of about 6% on the funding drawdowns.

[00:30:53] The tenant is a service provider to a third party logistics provider specializing in the provision of logistics and manufacturing and management services to feed forwarders. The next slide. In the first half of FY2023, we have also completed the development of two, sorry, one slide before that. We have completed the development of, thank you, of the two UK logistics and industrial properties. This is Connection2 and Uster, and Connection2, which is located in the Bly Valley Business Park. It has three units, and all three units are leased on a 10-year lease to high-quality tenants, one who is a Tesla. The other one is Solo Pack, which is an AV solutions provider. And the third is Really, which is one of the UK's leading suppliers the leaf and escalator industry. So the project has achieved a VM of excellent rating. And

[00:31:57] Mr. is prominently located at the entrance of the business park and the building has been constructed to high specs with a target energy performance certificate rating of A, the highest rating for energy certification. The property is pre-committed to Alean's flooring distribution on the new 15-year lease. It will be the tenant's headquarter flagship warehouse in the UK. We are also on track to complete Hot Galsmere by December, and with a committed 15-year lease to Persia, the property will also serve as a national distribution sector upon completion. Its property will also meet the BRIAM's outstanding and the EPCA rating. On the next slide, the ongoing facade enhancement to Central Park is about 65% completed. And we expect the facade enhancement works under night illumination to erase central parks value propositioned and attractiveness to both existing and potential occupiers.

[00:32:59] And this will be central park is actually purse a tallest building at 51 stories and the modernization of the facade will make a very strong statement in perf skyline. We works on the facade enhancement expected to complete in end of financial year 2024. I will now hand the time over to Tricia who will take you through the financial performance. Thanks Antia. So for the FY2023 results of the FLCT reported a revenue of $420.8 million and adjusted MPI of $311.4 million. This is a decrease of 6.5% and 9% respectively. The year-on-year decreases were mainly due to three main factors, the WUPA exchange rates of the AUD against HPD over the period. So the average AUD was down about 7.7% and there was also lower average occupancy at front of the business park,

[00:34:02] Maxis Business Park and 357 College Street as compared to FY22. Property operating expenses were mainly higher due to higher energy and utility expenses and these were partially offset by the full six months effect of the acquisition of the four properties in Australia in the second half of FY22. And we also saw this the full six months contribution from the practical with the practical completion of the two logistics industrial assets in the European connection to a loose film. Finance costs were mainly higher due to the interest rates and additional borrowing strong for complex and fund-through developments. We took a negative fair value adjustment on our investment properties. This amounted to $359 million with the valuations that we did as of September 2023. However, this has no impact on distribution. Looking at the total distribution income for a quite new chain from

[00:35:06] Egypt's 200 grand, it could be 2.3 million down from 200 to 1.8 million a year ago. And for the full financial year of 2023, we have declared a deep new of 7.04 cents. This includes the capital distribution of investment gains of about 16.1 million and the manager has taken part of the set of the series, but it speaks in units. Moving on to the next slide. The final chance for the second half of F4.23, but actually follows the same trend as the four here. And just looking at the second half TPU, we declared a 3.52 cents TPU, and this is the same as the first half TPU that we have declared. It includes the distribution of the investment is totaling 11.7 million per second. Moving on to the next slide, please. So if you look at our capital management,

[00:36:07] as you guys mentioned about our low aggregate leverage of about 30.2%, this is still very healthy. And one of the lowest among the S-reeds and leaving us with sufficient hearing of more than 1 billion before we fix this 40% hearing level. increase its, it's quite increasing aggregate leverage is because the asset base has been impacted by the negative for legal admission adjustment and we did draw down some additional borrowings to fund KPACs that we incurred during the last quarter. Our emphasis is to continue to ensure healthy gearing level during this uncertain business environment. Our interest coverage ratio remains very healthy at 7.1 times and meanwhile our borrowings are hatched at 77% of fixed rates which has helped us to buffer the impact of the increase in interest costs. So we presented our trading 12-month cost of borrowings. This moved out slightly

[00:37:11] from the last quarter and we stood at 2.2% on a trading 12-month basis. We also provided our training three months cost of debt and for the last quarter of FY23 that was 2.4 percent. Our winter leverage debt maturity is at 2.2 years. For the debt that is a huge mature rate in FY2024. The bump of it is only due in the second half of FY2024 June and August specifically and we do not have major refinancing needs in the first half and the facilities are in place actually for more than half of the debt that is due in FY 2024. We continued to enjoy a triple B plus credit rating with a lot of look from S&P. On the balance sheet side, the value of investment properties have decreased by 46% and this is really due to the net

[00:38:12] negative value adjustment that we took. That was also a year against the single exchange rate and by bested the diesel property model in the first quarter of FY2323. So this decline has been partially offset by k-tax incurred and the lower euro and past exchange rate against the signalless asset here. and the NIT per unit assets. So tier section between three is at a dollar and 17 cents. I won't go through this slide, but I'll hand over to Jay. Thanks, Richard. Hi, everyone. So I'll talk you through the portfolio reviews, starting with the leasing summary on slide 16. So this quarter, we've seen a steady momentum of positive leasing activity continue

[00:39:15] with a total of 100,000 square meters of leasing completed this quarter, which involves 13 deals. Year to date, this brings the leasing across the portfolio to over 492,000 square metres across 64 deals. And that represents 18.5% of the total portfolio area. So it's been a very busy and positive time for the team on the leasing front. Just looking at each segment, so we've had four deals completed for the LNI portfolio in 4Q. This involved just under 96,000 square meters and you'll see it achieved a strong positive rent or a version of both metrics with average versus average positive change of 33.5% and on an incoming versus outgoing basis, it was just under 21%. If we look at the full year reversions for the LNI portfolio, they've been very strong. you'll see 8% on an incoming versus outgoing basis,

[00:40:18] and average versus average of just under 20%. And this reflects the very strong growth in effective market rents, in particular in Australia. Looking at the commercial portfolio, there were nine deals completed this quarter, just over 4,000 square meters. The reversions were again positive, 1.4% on an incoming versus outgoing, and average versus average of over 9%. For the whole portfolio, we've seen some strong reversions throughout the year. The total verified 23 is just under 8% on an incoming versus outgoing basis and average versus average is just under 19%. The next slide shows our portfolio occupancy on slide 17. The occupancy detail includes an overall portfolio occupancy of 96%, which is reasonably steady this quarter. The LNI portfolio across all our regions,

[00:41:19] Australia, Europe and UK, which is around 70% of portfolio value remains 100% occupied. The commercial portfolio has been steady at 90%. Since September 22, the occupancy and the majority of our commercial assets has seen some improvement, most notably at ATP, Central Park and Farnborough. The last quarter we've seen a slight decrease at 357 Collins Street. This follows a handback of one floor by Commonwealth Bank. And this was part of a four year lease extension with the bank until December 26th. We're actually now in discussions with them to potentially take that floor back. Moving on to the next slide, we cover the Least Expiry Profile. So we have a well spread out profile with no more than 22% of the GRI expiring in any single year. The current portfolio remains steady this quarter. As I mentioned, the total occupancy is at 96% and the well is 4.3 years.

[00:42:23] With the strong leasing momentum that I outlined previously, the FY24 expiries have declined by 1.2% of portfolio gross rental income and now is at just under 9%. The FY25 commercial expiries are dominated by the Commonwealth of Australia, Caroline Chisholm Center. Lease extension discussions are progressing very positively. We'll hopefully have some news to announce shortly. In addition, the Google space at ATP is captured within the FY24 and FY25 expiries, and they will be exiting ATP the end of their lease in December 24. The initial tranche will be handed back in February 24. That's over 150,000 square feet. We have a marketing campaign, what advanced at ATP, and we're currently in advanced discussions with tenants over 150,000 square feet, that

[00:43:23] initial space. So hopefully we can report some positive news there soon. Just looking to the right of the slide at the top 10 tenants, the average well for the top 10 is at 3.8 years and no single tenant accounts for more than 5% of the portfolio gross rental income. This reflects a low concentration risk. The top 10 tenants include a mix of both commercial and LNI tenants and comprise some well-known brands that you should be familiar with and they're spread across the regions and sectors with five of the tenants occupying multiple buildings. There's been one change in the top 10. The Teetetronik and Schenka have traded places. Schenka has been replaced by a tenant called ACFS at 16,000 square metres at Eastern Creek. If we move now onto the valuation, so slide 19 summarizes the results of the the 30 September 23 independent valuation of the portfolio.

[00:44:26] The 107 properties have been valued at 6.4 billion SING, which reflects a decrease of 4.7% compared to the carrying values. The decline is generally a result of an expansion in yields, challenging leasing conditions in the commercial portfolio and the FX impacts of a weaker Aussie dollar. On the following slides, I'll talk through each segment in a little bit more detail. So on slide 21, sorry, not 21, slide 20, we'll look at the LNI portfolio. The new value for the LNI portfolio is 4.5 billion, and this represents a 2.8% decrease compared to the carrying values. The Australian portfolio of 61 assets were valued at 1.8 billion Aussie, reflecting a 1.4% uplift, with a weighted average cap rate of 5.5%. This reflects an 89% basis point expansion

[00:45:29] compared to last year's valuation, but this has been offset by the significant effective market rental growth, particularly in New South Wales and Victoria, and the positive leasing results I touched on earlier. In Europe, the 35 assets were valued at 1.3 billion euro. This reflects a 7% decline over carrying values with a weighted average net initial yield of 4.5%, which is a 48% basis point expansion compared to last year. The three UK LNI assets were valued at 80.4 million pounds, reflecting a 13% decline compared to the carrying values with an average equivalent yield of 5.6%. The next slide looks at the commercial portfolio segment. The total portfolio value for commercial is 1.96 billion, and that's just under a 9% decline on the carrying values. The four Australian assets were valued at 914 million Aussie.

[00:46:32] That's a 9.2% decline compared to the carrying values. Cap rates range between 6% and 6375, which reflects a 75 basis point expansion compared to last year. ATP has held up reasonably well compared to last year. It's valued at 678 million with a slight uplift against carrying value. The three UK business parts were valued at 285 million pounds which represents a 20% decline compared to last year following expansion yields of 175 basis points. I'll now hand the time back to Anthea. Thanks, Jay. So for financial year 2023, FLCT has continued to make good progress in the various unique initiatives, such as achieving green certification for the portfolio and sustainability link loans. We have also aligned with FPL to achieve

[00:47:33] our zero emissions targets by 2050. We have maintained the highest five star rating in the 2023 GRASV Real Estate Assessment for the third consecutive year and market leading position of being second amongst peers of 18 participants. Sustainability is integral to FLCT's operations and FLCT remains committed to delivering sustainability outcomes that underpin long-term forms. So while the current market uncertainties continue to place headwinds on the demand, our portfolio remains driven by secular forces and continue to see supply chain resilience and e-commerce growth driving demand for high quality logistics assets located close to the external base. ESG remains a focus for occupiers as we transition to the low carbon economy with demand for modern assets which meets ESG targets and corporate values. Finally, the flat quality trend also continues to dominate commercial demand as employers

[00:48:35] focus on high quality buildings and health and wellbeing to entice the staff to return back to the office and to attract talent. the next slide. So moving forward, we will like to reiterate our strategy for long-term sustainable growth and our continued focus on LNI. We will focus all our efforts and attention on increasing our logistics and industrial exposure from the current 70% to 85% in the long term. We are also casting our net wider to also look at developed markets with strong logistics and industrial market fundamentals. So this includes markets such as Singapore, which has weakness stable pricing and cap rates and expanding into Singapore will also provide us with tax transparency. Another potential market is Japan, which can provide a positive view from the low interest rate environment and the Japanese logistics and industrial market has weakness growing demand due to the increasing volume of shipping services and strengthening supply chains

[00:49:38] and strong e-commerce growth. We'll consider data centers as part of the LNI asset class, and we will evaluate data center acquisition opportunities which do not require any data center operational responsibilities. We look to invest in markets when we see strong demand and talented by good customers. So coupled with our discipline asset management and healthy financial standing, our investment focus remains to be in the high quality logistics and industrial assets in developed markets, while we leverage our sponsors' extensive network and capabilities to evaluate super-world investment opportunities in developed markets. So thank you so much for joining our webcast. We shall now turn this time over to the Q&A segment.

[00:50:38] Okay, our starting from Mervyn, I do raise your hand. We'd like to ask a question.

[00:51:04] Hi, can you hear me? Hello? I'm Mervin, I'm very happy to answer your question. Great, great. Anyway, congrats on the very strong rental reversions and I think markets should welcome guidance in terms of increasing the proportion of logistics industrial exposure to 85 percent. I just want to clarify in terms of that industrial component of the LNI, does it include Would that include data centers without Singapore overseas? And does that industrial include high-tech buildings in Singapore? Or is that considered commercial? And slide 25 is talking about Rofl assets from the sponsor. How should we be thinking about the UK business parks, commercial properties in Australia? Is there something we want to hold long term or we buy more?

[00:52:07] The second question I have is in terms of the capital top ups, seems higher than the original guidance in terms of just distributing a loss of income from FASTA exchange. Any thoughts on how much more you'll be topping up next year? And also in terms of fees in units, 100% this year, is that something that we should be expecting temporarily for next one or two years with higher borrowing costs So it'll be 100% flyover. Thanks.

[00:52:46] Hi, I'm Mavin. I think you've asked quite a number of questions. I'm not sure, those initial part, I think I didn't hear the initial part, but I think started with the question on the data center. I'll try to answer these questions first. And if we missed out anything, please ask again. So I think in terms of whether logistic and industrial proportion in the target, the increasing our focus in the logistics and industrial to 85% of our portfolio, whether does it include data center? Yes, we consider data center as part of logistics and industrial. And then I think as to your question about high tech building, we like industrial as in industrial, not the more business part or the B1, B2 kind of industrial buildings. And then in terms of row for assets, I think that some UK business parts that the sponsor still has. I think because of our focus in logistics and industrial, we'll be focusing on the logistics and industrial

[00:53:47] and we do not consider business part as logistics and industrial. We consider them more as commercial. And as to whether we are going to look at holding them long term, I think we will assess and evaluate our portfolio as we strive to move towards that. I would say that acquisitions shall precede any divestments. Given that we have already sold off a cross-strait exchange last year, we will actually, the next focus for us, we should look at acquisitions before we divest any further, or maybe even look at them concurrently. And I think when we look at divestments, definitely we will look into our portfolio of commercial properties and determine which one would be the one that will be most suitable for divestments. And I think in terms of the fees in units, I think we have seen that this year was probably quite a challenging year with quite a number of challenges. And we have discussed with the sponsor and have got the agreement to take all the fees in units.

[00:54:48] I think going forward, we are unable to say that whether the following year will be continued. But I think this is something that has not unusual. In the past, we have also been taking fees in units, may perhaps not 100%, but it's also quite essential now. If we have missed out any questions, because I didn't hear you at the initial part, please ask again. Thank you. Yeah, just in terms of the logistics in Singapore, I mean, the lead then is typically shorter. I mean, one of the attractive features for FLCT is freehold exposure. So how are we thinking about the shorter land than in Singapore? I mean, there's 5% right yield, you're happy to buy it like seven, eight, nine. And then the, yeah, this full up, I think my question was in terms of capital plops, how should we be thinking about that going forward? Will you be maintaining the same level heading to FY25?

[00:55:51] And then the freezing units, I guess, are you able to give guidance with the next CLP 100% thanks. Hi, can you hear me? Yeah, loud, clear. Yeah, okay, so I think in terms of how we look at leasehold assets in Singapore, I think we have not. We will definitely, I think we are open to looking at leasehold assets, but we are also very cognizant that leases with two short leases, number of years remaining, will also post significant valuation down side risk. So I think we will also want our assets to be marketable if we acquire them and be able to hold out for a certain number of years and still be marketable. So I think this is also a discipline that will also be instilled

[00:56:52] and we look at these whole assets. The next question, Marimah. Sorry, I mean, I don't know, you're gonna address the question of the gap, the gap of the pop-ups and the post-op easing, that's what I see. Are you referring to the question on the capital talk box? OK, sure. Yeah, hi, Mavin. So on the capital distribution, I think if your question is on how did we come up with this figure of $16 million, I think we have actually taken an assessment that if the currencies were to improve by just between about less than 5% and looking at all the leases that we are confident of closing,

[00:57:58] that will actually bring us up by 16 million. So that is why we have chosen to give a capital distribution of 16 million, given that we have divested cross-strait exchange and 55 market streets in the past. And we have actually quite a bit of divestment gains from those divestments. So can I assume if in the event that Aussie dollar continues be somewhat weak you could increase the distribution of divestment gains to offset it. I think we are unable to give any forward for class. I think in terms of the amount that we have, I think it's public information, the divestment gains that we have made from cross-strait exchange and 55 market-strait actually can last us for many many years. So I think in terms of capital distributions. And the fees in units, would it be 100% next year as well?

[00:59:06] Yeah, I think it depends very much on how the the GPU numbers are and I think it's something that we have not made a decision at this point in time, but as I mentioned earlier, I think we have taken quite a bit of the fees 70 to 80% in the past few years and it's not something that is uncommon for So in terms of principles for next year's DPU, there's a philosophy to try your best to hold it steady compared to this year, because I mean, on a year and year basis, at least for first-half, Aussie dollars will be down. There's higher borrowing costs potentially. Is that the philosophy? I mean, lots of reason doing that to hold the DPU, which is fine, but yeah, just try and get the thoughts that strategy. Otherwise, it's hard for us to focus. I think it's something that I think of cost ideally the property we want to work harder on terms of leasing controlling the expenses

[01:00:11] look at acquisition opportunities to drive the DPU but I will say that we have the capacity and the ability to be able to do capital distributions given that we have made very substantial divestment gains in the past. Thank you. Fantastic. We'll move on to Derek from the audience. Hi, this is Derek from Morgan Stanley. Hello. Hi, Derek. We can hear you. Please proceed with your question. Oh, hi. Yeah, here's a follow-up on, I guess, the divestment gains question. Just could you remind us how much is left in the pool and And strapling from comments, it seems

[01:01:15] like you do want to keep DPU at current levels using top ups because Google is also going to give up their starting next fab, and they're about 4% of your total income. So I suppose you want to offset that impact as well. Different gains, different top ups seem to be one of the primary options. So should we be looking at 3.5 cents DPU for the half as a guiding point, guiding reference?

[01:01:56] Hi, Derek.

[01:02:15] Sorry, there was some technical issue. Maybe I'll just repeat myself in case you didn't hear the first part, but essentially on the divestment, there has been typically some short by the guidance, I think as per prior years when the question is answered, but it is definitely a meaningful number. And that's because you see from just the accounting gains that we have announced, Crosstree Exchange, when we announced the digressment, the gain was about 117 million. And for 55 Market Street, when AFCOT actually announced the digressment many years ago, that was about 77 million. So that aggregate is quite a big sum and this divestment gains that is available for distribution is actually computed on a tax cost base, not an accounting cost base with revaluation done over the years. So we can imagine this number is actually quite big. I think on whether we will be using this reserves

[01:03:19] to top up the income I think and Tia has tried to address that. I can pass to her to Julie, on the little. Hi, I, I, I, I, I. Yeah, so I think just now, I think you, hi Derek, I think just now you also mentioned other than this, you know, because you also mentioned about the Google space that will be given back to us. I think just now my colleague Jay has also mentioned that we are also in discussions over, we are in some advanced negotiations over the leasing out of that space to backfill. So I think in terms of whether, you know, how that would turn out, I think that is something that we are looking forward to be able to close the leases and be able to backfill the space that is coming back.

[01:04:29] Thanks, Natia. So my question on Google is really the downtime arising from the backfilling and and the impact on DPU and as a result of that, should we assume that you would top up dividends, supplement dividends such that your next half DPU should be fairly stable quarter on quarter? I think we are actually able to do it because of the, but I think we have, we are unable to give any kind of certainty today that the DPU will be the same based on, but we are able to do it because we have a very sizable amount of sum available for distributions from the capital distribution. And as mentioned by Tricia earlier that the amount of HCT can last us for a very long time. Okay, just one, I guess my last question

[01:05:30] on the acquisition strategy. You mentioned that you're looking at developed markets. Yeah, could you maybe share more on the kind of markets you're looking at and also when you're buying assets, would you be buying keysmeal assets as in the past? And would this be forward purchases, you know, rental top-ups, et cetera? Yeah, some color on that would be great. Thanks for the questions. I think in terms of developed markets, we are actually looking at existing markets that we are operating in. Plus, I think we will look at developed markets such as Singapore or Japan. I think these are markets that are very interesting because we still see there is actually a good spread between the cap rates and the borrowing costs. I think in terms of whether we've been looking at piecemeal and all, I would say that all week managers would tell you they prefer to buy portfolios and I think potentially even platforms because we can always go into such acquisitions,

[01:06:31] opportunities together with the sponsor. Of course, ideally given that, I think given our skills today, I think and that we have a lot of debt hit room. So today, without even raising equity, we can actually raise that for more than 1 billion, about 1.1 billion before we even hit the 40% aggregate leverage level. So which means that actually we do have a lot of that to be able to pursue opportunities in markets where the catwits is actually having a very high margins over the borrowing costs. I think in terms of the weather, so which means that we are actually able to, If we are, because we have such a big debt hit room, I think our focus will be on the bigger opportunities, of course, which will also gives us a bit more in terms of time. I think it will be faster to scale up and moving towards our long term,

[01:07:31] 85% proportion of LNI. Right, sorry, you mentioned Singapore industrial. So is that like factories, logistics, data centers?

[01:07:50] Yes, yes, hello. Yes, Larry is, yes, we say logistics and industrial. We meant logistics and industrial and industrial would definitely include data center, which is interesting because I think I've always, I've always been speaking about the merits of the data center industry given its strong demand and limited supply. But I think one thing is very clear, we will only buy data centers that we do not have any operational responsibilities. So we will not hear from us on the things that happen to the DBS and the city banks, downtime. That's not the kind of data center operations or responsibilities that we want to get into. However, because I still very much need a very similar story, This is something that we still want to look at as part of our logistics and industrial asset class. Right and you'll be buying, you're also looking at flat factories as part of your industrial

[01:08:55] acquisition strategy because of the work that you're doing. We can but actually at this moment we are not trained on flat factories. I think there is quite a bit of challenges in those. I think we, As I mentioned, good, canon, covenant, strong, good quality customers is very important for us. So I think we will be quite selected when we say industrial. Okay and also it also sounds like you're ruling out equity fundraising even if you're looking to buy a portfolio deals, is that fair? I think at this moment we will prefer to use our debt headroom And because we do have a lot, unless you're talking about buying a two billion dollar deal which will actually that we have in chances that of us going to every fundraising is quite low. Yeah. Okay, thanks. A small question so I'll leave.

[01:09:56] There's no time for. Thanks. Thanks. Dale from DBS please. Can I ask you a question? Okay, thanks Delphine. Hi, hi, Cynthia. Nice to see you. Just checking, can you hear me clearly? Yes, no. Yeah, okay, okay. I'll just ask my questions one at a time. I think first one, with regards to the borrowing costs, I think congrats on maintaining a low borrowing cost compared to peers. But just wanted to understand, in terms of the debt expiring next year, what is the average cost of the debt expiring next year and I think you know just wanted to know how much more should we be expecting your all-important cost to inch up. Yeah, I saw a debt as I mentioned from those I actually really enjoyed and made in June and August 2024 and just based on the tower rates,

[01:11:01] some of these debts were usually quite long ago and the entry environment was still very low And so the cost of existing that is around 50%. And if we look at it on a four year, 24 basis, we continue to believe just based on the current interest rates, we will be still comfortably under the 3% on a four year basis. I mean, but that is just based on the current day. you have to see where the market goes. Okay, yeah, fair enough, fair enough, got it. Okay, and just wanted to understand also on the hedge duration, is it packed to the loan expiries? Yes, they are. Okay, got it, got it. Okay, and moving on to my next question on the Google lease.

[01:12:03] I understand that the Google space has actually been so-called customized to Google's requirements previously. So just wondering in backfilling the space in Phases, in FED as well as in N-Optics here, are you able to backfill it in Phases or is it something where you have to get back everything first and then you refit the entire place before you can backfill it? I think for A-Hidial, so I think for the Google space, it is not so much of a customized. I think that is also for reinstatement, obligations by Google as well. In this, I'm feeling the space. I think our preference is of course for a larger attendance to backfill the space. But we can also visit to smaller space. And I think, I don't think we have that flexible in the sense because what will be returned back to us before we reinstate that. Okay, okay. Not sure if you're able to share just now when Jay mentioned the 150,000

[01:13:07] space that's in the negotiations, which industry is the talent from? I think it's under negotiations that maybe we will not. We know at the end of the year actually, when we negotiate with these customers, we are actually at the end of the year. I think here's something that's under negotiations. There's a lot of people who have color when we sign the leases and able to share in the house. Okay, okay. At least we upset them. Yeah, I think maybe just follow up quickly. I think just to give a bit of a bit more comment, I mean we're actually seeing inquiry from various sectors I'd say, it's not a particular sector, it's actually quite a healthy spread across different sectors which I think is encouraging. So yeah, it's probably because of this point in front. Okay, okay, that's encouraging. And my last question here is with regards to the UK business parks, on a Q&Q basis seems

[01:14:11] to be inching down again. So just wanted to understand a bit more what's happening then, what should we be expecting for the year ahead? Sure. So the UK, we were over there a couple of weeks ago actually, and it is encouraging. There is more inquiry in the market as well, levels inquiry, steadily improving over the last few quarters when we spoke. We are so- Sorry Jay, I think there's some echo. definitely this flight to quality which is really and the likes of the farmer I think is really showing that it's very well regarded in that sort of position. We've seen some really positive inquiry levels there so where we have carried out refurbishments we now have a lot of inquiry over that space. Talking specifics at Farmrow we completed a deal with Zurich over building 110

[01:15:12] and that was for the majority of one floor. There's three floors in that building. We now have inquiry over all but about half a floor. Now we obviously are hopeful we can convert all those but that's a lot better than it has been maybe six months ago or so. We do have some additional inquiry that we're looking to convert. It hasn't been included in the 30th September because it's since then but there's a few good inquiries there for quite big spaces as well. So I think Farmborough we're looking pretty positive and we're looking hopeful that we can report something pretty quickly on that. Bly Valley is the best business park in the Birmingham area and it certainly is held in high regard. Inquiry there is is reasonable I'd say we have done a few deals over the last quarter, but it's certainly one that we're focusing on. And Max is a Bracknell. We have done one deal to Evelyn Partners there for a whole floor. That's probably a more of

[01:16:17] a concern for us. I think Bracknell was a little bit patchy at the moment in terms of inquiry levels. But what I'd say is just being on the ground there, there is a lot more positive signs. The UK has had a very tough period, as we all know. They've struggled through the pandemic, and they're probably now only starting to find their feet again and I think that's converting to some more decisions being made whereas in the last probably 12 months people have been sitting on the fence somewhat to see how things pan out. The other comment I just make is having been to the parts recently there is a lot more people coming back to the office that's very evident. There's maybe a little bit more pressure from employers to have their staff back in the office as well. But we were quite impressed how some occupiers it's pretty much, you know, almost back to 100% five days a week. That's not for every occupy, but it's certainly a lot better than it has been in the past. So that's encouraging. Okay, okay, thanks, Jay. Just just a quick follow up. So understand the inquiries are decent

[01:17:23] are picking up in the UK. But what about rents? Are they still inching up or has it already tapered off? No, with our valuations you see that all our commercial assets, the rents have actually improved year on year in terms of market rents we're talking about. So that's certainly encouraging to see. We're not seeing that base rents at least are dropping. Incentives in certain markets are perhaps inching up a little bit. I'd probably point to Melbourne there. But other regions incentives are fairly steady I'd say so we haven't seen a big drop in rents at all actually which is quite encouraging. Okay okay that's good yeah yeah that's all from me thank you. Thank you yeah all right next we have you can. Hi can you hear me? Yes you can. Yeah okay just thought there was a bit of feedback on your mics so there were some echo but I have two questions first is on

[01:18:27] acquisitions. You mentioned that you wanted to do data centers, which are the markets that are still very new and pretty different. Second question is would you consider trying to do data centers?

[01:18:42] Hey, hi Yuhua. Hi. So I think it does offer data centers. We can work on the market that will still be a real agreement. I think we will look at the, we will use that the way we look at the logistics. I think both logistics and data centers are actually trading at financial credits in a lot of our countries. And I think in terms of the same markets that we look at, we will also be looking at logistics to get data centers. I think in terms of whether we look at China, I think developed markets is where we want to focus on. At this moment, absolutely no China and no US. I think I can very, for very sure, very certainly tell you that these two markets will not be looking at the end of the moment. Thank you. Okay, so from a yield equation perspective, only Japan makes sense, right? Data centers. I think on the off market basis, let's try to see what we can find in Europe as well.

[01:19:43] I think that there could be also some opportunities in Europe and I think Japan definitely will also make sense. Okay, thanks. That's it for me. Thank you. Thanks again.

[01:19:59] Thanks again. We move on to Joy and Jesse Steve. Can you hear me? Yes, you can. Okay, hi. Thanks. Just a few follow up questions. First of all, in terms of valuation, right? Could you share what's the factor driving up the ATP valuation in Singapore? Hi Joy. Sorry Joy. Sorry Joy. Joy. Sorry. OK, so with ATP, we've seen a slight improvement. That's actually driven by market rents, been higher than last year. But what we've seen, it was the same value who valued the property last year as well.

[01:21:00] They adopted a reasonably conservative approach to ATP, given that Google hadn't occupied that space. So there was always a bit of a caution about what they would be doing at their expiry, and the value obviously was well aware of their handbag rights, et cetera. So the fact that they hadn't fitted it out meant that last year they did already include some adjustments and allowances for that Google accommodation. So the value still includes the allowances that we would expect in terms of leasing up that space. Where there's been a slight increase is actually in the market rents that we should be able to attain for that space. yield has hold steady this time around. Sure, thanks Jay and in terms of the market rents that they assume versus your ongoing you know discussions would you say that it is in line? Yeah I think they're pretty reasonable in terms of where they expect the space to lease up at, yeah we'd agree with the valuables. Okay cool and then just a follow-up on gearing potential,

[01:22:08] I think Anthea you mentioned about 40% when you looked at that capacity, is this where you want to bring your gearing back to in light of where interest rates? I don't think we... it's not targeted at 40% but we will not want to exceed 40%. I think if that's it could make myself clearer. Okay, and then just on the acquisition sort of new markets you mentioned about Japan being interesting and what sort of you know you mentioned that you don't want to go into operation so how big you want to build Japan portfolio is just going to be you know adding one or two assets here and there. Yeah sure actually we don't have a specific capital allocation for each of the geographies I think, but of course, if we serve very small, it also may not make skill, I guess it's important, doesn't make sense for us to just buy one to access very small in a new country.

[01:23:11] So whilst we can continue to add access in the existing markets that we operate in, I think when we look at the new market, we also want to go in in a bit more sizable manner. Thank you. And just one last question if I may, on a borrowing costs, Tricia, can you share what your current funding cost for the respective country, if you were to refinance today. So I don't think we usually set the complete current fees of our foreign, but I think you can refer to the current, if you just look at the current rates, it will be somewhere between between 4 to 6% depending on which currency I'm seeing. And in terms of spread, you've not seen changes in spread? Not so much, because some of these specific dimensions

[01:24:12] that we're going to take to refine the point where we've also, we've covered a discussion a while ago. So not that material. Great, thank you. That's all from me. Thanks, Drey. So we have a direct time from DBS. Thanks, Delphine. Can you hear me? Yes, we can hear you. Hi, I'm TMT. Hey, good morning. Just two questions for me. The first one is on valuation. I think I missed Jay, you mentioning the amount of Calvary expansion. Do you mind repeating that? And I'm just wondering on that front, do you think valuations are really effective and this is data? Did you repeat your last question? My last question is, can you all please,

[01:25:16] I agree, but what is that? I'm sorry. That's all right. Derek, I think I caught your second one. Let me just run through the expansions first. So for logistics LNI, we saw an overall expansion of 89 basis points to the cap rate, but that was completely offset by the market-ranked growth that we've experienced the effective market-ranked growth, in particular in New South Wales and Victoria. There's been a lot of leasing done this year and that has actually accessed a lot of that market rent growth as well. So we've had new leases on foot at a higher rent but we've also the valuables have applied a higher market rent against those valuations. In Europe, the let's talk about NIY, the net initial yield has blown out by 48 basis points and in UK the average, this is for logistics,

[01:26:22] the average equivalent yield, which is what they adopt, has blown out by 140 basis points. For commercial, Singapore has hold steady 5.75, UK has expanded 175 basis points. and Australia on average has expanded 78 basis points. In terms of, I think your second part of the question was what's our outlook for next year? I think it's probably safe to say, and we've heard it a lot this year, we've certainly been in a price discovery period, and there hasn't been much investment activity to really point to. So values have very much been influenced less by the transactions that they can rely on and more in terms of where interest rates are heading and looking at the spread on debt. I think that's been the main driver of the sentiment from valuers rather than being able

[01:27:24] to actually point to transactions. So I think for the next 12 months, it'll be interesting to see where transactions do start to land if they do so. We're not seeing distress in the market and therefore a lot of sales coming on. The other side of this is obviously on the occupier side. At this point we've seen strong performance across all the portfolio, both in logistics and improving, I'd say, in commercial. Market rents have improved in all of our assets, both obviously in logistics but also across commercial as well. So we're hopeful that that momentum will continue on the occupier side. Yields are a tough one to really gauge at this point, but there's certainly been quite a big expansion as I've talked through in some of the regions, in particular UK and Europe, and I'd hope it wouldn't go much further than that. There's some pretty dramatic expansion there.

[01:28:25] Okay, Jay, thanks for that input. I think that's all.

[01:28:32] Thank you, Derek. Maybe you took a question from David from Dawak. Hi, good morning. Hey, hey, Anthea, what's it like to be the CEO of a REIT that's trading at a big discount to NAV and compared with when you were at KDC when you could raise equity at will and be accretive? Hi, hi, David morning. Interesting question. I think every REIT has their own strengths and business. I think today we may be trading at a discount to the NAV, but the other point that we have is that we do have a very big debt hit room. So I think what's important is what can we do with the metrics that we have at the moment. And at the moment, because equity generally is higher than debt. If given a choice, I'd rather choose to have the the debt hit room to be able to buy

[01:29:37] where cap rates are still trading above borrowing costs. So I would say that I think it's about making the best of what we have. I think and also the ability for FLCT to go into and be able to focus on logistics and industrial which includes data centers actually is actually a rather good mandate and given that the sponsor has a lot of pipeline of logistics assets that we can still look to tap upon I think this is actually very interesting for me. Okay so yeah it's a very reassuring comment so it's good to know that you're not in over your ahead. Yeah, thanks. Bye. Thank you David. We want to next question. Oh, next one. Can Xavier from Morningstar? Hi, I am there. Thanks for taking my question.

[01:30:40] My question is, what do you think about the long-term prospects of UK business parks? Are these two an attractive asset class for you guys? I will take, hi Xavier, hi. I will take this question and then I'll pass on to Jay. I think in terms of UK business parts, I think they face certain challenges, but we also notice that the the flag to quality trends. So it is not totally irrelevant today. There are still requirements, there are still demand, and when given the choice, customers do choose business parts that are probably in terms of location, in terms of the quality of the building specs. So that is why we are actually able to maintain the occupancy that we are showing as well as having the amount of listing inquiries on the space. I think maybe I'll pass the time over to Jay, if you will have anything else to add.

[01:31:41] Yeah, no, really just to echo what Anthony says, I think it's really about positioning your assets. Farmer and Bly, as I mentioned before, are certainly probably the best product in their sub markets. So they are the ones that are attracting more inquiry. The other benefit of those two, especially at Blythe, is we do have a bit of a mixed use there. As Anthea covered in the presentation, we completed connection to project during the years. That was the addition of three small industrial units there, which is the second phase of connection one, which is alongside that. That's been a really successful project. The incremental return was about 8.5% and we attracted three really good quality tenants on 10-year leases with rents much higher than expected. So the beauty of that is that you have a bit more of a diversified tenant base and a different use in the park. It's very complementary as well. I think that's a good strategy. We'll look at where we can maybe unlock some other sites in that way as well. I think Farma does

[01:32:45] provide a little bit of opportunity in that area as well. So yeah it's really looking at your tenant base as well as if you can diversify a little bit. I would hope in the next quarter or so we can certainly give you some better news around our business parks and we're certainly seeing as I mentioned being on site the occupancy certainly improved occupancy in terms of people actually attending the office. So I think it's starting to come back. Yeah. Got it. So given that I guess you guys are still positive on the UK Business Park assets class, do you think there actually is also a good opportunity to kind of like bottom fish for, you know, sort of like distress or call plus business part assets? Xavier, thanks for our question. I think we have already articulated that we want to focus on increasing the LNI exposure and just for a burden of doubt business parts is commercial to us,

[01:33:51] not really classified under LNI to us. So given we have already set a kind of focus on achieving 85%, I think we will probably be really be focused on LNI when we look at acquisition opportunities. So, we should also, can I also understand in that sense that you think that the LNI asset class is in the medium to long term has better growth opportunities than the UK business part. And this is also part of the reason why your focus is on LNI instead, right? Yes, Ziepia, I think they look at the fundamentals, we do the structure fundamentals of the asset class and I think while FLCT has currently has both commercial as well as LNI, I think on a forward basis we do want to focus on LNI more because of the fundamentals and even today when we look at our results, I think it's really our good thing that we have 70%

[01:34:56] of LNI that is really strongly supporting the FLCT's financial numbers. Got it. Thank you so much. Thank you, Sibiram. I see Derek, you have your hand up.

[01:35:22] Hi, sorry, just a follow up on Google. I didn't get that question answered earlier. Just on the expiry, that 4.3% revenue, I think Jay mentioned that it will start to expire in FAP. How much of that 4.3% expires in FAP next year? And what's the remaining amount for FY25? Okay, so in February, just to give you the exact numbers, in February we have 150,000 square metres coming back. That was part of a handback right that they had. And in December 24, the remainder will come back. I'm just trying to find the figures. Sorry guys. So how much is there as a percentage of our revenue?

[01:36:26] Okay, so December there'll be 218,000 square feet coming back and 150 coming back in February. The February handback makes up 1.7% of that portfolio GRI. Okay, got it. Thank you. And expected downtime because you are in advanced negotiations. What would be expected downtime for the leases expiring? We're still negotiating on that, to be honest. So probably a bit sensitive to really talk about this stage. Okay, no worries. Thanks, thanks, Ray. Thank you. Thanks, Ray. I see Dale, you still have your hand up. Would you like to ask a question? Oh, sorry, sorry. I think I forgot to put it down, but am I since it's back to me, maybe I'll ask another question. You know, I think in terms of divestment, I think Ante you did give some guidance,

[01:37:27] but I'm just wondering, you know, I mean, there is no need for you to do any divestments at this point in time, given your strong balance sheet. But, you know, are you seeing any opportunities to exit, you know, assets at very, I would say attractive yields at this point? Hi, Dale. I think in terms of, because we have already done cross-trade exchange, I think that was done at very good yields, but I think at this point, we would prefer acquisitions to precede divestments to do it concurrently, but I think we will not be actively pursuing divestments before acquisitions. I think that it's where we are looking at. Okay, got it. So in your goal to increase your L&I exposure, it doesn't include divestments of a commercial? No, I think that is in terms of a sequence. I I think in terms of sequence, how I would envisage acquisitions to pre-steed divestments,

[01:38:28] but because we want to get to 85%, we will probably involve both acquisitions and divestments. So probably focus a lot more on acquisitions of LNI and divesting of commercial so that we can get to 85% sooner than later. Okay, that's clear. Yeah, okay. That's all. Thank you. Thank you. Hi, I have one more from Revan. Yeah, just a question in terms of Australian logistics cap rates. I'm just wondering your crystal ball, are we like towards the end of the cap rate expansion? Is it time to step up to play device, shortwave properties to pick up the positive leasing spreads? Hi, Momin. Yeah, I think as I said before, it's tough on the call, to be honest. I think

[01:39:33] we've got an organ on further interest rate hikes and how that might play out. But in terms of the shorter whale assets, I mean, certainly what we've seen in the last little while is with that positive rental reversion, in particular in Australia, there's been a lot more demand for those shorter whales. I think that's a very smart play if you're confident that you can access that reversion. And there's no no sort of caps on that within the within the lease, I suppose you know, there are there are often leases which have got option terms which might have a cap on on the market rent at if that option is exercised. These are the things you got to keep a lookout for. But certainly those shorter term ones might be a smart play. Because I think this rental reversion we've seen I mean, it's been unprecedented, I suppose, the right word over the last two years, really. I don't expect it's gonna continue at the same kind of rates that we've seen, but the deals that we're working on now

[01:40:33] are certainly seeing further rent growth on what we've achieved last year. So I think there is, it's gonna continue. And I think that would be certainly a very, very close thing that E-Wens looking at in terms of accessing market rents on those kind of assets for sure. I mean in terms of, I mean you mentioned this so they couldn't demand for these short-wheel properties but can you buy a short-wheel property at let's say a five half cap at this point in time or is there actually much type for?

[01:41:07] Well we are seeing in the, thanks for the question Madam, but one way I think the market right now is that it is depending on which market that we're looking at I think cap rates are at the five and a half to stop six to 10 range. So but those are also the shorter available assets are probably not five years but maybe three three two boys kind of assets. Yeah but the kind of assets that we prefer are the longer available stable income producing kinds and there's not a lot of products that's been put up on the market at this point in time. Yeah and in terms of funding for these acquisitions, will you perhaps blend it with cheaper, single borrowings to make it yield-creative or will the primary focus be naturally hedged, which means it's still quite difficult to make it a creative given the Aussie borrowing costs, probably mid fives to sixes.

[01:42:10] Yeah, I think ideally we would still prefer to have some natural hedge, So that will be our preference. Okay. Fantastic. I guess we'll look forward to some acquisition announcements. Hopefully. I had a question from Joelle. So I'll read it out. On capital values, does management see further category expansion in your markets and hence any further weakness in valuations. So which market and asset class has more valuation, downside risks and management opinion? Yeah. Hi Joelle. So I think thanks for your question. I think your question on which market has any more valuation. I think you have realized that this round we really take a very big hit on our valuations. I think we've seen some markets,

[01:43:12] certain asset classes with quite substantial adjustments. I think at this point we do see, there are not a lot of transactions in the market. I think the valuables do want to take in the sentiments on the ground in view of the high interest rate environment. So I think on a forward basis, I think we do not expect similar levels of markdowns on the valuations, but I think a lot will still depends on how the interest rate environment is going to affect going forward basis. But what we can do, and I think the way we have defended strongly our LNI portfolio, is to continue to drive the RAM reversions, drive the occupancies, and to make sure that even if there has to be even for our commercial properties, flat to quality, they'll be flying to our assets. So I think these are the ways that we can look at to better defend our portfolio

[01:44:13] valuations are going forward. We have also another question from Joelle. So I'll read out the question. Notice your natural hedging for AUD assets is relatively low compared to the other currencies. So would you be looking to increase over time? Thanks Joelle. Do you want the question? Yes, definitely we will try to see whether of these opportunities to also just move some of the debt towards the a bit more on the AUD side, so that their relief depends on the market environment. And I know, I mean, definitely, I think just now when you want to talk about acquisitions, when possible, we'll try to have the natural heritage heritage. I see one last question, and that's from Vijay. So quick question on CBA. Are you in discussion with the tenant and are they likely to renew?

[01:45:17] Okay, so just to confirm that, so CBA at 357 Collins Street, we have renewed them for four years. Now that was reported probably back in Q2. It's just under 10,000 square metres over levels 6 to 10. And that takes their lease expiry through December 26. They're one of our top 10 tenants across the whole portfolio. They represent 1.6% of the portfolio gross rental. What I did mention is that as part of that deal, they did hand back a floor which came back to us this quarter. We are actually talking to them about potentially taking that floor back because they are finding that more staff are coming back to the office which is a good sign. Okay, I don't see any further questions and any further hands raised up. So thank you very much everybody for attending our webcast today, and you have any questions you can proceed to email me, or so that we can get questions in order.

[01:46:30] Thanks for attending. Thanks everyone.