2024 Corporate Connect Webinar Presentation & Dialogue

Hi, good evening, everyone. Thank you for joining tonight's Corporate Connect. My name is Gerald, and I'm very pleased to be your host for tonight. So we have with us today, Lendly's Global Read, where we will be able to get the update from the management team on some of their key developments. We're very pleased to have with us the audience from MooMoo Live with us tonight. And in case you are wondering, this webinar is organized by CIRS and supported by the ASHX group. Many of us would probably be familiar with Lendly's Read. They own and operate properties in Singapore, such as sub-situ entry, as well as gem.

So we'll be able to get an update from the management team on some of these key assets during tonight's Corporate Connect. Before we actually go into the presentation, we'll actually have an upmarket update from Amelia from ASHX, where she will be able to share with us some of the recent developments in the Singapore market. Amelia is the Director of Research at Finland at the ASHX group. And with that, I'll hand over to Amelia, who will share about some of the recent developments in the Singapore market. Thank you, Gerald. OK, I've got my slides up. Today, we will talk a little bit about the ASHX market

to give everybody an update of how the sector has been performing so far. And then later on, we'll hear from both Kelvin, as well as Nigel, an update over there from Land Lease. So first of all, disclaimer slide, just to highlight that everything that we talk about today is meant to be educational in nature. Whatever historical numbers may not predict future performance. All right, so when we talk about the S-Rates sector, or REITs in general, interest rates is a key topic that has been in mind, especially since 2022, when the US has started to raise rates over the last one, one and a half years.

All right, and higher interest rates will continue to impact REITs, global REITs, not just S-REITs in three ways. For example, number one, higher financing cost could be as a result of that. Number two, this could also potentially impact the distributions that REITs pay out to investors. And number three, potentially also lower property valuations, and hence lower overall attractiveness to investors. From 2022, when FED started to raise rates until end of July, we took a look at some of the numbers. The IHS REIT index, which is the benchmark for the S-REITs market, has declined about 12%. And comparatively, the Food C Epran Narit Develop Index, which measures some of the REITs from the developed markets,

has also declined about 14%. So I'll walk you through how the interest rates will impact S-REITs, right? So if you look at the chart on the top left, this is the S-REIT index total return chart that we have plotted, which is the dark blue line, against the rate cut expectations back then when we took a look at the data set for the March, as well as the May FOMC meetings in dotted lines, the light blue dotted line, as well as the green dotted line. So we know this, I mean, what you can see from the chart is that last quarter, when FET started to hold rates steady,

we saw REITs rally. And we're talking about global REITs, not just S-REITs. Global REITs rallied up to 15%. S-REITs rallied close to about 20%, right? And they continue to rally all the way until January, where the rate cut expectations then started to ease after that. And we saw REITs actually retrace a little bit. The index is now in the REIT zone, down about 7%. So far, in the 6-7 months of the year, the FTSE Pranar REIT development index is also down about the same 6-7%. And on the right-hand corner of this slide, this is the CME FET Watch tool, which is a very useful tool that investors market can use it

to look at predictions or some of the expectations of where interest rates will be over the next few months. Right, so we can see that initially at that time, the markets were expecting the first REIT cut to come during the last quarter of this year. And we also saw the recent news from the FET market is expecting the first REIT cut to be in September. And in fact, close to, as of today, I had a look at this FET Watch tool. 80% of the market, 80% of expectations, are expecting a rate cut of up to 50 basis points in this September meeting. Okay, this is another chart that I took from the NARIT,

which is America's REIT Association, which compares all the global REITs versus the 10-year US Treasury yield. Similarly, right, when the 10-year yields rose about 332 basis points from 2022 onwards, REITs declined about 30%. And last year, when the 10-year Treasury yields declined about 100 basis points, the broader market and REITs all rebounded close to about 20%. This year, when Treasury yields rose a little bit, REITs also started to decline. So you can see that obviously there is directional correlation between interest rates movements, as well as the REITs total returns. And the NARIT CEO actually believes that the first rate cut in the US will start to see institutional funds

deployed back into this REIT sector. This is another chart that I took from the NARIT Association also. This actually talks about how they've done an analysis, and the analysis shows that REITs tend to outperform at the end of rate-raising cycles. So NARITs, at that time when they released a report, which was in the middle of this year, NARIT was cautiously, they are cautiously optimistic that REITs could recover next year. And the performance of REITs that we saw in the last quarter could then signal that as monetary policy adjustments are being made later on, the end of a rate-raising cycle will herald, or will see periods of REIT outperformance subsequently.