Good afternoon, everyone. Welcome to Link's Investor Day 2023. We are pleased to have our C-suite and also senior management team here with us today, including our CEO, Mr. George Hongchoy, CFO, Mr. Ng Kok Siong , Chief Corporate Development Officer, Mr. Ronald Tham, Chief Operating Officer ex-Mainland China, Mr. Greg Chubb, Managing Director, Leasing Hong Kong, Mr. Gary Fok, Managing Director, Mainland China, Mr. Zhu Haiqun, Director, Asset Management Hong Kong, Mr. Emmanuel Farcis. To maximize our reach and engagement with investors, we are hosting this event in a hybrid format, with most of our Link management team here present in Singapore and attendees joining us virtually through our Zoom webinar. Following the management presentation, we will open up the floor for Q&A. For those attending in person, please raise your hand if you have a question.
For those attending the Zoom webinar, please submit your questions using the Q&A function, and the management team will address them. I will hand it over to our CEO, George, to begin the presentation. George, please.
Thank you all for joining this Investor Day. It is our pleasure to host this event in Singapore. Today, we would like to cover several topics, namely our Link 3.0 strategy going forward, business updates across regions, and our capital management strategy. We have invited quite a number of our senior colleagues to present and to answer the questions at the end. The market has been volatile, turbulent over the past few months. We continue to see geopolitical tensions. Uncertainty over interest rates and inflation continues to cloud the global economy. Over the past months, bank failures from Silicon Valley Bank to Credit Suisse have raised concerns over the global banking system and whether interest rate hikes should continue or not.
In the end, the Fed has decided to raise 25 basis point last week, and they also said that rate cuts are not in their base case while they are monitoring the situation closely. I am very grateful that we have successfully completed our HKD 18.8 billion rights issue earlier this week. We are grateful and thankful for our unit holders' overwhelming support and continuing trust. The rights issue has strengthened our capital base, and we are well-positioned to capture opportunities that will emerge as real estate as asset prices reprices. We are set to complete our Singapore acquisition tomorrow, adding Jurong Point and Swing By @ Thomson Plaza to our portfolio. Incoming colleagues from Mercatus will officially join the Link family from 1st of April. A number of them are joining us physically here today.
We are fully committed to delivering stable distribution and continuous growth. Before we dive into the details, I want to highlight the key themes today, and we will discuss more in the subsequent sections. First, bouncing forward from the COVID pandemic. It has boosted Hong Kong and Mainland China. Our portfolio has been resilient, and now there is a clear growth upside from the rebound. We are a direct beneficiary of economic and income growth. Second, with our prudent capital management, we are coping with the new normal, from interest rates to inflation, supply chain challenges to geopolitics. Our capital strength and financial agility are key in this current environment. Third, our Link 3.0 strategy, as our new strategy pathway, has been presented in a video that we have uploaded recently to our corporate website.
We will continue to optimize our portfolio through diversification, and we will become asset- lighter, grow AUM with capital partners, and generate more recurring fee income. As we recover from COVID, we have seen continuous improvement in our operational data. Our Hong Kong portfolio occupancy reached 98%, with tenant sales growth surpassing 2019. For Mainland China and Australia, footfall and tenant sales growth are also trending up to near 2019 levels. After the rights issue, our net gearing ratio decreased to below 20%, and we won't have any refinancing need for the next 12-18 months. After the debt repayment, we have nearly HKD 10 billion of cash available to capture market opportunities. Some people believe interest rates will go higher. Some believe staying at around the current level.
We are of the view that this higher rate environment will be with us for a prolonged period of time. We should forget about the return of the ultra-low rate environment and embrace the new normal. Our capital strength will allow us to outperform in this environment. While we carefully monitor the market, we are not in a rush to do any deals. Indeed, we want to do only the best deals in the coming one or two years.
As part of our more cautious capital management strategy, having completed the HKD 18.8 billion 145 rights issue, for which we received overwhelming support from our unit holders. We are encouraged to see that our unit holders, including many who have been with us since our listing in 2005, have chosen to grow with us in this journey of transformation. We appreciate our unit holders for their continuing trust and ongoing support. Overall, we have strong endorsement for Link 3.0. We are seeing real estate assets being repriced. Link REIT is well- positioned to capture these emerging opportunities. We will solidify our position as a leading Asia Pacific real estate investor and manager. Link, since its IPO, have continuously transformed from 2005, then diversify out of Hong Kong in 2015.
Link 3.0 is about our next phase of growth. I'll ask Ronald to talk about this in a bit more detail.
Sorry. This slide is about our scale, our organic and inorganic growth track record and our governance. I trust that many of you have heard about this many times from KS and Sylvia. I won't repeat all of them here. I do wanna highlight that I guess it, we are a rarity as an internally managed REIT in Asia. We are looking to build, to add on, invest equity, not just at the balance sheet level, but also at the asset level. I would like to hand over now to Ronald. Just to emphasize, we are committed to boosting our position as a leading APAC real estate investor and manager. We are grateful for your ongoing support, and it's critical for us to achieve this, and to become a trusted partner in APAC real estate. Ronald. Thank you.
Thank you, George. As mentioned just now, under Link 3.0, we are going asset- lighter with our third-party capital manager business. I'd just like to say asset- lighter, not asset- light, okay? We will continue to be asset- heavy. We're just going a little bit more asset- lighter with our new business. You know, in the scheme of things, it's still gonna be quite a small part of it. Going- forward, we do not need to own all our assets. Not need to own all our assets wholly. We can work together with third-party capital partners so that we need to use less of our own balance sheet capacity. Our capital partners, including sovereign wealth funds, insurance companies, pension funds, endowment funds, private real estate funds, asset managers, you know, family offices.
This third-party capital approach applies to new investments as well as potential capital recycling of our existing investments. We can do so in different formats, such as joint ventures. We can create thematic funds. We can create platforms or even separate listed vehicles. Even simply providing management services to third-party assets, such as what we're doing for in AMK Hub. By growing our AUM, we will generate management fees as an additional income stream. This approach will facilitate us to continue to actively manage and diversify our portfolio, capturing trends and opportunities across public and private real estate sectors. We are confident in successfully executing this Link 3.0 strategy as we are backed by our proven track record in asset, portfolio, and capital management, our reputation and award-winning governance standards, and our professional and experienced team.
Just to repeat, we aspire to be a trusted partner in APAC real estate. Next. This slide illustrates how our total AUM stacks up. As a REIT, we have been talking about GAV throughout the years. Currently, most of our assets are wholly owned and consolidated on our balance sheet. GAV is the most straightforward measure, supported by our own debt and equity capital. Leverage would be a constraint on how much and how quickly we can grow GAV going- forward. As we implement our Link 3.0 strategy, we will work closely with our capital partners. Their investment will add to our AUM. We have a strong alignment of interest with our capital partners, as we are committed to co-own every investment with them, while we generate fee income from third-party AUM.
Of course, we can also generate fees from management services, which we don't own. Going forward, our GAV can increase with organic growth and acquisitions of assets. Meanwhile, with capital partners, our AUM can actually grow faster than GAV. While we will contribute capital to invest together, there's a multiply effect with third-party capital and non-recourse debt financing. Regarding capital recycling, our GAV may be reduced, but we can continue with managing the AUM. Total AUM will become relevant to better reflect our business scale going forward. In the coming months, we will share more about how we will execute this strategy. As we execute this new strategy, we'll be managing investment under different formats. Of course, we have our sizable listed REIT, which will continue to be sizable, a perpetual capital platform under which is internally managed.
We will continue to focus on APAC. On top of that, we will also be managing other vehicles, such as joint ventures and private funds. We'll also consider listed opportunities and platform investments. Just to add, I know many people ask us what does platform investment means. To us, it means people plus assets, similar to what we are acquiring from Mercatus. We are acquiring assets as well as taking on the people who are actually the senior people sitting at the back of this room. Besides buying assets, we also focus on building our capabilities as we grow. We will be implementing our strategy progressively. Rest assured that we will remain cautious, and this will not cause any major change in our risk profile. I'll now hand over to Greg to discuss our overseas business, including our Singapore acquisition.
Greg, please.
Good afternoon. It's great to be here in Singapore in person today. I'll start just by making some opening remarks on our pending Singapore acquisition, and just what our observations are on the market here in Singapore for retail. It's certainly showing a positive outlook, which is supported by very healthy operating metrics that have been printed over the last 12 months or so. First, retail consumption is rising with increasing shopper traffic driving the thematic. The two assets that we're acquiring in Jurong Point and Swing By Thomson both have recorded double- digit year-on-year growth. Consumer spending in suburban malls like these two assets have recovered quickly post the COVID pandemic, thus we are seeing very healthy tenant retention and new leasing activity across the two acquired malls.
Secondly, the suburban market is poised to benefit from rising rentals and strong leasing demand as we see it. Recently, CBRE released their Singapore real estate market outlook for 2023 and outlined that suburban rents maintained an upward trajectory amid strong leasing demand. It's that strong leasing demand that is driving the underlying rental growth. The majority of retailers also indicated a strong appetite for expansion in 2023. The strong growth in average growth rents and nearly full occupancy recorded across 2022 means suburban Singapore retail is positioned well for really strong future growth. On the acquisition itself, we've been working very, very closely with the seller since we announced the deal in December last year to ensure a seamless integration and a smooth handover of the operations.
With that, we've set up a regional office here in Singapore that will enable us to form the new platform and build on the existing in-market capability that we've inherited from Mercatus. The existing team from Mercatus have signed up with Link and will transition to become what we call Linkers, and Singapore's inaugural employees for Link. They bring immediate in-market experience and knowledge. I'm pleased to welcome a number of our senior new Linkers in the room here today. The Singapore team will work closely with our colleagues in Hong Kong for knowledge transfer and continue to enhance our successful asset management model and provide the best possible and unique retail experiences to provide differentiation for the local communities that we'll be serving here in Singapore.
We'll also be leveraging on the local know-how from our Singapore team, and we'll be providing asset and property management services for AMK, as Ronald mentioned earlier. effectively managing on behalf of a third party, which is a marked and important step as we transition to this asset- lighter model. The integration of the Singapore local management team covers the full platform scope. Corporate functions including finance, communications, risk governance, legal, corporate, digital, human resources, and admin. Also, functions necessary for us to have a strong regional operation here, includes asset management to formulate and execute budget and asset plans, project and operations to implement maintenance, operational strategies, and ongoing guidelines, leasing, all-important leasing to identify the retail trends and optimize the tenant mix, and our ongoing relationships with our retailers.
Marketing communications, which will be on the execution of all of our campaigns, and reinforcing branding, and acting as a liaison for all of our key stakeholders here in Singapore. Such integration enables us to establish this management platform with local expertise immediately in Singapore. We're really happy to welcome the team to Link. In terms of the asset management strategy for Jurong Point, which is the largest asset we'll be taking on here, we see various similarities that will allow Link to build on our success story here in Singapore. Jurong Point itself is a sizable suburban mall with a focus on non-discretionary trades. It's got robust footfall and a high occupancy rate. It's been incredibly well managed by the team that we're inheriting.
It has significant potential with its trade size and trade mix optimization, given its large and growing trade area and strong access to community infrastructure. We will look to enhance our successful asset management skills here in Singapore with the team by using our scale, our everlasting and building scale across the region. We'll be looking to conduct proactive leasing strategies, strengthening our tenant relationships and shopper engagement, exploring value-add opportunities and enhancements, at all the time, adopting the best-in-class asset management practices. I'll now move on to Australian retail. Australian retail sales have shown healthy growth during Christmas and in the first months of 2023. Our centers themselves recorded robust sales growth during the festive season, and we're seeing continued positive growth as we approach the Easter season in Australia.
Occupancy rates for the centers have improved since the acquisition to 97%, and the committed lease terms that we're now writing are longer than the activity following the acquisition in 2022, showing stronger retailer performance and ongoing confidence. Our three assets in Sydney have distinct yet complementary positioning and trade mix. They cater to a wide range of shoppers throughout their unique and ongoing tenant curation. We'll continue to introduce iconic retail and F&B operators to strengthen the attractiveness of the assets in the local market. There's significant activity in the Sydney CBD, and the city's plan to develop a nighttime economy and the opening of the Pitt Street Metro Station will certainly benefit the traffic in the trade area immediately alongside the Queen Victoria Building and the Galeries Victoria.
We're currently looking to enhance the Queen Victoria's George Street frontage and the Galeries Victoria's Park Street entrance in line with these ongoing developments in the city of Sydney. I'll now touch on Australian office. There's a significant market recovery which is being underpinned by the increasing demand for prime assets. The concept that's been well discussed in many, many markets over the last year or so is that flight to quality. In Australia, it's very evident. We've seen good, strong, high prime market absorption. Research also shows that around two-thirds of tenants moved into better buildings that in turn, command higher rents over the last two years. Office space rents are showing signs of recovery, and given ongoing leasing activity and a rational supply- demand outlook, remain cautiously optimistic about the Australian office market.
Our portfolio occupancy currently sits at 91%, and I must note that current portfolio occupancy is impacted by our asset enhancement works at our Kent Street Sydney property, with all other buildings showing occupancy rates in the very high 90% range, and we've seen good leasing success in recent times. The six properties across our Australian office portfolio are all top-tier buildings in prime locations in the gateway markets of Sydney and Melbourne, and importantly, have all got very strong sustainability credentials. We're ensuring our properties feature best-in-class facilities and specifications, and will benefit from the flight- to- quality trend. One of our strategies that we've recently been focused on is completing a number of speculative fit- outs that allow occupiers to move quickly and efficiently. This is attracting faster take-up by new tenants.
We've seen significant leasing activity in this area recently, and a number of the examples are on the slide on the screen. Finally, from me, our office portfolio in Australia, its income is supported by strong tenant covenants and a long WALE, portfolio WALE of approximately six years, and together with fixed annual increases, offer the unique benefit of the Australian office market. That's it from me. I'll now hand over to Gary, who's joining us by video from Hong Kong. Over to you, Gary. Thank you.
Thank you, Greg. I'm pleased to meet you all virtually today. In the financial year 2022 to 2023, we experienced many challenges from the pandemic, but we have left them behind, and we are heading toward a brighter future. With the gradual lifting of social distancing measures, the Hong Kong economy is resuming normalcy. We are closely monitoring the development of normalization to seize new opportunities. With the great work of our leasing team and the confidence of tenant in our portfolio, we have achieved a record high occupancy rate of 98%. Average unit rent also improved from HKD 63.2 per sq ft in last September to HKD 63.4 per sq ft in December 2022. Similar to the previous chain mix pattern, F&B and food-related trade tenant continued to make significant rental contribution to our portfolio.
Leveraging on the solid consumer basis of our shopping centers, our tenant sales in general have continued to outperform that of overall Hong Kong. As COVID recedes and the economy resumes normal, we are very pleased to see that our tenant sales continue to improve and their rent-to-sales ratio are staying at healthy levels at around 13.1%. As said just now, the robust consumption in our mall has remained a preferred venue to many retailers and prospective tenants. Up to the end of third quarter, in this financial year, we have signed over 560 new leases. We are delighted that over 200 of them are new brands to name, which help to enhance our retail attraction and more offering to the customers.
In terms of trade mix from these leases, besides F&B and food-related trade, we also see that fashion and learning institutions are returning fast as the market sentiment improved. With the social distancing measures easing, we organized different cultural events at our shopping mall to drive more traffic, to drive more business for our tenants. For example, the Music by the Sea at Stanley Plaza, Mag Lam at Temple Mall during CNY period, as well as the mini concert by the up-and-coming singer at T.O.P. All these events were well-received by shoppers during the event days. Thank you. I now pass the time to Emmanuel.
Thank you, Gary. Looking at our car park business. In 2022-2023, our Hong Kong car park and related business have demonstrated steady organic growth. Monthly car park income exceeded the previous years due to high occupancy and adjustments to the tariff. Harley income has also exceeded pre-pandemic levels. Last are two showrooms and car service center contributed steady income for the full financial year. We also continue improving our assets as part of our strategic portfolio management to support and generate growth. That includes ongoing identification, planning, and rollout of asset enhancement initiatives. In 2022-2023, among other projects, we transformed Tak Tin Fresh Market into a community stronghold with a much-improved variety. We also completed and are rolling out a number of placemaking projects. This support footfall, strengthens community engagement and activation with various partners and NGOs.
Development is also in progress off Anderson Road for a new shopping center of about 130,000 sq ft that will support the new surrounding residential areas under construction, also add synergies with our existing asset in Po Tat and Sau Mau Ping in the same neighborhood. Completion is targeted by 2027. Looking forward, we expect the market to continue evolving. We have developed strategies in response to these trends accordingly. First, the next few years will see a significant supply of new retail and office in Hong Kong. While most of this will be targeting discretionary spending, our strategy is to continue strengthening our trade mix, grooming new tenants, and creating a unique and compelling offer to our tenants and shoppers.
Second, mid-term and long-term rail and road improvement will make cross-district connections within Hong Kong, but also connections to the Greater Bay Area, much easier and faster. This will also support population growth, mainly in the New Territories, which is where most of our assets are located. The new bridge and tunnel in Lohas Park, for instance, in Tseung Kwan O, is a very good example of recent infrastructure positively impacting our assets over there. We are assessing both the short- term and the mid-term opportunities, but also risk these changes will create for our assets. At a micro level, we develop specific strategies for each property and for overall portfolio, taking in consideration asset and tenants' performance, evolution in population, nearby infrastructure, and competition. Third, people's lifestyles and expectations are evolving.
In the past few years, we introduced a number of 24/7 gyms in our portfolio, given the increased emphasis on health and wellness. We conduct market research on a regular basis to get a better understanding of the local demographics, consumer behavior, and purchasing power within our community. The revamp of our mobile app, Link Up, which we are just relaunching, will also enable us to engage and understand more about our community. Last, we continue to roll out various ESG initiatives for sustainable growth. For instance, we installed solar panel to provide sustainable source of energy. We also rolled out energy management system that provide better precision at energy management, which, in the context of rising energy costs, is very significant. I'll pass the time now to Haiqun , who will talk about our operations in Mainland China.
Thanks, Emmanuel. In this session, I will provide our operational updates and the recent observations on the ground in mainland China. Compared to Hong Kong and overseas, the operating environment in mainland China has been more challenging in 2022. The Chinese government has successfully contained the spread of virus with the dynamic zero-covid policy, and has stabilized the economic conditions in the earlier two years. However, unlike the previous strains, Omicron has been much more transmissible. As a result, we paid a great price with the extended lockdowns and more frequent home quarantine. All in all, we experienced a year that was more difficult for companies, retailers, and shoppers as compared to the previous two years. The operating environment has been tough in the first 11 months of 2022.
Our retail and office portfolios gathered in the four tier one cities has seen impacts to a different extent. Qibao Vanke Plaza, located in the densely populated community in Shanghai, suspended operations for more than 80 days in 2022. A higher unemployment rate and a lower annual income have dampened consumption sentiment and created a difficult operating environment for our tenants. During this tough period, we supported our tenants via various means. When a tenant could not pay their rent on time due to tight cash flow, we will try to boost their sales by increasing our marketing efforts. We will also negotiate with our tenants and granted them payment deferrals. For the tenants heavily impacted by the lockdown and mandated to suspend operation, we granted them rental concessions. We tailored these supportive measures for tenants based on our understanding of our tenants' business.
As a result, our tenants maintained a steady business performance. At the end of December 2022, our retail occupancy was 90.4%. Combined with upside brought about by lift of restrictive measures and the border re-opening, we expect the occupancy to continue to recover by March. The stable occupancy rate is a testament to our commitment to creating a community-focused environment that connects our customers and retailers. We firmly believe in this discipline and are proud to see it reflected in our occupancy rate. With around 70% of the community-oriented trades along with the stable occupancy, we expect encouraging outcomes after reopening. In the last quarter of 2022, we still suffered from a double-digit decline in football and sales year- on- year.
During the Chinese New Year this year, we already saw footfall rebounded by one-fold compared to the 2022 level, higher than Beijing and Shanghai's average level of around 90%, account announced by the local Bureau of the Commerce. Meanwhile, in the post-COVID era, we will closely monitor the changing market conditions, and I would like to share some new shopper and retail trends, as well as our corresponding actions to cope with these changes. First, on the shoppers' front, the consumption pattern is shifting towards more rational consumer behavior. At the same time, the market saw higher demand for products relating to more outdoor activities such as hiking, camping, rock climbing, and skateboarding. When it comes to brand names, consumers prefer buying local brands for clothing, designer toys, F&B, etc.
On the tenants front, our retailers remain cautious on expansions in the first half of 2023, especially in the fashion sector, as sales of which maintained soft. F&B saw a rebound in sales during and after the Chinese New Year. Some market-leading and well-operated brands are more active in expansion. Leisure and entertainment have become a major trend, especially trendy lifestyles such as urban camping, indoor climbing, and the children's play parks. Some operators are also looking for expansion, given that rental has come down to a more affordable level. To capture the new opportunities and cope with the challenges from the tenant side, we have adopted four proactive approaches. The first strategy is precise positioning. Our asset management team closely monitors market trends and adjusts the asset plan every half year.
To meet our customers' demand better, we have introduced a few trendy experiential brands like skateboarding ramps and rails, urban camping, rock climbing wall, and indoor playgrounds. These experiential- focused brands can attract more people, benefiting retail sales and F&B tenants. Secondly, our asset enhancement initiatives. Now the Happy Valley, a retail asset with 90,000 sq m located in the CBD district in Guangzhou, is undergoing asset enhancement. We will re-layout and reopen the area previously occupied by department store with over 10,000 sq m, and we'll introduce retail entertainment trades to improve the rental income of the asset. Meanwhile, the facade and the corridor will be upgraded, and the outdoor piazza will be rebuilt to shape a good ambience for dining and entertainment.
As of late March 2023, we have already finished the repetition of the east wing, L-one to L-five area as planned. Main atrium, piazza, and facade are on the schedule and are expected to complete by October this year. Leasing progress of the renovated area is also encouraging. The newly renovated area and the anchor tenants are gradually filling up by the second quarter of 2023 and 2024. Link set up the Mainland China regional office in Shanghai in 2019. With the continuous expansion of asset management scale, we have acquired more tenants and more optimizing the organization structure. In the following financial year, we will implement centralized management for better resource allocation and standardization.
Centralized leasing can help us to forge closer ties with our key tenants, key accounts, and improve the bargaining power of different retail assets. Central marketing can better exploit marketing resources and enhance the Link brand awareness across cities. Central property management can help to improve building standards, minimize operating costs, and push up our service level. Besides, we are developing our loyalty program by upgrading the membership system. Our customers can use the one-stop mini apps in WeChat to obtain members' points, pay the car parking fee with the member-only parking discount, or redeem retail or F&B coupons online with the member points, so they can reduce the frequency of walking through the service deck. The loyalty program can increase customers, stickiness, and ultimately driving sales.
Meanwhile, the data legally collected from the system can be further generated into different analysis reports, which will provide valuable insights to the operation and marketing teams. Happy Valley has already upgraded the system a few months ago, while other shopping malls in our China portfolio will upgrade their system within the fiscal year 2023 and 2024. Our Mainland China portfolio is comprised of office and logistics assets that generate stable income streams. Our competitive advantages lie in our ideal locations, our high-quality property services, and our reputable tenants, and our good relationship with the local government. We will continue to sharpen the competitive advantage of our portfolio. As of December 2022, office occupancy is around 94%, and occupancy of the logistic portfolio is 100%.
Kok, over to you.
Thanks, Haiqun, and good afternoon. Great to see all of you again. I'll cover our views on the interest rate outlook and our capital management in light of such an outlook. We continue to believe that a prudent capital management approach can help us navigate through an increasingly volatile market ahead. With all the uncertainties in mind and high inflation sticking around, markets still expects interest rates to stay higher for longer in this new normal. Except Loan Prime Rate in China, interest rates are expected to increase further and stay at an elevated level in the next 12-1 8 months. For prudence, we intend to maintain a fixed debt ratio of around 60% so as to better manage funding cost impact. However, DPU will inevitably be impacted by any material increase in funding costs in the short- term.
In light of the uncertainties as well as the potential opportunities arising, we have taken a preemptive approach to strengthen our capital base to power our next phase of growth. The HKD 18.8 billion rights issue has substantially strengthened our balance sheet and enhanced funding certainty. As a result, gearing has decreased to below 20%. After repayment of debts, we have no refinancing risks or refinancing needs for the next 12-18 months. The balance of about HKD 9.5 billion or HKD 10 billion will be ready to fund potentially new accretive investments. After taking into account the impact of the announced acquisitions and rights issue. It is estimated that a 100 basis points increase in interest rate will increase our gross interest expense by about HKD 240 million on a pre-tax basis.
Broadly about HKD 200 million on a post-tax basis if interest rate continues to rise by each 1%. We would like to iterate our prudent and dynamic capital management strategies. We will continue to keep to 60% fixed rate, manage our forex exposure by hedging out both the investment and income streams where possible. Maintaining a strong credit rating will be a differentiator in this market, and that will allow us to preserve our dry powder for growth. We continue to commit to delivering the capital return to our unitholders and will continue with the 100% payout ratio. While safeguarding the value of our unitholders with our prudent strategies, we strive to create value through opportunistic acquisitions.
At this stage of the game, we believe we are one of the safest investments available in the real estate market amidst all the uncertainties, complexities, and ambiguities. As a concluding remark, we expect our delivery of continuous growth in distribution challenged this year. We should be able to deliver strong positive operating underlying results. However, clearly, it will be offset by an increase in funding costs as the market evolves. That is very much less under our control. Although with the lower gearing, clearly, we are in a different position. We'll share more on this when we report our full- year results. Thank you.
Thank you, management, for the presentation. We'll now invite, the management to go to the stage to start the Q&A section. For those attending in person, please raise your hand if you have a question. For those attending through the Zoom webinar, please submit your question using the Q&A function and the management team will address them. Maybe I will start from a question we received online first. It comes from Mark, from UBS.
He would like to know the reversion outlook in both Hong Kong and Mainland China year- to- date, and also in 2023. Management, please.
One.
You have to press open.
Looking at reversion.
Yes.
Looking at reversion in that sense.
Yes, reversion. Yeah. Okay, we are definitely looking at reversion. I think what we are targeting is constantly CPI plus. That's where. That's on a yearly basis. That puts us in a mid-single- digit reversion target for Hong Kong. What we've been seeing in the past few months through the recovery is, the reopening is an increase in our sales, in our tenant sales. What we see is more confidence from our retailers, we do believe that this objectives are on target, I would say. Raymond?
For the reversion in Mainland China, maybe Haiqun Zhu can talk about it.
Yes. For the reversion in Mainland China, for the retail, I mean, over six to 12 months, footfall and sales will gradually recover. I expect it to exceed the 2021 and the 2022 levels. The footfall and the sales of our mall are expected to be 80%-90% of the pre-COVID level. I mean, the 2019 level. The retail reversion is expected to continue to be positive, we'll say a single digit in 2023 this year. Thank you.
Is there any question for those attend physically?
Hello? Can you hear me? Yeah?
Yeah.
Joachim Kehr from CenterSquare. One question. You talked a little bit about going asset lighter as opposed to asset light. Everyone else seems to be going asset- light. I'm just curious if you can delve a little bit deeper into the rationale behind asset lighter as opposed to asset light, and maybe you can define the term relative to, you know, going asset light. Thanks.
Yeah.
I think I've shared with you, many of you during the deal roadshow a couple of weeks ago. I think directionally we would like to go progressively asset- lighter over time. I think we recognize from the Mercatus deal to other things that we're looking at. I don't think today we are going to be able to do a 2% GP and a 98% LP stake overnight. I think there's a process where Link wants to go down that direction. We'll do with a larger GP stake, and over time, as we build the reputation, the track record, we will hopefully be able to do even a blind pool fund. I think where we are today, we need to start this ball rolling.
I think the only comment I would say is that the vintage looks right to start this business model now where things are being repriced and building a positive strong track record at the expense of incumbents whose track record is difficult to uphold. I think we are coming in the right cycle. I think to go towards all the way to say that we could become one of the Blackstone, BlackRock guys, I think it's not practical today. I think we wanna kick the ball going. The work we have chosen is actually from 100% that we used to own progressively. We have done a few capital partnership, 50, 49, and now I think we are prepared to slowly go down and then bring in capital partners.
I think the other key when we talk to our various capital partners, that they do like the fact that we like to manage our assets, and that is the alignment that and the differentiator, rather than focusing on it, just a financial investment. We did start off that way as a asset, a heavy business, and we'll continue that way in terms of the detail that we spent in, yeah, understanding, analyzing, and managing, yeah, every line on the P&L. Every little aspect of how to improve the asset in terms of tenant mix and trade mix. And those, then, you know, you overlay it with financial structures and all that, hopefully will improve the return even further. But as Kwok San said, yeah, this is a evolution.
We're not, seeing, at least in the near term, a transformation transaction where we'll, you know, build and merge with a platform and we become a much, asset much lighter than, I think an evolution will allow. I guess, you've seen us being cautious over the years, and we'll continue to build, even in this path, cautiously.
Anyone else physical?
Sorry, I want to follow up. This is An Chen from AEW. Following up on the Link 3.0 and I guess asset lighter strategy. What do you think differentiates us relative to other, you know, fund managers that are out there at the moment? If I look at the various asset or real estate investment managers out there, everyone's trying to develop this platform and strategy, right? If I look at the differentiators, there are some that are targeting Thematics, so their expertise is in logistics development. So they are, you know, hoping to get better returns for their investors. There are some that are targeting, you know, via various Thematics, you know, DC. There could also be, you know, I guess different differentiators where they're doing developments.
If I look at Link, our main focus has been in Hong Kong retail. In other markets and asset classes, I guess we've only been investing. We've not really done development in a big way. With core assets, today, the returns aren't great. I guess my question to you is, what differentiates us, and what do you think are the challenges as we try to be an asset manager or real estate investment manager, whether it's in this region or, you know, globally? Thank you.
I might start. I just think that 17, 18 years since the IPO in 2005, and that focus on active asset management is something that can't be underestimated. Truly understanding, I guess, the opportunity that exists in each and every asset and how we can respond is part of the DNA of the group. I've only been in the business for a year, and that's my initial observation is the absolute asset management skills that exist in the business. I think initially that's what we bring to third-party investors, is that razor-like approach and that ability to extract value where others can't. Where that takes us over time will be part of that journey. As the guys have said, it is a journey, and that's why we're saying asset- lighter rather than asset- light as we move through that journey.
I think it's. It'll be nice to grow from one to 10 in two days. We've described this as Link 3.0 from our early days of just managing our assets in Hong Kong as one point zero, and then the diversification as two point zero. As Greg said, that attention to detail for asset management, it's I think, unique. Because if I look at some of the acquisitions that we have done from private equity real estate owners that sell to us, they care a lot about the entry and the exit, and then not much in the middle. In a volatile world, when you can't predict that much in the exit, then the management of what's going on every day is actually very important.
As a REIT, we do need to pay out 100% every year. That is important. How we manage that is quite different. I think a lot of people look at our plan and say, "Oh, you wanna be like some of the, especially PE manager, where they care a little bit less about the J curve.
As long as the end, you know, the exit allows them to make that IRR. We care a lot more about building that distribution over time for our unit holder on the GAV, and then building AUM in terms of fees, and then delivering also that two points to our capital partners. I think we'll be managing a more complicated transformation and set of drivers, business drivers, in this transition. As we get towards, I guess, our AUM being a lot larger than our A, than our GAV, then we may be different. We, we don't underestimate the change and the challenges that is needed.
Even just since we signed the deal acquiring the few assets here, the amount of time that we spend with the team here, the amount of detail that we spend in terms of the platform that Greg presented to you earlier, is no different from what we have done in China. We are doing it in a lot more detail and intensity than we have done in the past, because we've learned. Every time, I think as we evolve, the partners that we are talking to were just impressed about that attention of detail. The other little things that matters, and it's actually important for a lot of these investors as I travel and meet them, is governance.
As a list-listed REIT, the amount of transparency that you have enjoyed as investors is a lot more than what they get in the private equity world. We'll continue to provide that level of detail, transparency, and accountability that I think would stand us very much apart from the others. Because we have to tell you anyway, we might as well tell our capital partners those level of detail, so that they actually are co-owner with us, rather than we just take their money and then one day we'll return it at a decent return. That we would wanna treat our capital partners as we trying to call them, partners, rather than just, you know, people who provide us some money. Lastly is, you know, this commitment over the last 10+ years in sustainability.
We will continue to do that. I think whether it is in listed world or in the private equity world, capital providers these days are finding it important for their own reason for existence and for their investment, the need to really have sustainability up front and center. It's financial return, it's sustainability, it's governance, accountability, and our attention to detail, and some of those points that I think we have demonstrated over the last 17 and a half years, and will continue to do so.
Thank you, management. There is a related question. From Ken yon of Citi, "Do we have any update on the capital partners for the Singapore deal?
We are in the process. I think when we, when we started the acquisition process, the partners have been informed, but they are not going to commit until we complete the deal. Some of them are already in process of doing their own structuring due diligence. I think where we can share at this stage is that we will have to come out to AGM to seek special approval, 'cause we'll be selling down within two years of acquisition. Under the record, Link cannot sell unless we get approval from unit holders. And I think this is something that we are trying to dovetail into the AGM if the timing is right. That fair to say, I think, coming from that side of the fence as they look at this portfolio, clearly these are long passes.
These are people keen to diversify. Clearly, Singapore is currently a pretty warm to hot market, I would say, for most real estate play. It's probably one of the easiest to read market in APAC. Fairly comfortable that we should see some investors that will come through come AGM.
I'll add a few points. One is, given the strength of our balance sheet, we were able to take on this deal using our balance sheet and then sell down over time. As you would expect in any transaction, real estate transaction, the seller will give us a period of time as exclusivity and then a period of time to complete the transaction. For capital partners, they don't really engage with us until they know that we are "the winner." Even if we start engaging them, the real discussion really start after we sign, and then they will start talking to their IC for pre-approval to spend money, et cetera. We are in that phase.
Even if we're trying to complete the acquisition at the end of this week, we still continue on that discussion with those few parties. You know, we can take it on. We don't need to wait for them. We don't need to sign a deal that is subject to financing. It's uncomfortable because I would like to actually have it signed and complete both in terms of bringing in the partners and the transaction at the same time. As Fok-shing said, you know, the recall requires to come back to you to ask for your approval to sell down. Hopefully, you'll give us that approval. The other transaction that we are working on is capital recycling.
That we don't see the need of selling everything 100% in the future, that there are opportunity where we'll sell down a majority stake of some of the assets that we own, whether in China or Hong Kong, and bring in capital partners. We will continue to manage for fees. Those are discussions that is ongoing. We hope that over the next few months that we will be able to do some of these transactions. You'll see us, especially with capital recycling, a transaction will reduce our GAV, will reduce our DPU, as we complete those. No different from disposal. We'll earn fees, we'll have capital coming back, we'll have to deploy.
We then don't, you know, we don't have to come to unitholder for equity. We don't need to increase our leverage that much. Different from the disposal that we have done over many years, is that we'll continue to hold on to a minority stake with management fee.
Thank you, management. Oh, Shigemitsu.
Hi, I'm Shigemitsu from Sumitomo Mitsui Trust Asset Management. Can you elaborate 3.0 strategies, third-party capital, in terms of the markets and the country, also sub-sector, you're focusing on for building platforms or divesting the funds as a part of asset recycling?
The target markets and segments are no different from what we have explained, presented in the past. As good investors, you look at a market that has good growth and also liquidity. Hong Kong, Mainland China, Singapore, Australia, and Japan. We have stated today that we are trying to develop our reputation as a trusted partner in Asia-Pacific Real Estate for both investment and managing. We do have a distraction in London that we'll be dealing with. This is not the time to talk about exactly how we're gonna deal with it. You know, come to us with suggestions. It has become a distraction.
If we want to focus, we do admit that at that time, it was the right deal to do. As we want to refocus, it's something that we need to deal with. In terms of asset class, retail is our core, and we'll continue to focus on that. Non-discretionary retail to a large extent. We do want to look at selective discretionary retail at the right location. Office, very selective, because I think there is significant opportunity for repricing that has to happen across many different cities. We wanna wait for those repricing to happen. There is a different mode of working. I don't believe that everyone will work from home. I have told our Singapore colleague to come back to the office, although there are still a lot of them working from home.
But you can't socialize, you can't build the team without sitting together. Zoom is good, but Zoom was created for a pandemic. We are social animals. We can only be strong as a team. No one can do a successful business on their own, sitting in a room at home. We believe that people will come back to the office. We have seen signs of that. Yes, it may not be five days. It may be three days, it may be, you know, flexibly hours, et cetera. Everyone's trying to work out that mode for their own business. Everyone have their different requirements. We're dealing with that at Link ourselves. But people will come back. Whether it will mean a smaller demand of space, I guess it depends.
I think over the years also, the per square foot space that each employee have shrunk. Maybe, you know, they will end up having more, you know, hub for working areas, et cetera. The reconfiguration is still happening. Logistics, we are interested. We have looked at various opportunities. We have invested in a few. We are cautious because we think that pricing have gone ahead of itself. Again, there will be repricing that will happen. You can't have the Australian terms call them sheds. From sheds, and then you call them logistics center, the cap rate will go from seven down to three. It's just not right. I think you will see repricing that will happen, especially from stress that some of the owners currently are having.
We'll be cautious, but it is a sector that both ourselves and our capital partners are interested in adding to. Those are the three particular areas. We continue to be. Well, we've been avoiding, and I don't know what is the catalyst that will change, but we don't. We avoid anything that have people staying there overnight, whether it is hotels or service departments and all that. I would only. Yeah. I would say if there is a mixed- use development that requires to have, say currently a two-story shopping center that need to be redeveloped into a mixed- use with a resi on top when or office on top, we will not shy away from that if it works, right?
You know, it requires a lot more speculative assessment about, you know, what it will end up in terms of leasing of the enlarged shopping center and the office or resi, et cetera. You know, we'll work with our colleagues and our partners to do that. Those are the few sectors. When you put it on a two-dimension matrix, we don't tick every box. We don't necessarily like retail in every country, every city or office in every country, every city. It's very selective. I won't go into detail today, but we will look at obviously economic cycles, real estate cycle in each.
That's the purpose of diversification, that you have a mix of those, so that you know, once you mix them up, it will grow on a steady basis as a portfolio.
Any question here in Singapore? I have a question online from phone from CCB. How do we determine what kind of assets to be put for asset-lighter model?
If you look at our approach over the years, clearly there's a portfolio management ranking that we go through as a discipline. most of the time, I would say 90% the portfolio assets that we believe is coming to a mature state. It fits the, I guess, the third party in terms of their yield requirement, but it may not generate the growth. sometimes we do bundle one or two to make the portfolio palatable from a marketing point of view. I think the reality of the Hong Kong portfolio is, yes, there are estates that are decades old, demographics are evolving. You fit certain strategic intent, but not necessarily the financial discipline and requirement that we are looking for.
If we could find investors we fit, that can appreciate, that kind of, I guess, attributes and the demographics for certain reasons, we are happy to then put that into that portfolio and recycle and yet manage for them, for a fee.
I think one of the things is listening to the capital, what the capital is looking for. It'll be largely driven by what responses we're getting from the capital, more so than us determining what the investors will want, and then responding accordingly. Whether that's part of our existing portfolios, whether it's acquisitions. Probably the most important thing in all of that is that we're partnering with like-minded capital. We see that word partnership not being taken lightly. We wanna be partnering with like-minded parties.
If we look back at what we have done in terms of capital recycling, every time we tick out those that are not performing as well, the portfolio average goes up. I think that is probably something that we'll continue to try and achieve over time. Tick out those that are less productive, and then let the rest perform.
Okay. Thank you. Will the fee income be 100% distributed as well? Also, if we introduce capital partners, will you change our risk appetite?
The fee income will be 100% distributed. We will be part of this, the DPU. It's a bit hard to model at the moment as we just started to build this business. You know, Ronald presented that graph for you to think about. I can't apologize for the challenge that you would have modeling it compared to how easy it is when it is asset heavy, and then you just have the NPI and our funding costs. Now you have to assume a certain AUM that we'll grow to. As you would appreciate, the AUM fee relative to the asset value is a lot lower than the NPI that will come from it. We need to do a fair bit more in order to drive that.
In terms of risk appetite, if it involve the money, you know, the GAV of Link, then it will be to a large extent the risk appetite that a REIT should have. It would not move too much towards the value add especially opportunistic, except that we, as we just said, want to have a higher stake as a GP, as a partner contributor to that JV or to that platform. Let's say 10%, 15%, 20% rather than the 3%. For AUM, it could go to more value- add. For example, I mentioned just now, if we do have a development opportunity, then most likely we will work with partners rather than put it all on the balance sheet.
Those are variation that we're working on.
Okay. Thank you. This question is about the Australian business. This is from Clara, from Resolution Capital.
Regarding the Sydney retail CBD, can you comment on the rental growth outlook? Also you mentioned you continue to introduce new retailers. What are the retailers optimistic about the CBD? Is it return to work or tourism? Are leasing discussion changing in the light of mounting economic and consumption strengths?
It's a bit time packing that question, but I'll endeavor to work my way through it. Interestingly, we're seeing that Saturdays and Sundays are, by some margin, the busiest days for the three properties that we've got in the Sydney CBD. Certainly the return to work in Sydney is gathering momentum, but still, Mondays and Fridays are much quieter than Tuesdays, Wednesdays and Thursdays. In terms of then the performance of the assets based on the increasing footfall, and this is on the basis that still tourism is not coming back as strongly as it should in Sydney. Most of the trade that we're getting is local Sydney-siders and also some domestic tourists.
Certainly the rebound in sales is profound and as a consequence, the confidence that is coming back with the retailers is seeing us going from doing 12 and 24 month lease renewals with our existing tenants, say six or nine months ago, to now doing standard five-year leasing transactions, today. Reversions vary from tenant to tenant, but broadly we're flat on renewals and we're slightly positive on new leases. As I mentioned in my earlier presentation, let's not forget the fixed annual reviews that we get on the leases in the Australian context. The standard lease fixed bumps that we're getting on our Sydney CBD portfolio is 5%. We're getting 5% year-on-year growth until we get to reversion, and then for the most part, it's fairly flat at the moment.
All in all, the signs are very, very promising. Most importantly, we're dealing with three landmark assets. The Strand Arcade is virtually 100% full. Galleries Victoria is about 98%, and QVB is about 96%. Most of the work that we have to do to continue the repositioning of that portfolio is in the Queen Victoria Building. All things being equal, very positive signs.
I'll just add two points. We mentioned this when we announced the transaction for QVB, while everyone might take the Instagram photos on the few floors at the historical building, the majority of the income are in the basement, and that, to a large extent, is non-discretionary. There are people going through the busiest subway in Sydney or in Australia, and they're buying the sandwiches and all that, you know, while they go to work or, you know, pass through the town hall, et cetera. We look at that as slightly different from other CBD retail in that it is not totally discretionary, unlike some of the other properties within city, CBD, Sydney CBD.
retail element that we've added at 388 George Street, see the Cartier flagship store in Sydney just opened there, and that is a new addition to the office on the ground floor, where we've added this high-end retail. So we are. As I said, we don't do a lot of that, but it so happened that that particular location allowed a very high-end flagship store to be located there. We're very happy about that
On the basis of placemaking now, the office building above is 100% leased. The whole ground floor plane has been transformed with the addition of that Cartier flagship. It's allowed us to do a significant amount of leasing in the last six months in the office building above.
Okay. Thank you. In the interest of time, we will take the last question from online, then we see whether there is last question in Singapore. This question is about China operation. Can you quantify what's the rental concession that were given to the Mainland China tenants in the second half? Is the rent less affordable for the tenants now compared to pre-COVID?
Yeah. Well, I'll take that question. I think we have not officially been talking about the China concessions. There will be some in the second half. I think granted it was pretty difficult from November, December, January before the opening. There will be some rental concessions. I don't think it's anywhere near the same magnitude as the Hong Kong ones that we went through. I think safe to say is that after this second half, next financial year, we do not expect any more concessions from Hong Kong on China. There'll be a bit of support. I think the opening of China has come back with a very nice bounce, very much on like Haiqun Zhu say, F&B, experiential, gym and this. I think it's still probably a bit early in my view to get a sense of where that new normal is.
Safe to say, other than those assets that is going through AEI as we continue to lease out, most of our other assets are actually in the 90s in terms of occupancy. F&B has done well, fellowship, gatherings, and all have come back. I think retail, as you will know, nationalism is still very strong. A lot of local brands are still doing well. Foreign brands are still, I guess trying to find their way back. In the last two years, quite a fair bit have departed. Looking at the signages and signals from Central is they are back to open for business. Now we can go in with APAC, and more and more businesses will start to explore again.
I guess give ourselves another two to three- months and get a good sense of where China in terms of how much retail bounce back we are talking about. As of now, like Haiqun Zhu say, we are about 90% of pre-pandemic. Of course, we hope to get to 100. Where is that 10%, I guess, whether is it tourism coming back, enter without visa, no APAC card needed, then that goes back to that normal business. Otherwise, it does a tad lower without tourism.
Is there any question then?
Sorry, I just wanted to follow up on Ann's earlier question, George, your answer with regard to the fact that previously, the entry and the exit point was key for investors. Increasingly, the middle, the management of the asset is important given the volatility in the market. Obviously, for Link, a lot of that expertise, you've acquired that expertise in Singapore, and obviously, looking at capital partners for the assets here. You have a lot of expertise in Hong Kong that you've built over the last few decades. In terms of interest from investors to capital partner with you in Hong Kong, are you seeing strong interest or is the fact that, you know, cap rates are as low as they are in Hong Kong, is that inhibiting potential interest? Thanks.
We are in discussion and I guess at the right time, we will make the necessary announcement. I just wanna clarify. I was saying that for private equity, then they tend to look at the start, yeah, the entry and the exit. For us, we always look at, you know, the cash flow every year because we focus on the distribution. Obviously, we do look at when we do our IRR and our modeling the terminal value. We tend to hold on it to a lot longer, not to five years, maybe 10, maybe 15. Depends. You know, that's the point. Hong Kong capital recycling, we are working on several projects. Yeah, just not the right time to talk about.
Yeah. Maybe the very last question.
Thank you so much. This is Terence from JP Morgan. One of the key benefits for Link REIT is actually access to a lower cost of capital. I think in the presentation shared earlier, you had shared that potentially for Link 3.0, you'll be able to tap non-recourse loans. Well, I think two questions from here. Firstly, how do your banks and lenders view financing non-recourse loans, let's say to some of these capital partnerships versus lending to Link directly? The second question, in terms of hurdle rates, do you see that hurdle rates could be higher for some of these capital partnerships? Thanks.
If you look at what we have been articulating around capital partnerships, I think largely it's in the non-discretionary retail space. I think vis-a-vis office and potentially even hospitality. Clearly, the credit margin is lower, and that facilitates that dialogue. Definitely, if it's 100% Link and not 100% Link, there's a difference. I'll give it about 5 basis points- 10 basis points. Underlying that 5 basis points- 10 basis points is what quality of capital partners. I think what we have been saying that we have to look for like-minded guys who the banks do see us in that same league. I think going forward, if you think about this business, I think going into a mix of treasury level and asset level is probably the right way, even if it's 100%.
Because there are instances whereby different geography, Link doesn't get that huge a premium 'cause it's not my home country. If it's Hong Kong, Singapore, we are clearly one of the best credit. People understand us. When you go further afar to Japan, to Australia, that difference is not that pronounced. Sorry, George.
No. The funding advantage is something that you wanna keep, and one of the reason why we wanna keep a very high credit rating, is something that you'll lose within seconds if you do the wrong things. Which is one of the reason why we have been very cautious over the years, and we'll continue to do it that way. What we have presented, and thank you for joining, it's a lot, a good hope, hopefully, overview and update for all of you. We'll see you all on the 31st of May when we announce final results. I do wanna just finish with one point. I mentioned a few little points about, you know, how we wanna grow and what differentiates us.
The other thing that is important is how we actually want to make sure that whatever knowledge and skills and experience that we have can be transferred across geography. One of the things that we have done, you know, really upgrading the leadership team and hiring the, some of the best people. You've seen, well, on stage with Greg joining us from Australia, he has been since last year, COO for international. From first of April, he will become COO excluding China. When he manage to speak Chinese, then we will let him manage China as well. He's COO excluding mainland China, but including Hong Kong from first of April.
Kok Sang will continue to lead the China business, working together with Haiqun Zhu, who obviously bring to us, you know, years of experience in especially retail asset management in Mainland China. Ronald focusing on some of the transformational transactions that we are going to work on in the coming years, in terms of, you know, whether it's corporate finance, platform investments, et cetera. Kenny, who's not with us today, busy talking to potential capital partners. I have traveled with him to the U.S., to Middle East, to other places, to talk to various parties who will invest together with us. Those dialogue will continue and we'll report as soon as we can on some of these transactions.
Gary have transferred back to Hong Kong. He was the person leading our investment in China, doing asset and management in China. He's now head of leasing for Hong Kong. We see Hong Kong continue to be extremely important to us. It is the largest part of our portfolio. Putting someone senior who started his career in Hong Kong, spent a lot of time in China, coming back to Hong Kong, and in fact visited Singapore as well. One of the things that, you know, Greg will do more of is how actually retail tenants can actually, you know, from different country transfer to other part of our portfolio. We've already brought some tenants to visit malls here in Singapore.
We've brought some Hong Kong tenants to China, mainland China, et cetera. I think that is again a synergy as we have this footprint. Thank you all very much. I hope this is informative. As we move forward, just rest assured we'll continue to focus on delivering outstanding value to all our stakeholders, and a steady return through increasing distribution. Thank you.