Morning, ladies and gentlemen. A very warm welcome to CapitaLand Investment's financial results for the full year 2022. My name is Grace. I'm the head of investor relations and your MC for today. It's amazing to think that another year has just flown by, and we're delighted to share with you how CLI has performed in our first full year of operations since listing in September 2021. I would like to extend a very warm welcome to our analysts, members of the media, as well as our financiers who are joining us in person. For those who are watching via Zoom, thank you for joining us virtually. We're broadcasting live from WeWork's flagship asset at 21 Collyer Quay, which is an office building owned by CapitaLand Integrated Commercial Trust in Singapore. We have Tony Tan, CEO of CICT here with us as well.
This is WeWork's largest office in Asia Pacific, spanning more than 200,000 sq ft. For our guests here, you're welcome to explore this amazing space after this meeting. Now, please allow me to give you a quick rundown of today's program. We'll begin with a presentation by our newly appointed Group CFO, Mr. Paul Tham. Paul joined CLI as Deputy CFO in 2021, and this will be his first time presenting the results. After that, we will have Chee Koon, our Group CEO, to share his thoughts and outlook before we proceed to Q&A. Without further ado, let's welcome Paul to share some good news with us.
Thanks, Grace. I think I'm gonna stay here 'cause I'm a little scared I'll fall off. Well, good morning, everyone. Thank you all very much for joining us here. This is actually, I have to say, is a lovely office, and it's really nice to see all of you in person. As Grace mentioned, I'm gonna share a little bit more on our FY 2022 numbers, give you an outlook of a sense of how the year went for us, both from an operating and financial perspective. Then I'll pass over to Chee Koon, who will really give you our outlook for 2023. Please save your tough questions for him.
2022 was a challenging year for real estate markets, and particularly some of this really impacted us as well. I think there were two main things that really did have an impact on us. The first was really around inflation and interest rates. Inflation, interest rates in the second half of the year, we saw significant uplift or hikes by a lot of central banks globally. That put a lot of pressure on us, particularly in terms of transactions. As you know, we have a large REIT platform, and the increasing interest rates put a lot of uncertainty and a slowdown on our transaction volume. If you look at the first half of last year, I think five out of six of our REITs were active. Second half of the year, that slowed down quite a fair bit. Our view is that this year things will settle a little bit.
We may see a little bit more in terms of hikes, but as long as there's a little bit more stability, we like to believe that that transaction activity will start to recover. The second big thing that impacted us was really around China. Geopolitical tensions, Russia, Ukraine, U.S., China, that had a distinct impact on our ability to raise global capital going into China, which was always one of the thrusts we had going forward. Fortunately, if you've seen the news yesterday and today, we've announced a couple of new funds, which is really foreign capital going into China. We think that's a very positive sign for us for the year going forward. Last year, certainly a challenging environment.
Together with that, zero-COVID policy in China, obviously with the lockdowns, that meant direct impact to us in our lodging business in terms of rental relief, and that did have a drag effect on our financials. Our belief is obviously this year with the reopening up and no pressure on Tze Shyang and his team, but we expect that there will be an uplift and improvement on the China side. A lot of macro factors last year that had a challenging impact on us. Some of that continues into this year, but overall, I think we're much more positive on how the environment will be. Some very key highlights. Won't go through all of this. We'll go into detail with the slides. One is operating performance for us was actually pretty good.
FUM grew to SGD 88 billion. If it wasn't for a currency impact, that would actually be closer to SGD 92 billion. Obviously Sing Dollar strengthened against almost every currency but the U.S. dollar, so that brought that down to SGD 88 billion. In terms of embedded FUM, this is for us is capital that has been already committed or deals that are in progress for our REITs. We're actually up another SGD 8 billion, so currently sitting at SGD 96 billion, well on track for our organic SGD 100 billion target. Lodging had a great year. Ascott, best year we've had. We expect that will continue, but it helped us a fair bit last year.
On divestments, we hit $3.1 billion, exceeding our $3 billion target, but obviously looks a little bit more challenging given we had an exceptional year before in 2021 where we divested gross asset of $13 billion. A little bit of a drop there. How the improved operating performance translated was better operating PATMI. We're up 22%. However, total PATMI comes down because of the slowdown in fair value gains and also the slower recycling. Hopefully in this year, we start to see a little bit more of a pickup.
In terms of dividend, given the strong operating cash flow, operating cash flow for us this year was actually stronger than the year before, we're maintaining our core dividend at SGD 0.12 and also distributing in species an additional SGD 0.06 or approximately SGD 0.06 of CapitaLand Ascott Trust units as a capital management tool, also to let shareholders in CLI also join in part of the recovery and lodging. That's the quick overview. Going into some of the details a little bit. PATMI for 2021, 2022, as mentioned, operating PATMI up 23%. And part of that was offset actually. Actually operating performance would have been better.
We had a little bit of an offset from Forex losses, given the strong Sing Dollar versus most other currencies, and also had rental rebates in China of about SGD 30 million. That actually offset the uplift we had, but we expect that operating PATMI trajectory will continue. Obviously, the big swing for us were the two columns in the middle, portfolio gains and revaluation and impairment, or lack of revaluation gains. You can see the big drop off, and if you look at the portfolio gains, SGD 616-SGD 222, that was really the big difference there for us also again was China. The year before we had the Raffles City divestments. Last year, you know, a lot of these gains actually came out of other markets.
Hopefully this year we get a little bit more momentum going back on the portfolio gains through more capital recycling. Revaluation largely flat versus a uplift the year before. I won't go into all the breakdown on our EBITDA, but we break down our EBITDA and our financial results by business, by geography, and by asset class. Maybe just to highlight two things. One is if you look at the middle chart, the inner circle shows you the 2021 numbers, the outer circle gives you the 2022. If you look at our breakdown by geography, China has historically been about 1/3 of the business. Mainly before restructuring, it was closer to 50%, but we should be at about 1/3 of the business.
If you look at the chart, what you'll notice is 2021 versus 2022 moved from 28% contribution to 11% contribution. That really for us was a lot of the difference. A lot of the other markets actually outperformed the year before, including Singapore, which became quite significantly much larger as a contributor. Overall, we saw improvements in most markets, and hopefully that 11% enlarges this year. The other thing to highlight on this slide is asset class. Generally, you look, and you can see a pretty well-balanced portfolio. Obviously, one distinct change is the increase in lodging. Lodging contribution has become much more significant for us.
This is great from a fee income perspective because this is good, steady, recurring income from our lodging management, and we're actually very pleased by the contribution that we've seen over the last year. Given the trajectory of the market, look forward to that continuing to increase. This is a breakdown of our financials by business segment. I won't go through this, it's just a different cut. The only thing maybe to focus on is on the right-hand side of the slide, you can see our operating PATMI numbers and how that breaks down. We break it into two components of the business, our fee-related business, which is the FRB, and our real estate investment business. Our real estate investment business is the ownership stakes in our REITs trusts, and in our private funds. Right?
This is really the property ownership, and the lower part is from the fund management and the lodging management business. You can see what we've been encouraged by this year is there's a slight rebalancing. Our fund management and lodging now contribute about 50% of that. Generally, as most of you know, generally the market gives us a better multiple on that component of the numbers, and we are seeing that improve, and we believe that this is a pretty good proportion for us to keep going forward. We look at these two segments of the business in different cuts. The first relating to the fee business. As mentioned, we are seeing this part grow nicely. This is a revenue cut on our four different parts of the fee-related business. The first is listed funds management.
Listed funds management has trended down slightly, but that's actually because of lower transaction volume. If we were to strip out just the recurring part, you would actually see this lift up slightly. It improved on a growth from funds under management on the listed side, but lower transaction volume, so slightly lower acquisition fees, so the slight decline. Private funds had a very nice uplift generated by good carry fees from funds in South Korea, in Vietnam, in Singapore that help uplift our private funds management performance. Lodging management had a stellar year, a nice 36% uplift. Looking forward to that continuing. Property management, slight decline, partly due to property management fees out of China, which were down slightly, and also a little bit as we reconstruct our portfolio. Net, net overall, good growth.
We'd love to get around that 10%, 9% for last year, overall, good growth from our fee business. On the real estate business, this is the ownership stakes. On the left-hand side, a breakdown by earnings, by EBITDA. Similar to the slides before, what you see are two things. One is you see a very steady operating income, in terms of the non-operating, and this is portfolio gains and fair value gains, obviously that big drop down. Maybe the thing to highlight different on this slide is if you look on the right-hand side, on the chart, similarly, 2021 on the inside, 2022 on the outside, what you'll see is the contribution for where the real estate investment business earnings are coming from.
It is now 73% coming from stakes in our funds and REITs. This is important because this for us is part of our balance sheet management. We want less and less on our balance sheet, more and more as stakes in our funds and our REITs as they grow. It's much more capital efficient for us. You know, that drop from, which is the sort of middle blue, I guess we've got to change the colors to make it easier to explain. The middle blue drops from a 40% to a 27% on balance sheet contribution, and this is directionally where we would like to be going. Capital recycling. Capital recycling, last year as mentioned, SGD 3.1 billion gross asset value. Maybe two things to highlight on this slide.
One is 89% of that divestment value went into our funds and our REITs. The bulk of what we're able to divest is actually helping us grow our FUM. You know, we'll talk a little bit more on one of the later slides how much left we still have to divest. We think this is, besides the third-party assets that the team is acquiring, this is a nice controllable divestment for us, helping seed new funds or helping grow some of our listed entities. The other thing to mention on this one is, you can see our premium above carrying value. It was 12% above carrying value for us last year. The year before it was 13%, largely in line even though the market was a little bit more challenging.
I think on this one, the truth is could we have recycled more last year if we really wanted to? Yes. Part of this also for us I think is prudence on what values we recycle our assets at. You know, obviously, that is something that we debate internally quite robustly as well, is making sure that we're looking after CLI investors as well. As we look to exit some of our positions on the balance sheet, we wanna make sure that we are not exiting for the sake of exiting, but really looking to get a balance of returns on our assets as well. Overall, capital recycling, while it did achieve target, this is something that we definitely want to push harder for this coming year. Property valuations, largely stable.
This gives you also a good sense of where geographically that came from. Obviously, retail struggled a little bit more. Our business parks, new economy assets did well. As you can see from the chart, the two areas where we had weakness last year, China, net loss or down value in value by SGD 90 million, and then slight weakness in parts of Europe and the U.K.. A little bit of weakness there, but generally in our other markets, valuations were actually relatively stable or improved. Particularly India and Singapore showed good strong improvement. In terms of just a quick snapshot on our financials. Won't go through the details, but our Debt to Equity continues to be relatively stable and we're at comfortable levels, about 0.5.
I think the thing to highlight, as mentioned, operating cash flow, which you can see, SGD 735. This is an improvement from the year before. This is something that gives us a lot more comfort in terms of our balance sheet going forward. Which is why I think from a proposed dividend point of view, we were very comfortable maintaining our SGD 0.12 dividend, core dividend, which is the dark blue box. Think this for us is a reflection of stability of earnings and our expectations going forward in terms of our earnings profile, so something we're very comfortable with. We have a special dividend this year. Last year, we had a SGD 0.03 cash dividend, which is partly to reward shareholders from sort of the drop-down we had to SGD 0.09 the year before.
For this year, what we've decided is to give a dividend-in-specie of CapitaLand Ascott Trust units. The truth is, it's probably our best performing trust this year. We think given the high potential in the lodging sector and growth, this is something good for CapitaLand Investment shareholders. This was something that was considered during our restructuring. The point in time we decided not to give class units because it was, you know, in the middle of COVID, most folks at that point did not feel that hospitality was the right asset class to own. Now we feel this time round, we think it will really benefit our shareholders. From a group perspective, we moved down from 37.5% holdings down to about 29%, where we're very comfortable.
It brings us in line with a lot of other REITs and trusts where we hold low 20s or even high teen percentages. That is our financials in a nutshell. I'll just touch very quickly on some of the key operating highlights for us for last year. Our fund management side. As mentioned, fund management up, including embedded FUM, up to 96. Actually, if it wasn't for our currency, we would have been a lot closer to the 100B target. You know, maybe Chee Koon would cut us all a bit more slack. We're not quite there, but on steady track, we believe, and we hope this year will accelerate some of that growth. On the right-hand side, something to highlight in terms of capital tenure for us, which is a little bit of a unique differentiator.
If you look at our capital pools, we're actually largely perpetual capital. Perpetual in the sense that obviously we have about SGD 60 billion in the REITs. Unlike our open-ended fund, though it had no redemptions or some of our private funds, there isn't a risk of redemption. Admittedly, there can be some impact on share prices that can move up and down, but we don't have that same impact. For us it is a unusually steady recurring income stream, which we get, compared to other fund managers. You know, I think of that franchise that we're very happy with, on the listed side. In terms of overall fund management performance, where it is, we see slight growth in the fee revenues on the left-hand side.
On the right-hand side, you can see a little bit more of a breakdown of what was recurring fees, starting with the listed at the bottom. A little growth in that recurring fees. Slightly lower on the acquisition fees or the transaction fees. They are event driven, that SGD 52 down to SGD 35. That was made up for by the private funds. This for us is to a certain degree, the benefit of having the two sides, which is why we wanna see both legs of this grow, is to help offset. Because in certain markets, it's better to be running the REITs. In certain markets, it's better to be running private funds. We think having these two longer term for us becomes quite complementary. On the listed side, just some quick highlights.
Our listed side grew by about SGD 2 billion. Maybe actually the thing that we're actually most proud of is if you look at the bottom part, starting with number five, we actually had steady DPU growth on most of our REITs. In fact, five of our six REITs improved, with the one REIT being related to China, which we think is quite understandable in the current market. This is actually for us actually critical, right? More than growth, I think for our REITs, what we take very seriously is the performance and being good stewards of our investors' money. What you'll see is that steady DPU growth to cents per unit was driven by the parts above it.
Above five, number four, proactive asset management, a fair bit of asset enhancement, you know, working on our properties and expanding. In certain case in Malaysia, we expanded into logistics, in India into data centers. That helped drive that DPU performance as well. I think when we look at this, you know, most critical for us, particularly in the coming year as well, is making sure that our REITs perform well. Given that we're also the largest shareholder in all of these REITs, having them deliver on NPI and DPU is important to us too. On the private fund side, good momentum. I would love to have shown an overall growth in the private funds numbers. Private funds took a real hit due to currency. We have a fair bit of exposure in foreign currencies.
With that FX impact, most currencies outside of the U.S. actually depreciated between 8%-12% for us, and that actually shrank the FUM. Though the team has grown, it doesn't always reflect in the numbers. Obviously, we had good domestic launches out of China, renminbi funds. Our Korea funds generated good carry, and we were able to see repeat investors, and we believe that will continue to grow as well. Then we had a few niche funds, self-storage, obviously lodging for us, which is a standout, I think, in terms of our ability to have a vertical stack operating platform, really helps differentiate us there. Some growth there as well. Do we expect that it will grow faster?
I think you all should hold that question for Simon and Patrick later on. It's certainly something that we would like to see this momentum continue to accelerate. What we announced this morning and yesterday, two new programs of funds related to China. This is big for us because it is evidence of foreign capital starting to look again at investing in China. First, we announced, I guess on the upper part of what we announced this morning, our China Opportunistic Fund. This is really looking at special situations, and it's on a programmatic basis. What we have is we have one which is single asset fund, and which with global investors, which we are doing a repositioning of a retail asset into a little bit more of a mixed use with more office space.
We also have a programmatic joint venture, which we've seeded with one of our logistics assets in Foshan, and which was on our balance sheet before. This is a start of a programmatic joint venture and looking with some global investors in regards to how else we can find special situations in China. The second fund, our China Data Center Fund. This was seeded by a couple of development projects we have on the balance sheet, which were acquired for this purpose, really to help us launch there. This is a development fund which when fully completed, project total value should be at about CNY 1 billion. Equity commitment from global investors is about half a billion. This, for us, is a great complement to the domestic renminbi work that we're doing.
We believe that these two aspects, together with China's opening up, will certainly help us pick up or continue the good momentum we've seen in this. Just on the lodging business. Lodging is very easy to talk about these days because people can see travel going on, more people coming back, flights are expensive, rooms are expensive. Last year, we added 33,000 new units to the portfolio. It was an outstanding year from us on a lodging basis. Lodging fees up 36%. That was driven by a lot of recovery, good occupancies, but it was also driven by improvement in revenue per available unit, RevPAR for us. You can look on this chart, you can see our RevPAR by geography. If you look across the entire chart, you'll see everything is green except for China, right?
Overall, despite that, we were up 40% year on year. This is, for us, you know, this is a good part of the business that gives us a little bit of advantage in this space. This year, hopefully with the recovery in China, the one non-green becomes green, and it helps to offset potential, you know, any headwinds that we may see in some of the other markets. Overall, gives us good confidence that we're gonna continue to see some growth on the lodging side. Finally, just touching on our real estate investment business. This is our ownership stake, as mentioned in our properties, in our units, in the various REITs and trusts, and through our stakes in the funds. This is just a snapshot of how it did.
For those of you who track us quite closely, the truth is more than 50% or 57% of our real estate investment business is now held through the REITs. Actually, if you watch the REIT reporting, and I think all 6 REITs always go out before us, you'll actually get a good sense of how our numbers look as well. As you would probably know from having seen results from our different teams, Singapore is good performer this year. High occupancy, positive rental reversions, and because of that, we saw positive NPI contribution. Similarly for India, good performance, new development projects, NPI numbers are up.
I would say in terms of weakness globally, where we saw it, obviously China was a tough one for us, as mentioned, for all the various reasons, which we expect will hopefully improve this year. We also saw a little bit of weakness in Germany and in Japan, under our other markets, but that was offset by improvements in the U.S., Korea, and Australia. Overall, actually, we had, from an operating perspective, a pretty good year, just offset by challenges in specific markets that unfortunately affected us on an overall basis. Conscious of time, last slide for me. In terms of our longer-term pipeline and in terms of divestments and reseeding, we continue to have just over CNY 10 billion in terms of pipeline assets on our balance sheet.
We started to put some pictures up of the bigger ones, below, for two reasons. One is to give you a sense of assets that we are proud of, but also to give you a sense of what we have on the balance sheet for potential divestment. What you can see from the chart below is what you'll realize is when we look at our biggest assets for their investment, with the exception of obviously ION Orchard in Singapore, the rest of our assets are actually in China. A lot of our assets. I'd say, you know, easily half of what we would look to recycle is really there. For us, this makes a big difference, right? in terms of geographically where that recycling will come from.
I think what gives us confidence is this year, even though it was a little bit more challenging, we still managed to divest CNY 2.7 billion into or recycle it into fund management, into our fund vehicles. We continue to acquire, to warehouse. That's the one thing we're comfortable using our balance sheet for, is really acquiring, holding for a while, and seeding funds or into our listed entities. This, for us, becomes part of our growth for the future as well. With that, I will pass this over to Chee Koon to talk about our future.
Thanks, Paul. I think you did a great job as the inaugural CFO for his new appointment. Congrats, Paul. I think good job. Give him a round of applause. Thank you. Andrew, you chose well. Thank you all for coming. He did such a great job I don't want to belabor the point about talking about last year's performance. Maybe just to remind everybody, we embarked on the restructuring exercise less than two years ago. Our ambition is really to, you know, after doing the entire restructuring, creating the vehicle, you know, we have a long-term plan of really building a globally competitive real estate investment manager. It's gonna take time. You know, some of you who are here, I'm familiar with.
You know, I used to sit here when I was running Ascott, and I got many, many questions from friends, and some of you are still seated here asking, "Why was the ROE for Ascott so low? Why don't we sell the Ascott business?" If you look at the business that the Ascott has done today, I mean, whether it's on an asset-level, the discipline in terms of how they manage the assets and growing the fee income business in a very asset-like manner. Not forgetting, you know, every time they sign a management contract, the fees last for 20 years. Now you build a certain scale, the fees flow very, very nicely. When you need to... We are very focused on what we want to do to build a global business to be a asset management business.
Reputation is important. Track record is important. Making sure that everything that we do, we need to think on behalf and think very, very, in a very disciplined manner, how do we deliver returns for LPs, for unitholders, and also for CLI shareholders? That's the basis that we will continue to pursue growth. This is a reminder, I mentioned this before, I think, to some of you. When we did the restructuring two years ago, the original plan, original plan when I took over, the CEO of CapitaLand in 2018, the original plan was to do the restructuring only after 2024. That is, you know, after we built up all the capabilities, after we quietly bring in people like Simon, Patrick, and all the, all the distribution team, deliver some track record, then we do the split.
The COVID situation presented the opportunity for us to do the split ahead of time. Of course, at that point in time, the organization was not ready. We decided to go ahead, don't waste a crisis, bring in the team, build the team. I must say that, I mean, today, I mean, Simon and Patrick have built up the team. I mean, we have a much more global capital-raising team going out there introducing about what CapitaLand is about. You know what I mean? I'm on the road a lot, you know, meeting a lot of new people, and they are excited about the opportunities that Asia presents, whether it is China, whether it's India, whether it's Southeast Asia. I mean, China is always a... I mean, I meet with many of the investors.
Many people are asking, "You know, is China investable?" Right? I mean, for us, China is a big part of our business. You know, we said that we have to demonstrate that we can raise domestic capital from China. In the last two years, I think, big thank you to Tze Shyang and his team, managed to raise almost about CNY 40 billion. We said that we're gonna do it, we execute it, we demonstrated it. I think once you can demonstrate to investors that, look, there's a domestic capital that is prepared to acquire the assets, for foreign capital that wants to invest in China, first and foremost, is the economy strong? Is China going to continue to be one of the top two most important economy in the world? At least I believe so.
There will be bumps on the road, but if it's gonna be investable, investors, especially foreign investors, they need to look for exit options. If there are foreign LPs that start to have second ideas, concerns, but if you can demonstrate that there is already huge pool of domestic capital ready to take on the assets, I think that demonstrates confidence. It demonstrates our ability to execute, ability to asset manage, and ability for domestic capital to come in to invest with us. I think that will slowly bring back the confidence of people to continue to invest into China. I mean, we are today at, I would say, a pretty interesting point in the, I would say in the, in the business world, especially for China, I must say. I mean, we have been there for 20 over years.
Reputation, we have boots on the ground. We are actually vertically integrated across many of the asset classes. Domestic capital, we started only talking to one, two years ago. Today we have opened up, I mean, the relationship is a lot deeper. After you open up one relationship and there has been a lot of reverse inquiries. I was just in Shanghai last week. I mean, to be, to be fair, today my mood about the economic outlook for 2023 today is a lot better than two, three months ago. You know, in, towards the end of last year when we were preparing the budget for 2023, I was, I say, "Eh," I say, "China is still shut." Thinking that China was only gonna open maybe second half of this year, recovery only 2024.
When they decided to move, well, things opened up very, very quickly. You know, even though environment was very, very difficult, we continued to stay very disciplined in looking for investment opportunity. We acquired, some of you may know, you know, who followed us very closely, we acquired the Beijing office asset on the first day of the 20th Party Congress last year. First day. We announced it. It was a court auction deal. We acquired it at a price that's significantly below replacement cost. That's the discipline that all the teams on the ground have. You know, today in the market where interest rates are rising, where it's very difficult to underwrite deals because you go to investment committee, people will argue about what is the cost of financing, what is the exit cap rates.
We need to be very disciplined in finding deals that we believe is below replacement cost and we believe can deliver good returns. We are prepared to use balance sheet, because we are confident that we can deliver the returns. If you can find good assets, a lot of capital will be knocking on your door to want to participate in those deals. That's the discipline that we have been keeping in the group. Going forward for this year, you'll continue to see us continue to look for growth on the listed REIT side. Obviously, given where the share price is, you know, you can ask Jonathan later how he's gonna look at growth. We'll continue to look at opportunities through reconstitution, through accretive acquisitions. All this will happen.
Maybe pace a bit slower, but we'll continue to look for deals. On the private fund side, the engine has been built. You'll continue to see activities coming up, especially in this part of the world. Some very bold ideas that Simon has together with his team. If you can get it through, it will be good for CLI. Lodging, I mean, I don't need to say too much. You saw the numbers. I mean, if you know how much it will cost you if you have to travel. I was trying to book, take a short weekend trip in April, to stay in Kevin's service apartment. The kind of rates that his people were gonna charge me was so ridiculous that I decided I'm gonna go Taiwan instead.
I couldn't afford the rates. I just want to tell you, I mean, I think to build a company, we have to take a long-term view, how we are continuously building capability and creating enterprise value. That is the basis on how we will build the company. Along the way, there will be bumps, there will be interest rates issues, there will be geopolitical issues. I just want to reassure the investors and the analysts here that we will continue to be very focused in terms of our execution and be very disciplined in how we look at deals. You can look at the team here. The average age of the group has been reducing with the exception of Manohar and Seng Chai.
The team, we are building younger and younger people in the team. Why? Because to build a company to be globally competitive, we are talking about building. We are gonna fight this war for the next 10-20 years. You need people with the energy, right? With. Not that Manu has no energy. He's still very. He's still very, he's still a lot more energetic than me in many ways. You know, we need to. We are preparing for this. It's a long journey that we are fighting. It's about the capability, it's about the experiencing, the experience that we are building in the company. With that, thank you. We can do Q&A.
Can I also invite Paul, as well as Andrew, who is now CLI's Group Chief Operating Officer, to take the stage? I would also like to make some introductions. Joining us and seated in the first row are members of our CLI Leadership Council, and they are, and that includes the CEOs representing our key income streams, which, and they will participate in the Q&A. We have Simon Treacy, our CEO of Private Equity Real Estate. Patrick Boocock, CEO of Private Equity Alternative Assets. Please ask them about their fund launches, which we announced yesterday and this morning. Of course, Jonathan Yap, CEO of Listed Funds, as well as Kevin Goh, CEO of Lodging. I would like to make a special mention of Puah Tze Shyang and Ervin Yeo. They're seated there.
Our senior management in China, who are joining us for the first time in person, first time in three years, and they'll bring you the first-hand news from China. Finally, I would like to shout out to our viewers online. Please don't hesitate to join in the discussion by leaving us a message in the chatbot on Zoom. With that, we are ready to take the first question. Mervin. Can we pass the mic to Mervin, please?
Hi, I'm Mervin from JP Morgan. I promised Paul I'll be gentle with him today. I wouldn't direct any financial questions to him. Maybe we can start off, congrats on the announcements the last couple of days in terms of new mandate wins. Can you touch on investor inquiries, be that onshore, offshore, what's investor appetite? Any particular asset classes that they're looking at? Obviously you were the only bidder for the Chinese property, IE compared as being more aggressive with buying as well. Second question I have is for Kevin. He's obviously doing exceedingly well. He's effectively hitting his targets one year in advance. Any thoughts of guidance in terms of number of units under management going forward? Thanks.
Simon, do you wanna take the question?
You can.
No.
Okay. Thanks for the question, good morning, everybody. In terms of investor appetite, clearly, investors are spending this quarter looking at their overall portfolios, looking at their operating environment, looking at what capacity they have to invest, starting probably from the second quarter this year. I think that's a very global synchronized activity at the moment for institutional investors. That said, they are still underweight Asia, particularly with their portfolios in Europe and their very careful monitoring of the U.S. market, where capital values are starting to come down now quite significantly. We continue to have, with our global capital raising team, numerous meetings with investors all around the world every week.
Again, their views on our platform is that they're seeing a differentiated way for them to better understand real estate risk and have their capital sensibly deployed up and down the risk-return spectrum, including in new niche sectors where we have the capability to better understand the trends happening in the market, such as data centers, credit, et cetera. I'm quite positive that in the second half of this year, you're going to see investors now coming back into the market and looking at us as a very viable complementary manager to their existing GPs in this region to invest in these markets as they recover. My hunch, my strong sense is that this will be a very, very good vintage year for investors, and that we're very well positioned to take advantage of that on their behalf as fiduciaries.
Kevin?
I'll take the second question. To give it a bit of context, when I first joined the company, we were at about probably 20,000 keys globally. At that point in time, we find that we're very constrained. With 20,000 keys, you have no scale, you can't invest in a loyalty program, you can't get the best systems out there, you can't get the best people. At that point in time, I think what we're trying to do is to focus on getting the numbers up. We wanna get 20,000 to 30,000 to 40,000. Since then, you know, I've seen us grow from 20 to 40 to 80 to 160, and that's doubling every 3- 5 years. Of course, the doubling gets harder as the base gets bigger.
At this point in time, I think at about 160,000 keys, we're looking across our portfolio. We also look at the different product types that gives us the different margins. We are beginning to see that the service apartment product actually gives us a lot more fee per key than, say, managing a rental housing, which is a lot lower. We're looking into the, the quality of the fee income that we can extract from each of these product. To borrow an often mentioned phrase of not growing for growth's sake, we really wanna look at where the quality growth is and guide, you know, many of you here to see in which direction are we growing and what kind of fee income are we gonna extract from the growth.
I think going forward, we will try and give you a little bit more color into the various dimensions of how we measure success and how we look at how we grow. I would very much wanna keep to the momentum of doubling every 3- 5 years. If we do that, we could be the next Marriott in not too far future. I think we have also to be realistic that as the base get bigger, it's harder to double. We definitely continue the growth momentum, right? I think in the course of this year, we'll come out with certain metrics. If you look at some of the management companies out there, the hotel management companies, they look at net room growth. They look at margins.
They look at certain product types, certain brands that they wanna grow. They look at geographies where they have higher ADRs, where you can extract higher margins. We'll start to kind of give a little bit more color on some of these factors. You know, we will, we're still working things out, and when we're ready, we'll come to you.
Thank you, Kevin. You have the next question. Yew Kiang?
Yes.
Hi. Yew Kiang from CLSA. Thanks, Paul and Chee Koon for the lively presentation. I have two questions. The first one is on asset recycling. Last year, you managed to divest at 12% premium to book. This year, how are you gonna balance that between asset recycling, AUM and that premium? Are investors and bidders willing to pay that kind of premium in this market? Secondly is on any share buyback plans, you know, now that BIS for Class is done, you know. Any future plans on that? Thanks.
Do you wanna take it? Asset recycling.
Yeah.
Yes. Yeah, Andrew addresses those. Okay, I'll cover the share buybacks then I will leave Andrew to talk about asset recycling. On the share buyback, you know, we still have our mandate. We will go back out to shareholders for renewal of mandate in the upcoming AGM as well. I think we still consider share buybacks part of our capital management tools. We don't have a set target on how much we are looking to do the buybacks on, but obviously I think we believe intrinsically in the value of the stock. If there's an opportunity is to pick up and improve some of our holdings as well, I don't think that anything would stop us from doing that. That the intent would be...
You know, last year I think we bought back probably about SGD 130 million, something in that range. I think for us that is a fairly comfortable number.
Question on recycling. First thing just to remind everyone, we're not in the business of selling for selling's sake. We try to engineer good premiums, and we look for partners who are willing to take assets at the right price. That will continue. As I mentioned this morning, I think buyers and sellers are in this adjustment period. There is a need to recalibrate because you've got interest rates, you've got funding tables that need to be relooked at, underwriting that needs to be relooked at, and so on and so forth. We do think that first half it will continue to shift. The ground has not settled yet, and I think that's, it's probably important to acknowledge that.
If we do see the signs of stabilization from a monetary, from a policy perspective, we do see capital waiting to come in, which we do. There is a wall of capital waiting to come in. They just need to know how to underwrite. I think when we get this greater certainty, then the recycling will spool up to a comfortable level that will enable us to hit our targets comfortably. Whether you hit, you know, we repeat our exceptional year of 21 or we get to somewhere between three and 13, I think we'll find out la. It's again, I think not a, not a difficult period for us. We are very comfortable with what our targets and our budget is for this year.
To be honest, I'm more concerned about FX movement, the strong Sing dollar currency than anything. Yeah. Before that, Tze Shyang you wanna give some color about the, what the Chinese renminbi capital partners are thinking. I think useful to share with them because you deal with them on a regular basis. Just give them some color about the appetite. I mean, just have to know that there's a lot of capital in China that can't invest outside of China. Yeah. Maybe Tze Shyang can.
Thanks, Chi Kwun. Maybe adding one a bit to the asset recycling bit and what Simon Treacy has introduced. We looked at China, we were in the past quite focused on raising foreign capital to invest. In the last 18 months in particular, given what has happened in China and all the geopolitics, I think it was a very evident and it was critical for us to refocus and diversify our efforts to tap domestic. The domestic investors obviously know the market better. The domestic investors obviously can underwrite better. Underwrite means that they can tell, you know, what's really going on, where the rents are gonna go, where the occupancies are gonna go, how the assets are gonna perform, and which asset classes to deploy in.
We have had a good run last year. We had our renminbi fund managers license in 2021, we were able to then get onto the act of really explaining our work to the domestic market. Last year we raised 3 funds. FUM coming close to CNY 10 B. I think it was about CNY 9 B. Third-party capital, as Chi Kwun pointed out, was about CNY 4 over B renminbi. The domestic investors, for example, like one of the biggest pools, the insurance players, they are doing good business domestically. They do have capital to deploy, and they do need to deploy. At the end of the day, they'll be looking out for assets that are well-managed. They are also very well...
They are able to understand very well the consumptions that goes on in the country. A very good example of an asset class, retail, right? For foreign investors, you know, retail has always been difficult over the last few years because of COVID, not just China, across the world. In China itself, you know, while the foreign investors, the instis, may not want to dabble too much into retail, but the domestic guys, they actually can appreciate, you know, that domestic consumption is actually one of the strongest themes out there, and they're able to relate to it. That gives us the differentiating factor. You know, every... Back to the asset recycling just now, I was just thinking whether the question will come to me for China.
It's really how much premium you can engineer there is the difference between how you value the assets and what the market or the, the buyer wants to acquire the asset at. Again, it comes back to how they see the future. If they were to be able to look at an asset class, they feel comfortable with the underlying trends, they feel comfortable with the operator, they know how we will underwrite and they're comfortable. Actually, the asset recycling can take place at a, I would say, comfortable margin. So this is from a domestic point of view. The, the instis that we have reached out to last year, 2021 we had a big breakthrough with one of the big insurance players.
Since then, it has allowed us to tap into a lot more avenues. Not only have we gone deeper into the insurance sector from one player to now six instis with us, that's really a show of strength. We have also touched non-insurance. Non-insurance like trust money, SOE money, also securities.
That broaden the pool of capital available to us. Moving into the future, just answering Chee Koon's point, I think the domestic investors will continue to have that greater clarity over what's investable in home country over what asset classes. In fact, retail or new economy, I think all the asset classes will bear attraction to domestic players. Back to Simon's point, the foreign. Just wanna add one point. The foreign investors may, some of them may have been very conservative in the COVID years. Yeah. I can tell you, just over the last two, three weeks, you know, I've already met some Middle Eastern folks. I've plans to host the Canadian folks and the European guys. Everyone is penciling in dates to revisit.
I'm not saying that they are gonna touch, okay, any asset class, okay, anytime soon, but the willingness to relook the market is there. Thank you.
Thank you, Susan. Maybe we have Mayuko-san, Nikkei.
Thank you. This is Mayuko from Nikkei. Nice to see you again. Further to China, question, you have new two funds, and you were talking about having the global interest back into China investment. Can you give me more details, a bit more about, you know, where the money is coming from, hopefully region or country? What changed them? Were they just, you know, made a decision, and why did they make a decision now? What does that change look like for you for the going forward the rest of the year?
Thanks for the question. That's a really nice try to get from us who was investing. We can't tell you that, obviously, nor the region. What I can tell you that's really interesting is that there's always global investors that focus on what's coming over the horizon a little bit and positioning their capital and their thinking before the market starts to turn. That's really the type of investors we like dealing with, where we can show our thought leadership and present them contrarian ideas possibly a bit earlier than the weight of capital would otherwise think. There are a handful of investors now who are really just thinking about where's the world gonna be the end of the year? How do they play that now? Given Chee Koon's comments about the difficulty of underwriting, it's back to good old-fashioned analysis of replacement costs.
That's probably one of the better indicators. I think the takeaway for you should be that there's always these investors that are very smart, thinking forward, trying to get ahead before the weight of capital starts to come on in. You'll see that now increasingly to the point where then the wall of capital will really start to evolve from Q4 this year. There's a window for us now, particularly in China, for us to capitalize upon the opportunity. My sense is that India could be next. That is a market that we've got a remarkable presence, close to 30 years, where again, that's transforming a lot more than people really give it credit for.
We all went and got on the ground there before Christmas, and just we're very impressed by the ongoing development of that business we have and the quality of the tenant market and the demand for international grade space. That's the next thing to watch out for.
Thank you, Simon. We'll have Joy.
Hi. Joy from HSBC. 2 questions here. First just on sort of fund management business. In the new funds, do you see a change in terms of return hurdles, sort of leverage requirements, for the new funds? Also, if you comp domestic Chinese capital versus international, is there a significant difference in what they require in return? That's one and two , on your balance sheet, could you just share your thoughts on where you think your balance sheet stands for yourself, for the group, including REITs, and also how you position for sort of future growth requirements? Thank you.
Let me take the first one. Maybe Paul can talk about it actually. Joy, I think it's a good one. I think what we've noticed is, to Simon's point about thought leadership, the capital that is happy with the risk at this point in time, and we all acknowledge uncertainty is high. You're looking for returns that compensate you for taking this position, such positions. If you look at the funds that we've announced on the US dollar side, right? Opportunistic Program, Data Center Program. I wouldn't call these sort of vanilla cookie cutter things. These are proprietary thought leadership. We have to take positions. We have to demonstrate that we have skin in the game. We have conviction in our investment themes.
To Simon's point, going out to look for like-minded capital partners who share our view of where things will be. They say, "Okay, let's come in, and we are willing to compensate you." Obviously, returns need to be where they are for taking such positions. If you think about opportunistic programs, greenfield data center, yes, those return hurdles are where they need to be. At the same time, from a GP perspective, so does the fees for taking these positions. As long as you can match the opportunity and capital with the investment pipeline, then we've got a nice platform going. I think this is the type of product that, especially for China and maybe for India, is where CLI can demonstrate leadership. ‘Cause again, just we’ve been on the ground, we’ve got vertically integrated businesses, we’ve got a decent track record.
This is where we can differentiate ourselves and quite frankly, what the market is looking for from us. We can't solve these two markets, then it's gonna be a tough sell for the other stuff, for the other part of the business. In these sort of higher value add, opportunistic, greenfield, selected alt sectors, credit's one of them as well, I think this is something that you should look for more from us going forward at this point in time. Then I think on the other side of the wall, sort of the core products, this is, I think to my earlier point, will take a bit more time to settle down because core is much more dependent on your funding solution, your margins are tighter, your spreads are very important to you and so on and so forth, right?
We all know this. This will take a little bit more time to settle down. We think that once the policy moves to cool the global economic engine start to take effect, people will be able to work that into their underwriting, work that into their cap tables, and then that appetite to deploy this amount of capital which is sitting on the sidelines will come back. We have a nice comprehensive menu of core product for you, private side, public side lodging. That's there waiting to happen. We think second half of the year we'll start to see much more appetite on that. In the meantime, we're putting out some interesting product that demonstrates thought leadership in the markets that we have every right to lead on. Paul?
Just on the balance sheet, maybe a few things. One is we have a strong balance sheet, right? We're about 0.5% or 0.5, 0.52 times Debt to Equity. That includes the fact that we consolidate a couple of our REITs on our balance sheet, so we're actually closer to 0.4. The reason we like the debt headroom is actually to give us room for potential M&A or warehousing of large platforms or assets. It's intentional that we keep that headroom for future growth. It's actually generally at a very comfortable level, and given our operating cash flow has been strong, that also helps us. You know, that balance for us is about there.
I would say the other two aspects to it on our balance sheet is we're trying to become more efficient on how we use our capital. You'll see in the new funds compared to previously, we really have smaller stakes, 10%-20%. Self-storage last year was a 10-90. Some of the new funds, which are new areas for us, are 80-20. Generally that's the path we're going, right? To try and be more capital efficient. Tied to that obviously was the DIS of class on the REIT side as well. If you look at our 6 REITs and I will leave the Malaysia one out slightly separately. It's listed in Malaysia, slightly different from the 5 we have here. For the other five REITs, you know, we hold 18%-23%.
class was a bit unusual at the 37.5%. We thought this was effective from a capital management viewpoint in terms of returning a bit to shareholders and also reducing our stake. That said, to be fair, I think to class, we're not planning another DIS of those units, so you know, that 29% we're quite comfortable. I believe the class team has growth plans and over time, similar to the other REITs, I think we can naturally dilute down. We're quite happy with our holdings at this level. This is already improved efficiency from us. The last thing on the balance sheet I think would be around interest rates. We are cognizant that we're still in a rising interest rate environment.
This year, I mean, we're 3.1% versus 2.7% in terms of interest rate cost year-on-year. That number will move up, unfortunately, as our loans come up. We will pick up a little bit more cost there. We're trying as much as possible to be active on this. Treasury paid down, I think another SGD 1.2 billion in loans. You'll have noticed year-on-year our cash balances have gone down. I think Mervyn has complained to me before about us being more better on cash management. And this is something that we are actively trying to do as well, trying to reduce our interest costs, and all of that. A little bit more efficient, a little bit more cost savings.
There was a question, I think I forgot about China expectations, right? Sorry about that, Joy. Tze Shyang , please jump in if I missed anything. Yes, I think the short answer is yes, and it's a function of a couple of things. The makeup of the domestic Chinese investment community is different. Whenever you talk about insurance companies, long duration type stuff, they are looking for stability and predictability over alpha and high return. I think it plays into our core portfolio. You saw the pictures of these assets that we have, a lot of these in China. Stuff that we have on the balance sheet that once we get to a stabilized state, there is a very natural offtake for this product.
In the past, we didn't have a private equity product that we could turn into on a domestic side. That has changed. It gives us greater optionality to think about these products when we can securitize them and find the right capital partners. Now that we've had conversations and meaningful relationships with these people, they understand what it is we can bring to the table, both from a portfolio perspective, but equally from an asset management perspective, which is critical when you're talking about just delivering steady core return, right? Can I partner you for the next 10 years knowing that you can deliver my, you know, 5%-7% EBITDA yields and so on and so forth? That I think plays nicely specifically into expectations for core return in China.
The other useful part of the equation is interest costs are going the opposite way in China. That's just a function of where we are in the cycle. Nothing to do with us, but it helps us put these products together because Chinese investors don't have the same concerns about where rates are going and where it will taper out, right? They don't have the same pressures on margin versus the costs of funding. I think for us in China, we have the makings of a healthy domestic product pipeline.
That now that confidence is coming back, people are willing to start to talk about, okay, how do I deploy? Who do I deploy with? We've got a local AMC license. We can go out and start to have meaningful conversations and growing from the six funds. Six RMB. Three funds. Sorry, three RMB funds. Six is the future, sorry. three RMB funds that we have.
This is the funder for the year.
I used to know this stuff. The 3 RMB funds that we already have in the pipeline allows us to then see where we can take the platform. Hope that answers your question.
We'll have Tan Shen before Louis and Donald, okay? Tan Shen.
Hi. Morning. I have two questions. First is on lodging management. Can you give us a sense of the management EBITDA margin in 2022? Do you think there's room for further expansion? Second is on FUM growth. SGD 100 billion does look quite achievable now. What are you thinking about the next 3-5 years? Lastly, on class distribution. Are we expected to deconsolidate? Can you walk us through the financial impact? Thank you.
Yeah, just quickly on the first question, I think we disclosed our margin numbers. It was at the low 30s, if I'm not wrong. We've seen this number going up as we scale up. As we open more properties, we do expect the flow-through to go down to the bottom line. The beauty about lodging management business is that the marginal equity required to service more units is actually very low. Right? This year we opened about 9,300 keys, which is operational keys that gives us revenue. I think next year we are projecting at least the same level, if not more. Right? We do have a very healthy pipeline of assets that will turn operational in the next few years, and that will drive margins. You ask me, is there a target?
If you look at the likes of the other lodging management companies, it could go as high as 60%, 70%, right? Those are really big scale. Between 30%-60%, I think we can land somewhere in between, and I do believe that our margins will continue to grow.
Just to add on for Kevin. I know the business a bit, the details a bit better because I used to run it. You see, as he's trying to grow in the various markets, he has to recruit the business development people and invest in technology. That requires a bit of time. As the properties come through, the cost gets just gets amortized across more properties. That margin that's not at the level of the other big players is one, in terms of scale. As the properties get open, you will flow through quite nicely. Yeah. In terms of the FUM target, I'd like to give you a number. I mean, we have an internal target for ourselves.
We decided not to make it public because otherwise every quarter you'll be asking me, you know, when am I going to deliver that. Not because we don't want to give ourself target, because the fundamental basis of achieving growth must be, you know, we want to deliver good returns for our LPs, for our unitholders. I mean, we, I mean, Janine and team, we continuously look at M&A platforms. I mean, to be honest, if we want to, you know, grow another SGD 50 billion AUM, it's not difficult. I mean, we can just buy a platform and straight away it's SGD 150 and SGD 180, does it make sense? Does it add strategic value? Is it going to help us to drive fee income?
Is it going to help us to grow the enterprise value for the CLI investors? These are questions that we always ask ourselves. If there are
Right
...opportunities, you know, we can be $200 billion, we can be $250 billion anytime. The important thing is the focus on growth is there, but it must be on the basis of a responsible, disciplined growth. It's a long game. It's really a long game. It's, I don't want to promise you something that I deliver next year, then the whole reputation gets exploded, then that's it. No, there's no more CLI to speak of. Yeah.
Just the last question on class accounting treatment. No, we won't deconsolidate. I mean, the truth to us, the most important thing is the holding percentage. It's actually not so much whether we consolidate it or not. The reason we're at 29% is originally we had actually talked about 30%, but then if we're at 30%, we'll always have to, you know, go for an MGA, you know, or we trigger that GEO code all the time around 30, which is why we ended up there. The more important thing to us is the holding percentage. In regards to the treatment, all it will be the difference is you'll just have to account for the difference in our non-controlling interest component, which will increase, just given that lower percentage.
Okay. We have Louis.
Hello, morning. Just two questions for me. I think the first, I think a while ago, the CSRC officially released some guidance on the setting up of private equity real estate funds in China. Just wanted to get your thoughts on the impact of this on the competitive landscape, the domestic investors, and how the sector is going to develop in the near term. The second question, also related to China, just following on or from Andrew's comments about what the domestic investors really look for. Just wanted to get a sense of your legacy China mall funds. I'm not sure how long are they in their fund life, but would this year then be a good year to kind of match the exit of some of these funds to what the domestics require?
Thank you. On the first question, yes, CSRC recently has also jumped into the fray.
Announce an intention to allow PERE funds to invest in residential. As you can tell, from the last few years, resi has been a difficult sector because of the administration wanting to keep a lid on the runaway prices. The developers have had it tough also, I'm sure everyone is familiar. With the bigger context, there has been a slew of supportive announcements, measures, policies. First and foremost, the developers are now able to tap the bonds market. That's one thing. Second, I think the banks are encouraged to lend to the better run developers. Third, in office, six years, you know, last year developers were now finally able to go back to onshore equity financing.
This CSRC announcement is really just another measure to try and possibly create a soft landing for the sector itself. Having the AMAC approve PERE funds, it just allows domestic capital to now go into development funds or I would say build to core type of PERE funds. These funds can then flow into supporting some of the residential projects that are currently PUDs, projects under development. You know, for whatever reasons, you know, financing or cash flows from sales has been slow, and then the projects have stalled, right? This will then provide relief. That's the background to it. The exact rules of engagement, all of us industry players we are just trying to find out, but it's a positive news that the sector will be supported.
Positive news that there will be financing for the residential sector. For us, we are looking at that as another breakthrough into what we think we can add further value, which is rental housing. It is also residential, but it is more attuned to our ecosystem, where a CLI can go into PERE setups, develop products for LPs, domestic LPs, principally. We can also have our colleagues from CLB do the development and the design, okay? We also have our colleagues from our lodging platform, right, coming to manage. This is a very, very positive development for us, and we are looking forward to it.
Legacy
Okay. We have had four legacy retail funds. That's our biggest portfolio besides the Raffles portfolio. In 2021 we managed to recap six Raffles cities into a core kind of open-ended platform with one of the insurance players. That was an indication that the domestic investor was able to relate to the product itself. We would have continued in 2022, okay, turning some of our retail legacy assets into a similar type of core open-ended platform, renminbi platform in 2022, if not for what happened. I mean, all the lockdowns, all the strain on the rentals, right? This year, 2023, we see a great opportunity, okay? All eyes on the reopening.
We don't think that immediately the increased footfalls and the clear recovery, in sales, tenant sales, will immediately flow into rentals, but it's coming. We are cautiously optimistic, okay? Given another quarter or so, we should see underwriting strengthen, we should see confidence coming back in, and we are confident of recycling some of our retail, legacy retail assets within the funds I just mentioned, okay, into similar renminbi type open-ended core platforms. Hope that answers. Thank you.
Thank you. Over to Donald.
Hi. Donald from Bank of America. Just circling back to fund management, just a couple of questions. First is on your data center fund, latest one. Are you gonna get development fees for this, given that CLD now is the developer? How would the economics work? Would it be shared? Could you guide on that? That's the first question. Second is on the embedded AUM, SGD 8 billion. When would you think you will start to contribute? Has the capital been committed? When will we see this flow through into the fee income? Third is really on what's your thoughts on C-REITs at the moment, given that the government is may start to open up for commercial real estate going forward? Thanks.
Thanks for the question on the data center funds, which we announced yesterday. Great announcement to get those two assets under construction. We are entitled to development fees. We do have two development partners, one being CDL and another one being a third party. As you would expect, they are earning some of the development fee that we're charging to the fund.
It's split.
It's split, yes.
Okay.
It would be based on the value of the work they're performing. Yeah. Second question.
I'll take the embedded FOM question. Chi Koon's gotten really good at this delegation business, I have to say. The embedded FOM's about SGD 8 billion. The majority of that is private funds. For instance, we would consider Patrick's CDCP data center fund as embedded capital. As the fund completes, you know, those fees increase as well with the asset value. I would say we would expect most of this to contribute over the next 12-24 months as investment periods move. There is a component that relates to obviously some of the transactions the REITs have committed to as well. For instance, Queensway Mall, which is included in that FOM number. That is more like about SGD 1.5 billion. The bulk is private funds for us.
Yeah. Yeah.
Question number 3 was C-REITs. How's it, Don? Yeah.
Consistent with what we've been able to accomplish on the private side, AMC. The idea is to maximize optionality with the domestic Chinese economy. Your product suites should include, for any bona fide capital manager, ability to manage private equity, manage public equity, have access to RMB funding, both on the loan side as well as the debt side. You've got your full suite of options available to you. We've solved for two. We need to solve for RMB bonds, we need to solve for RMB equity. This is on our to-do list. Now it's gonna be a function of what the regulators allow us to do. The idea is to be first in line when it opens up, right? We are part of the dialogue.
We have positioned ourselves in front of the CSRC to tell them, "Hey, we know how to do REITs. We opened the REIT market here in Singapore. We made mistakes. We can tell you how to avoid them. We can tell you how to structure it so that you create an ecosystem that is tailored for your natural REIT investor, which are your core guys, your cores, your pension funds, insurance companies, your people who are looking for stable income as a source of income." That is gonna be paramount for the Chinese regulators. They are gonna be very careful. They're gonna be deliberate about not getting it wrong.
The sponsor that they choose to allow to put this product out to the market when it comes, not for the infrastructure stuff, but the real REITs, what I call the real REITs, commercial properties. Where the vast majority of the opportunity set lies for China, and quite admittedly for CLI as well, this stuff has to be right out of the gate. They cannot afford to get it wrong, because then investment will sour, sentiment will sour, they will be second-guessed. Our read of it is that they will be deliberate about it. They will want to be sure that they get it right with the first product. This is where I think we want to position ourselves to say, "Let us help you do that." By the way, we've got a bunch of properties that are stabilized.
We can deliver the types of core returns that you can get to, and help us help you get there. I think we have a role to play here. It will be a function of where the regulator is comfortable enough. If you take what Tze Shyang said earlier about sentiment and the commitment to reopen the economy in 2023, I think this dovetails quite nicely as part of that. Whether it happens earlier, 2023, 2024, who knows? At least it's on the table, and they can see this as part of the solution set to reopen the economy, introducing products for an internal circulation of capital and prudent capital management, guys who know what they're doing in terms of managing such portfolios. My personal view is I think it's coming. As an institution, we wanna be front of the queue.
We're doing what we can to demonstrate that we deserve to be there. When the time comes, I would expect us to be in that conversation.
I'm sure at the back of some of your minds, you may be thinking, you know, if you're gonna do C-REIT, what does it mean for CLCT? John, can I invite you to share your perspective?
I mean, I rather we deal with the issues and share how we are thinking about this. I mean, I'm sure this will be the second question. John, I...
I have to agree with Paul. I don't know, is that really your question? If indeed it is, you know, at the end of the day to me, capital is fungible. I think we can work things out. Just like when we did 79 Robinson Road CapitaSky, people wasn't expecting private fund and public fund to co-invest. We did that. Likewise, there's no reason why we can't work out a solution between CLCT and whatever REITs we may or may not do in China. I think at the end of the day it's just working out what's the right thing. It's quite interesting, right? As China open up, in fact just this week alone, I have two different conversation with businesses from China on the same topic.
Last time I had a really long one with a bunch of bankers from China. I think people are optimistic, and I totally think there's absolute good reason why regulators and policymakers in China would want to have REITs opening up to beyond infrastructure and logistics properties. To me, it makes a lot of sense. The moment you draw the line between residential and non-residential, I think REITs as shares has got a very important role to play in the, in the way they manage real estate market. I do think they got that already. Now I do think the space will move very quickly, and from our perspective is we work out something that work very well. In fact, Zui, I think you're here somewhere. Yes, I saw everybody else pointing to him except him.
Yeah. I mean, in fact, he's part of the conversation as well as to how do we find a logical way to deal with the opportunity that we see. Clearly, Chinese capital is very competitively priced, so it would be silly of us not to leverage on it. Likewise, it would be silly of us not to do justice to CLCT. Trust us, we are logical people. Thank you.
Okay. In the interest of time, we'll take another couple of questions. Before that, I don't think we have a lot of questions on the new funds that we launched, and I'm quite keen to tell, to have our leaders tell all of you more. Maybe Patrick and Simon, could you perhaps, you know, say what are the key highlights of CDCT as well as our C-COP program?
Sure. Thanks, Grace. You would have seen the announcement yesterday on the launch of our China Data Center Fund targeting $1 billion of AUM on a fully developed basis, equity size just over SGD 500 million. That's quite a substantial achievement for CapitaLand. It's a large project, two sites totaling 100 megawatts outside Greater Beijing. It's a greenfield development business. We source those opportunities on our own through our own network, and during the last 12 months have been building up a dedicated China Data Center team across all areas of delivery, including design, development, operations, and importantly, customer relationships. That's the first foray into the China Data Center market, which is the second largest data center market in the world, the largest in Asia. We think there's tremendous growth there.
Leveraging off of CapitaLand's deep embedded boots on the ground and the 30-year history in China, I think we're very well-placed. On top of that, I think it's worth noting that we do have a substantial global data center business, both in U.K., Europe, and in Asia-Pac. Today, we have 26 data centers, 500 megawatts on a fully developed basis, SGD 6 billion of AUM. That puts us in terms of other global operators, you know, mid to high tier. We've got a really good capability globally. The other thing I would add is. We have in-country teams that are capable of doing what the China team is doing: design, development, operations, and customer relationships.
The other important link, we're already starting to see it bear fruit, is the linkage of having a global data center portfolio and frankly, having a global portfolio of traditional real estate. We're starting to identify customers who want If we have space in our London data center, they call us up and say, "Hey, do you have space in your data center in Singapore?" We've had some live examples of this just recently. Similarly, we may have tenants, you know, financial institutions as tenants in our office buildings or our office parks in the case of India, who need data center capacity. Having that cross-selling capability in the organization is very, very powerful.
We do plan, now that we've announced and launched this China Data Centre Fund, we do have ambitions to do more in the region and potentially more in Europe.
Thank you, Patrick. Simon?
The China Special Situations Fund that we announced this morning is really a reflection of the market and where it's at. Again, it's a contrarian play, enabling investors to take advantage of the dislocations happening in the Chinese market and the pressures, particularly on owners of real estate. The two investments that we announced this morning, one was a logistics property in Foshan that is a fully leased facility, and it's under a 15-year lease. Again, it's a situation because of the owner's position. The real estate is fantastic, and we're able to procure a world-class facility there for that textile e-commerce tenant. Again, right time, right place, right location. Able to assess the market and move very quickly to secure that property for our investors.
The Beijing property that Chee Koon talked about was just probably one of the most engaging discussions we've ever had at our investment committee. The timing was, you know, the day of the opening of the 20th Congress. We just brought it back to very simple real estate fundamentals, that it was a very well-located property on the East Third Ring Road, where there is in the four ring roads a moratorium on office development. It was the complete kind of broken situation that we have been actually monitoring over the last couple of years, and we're able to really underwrite it on the basis that it's just very, very good value. Like all properties we acquire, it has a good component also of alpha.
Therefore, we're able to use our hands-on asset management skills to deliver an even extra quality return out of the cash flow. Again, our pipeline's quite deep. We're always looking at three or four properties at any one time. Investors like this strategy and will come into the program increasingly over time. I'm not sure how many other players could actually execute that type of program. The other dimension of this, and something that we should talk more about, is the ESG components. Every asset we underwrite, we go through very extensively the footprint of that property, and that also is an increasing part of how investors are looking at the performance of their investments. It's not just IRR and EM. They do deeply take care for the SG, and they see us as being a very good steward for that.
It's really a new age program, and it has that nice kind of sliver of ESG adding value to the investor's profile as well.
Thank you, Simon. We'll take the last two questions. Brandon, first and Derek, DBS. Brandon?
Yeah. Hi. Brandon from Citi. Just two questions. The first one is on a capital management standpoint, right? Under what kind of circumstances could we potentially see CLI or a screw of REITs undertaking, say, a preemptive capital fundraising? Do we have to see, like, a GFC, or do we have to see, like, a very attractive acquisition target? Yeah, that's my first question. The second question would be, how long do you think the current environment of distressed assets in China is gonna last? I think obviously we have seen you executing very well since last year. Yep. Thanks.
I will talk about CLI fundraising. I'll pass it to John to talk about the REITs. For CLI, we currently see no need for equity fundraising. As mentioned, you know, we've got strong cash flows, strong balance sheet. I think the only opportunity perhaps, and there's nothing identified, if there was a large M&A opportunity, we believe our share capital is quite valuable for that. For that reason, we may use shares for a big M&A transaction. There is none in the near term. That's the only time likely we would use that. Otherwise, there's no need at the parent company.
Thank you, Paul. Brandon, I guess we will raise equity when we have a need for it. As we demonstrated in the past, whether it is, Clare or Clint, we did raise equity ahead of the transaction. We know that because you cannot always match capital markets window 100% perfectly with investment closing timing.
Once we're confident that there is an investment that we want to make because it's attractive, it's good for unit holders, and if, let's say, the timing of capital market is a little bit ahead of where we see investment market, we will do it preemptively. It is on the premise that we've got good use for the proceeds. Hopefully that answer your question. Thanks. On China distress, my own sense, we probably would have maybe at best 12, 18 months remaining, at best. Why? I think, today the balance sheet of many of the real estate developers are being repaired through massive support from the Chinese government, and they need to continue to sell the residential stock.
While they do that, I think they probably do not have too much attention to play in this space. Once the recovery is there, then we will be again competing with the local players. The second thing is, I think a number of foreign investors, until they get greater clarity on the geopolitical tension, I think going to investment committee today to do investments into China, it's going to be complicated for many investors. That I totally can understand. The question is for us who understands the market, we can underwrite the risk, we can asset manage. I think this is a time for us to find the right opportunity and to continue to place the right bets. I mean, we stay very disciplined.
Deals that are marginal, they know they won't even bother to come to the investment committee because in fact, for the last 1- 2 weeks, we haven't had any investment committee meeting. I say, "Marginal deals, don't bother coming." It has to be, you know, delivering the alpha returns because it's on the basis. We need to at the end of the day, if we put on the balance sheet, we need to be sure we can bring this to investors and say, "We think this is a good deal, and we can deliver the returns." My sense is 12 to 18 months maximum, because we know when China reopens, they can recover very, very quickly. I can't predict for sure, but let's see. I was in Shanghai last week.
The traffic jams were horrible. The queues going into the restaurants were the same like before. I mean, it was packed. I mean, I felt like it was back to the China that I was familiar with. I talked to the colleagues in China. They say, "Please, it's over. We look forward. No more COVID. It's forward." I mean, that's their confidence. I think domestically, I think you will see spending, you will see the government doing a lot to spur the domestic economy. Whether new FDIs will go into China today, I think people will still take a wait and see approach. Existing businesses looking at the domestic economy, I was with one of the big luxury brands owner founder in Europe not too recently.
Gonna continue to invest in China very significantly. They say, "Please," I mean, whether there's tension or no tension, people are gonna spend. I think we have to take things in perspective and just look at the potential of the spending power of the domestic. I mean, which other market has such a big middle class earning good salaries, you know? If you're gonna ignore their market, it's going to be quite challenging, right? For many companies. Yeah.
Just to add to that, Brandon, I think let's wind back the clock to second quarter last year when Shanghai started to lock down. This actually, the window didn't open until, let's say, April last year. Was it April, May? We had Shanghai lock down, right? It started to get serious. We started to say, "This is what we experienced in Singapore in 2020. 2020, April, May," right? Extended restrictions. Simon and his team came to us and say, "Hey, this is a window, and we should use this window to leverage off our boots on the ground because people cannot travel into China anymore." We become a very small circle of investment capital managers who can start to sniff out this stuff and be ready to move when capital is going to invest.
There will be capital partners who will have similar mindsets to us, 'cause they will see that this is going to be a window to act with asset owners that Simon mentioned, asset owners that need to transact to solve their broken balance sheets. This has indeed come to pass. It's taken us the better part of 2022 to manufacture the product and to get capital partners who share see what we see, to see that this is a finite window, and we have to strike now whilst this window is open. Just to give you a appreciation that this does you don't just switch the light on or just flip the switch and the manufactured stuff comes on. This takes time. It takes foresight to be able to predict that this is an opportunity for us.
It takes an appreciation that this is something that we can demonstrate leadership on, we all have to move together and move fast. I like to think that this is. We should take a minute to just appreciate that this is something that's not easy to do. It's important that investors recognize this. There are not that many opportunistic funds out there right now. I'd like to think that there's more to come. If we continue to keep our eyes on the ball and stay disciplined and keep our ears attuned to other thematics that are emerging on the horizon, we should be able to similarly put out product that is in keeping with times and investment themes that are exciting to investors to build alpha for us.
Last question from Derek. Just one question, right?
Okay. Thanks, Grace. Good morning, management. Just one question from me, and it's on asset prices. I'm just wondering about in terms of the geography that you're looking at, asset classes that you're keen to invest in, you've been very disciplined. I'm just wondering whether what's asking by the sellers versus what you are keen to invest in, how big is the gap that will turn a bit more aggressive and maybe if you could and indulge us which country and which asset class would you be keen?
Actually, we are quite agnostic whether it is, whether the opportunity is in Singapore, in Europe or in China, as long as we find that the pricing is interesting. I mean, the discipline that we are giving to the team is to find deals that are below replacement cost today as a guide. I mean, given the fact that it's very difficult to underwrite exit cap rates and, I mean, in funding in just for instance in UK, is just too high. I mean, to be honest, I mean, we were given a very great opportunity to develop a data center, great location in London.
We were not prepared to do the deal because just simply because we said that we won't be able to underwrite the construction cost in terms of the potential cost escalation and, so we say, "No, we are not gonna do it." Good location, again, I don't believe that we can deliver the level of returns in that under today's environment. No. Yeah, we say no to the deal. Very disciplined. Extremely disciplined. Yeah.
Okay, we're gonna close. Chi Koon, any quick closing remarks?
No. Thank you. I think did we overshoot the time a bit?
Yeah.
Yeah.
CDL's next.
Okay. I think Sherman is giving quite a lot of dividend. Thank you for the time, for the attention and for the support as always. Just a reminder, we are in this for the long haul, building capability and creating enterprise value consistently. Okay? Thank you.
Thank you. Thank you, everyone. Have a good day.