Good evening, ladies and gentlemen. Welcome to the half year 2025 results briefing of CapitaLand Ascendas REIT, or CLAR for short. We thank you for joining us in person and online this evening. As always, the briefing will start with a presentation by management on CLAR's financial and operational performance for the first half of 2025. After which, there will be a question and answer segment. For those in the audience, you may raise your hand during the Q&A segment. I will call out your name or identify you by your company, and a microphone will be brought to you. If you are attending the briefing online, you may submit your questions via the Q&A feature on Zoom anytime during this briefing, and we will address any questions that have not been asked by the audience after.
Before we begin the session proper, let me first introduce the management on the panel. First, we have Mr. William Tay, CEO of CLAR. Second, we have Ms. Koo Lee Sze, CFO of CLAR. Then we have Mr. James Goh, Head of Portfolio Management. Last but not least, Ms. Yeow Kit Peng, Head of Capital Markets and Investor Relations. With that, I will hand the time over to Kiping, who will begin the presentation. Thank you.
Thanks, Andrea. Good evening, everyone. Welcome to CapitaLand Ascendas REIT first half results presentation, and also welcome those present here with us to J'NEO, our newly completed property in Science Park Drive. Without further ado, let's jump in to the results. Despite the ongoing macroeconomic uncertainties, we are pleased to announce a steady set of results for first half 2025. Some key highlights here. The distribution income of SGD 331.1 million and DPU of SGD 0.07477 are stable. Investment properties increased to SGD 16.83 billion. Our portfolio occupancy remained high at 91.8%, and we achieved high rental reversion of 9.5% for leases renewed in the first half. Gearing is healthy at 37.4%, and cost of debt is stable at 3.7%.
Diving into the financials, gross revenue in the first half decreased by about 2% to SGD 755 million, and some of the reasons were due to the divestment of some properties in Singapore, Australia, and the U.S. However, the contribution from newly acquired DHL Logistics property in the U.S. helped to mitigate the decline. NPI declined slightly by 0.9% to SGD 1 billion due to lower operating expenses, and distribution income was stable at SGD 331.1 million. DPU declined slightly to SGD 0.07477 due to an increase in the units. When we compare first half 2025 versus second half of 2024, gross revenue increased slightly to SGD 755 million, mainly attributable to the acquisition of DHL Logistics property in the U.S., and partially offset by the divestment of 21 Jalan Buroh in Singapore and Parkside, a business space property in the U.S. NPI increased in tandem with the increase in the revenue.
Distribution income decreased 2% to SGD 331.1 million due to higher interest expense. DPU increased 2.1% in tandem with the distribution income to SGD 0.07681. Okay. Distribution. On June 30, we paid an advanced distribution of SGD 0.06479 per unit for the period of January 1 to June 5. For the remaining period of June 6 to June 30, a distribution of SGD 0.00998 will be made, and you'll be receiving the dividends on September 4. Moving on to investments. We completed the acquisition of DHL Logistics Center in Indianapolis in the U.S. in the first half. We also completed the redevelopment of 5 Science Park Drive. You are here today. We completed at a total development cost of about SGD 884 million.
Very soon, CLAR is set to add another SGD 725 million of income-producing assets in Singapore, which is 9 Tai Seng Drive data center and 5 Science Park Drive business space property next door. The total acquisition cost for the four properties comes up to almost SGD 1.2 billion. If you recall, all these properties were acquired at attractive NPI yields of six over %, and to as high as 7.6% for the DHL property. They are all accretive and will contribute to our income stream in the long term. These slides you have seen before. Moving on to divestment. This is new. We have divested Parkside, a business space property in the U.S., Portland, for about SGD 26.5 million. The property was sold at a 45% premium to market valuation. It was sold to an end user.
On capital management, gearing remains healthy at 37.4% after the equity fund raise in May. You will also note that the debt EBITDA numbers have also improved, and if you look at some of the numbers here, ICR is still very healthy at 3.7 times, and the cost of debt remains stable at 3.7%. Okay. On the debt expiry profile, we have about SGD 6.7 billion worth of total debt. You can see here they are very well spread out. In the next two, three years, we have about SGD 900 million or so due for refinancing per annum. Okay. Natural hedge, we continue to have this high level of natural hedge for our overseas investments. On a portfolio basis, it's about 76%. Okay, occupancy. The occupancy rate for the portfolio was stable at 91.8%. Just on the right-hand side of the slide.
The occupancy rate for Singapore was 91.2%, U.S. 87.3%, Australia increased to 93.1%, and U.K., Europe stable at 98.9%. Let's take a look at the details. In Singapore, the occupancy dipped slightly to 91.2%, and this is mainly due to a non-renewal at an industrial property. When we look within the Singapore portfolio, occupancy rates for the business space properties and the logistics properties were stable. In the U.S., the occupancy declined 0.7% to 87.3%, and this is mainly due to an expiry of a lease in a logistics property in Kansas City, but offset by higher occupancy for a business park property in Portland. Australia improved by 3.9% to 93.1%, driven by higher occupancy rates in Sydney. We backfilled two logistics property and the tenants have signed long leases of five years, seven years in 94 Lenore Drive and 16 Kangaroo Avenue.
As for 197 Coward Street, a business space property in Sydney, it also attracted a few new tenants. Occupancy rate improved from 85% to 94%. Overall occupancy rates for both the logistics and business park properties have improved. In the U.K. and Europe, as usual, the occupancy remained high at 98.9%. New demand in the first half. For Singapore, the largest sources of new demand by gross rental income were the logistics and supply chain management industry. Many of these tenants are moving into our logistics properties. The next large source of demand in the first half is the IT and data center sector. Many are moving into our high specs industrial properties. Education and media is the next group. Many of them are also moving into our business space properties. As for our overseas portfolio, the largest source of new demand was the logistics sector. Rental reversion.
For lease renewals in 2Q, the first column, 2Q, at the last row, you will see 8%. The total portfolio achieved a positive rental reversion of 8%. If you were to look at the various geographies, Singapore, 7.8%, U.S., 10.9%, Australia, 3.5%. For U.K., Europe, you see a dash there, and that's because there weren't any lease renewals during the period. WALE, stable at 3.7 years. On expiries, for the whole portfolio, all four geographies put together, we have a balance of 8.9% of rental income that will be due for renewal for the rest of the year. Okay. Okay. Currently, we are working on six projects, including one development, three redevelopments, and two AEIs. These projects are scheduled for completion between 3Q, 2025, and 1Q, 2028. We will continue to add to this list. All right.
The last slide, in this uncertain economic situation, I think will continue to be with us in the near future. However, we are confident to ride through this period. Right. Given our well-diversified portfolio, good tenant base, good operational management, and prudent financial management. We will continue to adapt to the changing market conditions. Thank you very much. Back to you, Andrea.
Thank you, Kit Peng. We will start with the Q&A segment, and the first raised hand will be from JP Morgan.
Thank you. Thank you for the opportunity. I'm Terence from JP Morgan. Congrats on the good set of results. Since we are here at this beautiful building, perhaps I could ask a little bit more about J'NEO. Is there anything further you could share in terms of who are the major tenants coming into J'NEO? What some of the signing rents are, and perhaps when the cash flow contributions could start? That's the first question from me.
Thanks, Terence. JP Morgan, always the first question. We have not any further updates. We have mentioned we are about 95% pre-committed and in advance negotiation. About 75%, 76% are already pre-committed. Just now we were talking about whether any tenants have moved in. The retail tenants are already in. After you asked, I just got update, first tenant is going to move in in mid-August, end August, September, October, all the way to July next year. We will progressively update the directory when the tenants move in, so you can catch who are the tenants that's moving in. The signing rents, as you have heard me mention about Shopee building next door. Shopee's building, we believe they are 15% under-rented. We are not even talking about the rents that J'NEO has achieved. J'NEO actually has achieved much higher rental.
If you gauge against one-north region, in Science Park, typical signing is about SGD 5, SGD 6. J'NEO is above SGD 7. We believe that this sets the benchmark because of the quality of the building, as well as the offering in terms of retail and the catchment, and it's directly connected to MRT station. You can walk around, it's all covered. This is actually quite a good rent for us. We believe this will just set where asking rent is for other renewals, whether is it in Shopee, across the road in Ascent, this will set the expectation of rents.
Thank you. I just do have a question from a client. Basically, the client's asking, is there risks that when tenants move into J'NEO, is there a risk that they could be leaving some of the existing assets, particularly for Ascendas, for CLI's properties?
Moving from Ascendas.
From CLI's properties into J'NEO.
Existing tenants, huh? I think there's only one tenant that's moving from Ascendas property. The rest are all expansion and relocation outside of CLI properties.
Okay. That's very, very good to hear. Maybe onto my second question, if I could ask on the update on the data centers from Singtel and the company's redevelopment opportunities.
We are still evaluating our plans. We are likely to look at commercial development, as I mentioned, that's probably what we're heading towards.
Final question, maybe any changes to the cost of debt guidance for this year and next year?
What's the cost of debt guidance?
We expect the cost of debt to hover around current levels, the 3.7%, all things being equal. Yeah.
Okay. Thank you, Kit Peng, and thank you, Terence. We'll move to Rachel from Macquarie.
Thank you. Hi, William and team. Thanks for the briefing and inviting us to your building here. Maybe my first question is on the vacancies that I have seen. I think this quarter we have seen a few properties that are single-tenanted that's been vacated. What are your plans on this? You do have some lease expiries that's coming up. Are we going to expect to see any single-tenanted vacancies coming through? Yeah.
James, you want to take that?
Thanks, Rachel. I think it's par and parcel for a large portfolio when we have got single-let properties. As the leases expire, we might not get a back-to-back tenant to replace. I think that's quite common. The one that has just expired in Serangoon is actually a B2 site, pretty centralized. The location is good. The specs might be a bit dated. Nonetheless, we don't think it will be an issue to find a replacement tenant. Maybe not immediately, but we are pretty confident of that site. I think for the rest, again, they are just par and parcel because they are logistics assets. I'm quite happy and pleased to report that 16 Kangaroo, I've got a lot of questions about that over the last couple of quarters. We found a tenant.
We had a couple of tenants who were very close to signing the lease, somehow they just slipped through the cracks. I really do not know why. It really baffles me. I'm very happy to report that Aussie's occupancy has now improved to above 93%.
Okay.
For overseas, I think you will see the details. Yeah, we have two in U.S., one in Melbourne. Logistics single-let buildings is typical. Once a tenant leaves, either you can back-to-back have a new tenant. If not, the current environment require us to at least three months, six months. While James mentioned Kangaroo took us about one year, but at least we do see demand in the market. In Singapore, other than Singtel building in Tampines, this is the other one. It's a B2 site. Actually, it's very attractive given where the current demand is for B2 location. Even before the tenant leave, I mean, some brokers already got wind that they are moving, and we actually had some unsolicited offers to see whether we're interested to divest. We are still evaluating options.
Because a B2 site, I think is quite a good location as well as suitable for manufacturing. Much better than a B1 site. We will evaluate options and see where we can close this as soon as possible.
For the 16 Kangaroo, do you have to give additional incentives to get the new tenant in?
Okay. Hello. Generally, incentives in Australia has gone up, it has helped that the headline rents have also gone up aggressively. We are still seeing a positive at the effective rent level improvement over the previous rents.
Escalation also has gone up. We have signed about 3.5%-4%.
Okay. For the U.S. and the Melbourne properties, the expiring rents, how is it compared to the market rents?
Yeah, I'll take that question. Generally, if you look at U.S., we are still under-rented, although that gap is narrowing. You see even in our latest revision, we are reporting close to double digit. We are somewhere between mid-single to a low double digit kind of under-renting below market right now.
Okay, thank you. Just one second question from me. I think, in terms of your telco part, I think you spoke about converting to commercial, looking at commercial. Are you likely to do it yourself, or are you likely to look for another party to do it for you? That means divestment. Do you have any interest?
All options are being considered.
You have started to market the property?
No.
No.
Yeah. We are still looking at our plans in terms of the development options. Yeah.
Okay.
Whether we divest, bring in a partner or what, I think these are all options that are still open.
Okay. All right. I'll give others a chance to ask.
Next we'll have Dale from DBS.
Yeah. Thank you. Hi, William and team. Thanks for the presentation. Just few quick questions from me. I think, with regards to the acquisition, I mean, with regards to your recent acquisitions and this 5 Science Park Drive, right? I mean, in this first few months, there will be a little bit of drag to earnings because of the placement and things like that. How soon should we expect these additional contributions to start driving DPU, driving earnings back up?
We expect to close within next one, two weeks.
This week or next week? Okay. Sounds good. Okay, next question is on Shopee. I know it is still some time to November, but, how are negotiations looking or what are expectations? Has it changed? Are we still expecting that 15% upside in negotiations?
Still early. That sets the expectation. As I mentioned, I think with 15%, it sets the expectation of what we think is the floor.
To Terence's question earlier, the signing rents that we have achieved and asking rents is much higher. Given it is a full single building, I do not think it is possible, to be honest, it is possible to sign at the max rent that J'NEO can achieve.
J'NEO is multi-tenanted. We bring in different tenants of different sizes, and this is a single let building. I think there will be a negotiation. We have not started, but given where we understand from our existing negotiation with Galaxis and their movement with regards to the business unit that has been moved to Rochester Commons, we got a good sense of where are their business planned. Once all this is settled, I think this is the next stage of negotiation, and it is still November next year, one and a half years later.
Mm. Okay. Sure. Sorry, last question, if I can squeeze in one. I think in terms of the borrowing cost, I think Kit Peng is saying that you expect it to remain around this 3.7. This is including the refinancing that is due for the next half of the year.
Yeah, we are left with a AUD loan. Yeah, that we need to refi. Taking that into account, we should be able to achieve around the 2.7 % for the full year. Yes.
Okay. Got it. Yep, that's all from me. Thank you.
Thank you, Dale. We'll move to Vijay from RHB. The gentleman over there.
Yeah. Hi, good evening. Thanks for the opportunity. I have a couple of questions. Firstly, in terms of the U.S. divestment, it was a good premium, a surprise of 45% premium. Considering the challenges in the market, how did you manage to get such a good premium for this asset, and are there any such opportunities available in the U.S. portfolio for future? Maybe you also can guide on divestment target for this year. Divestment has been a bit slow so far.
Thanks, Vijay. Thank you for asking this question because I think our team did really well. Kudos to my U.S. asset management team. To be honest, all options are always on the table, particularly for challenging markets like U.S. We look at various ways, including whether we can enhance the value of the property by doing selected AEIs, which we have done and we continue to do. If we could then selectively also divest assets and try to extract maximum value for our portfolio. In this case, the end user is pretty unique. It's a local government entity that runs parks around the Portland area, and they were looking for a flagship HQ to move into.
Now, just to give a bit of context, this property used to be occupied by Nike, and when they left, the occupancy went down to about in the 20s, in a percent, and has remained that way for a while. It was active, kinda like combing of the market that we managed to find this potential user. While at first the discussion was about leasing, but it very quickly pivoted to a sale process. We are very happy that through this entire process, we were able to get very good value for this asset and to return that value back to our unit holders by selling that property.
Are there any such opportunities and maybe divestment target for this year?
Divestment target, I think since 4Q last year, I did mention that this year we probably look at about SGD 300 million to SGD 400 million of divestments, in Singapore, in Europe and U.S., as well as Australia. Just what James mentioned, I think all options are open for us, especially such non-core assets like the one that we just divested in Portland. Given that it's actually a government-related company or other entity, it took some time for us to close that, but there is a value to them because it's near where their operations are. Which is why I think it helps us to get a premium. The other one is Australia. I think you have also seen us demonstrated in the past. Last year, we divested three assets that we can get about 3%-4% of exit yield.
I think Australia, even when we will have, for example, some vacancies, we do entertain customers who are prepared to acquire the assets if they say they do not want to lease. We will work on that. In Singapore as well. Singapore, given there are some assets that we believe that is Assets that we want to keep actually are those that we have redevelop opportunities. I think since 4Q, I also mentioned of a redevelop target, about SGD 1.5 billion. This includes not just the data centers in overseas, but Singapore as well, especially near MRT stations, also mentioned by IBP. Those assets that is potentially not able to achieve either higher plot ratio or redevelopment opportunities. And in Singapore's case, if there's still existing good lease on the asset, I think is where we can find buyers for Singapore assets.
These are the few things that we are able to. Hopefully we can close them in the second half of this year.
Thank you. My last question, in terms of occupancies, can you give us more color in terms of the vacancy at the U.S. logistics assets, considering this has been acquired recently? Also in Singapore, the reason for the tenant exiting the Serangoon asset. Broadly, is there any tariff impacts so far you have seen in any of your tenants or your portfolio?
James, you want to take it?
First, I'll address the U.S. question. I think U.S. logistics, there was very strong tailwind right after we did the acquisition because it was post-COVID, and there was the entire supply chain disruption. That led to a lot of 3PLs taking on more space than they required because they were holding buffer stock. Now that things have normalized, it's reverting back to the mean, where there'll be some downtime. I don't expect the U.S. logistics occupancy to vary too much. It wouldn't be at your high 99%, 98% kind of range. It will probably moderate a bit, but it shouldn't move too much. I'd just like to add that U.S. office continues to be challenging, and we do see in the second half some potential downside there. Your last question was on Singapore?
Tariff.
Tariff impact, sorry. On the tariff impact, generally, we've done a refresh of the survey. When the first announcement was made, we actually polled internally our 10 of our largest tenants in each location to ask them what the impact was. At that point in time, the response that came back was, "Oh, it was too early." It's still BAU for them. We did another sense check very recently to find out has anything changed now that things seem to be settling down. Again, the response is the same. There's a lot of uncertainty still. At the same time, we do not see them holding back in terms of either renewing their leases or continuing to expand. I think in geos, we haven't really seen any material impact, and this is not just in Singapore.
This cuts across all of our operations into U.S., U.K., and Australia as well.
Thank you, Vijay, and thank you, James. We'll move on to Tan Shen from Goldman Sachs.
Hi, good evening. Can I ask how you're thinking about redevelopment versus acquisition at this point, and also what are some of the opportunities that you're reviewing?
Both are exciting for us.
I think redevelopment is quite clear given the fact that we are sitting on assets that we know very well. Tested location, we know what we can achieve out of testing, whether there's additional plot ratio, additional capacity. Even for overseas, where there's opportunity, we also looked at whether there is redevelopment to reposition the asset. If you know, a lot of our overseas assets are actually of certain vintage. We want to be able to refresh them, as well as for this data center, the first thing we will do is if there's opportunity, we look at whether we can increase power. With our assets, we can have more control and more, if you like, examine more options for us in terms of redevelopment. Especially when you're holding on to assets for a while, we know whether it's leasable.
If it's a redevelopment on spec or even if you're a customer, we know what we are entering into. That is one key strategy which we mentioned that we will go into because as the REIT gets large enough. In the past, we typically have about SGD 300 million-SGD 500 million, right? As we develop, like take for example, this, we invest about SGD 300 million. We also have a few others that is coming on the way. Once it becomes income producing, it gives us the capacity to bring in development. It's a cycle where we redevelop and then in time to come, when there is new income from the redeveloped sites, then we can continue with redevelopment. This will be a continuous cycle, if you like.
Allow us to reposition our asset either for green purposes or to increase our ability to lease out higher specs as well as reposition the assets. On acquisitions, we have done now to date SGD 700 million with what is approved at the EGM and the DHL acquisition. On acquisition side, we are still active. We continue to explore opportunities here in Singapore, and mostly in Singapore and Europe. U.S., we have took a slight pause of where it is today to see where the dust will settle, and we'll see whether we can reactivate our acquisition opportunities in the U.S. As I mentioned, Australia has always been a difficult market for us, given where cap rates are against debt. The acquisitions, I would say, includes both sites for development, just like what we've done in the U.S., logistics development, as well as core products.
Thanks. If I can follow up on occupancy, earlier, James, you mentioned the U.S. could see some weakness. What about the other geographies that CLAR is in?
Okay, I'll take that question. First we start with Singapore. Generally, we expect it to be pretty stable. I don't expect to see any material movements. As a side note, I'd just like to highlight that CBP, we have actually quite quietly pushed up occupancy there to about 84%. That's the highest in the last nine quarters. While it's no longer in the news, we continue to work hard to squeeze the most and to try and reinvigorate some of these assets. In U.K., Europe, again, we don't expect any large movements because a lot of those are single-let buildings with long leases. Australia, now that it has improved to 93%, we expect it to hold above the 90% mark. U.S., as I mentioned earlier, that the logistics will remain close to where they are currently, and there might be some downside to the office.
Thanks. Just one last question?
Let me just touch on CBP. A year ago, it was 74%. We pushed up to last year's 81. Now it's 84. At 84, it's similar to where Science Park is, Science Park II. If you look at Science Park II, it's about 85. Science Park I is about 90. one-north is the best, 98. I think CBP, what we have done is we have actually injected new target markets we deemed that likely to be approved by the authorities, and they've been quite supportive in relation to where are the adjacent industries. Not the typical traditional BP players. Obviously, you have heard mention about an aviation company entering into OCC. That's engineering. Subsequently, we also started looking at institutions, which we have brought in into CBP. This allow us to be able to fill our buildings.
A quick one. What's the yield on cost on J'NEO?
Publicly, we say 6.3, but now it's actually higher than 6.3.
Thank you. Next, I'll move to Joy from HSBC.
Thank you, everyone. First on maybe just updates on the upcoming redevelopment. Can we get a sense of leasing and income contribution once completed?
The entire-
The 5 Tuas Avenue 5. No, no. The upcoming one, 5 Tuas Avenue 5 and 27 IBP.
About yield on cost, about seven and above?
No, leasing.
Leasing. Okay. Leasing, we will again announce when we hit TOP. Yeah. I hope you understand bear with me because that's how we want to strategize. We do not want to disclose pre-commitment and any leasing activities because there we got a better hold of where, how we negotiate, and where we want to land the tenants.
Okay.
There are pipelines.
I guess maybe just in terms of income contribution, how should we think about income contribution for these buildings? Like when would income start to come in?
For your model, just assume maybe a year. A year of void. Yeah.
Okay.
Yeah.
Okay. Second question, updates on the U.K. data center?
U.K. data center, not much progress. We are still talking to our tenants. I think there was a question asked about Does our tenant include hyperscaler? Most recently, we started entertaining inquiries from hyperscaler. As we all know, as you get closer to the date of confirmation of when the supply will come, I think that's actually triggers some interest. We originally intended to build a 60 MW data center. Given the fact that we haven't got confirmation of when with the additional 35 MW will come in, now we are working with a prospect to relook at the construction. We may then now phase out 25 MW first, then subsequently take 35 MW when the power comes in. This works well with the tenant, well, the prospect, given the fact that even if the 60 MW on day one, they won't be utilizing 60 MW.
We need to go through the specs and relook at our planning and construction.
Okay. Thank you. Just a last question on rental reversions. Your guidance is maintained at mid-single. First half is actually high to double digits. How should we think about it?
We are still tipping at mid. I think as James mentioned, we still continue to see some uncertainties. To Vijay's questions, whether tariff has any impact, we haven't seen directly hit from our tenants or rather as at least from our tenants. On the question that Vijay asked about whether this quarter's non-renewal, was it affected by tariff? I don't think so because their business was slowing down as we see from their business. We think that given where now tariff is landing, we may start to see signs, whether it is in 3Q or 4Q, to see whether there's impact down the line to our tenants. At this point in time, we got no clear indication. The tariff is probably holding their expansion.
If it's renewal, most of the time, since it's uncertain, they renew short-term, two years, three years, instead of five years or seven years. I think with all this clarity, I think we would like to see our tenants being able to make better decisions, and we would then evaluate whether there will be any impact.
Thank you.
Thank you, Joy. We'll move to Jonathan from UOB.
Sorry to repeat the topic. I'm looking at tariff, but maybe from a positive angle. I read tariff in Singapore is 10%, a lot lower than 20% in neighboring countries. Some are even higher. Does that mean that there will be positive impact on demand to expand in Singapore for multinational companies? Would that lead to higher occupancy for Business Park and high-tech buildings in the second half and beyond? Yeah.
Business Park is not affected. I don't think our tenants in that area are affected by the tariff. If you are weighing the point about tariff relatively lower than, say, our ASEAN partners, I hope what you have expected will come true. There are other costs. Occupation costs includes labor, electricity, many others. I would say, I don't think there's any immediate. If there is, it's good, but I don't think it's going to be immediate, given the fact that you were to move an operation from a location into Singapore, it's not an overnight decision. We hope that there will be, because when it first started, I think you also heard me mention there was increase in inquiries. Almost everybody, not just in Singapore, but overseas brokers were telling us there was increase in inquiries. It has since died down.
Now, if you're asking whether with all this certainty, we hope there will be more activities. I think operational cost is not just about the tariff.
Okay. For U.S. Business Park, they are the one imposing the tariff. Is it a positive or a negative impact for Business Park in the U.S.?
No direct impact from Business Park. Yeah.
Okay. Just a short follow-up. Weakness for logistics in the second half. What's the reason for weakness in the second half?
Not logistics. Office. Yeah. Not weakness per se, but continuing challenges with the U.S. office market.
Okay, thank you.
I think U.S. office, we do need to see a catalyst. I think we have started to see a bit. For example, where we see Portland, there's increase in occupancy. A small amount that came from AI-related, but these are still small. If you look at entire U.S. market today, the big tech and the life sciences are not expanding where they were previously. It will still be likely in this state for a while. It's not logistics, it's more Business Park, and we've been saying this actually from quarter to quarter. Logistics, we are still confident that we can find the tenants to replace any vacancies.
Thank you. Thank you very much.
Okay, thank you. Can we have the next question from Dale, DBS?
Yeah. Thanks, William. It's me again. Just wanted to follow up on the divestment targets for this year. How should we look at your divestment gains? Is it you're going to use it to stabilize DPU? It's entirely just used to repay debt?
We prefer to repay debt. That opens our headroom, and we can acquire. If we do divest at better exit yield, of course, acquisition, we've been looking at 6%, 7%. It'll be helpful for us to recycle, and that's probably a better use of funds. If you look at even this half year, operationally, if you look at the numbers, whether it's NPI or gross revenue, it's been quite stable. The key reason for the slight decline in DPU is because of the new units that's issued. The relevant question is when income will come in. Likely to be these two weeks. That will actually be able to support the new units that was issued. We prefer to make all the divestment proceeds.
Okay. Got it. Just a quick follow on that is, I'm presuming any of the divestments, it would be somewhat dilutive to DPU in that sense, unless you get really low exit yields of, I don't know, below 4%?
Depending on market, yes. I think if you say in Singapore, I think where you've seen all the existing divestment that was done, about 5%-6%. Obviously, you hope to do better, and we can acquire better. In terms of increment between a divestment acquisition, I think there's some positive carry. Take, for example, where we acquired, it was over 7%. It is huge given the fact it is over SGD 400 million. We hope to be able to do that. While we look at divestment, yes, including overseas, where there's still rent growth, like for example, Australia, we do expect sharper exit yield, which will be helpful for us to redeploy.
Okay. Got it. That is clear. Thank you.
Thank you, Dale. Are there any more questions from the audience? Okay. If not, I think we can end this session. There is no more questions online that were not answered, mostly covered as well. Yeah, I will just do a final check. Oh, okay. There is one more question.
Thank you. For U.S. portfolio, I think occupancy now is at 85%. Logistics is stable, some challenging in business space. You think portfolio will drift down to close to 80% occupancy?
I cannot give precise guidance right now, it should be on the downward trend.
Okay, thanks.
It took us a while to drip to 85% as well. There's always, if you like, we do see non-renewal. After a few months, we do be able to backfill. While there are still activities, I think what I mentioned about if you want to see the occupancy starts to pick up, I think we need to see catalysts. Yeah.
The vacancies are mainly downsizing or just vacating, moving to somewhere else?
A mixed bag. Non-renewals as well as downsizing.
All right. Thanks.
Okay. Thank you, Rachel. Any final questions from the floor? Okay. If not, thank you everyone for joining us physically today as well as online. We wish you a good evening ahead. If you have any further questions, you can follow up with the IRC. Thank you.