Morning, everyone. Welcome to CLCT's 1Q 2026 analyst briefing. I am Xiuyi, Investor Relations for CLCT. With me today, we have our CEO, Gerry; CFO, Joanne; CFO Designate, Lin tong; and Head of IPM, You Hong. For this meeting, we will start with a brief presentation followed by a Q&A session. If you have a question, please use the raise hand feature, and I will direct the time to you. With that, Gerry, please go ahead.
Thanks, Xiuyi. Welcome, everyone, to CLCT's 1 Q 2026 business update. Thank you again to make some time this morning to attend this presentation. This is a business update, so I think it will be relatively short. There will be more Q&A time later. CLCT, we are the first and largest China-focused S-REIT. Now, of course, we also have connectivity to the C-REIT market, through us jointly listing the C-REIT on the Shanghai Stock Exchange with our sponsor. Our current total assets is SGD 4.5 billion. We have eight retail malls, five business parks, four logistics assets. Most of our assets are in tier one and tier two cities. Distribution yield using FY 2025 DPU with the unit price now is roughly about 7%. That reflects some of the unit price movement from the broad market weakness after the start of the Iran war.
In terms of our asset allocation, you can see that relatively unchanged. Our retail is still our largest and most resilient asset class, 70% of gross rental income. That is the biggest part. The remaining 30% is what we term as more new economy, so business parks 27% and logistics parks, smaller at 7%. In terms of the different segments, generally speaking, the retail has been showing relatively more resilient with our AEI effects starting to flow in Q1 of this year. Logistics stabilized, of course, with some land resets that we have done in 2025. Business parks, you would see that continue to have weak demand. Overall portfolio gross revenue, and NPI, dropped about 5% and 3%, respectively. That is mainly due to the divested Yuhuating effect.
Encouragingly, on same-store basis, you will see that our portfolio gross revenue are marginally negative at -0.4% year-on-year. NPI actually increased 1.3% year-on-year. If we dissect further for retail, again, on the headline, revenue, it declined by 7.2%, but again, mainly due to the loss of Yuhuating's revenue, which alone was about RMB 21 million. Without that, if you exclude that on a same-store basis, the drop net narrows to -0.5% year-on-year. The other effect is, for retail is that the completed AEIs started to provide us with new revenue flow. That is about RMB 5 million per quarter. It was somewhat offset by some of the continued weakness we see at Xinnan, Grand Canyon mall, and Aidemengdun. For BP and logistics, when we combine together, the revenue is relatively flat year-on-year.
What we have done, of course, we continue to focus on operating efficiency. Our operating costs on a year-on-year basis, we reduced by 3.7% on same-store basis. Next, if you look at some of the retail operational statistics for 1Q, continued growth in traffic and tenant sales. You can see traffic grew by 3.3%. Tenant sales grew by 5.5%. Both of these statistics are generally faster than we have seen in terms of growth than the average of full year 2025 over that full year 2025, which grew about 2%+ for the full year 2025. But really, we are continuing the strong momentum that we saw 4Q 2025. Overall, occupancy cost healthy, 17%. Again, there is a slight drop in occupancy cost. That is due to the good, healthy sales growth that we have seen. Trade categories that have done well, F&B, 4.2%. That is not a surprise.
It has been a big category for us. Again, last quarter I shared the same trends are driving this F&B segment. We introduced new high-performing trending brands, which are pull factors for shoppers. Growth also was broad-based. You have all local favorites, Japanese sushi chains, and bakeries all doing well. IT up 8.5%. That is again boosted by consumption voucher as far as we mentioned, we expanded more digital brands during our AEI in Xuefu and Wangjing. Brands like Huawei continue to do very well in our malls. Jewelry and watches, +8%. Again, driven by the trend to invest in gold. Toys and hobbies, again, a standout, +59.6% this quarter. Continued popularity of the collectible toys market. POP MART was 100% up year-on-year. MINISO, again, did very well with the MINISO land at Xuefu going strong.
They are up about 58% in terms of sales growth. The other categories that are not in the slide, but I can share a little bit. Last year, we did a lot of supermarket AEIs. The supermarket upgrading in Wangjing, Xuefu, Xizhimen did well. Those powered our supermarket category. Actually, it is there in the right-hand side. We had strong sales from there, RMB 80 million. The growth there is, of course, double digit. Since last year, supermarkets, some of them have closed down. Once they were open, this supermarket drove good traffic growth at the three malls that they reopened at. Another category that did well, sporting category. We also opened at Decathlon in Rock Square, and very good store in Xuefu. The sporting category this quarter also did very well, +46%.
One real surprise for me is that the fashion category actually turned positive this quarter. It was + 1.4%, a small positive, and growth was driven by the stronger malls. Some of the names that have been growing well, [what it termed] , which is basically winter wear, thermal wear, and perhaps it is driven by the winter season. We had a strong overall growth of about 40% sales growth. While one quarter isn't a trend yet, but certainly this is encouraging because we have had many quarters where we have not seen fashion had a positive sales growth. In terms of occupancy, our malls continue to have high occupancy. This quarter we had 97% with almost all malls above occupancy of 95%, except for Xinnan, which, of course, we are continuing to reposition.
In terms of reversion, similar levels to 2025 at about - 2% with two anchor renewals affecting our reversion number. We are doing some anchor renewals, like in Nuohemule and Aidemengdun. Business parks occupancy is at 86%, a slight drop from 4Q 2025. Leasing momentum in the 1Q is usually slower, but our business park assets continue to outperform our submarkets, despite a generally softer environment for business parks. We see improvements in Ascendas Xinsu Portfolio and Ascendas Innovation Hub. There are declines in some of the other assets. For example, Ascendas Innovation Towers occupancy dropped mainly due to one of the BPO tenant that did not renew upon expiry. We are looking to fill that. Hangzhou phase one and two, challenging market, which we shared before supply wise.
Occupancy drop were from two bigger e-commerce tenants that pre-terminated that took up about 4% space of Singapore-Hangzhou Science & Technology Park Phase II. Previously, we also shared that for Singapore-Hangzhou Science & Technology Park Phase II, we had some ex- master lease service office lease that we took back, that is about 55,000 sq m, and then where we sublease now from about 70% last year, we are now up to 74% backfill. We will continue to backfill that space. Overall business parks are reversions at - 11%. We are, of course, prioritizing occupancy, through actively trying to retain our tenants and conversion of the new leasing pipelines. You can see that actually this quarter we did do quite a lot of leases, almost 60,000 sq m of renewals and new leases in 1Q. We are working hard at it.
Logistics park, smallest part of our portfolio, 3% of GRI. We can confidently say that I think the logistic portfolio has stabilized. We further improved in Chengdu, driving that occupancy of that asset to 96.2%, and also improving the overall logistics portfolio to about 99%. We feel that rents have almost bottomed up in this logistic portfolio. We aim to continue to achieve full occupancy at this level. Capital management, before I hand it off to Lintong to talk about it, I would like to just highlight that in terms of our average cost of debt, this quarter we have managed to cut it down from 3.3%, where we ended off the year in 2025 to 3.1%. Benefiting our efforts from refinancing and the overall constructive rate environment in both Singapore dollars and renminbi.
For this quarter, the combined efforts, we managed to translate a loan interest rate savings of about SGD 2.9 million. That is about 18% year-on-year drop. Over to Lintong.
Thank you, Gerry. Capital management remains a core strength and priority for CLCT. Our focus is actually very clear. We wanted to maintain a healthy balance sheet, actively lowering our cost of borrowing, and protect distribution stability across the cycle. As at March 2026, our CLCT step level is slightly higher than one quarter ago following our distribution. That has resulted in aggregate leverage of 41.4%, which still remains comfortably within the regulatory limit. More importantly, like what Gerry has just now highlighted, we actually have achieved year-to-date average cost of debt of 3.1%. This represents 40 basis point reduction year-on-year, and 20 basis point reduction versus full year 2025. These are tangible outcomes from active actions taken early in 2025, when we proactively refinanced and shifted funding from higher cost Singapore dollar debt into lower cost renminbi debt.
Also, we have increased our proportion of renminbi-denominated debt, which has strengthened our balance sheet, making it more resilient against the FX movement. As we deliberately balance our Singapore dollar and renminbi debt mix to stay flexible across various macro conditions, I want to highlight that in the small table on the upper right corner, that actually shows our distribution sensitivity on Singapore dollar and renminbi interest rate movement. We now have more floating rate debt in renminbi in Singapore dollar. This actually positions CLCT to benefit from monetary easing in China while being better shielded from any potential volatility in Singapore dollar interest rate, given the global macro environment. With lower borrowing costs, that has also strengthened our credit profile. Our interest coverage ratio has improved to 2.9 x.
Under stress test scenario, whether 100 basis point increase in average cost of borrowing or 10% decrease in our EBITDA, our ICR, interest coverage ratio, is able to remain comfortably above 2.3 x, well above various regulatory thresholds. CLCT's debt maturity profile also is very well-stacked, with annual refinancing capped at around 25% of our total debt. That is to manage our refinancing risk. The only offshore bond that is maturing in 2026 is RMB 600 million 3.8% FTZ bond, which is due for refinancing in Q4 2026. While CLCT has sufficient committed bank facility to refinance this bond, we see this as a good opportunity for us to further diversify our cost of funding, as well as to refinance our debt at meaningfully lower costs. We will actually keep unitholders informed about our refinancing efforts in the following quarters. Finally, we have strengthened our natural hedge.
Our renminbi-denominated debt now represents about 60% of our total borrowing, including other hedging instruments. We have around 78% of our total debt in renminbi-denominated form. In summary, our capital management strategy is to deliver a very clear and measurable outcome for our unitholders. Lower cost of debt and stronger resilience to interest rate and FX movement. This effort underpins our distribution stability and provides CLCT with long-term growth capacity. Now over to Gerry.
Okay. Thanks, Lintong. I will just end off with just a summary of our strategy in 2026, which is really a continuation of what we have done in 2025. We are trying to build a portfolio in the long term that aligns with China's focus on domestic consumption and innovation-driven economy. How we are doing it, we create value. We have, in 2025, established a long-term capital recycling vehicle by the C-REIT platform. This will continue to support our ongoing portfolio reconstitution. In 2026, our immediate target is to target some expansion in our new assets, especially retail, while continuing to make sure all our properties have stable occupancy. Unlocked value. What we have done, of course, is last year we have recycled CapitaMall Yuhuating. In 2026, our first priority is still to buy an asset to replace, to vanish and reconstitute what we have sold in Yuhuating.
We will continue to work on and see whether there are suitable opportunity to recycle some of the non-core or mature assets, where we feel that value has kicked. Extract value. Our AEIs, I think is clear for everyone to see, have been successfully completed and helping us in terms of organic income in 2026. So that will continue to be a key part for us. We are trying to identify whether we can extract more value from existing assets. As we look for new acquisition, we also want to see whether the new acquisitions that we are evaluating have potential and room for us to continue to apply our AEI expertise on them. Proactive capital management, I think Lintong has already touched on it. We will continue to drive down our average cost of debt while reducing our FX base where appropriate.
So that is the end of my presentation. I will hand it back to Xiuyi for the Q&A session.
Thank you, Gerry, for the presentation. Now let us proceed to the Q&A segment. We have our first question from [Terence]. Please go ahead.
Hey, thanks, Gerry, for the presentation. Congrats on actually the strong numbers. Actually, I really wanted to ask on QoQ. I noticed that, let's say in fourth quarter last year, actually, both revenue and NPI did drop in the mid to high single digit number on a QoQ basis in fourth quarter. Then this 1Q, it did improve quite substantially on a QoQ from fourth quarter. Maybe could you share on the QoQ movements in the numbers? That is my first question. Yeah. Maybe we can answer this first.
I will answer that, and if there is some additional info that the CFO want to provide, he can do so. For the first two numbers, I think if you look at this slide, we sort of have already laid that out. Of course, the big effect is Yuhuating in terms of the revenue. I think I mentioned that is actually quite a big number. That is about RMB 21 million that we lost for revenue just because we divested Yuhuating. But if you exclude that, you look at the other components, we have the AEIs effects flowing through. Last year, most of our AEIs completed some at the late part of 3Q, some at the late end of 4Q. So most of the income really have not come in. But this year we have full contributions from all our AEIs.
Just now I mentioned that the swing there is about RMB 5 million per quarter. So that is a key part of why, I suppose, you saw that retail revenue on a same-store basis has been quite stable. Right. Of course, as I mentioned, it is slightly offset by some of the poorer assets. Xinnan, Grand Canyon, and Aidemengdun. So that is basically how we come to about flat, excluding Yuhuating for the retail revenue. Business parks NPI- wise, actually, if you look at the segmental breakdown, you would have saw that actually business parks also improved. Part of it was because last year we had been trying to backfill some of the spaces in Singapore-Hangzhou Science & Technology Park Phase II. I mentioned about the service office master tenant, which we took back the leases from and then start re-leasing out.
Last year we said that we finally managed to lease it out to 70%, but a lot of it was really committed at the back end of the year. Then again, the income flows and effects start to flow in 2026. So that helped basically, together with logistics park, get us to a position where revenue is flat rather than declining in those sectors. And of course, generally, we are trying to maintain cost control. So I mentioned the cost control, and we have saved about 3.7% on same-store basis. So that is why on overall basis, you can see the NPI is up 1.3%, excluding Yuhuating's effect. Is that—
Yes, that's very helpful. Maybe if I can ask a separate question. I understand that the C-REIT regime has changed quite dramatically. I mean, your sponsor is looking at another separate C-REIT. Wanted to get your views on how the changes impact the existing C-REIT and whether you may look to divest assets via C-REIT or how are you looking at asset divestments?
Okay, so two questions. I think one is about the new C-REIT and the relationship with us and the sponsor. Second one is whether we are looking for more securitization or divestment from our portfolio into the new or old C-REIT. I think those are the two questions. The new C-REIT format is something that really picked up in concept only end of last year. It's something that the CSRC in China, the securities regulator, is driving very hard to get going off the back of already quite a successful C-REIT market that they have right now. CapitaLand, as a very reputable REIT player globally and also in China, has been invited to do that sort of first pilot batch of this new C-REIT format. The differences I can let You Hong explain the two differences in a short while.
But when this was discussed, certainly CLCT was also in the loop, and we also were consulted to see whether we want to have any assets securitized into this vehicle. New vehicle that's coming up, which will probably be 2Q and 3Q by the time they list it of this year. We decided that since we have done our first securitization quite recently. We wanted to pace out the pace of our securitization or divestment so that our DPU can have some income stability. As you can see from the results, even though Yuhuating's divestment was not that big, we still lost some income. We wanted to see whether there are opportunities to basically buy some assets to basically replenish those income before we go on to the next securitization. If you look at the general market for C-REIT, it's actually very buoyant.
So we are in no hurry. The market will be there for quite a while for us to take advantage of when we need that liquidity. So it depends on whether we have the capital needs. Maybe we find very good assets, a very good attractive deals that then we may think of activating another round of securitization. You Hong can maybe explain the difference between the new and old C-REIT as well as what people are saying in terms of how they work together.
Yeah. On the new regime, if I may, we can call it commercial C-REIT, just to terminology differently from the previous regime called infrastructure C-REIT. They are actually quite similar in terms of leverage, the legal structure and all that. I would just say there are two to three main differences that drives them. One is the speed at which I think the regulatory wanted to move this faster. I think they have sort of, the approval window will be shorter, because last time there's an NDRC, CSRC sequentially have to approve it. Now, I think it's all in the CSRC's purview. That's number one. Number two, I think asset class, they've expanded into a more bigger real estate-focused commercial asset class, namely including office, hotel. Of course, retail are still in it.
All the other more generic type of real estate or income-producing real estate are all admitted to this commercial real estate, which previously it was very limited. Number three, I think they've also relaxed certain reinvestment obligations. I will not go into too detailed, but having —basically, I think, this is welcome generally by the market as a whole. From our point of view, I think we are indifferent as to which vehicle can be our offtake vehicle. I think there were also questions on why there are two, both can do C-REIT under CapitaLand's name. I think the regulators also suggest that could, in the future, be actions there to take care of that, but that will be a next stage action. Yeah. Okay.
Thank you, You Hong.
Thanks. That is very, very clear. Hopefully we can see more C-REITs to come. Yeah, that's all I have. Thanks.
Thanks, [Terence]. The next question is from [Geraldine]. Please go ahead.
Hi. Morning, Gerry and management team. Congrats on the more stable than expected set of results. Maybe just tying back to [Terence]'s question on divestment, you will probably look to phase it out a little bit more to reduce DPU impact. Can we also say the same for the existing recycling to CLCR in terms of retail assets?
Yes, I think we view it the same actually, because it is kind of, I would say, a slew of tools that we have in our disposal because we are part of the same group. Right? So, whether it is to the new C-REIT or the old C-REIT, we will pace it according to our own needs. Yeah.
Okay. Thanks, Gerry. You also mentioned about acquisition opportunity where you see in older retail assets. Just wondering, would you want to pace that with a divestment? Or if the opportunity is really very interesting, will you actually consider doing EFR even though gearing now is at 41%?
Well, it depends on how attractive the deal and basically, the timing that we have, basically to complete the deal. There are quite a lot of permutations. Yeah. It really depends.
Okay. Thanks, Gerry. Maybe just squeezing in question on logistics and business. I think logistics reversion was a positive surprise. Is this lease-specific or really reflecting a potential early bottom for the logistics asset class within China?
Yeah, I think it's quite been the trend for about two quarters already. You Hong can add a little bit more color, but we have tried to communicate that we feel that the rentals have really resettled. That's why if you look at the reversions, it's actually just mildly negative in this quarter.
Yeah. The reversion mainly come from, if I recall correctly, Kunshan and the Chengdu—
That is true.
—because these two are the ones that have a bit of a change in leases. Having said that, I think our observation of the market, I think we have alluded to previously as well, that we will hopefully seeing the rent as stabilizing. Following two years of quite a, I would say, drastic drop. Of course, we cannot say for the whole China, because I think north part of China, southern part of China may be in a slightly different timing and cycle of the market. But in the four cities that we are in, I think this is generally observed.
Okay. Thanks, You Hong. China very big. Maybe just on the logistics, if you look at your four assets, how many percent of the leases are still on the rents that have yet to be raised versus the already mark-to-market rents?
I would say that our lease are generally in the two years, three years kind of lease cycle, and then we have more or less done with the material setting. That is my view.
Okay. So looks like one more year to go there.
No, I would say that we have more or less—
Reset the right discount.
—reset to the market rate.
Yeah.
Yeah. Although some of them are two years, three years. But I think we have done the big churn in the last one and two years. Yeah.
Okay. Sounds good. Thank you, Gerry and You Hong.
Thanks, [Geraldine]. The next question is from Hong Wei. Please go ahead.
Oh, hello. Hi, Gerry and team. Wong Hong Wei from OCBC here. Just a few questions. I noticed that the retail reversions are still negative despite the trade sales going up. What is causing the divergence? Is it just a timing issue or are tenants still being squeezed? Related to this question is occupancy cost. What should we think about as a steady state kind of occupancy cost? Now it is trended lower to 17%, and is this going to trend further lower? Another question I have is on cost reduction, 3.7%. It is somewhat substantial. What was actually being done to drive that kind of cost reduction? Should we be expecting further cost reduction then? My third question will be in terms of the cost of debt. Do you have some guidance on where it will go towards the end of this year?
Okay. Thanks for the question. Four questions. The first two, I will touch on a little bit before I let You Hong to take the first two in detail, and then after that Lintong will second two in more detail. Generally speaking, the whole China environment is still in a deflationary sort of environment. Prices are not really moving up. That certainly fit true when you try to ask tenants to increase rent. Of course, for those trade categories and those malls that we are doing well, we have better ability to ask for higher rents. This quarter, I spoke about, for the retail, there were some anchors that we renew, that affected our reversions. I recall the number without them is -1.6% instead of -2%. But still negative. You are right, still on a negative trend or slight negative.
I shared previously, I think last quarter, that if we believe that sales trend are a leading indicator of reversions. Of course, the timing you can debate of how much a leading indicator it is. We have had almost a 1+ year or two years actually of sales growth that obviously outstrips rental growth. So that to me shows that actually our tenants are actually in a healthy position. That should continue to underpin the strength of our retail portfolio. In terms of the savings, we do work very hard on them. The details, I will let Lintong talk about it. In terms of both operating expenses as well as our interest, we are working very hard on it. The first details, maybe on the operating side, occupancy cost. Maybe You Hong you want to add more color on that?
Yeah. Thanks. I think that's a really good question. Actually, we are also trying to understand, and in my conversation with the ground team, we are also trying to see whether there's room for us to drive rent up. I think the 17% is actually already below the levels of before the level of the pre-COVID. But then again, I think what we hear is that when we talk to the tenants, they are still relatively cautious on upping the rent, although they are able to still do good business. But I think the resistance is there because for one reason is that they are also in a deflationary environment, trying to promote and do more promotions, do more sales events. So they also felt that their business margin is also not as good as the good old days. I think that's number one.
Number two, I think in terms of the aggressive expansion tenants. What we are seeing is more in the drinkings, in the bakeries. Some of them still do, but the large format kind of tenants, F&B, fashions are still sort of lacking or rather the willingness to expand is still not there overall, I would say. So we would want to work with them, see how to drive it up. But I think at the moment, we are still seeing the rent being rather subdued. So I think that will probably take a bit of time. But hopefully now we see the new data on the PPI and all that. Hopefully the CPI will also be able to go into the positive territory for a longer time. I think then people will start to feel that the inflation cycle will turn. I think that will help us generally.
Okay. For the interest saving. Yeah. For this quarter, we are very encouraged to see our cost of borrowing has actually come down. So this is actually years of efforts. Since 2025, we have been actually very much focused on lowering cost of debt and also to use the renminbi borrowing to actually lower our overall cost of borrowing. These actually take time to filter through because we do have some expensive swap that actually need time to mature and reset. So I think for now, I guess this level of cost of borrowing, I think we hope to actually hold it there because we still have some floating rate that are actually subject to macro environment. But we do hope that we are able to hold the interest rate here at this level. Then we are also looking for opportunities to further reduce our interest rate.
Take for some example, our FTZ bond that is actually currently the passing coupon rate is 3.8%. This bond is actually coming due. I think we are able definitely to refinance this bond at below 3% kind of level, even better than that. This bond will actually, any refinancing effect will probably be felt in 2027 and when their interest saving contribute full year. Also we do observe that occasionally there are opportunity for us to swap our Singapore dollar debt into renminbi debt through cross currency swap because the interest rate environments are actually still quite volatile on the long end. Opportunistically, we are able to capture some interest saving when we swap Singapore dollar into renminbi using cross currency swap. That is actually we might be able to actually pick up a few interest savings here and there.
Generally, if you want to look for some guidance, I guess we would be able to keep at this level, 3.1% kind of level and hopefully can do better. Also want to highlight that earlier I mentioned our fixed and floating rate debt. The ratio is now 65%, and that actually allow us to enjoy any interest rate savings if the Singapore dollar rate actually continue to stay low and then if there's any chance of renminbi further monetary easings coming this year.
Operating costs?
Oh yeah.
Source of operating costs.
Okay. Source of operating costs. The team has actually been very focused on the cost measure. A part of our operating costs actually come from revenue-linked expenses because if you look at our cost structure, we have a lot of expenses including the property tax as well as some of the management fees are actually linked to our revenue. This part, the decrease, a portion of it is actually linked to our revenue decrease because we have actually some, our Yuhuating has been divested. On the operating front, we have actually seen significant savings in maintenance costs.
Something that we continue focus on and to actually save the NPI.
Yeah. Thanks. Maybe I will just add a little bit color on that. The property cost savings, of course, we work indeed very hard actually with our property managers who, of course, you will know is our sponsor, right? As Lintong said, if you take out the Yuhuating effect, if you look at same-store basis, the -3.7%, maybe half of it is the revenue-related cost drivers. Some of the costs we see correlate to the revenue levels. The other half, I would say, somewhat like fixed cost, but we have trimmed that down by quite a bit. The first two, actually we have made very, very double-digit sort of cuts to those fixed costs on a year-on-year basis. On a combined basis, that is why you get this -3.7%.
Thanks a lot for the response and understanding. Thanks.
Agree that [we would do our goal ].
Thanks, Hong Wei. We have the next question from Terence Lee. Please go ahead.
Hello. Hi, Terence Lee from UBS. If we looked at page seven, the 1Q year-on-year sales improvements, is there a way to just maybe talk through what would be, like from the bottom of the list, which sectors are the more, I guess, worrisome or not performing that well?
Okay, you are talking about three categories that we may not have shown.
Correct.
I would say, usually when this question is asked, last quarter I would say fashion. But I tell you, this quarter, fashion have sort of surprised us a little bit. The other category is the beauty category, the cosmetics. Again, I think last quarter I did say within the beauty category, about minus single digit, minus I would say maybe mid-single digits. But actually, this quarter also it is negative, but it is not so bad. I let you-
Yeah.
I let you in—
Yeah.
—chip a little bit. You also can talk about EVs a little bit.
Yeah.
That's a big trend.
Correct. I think from what we are seeing, the three categories that we see year-on-year drop, which is more on the slightly higher side, is the ranking them, vehicle, EV sales. Secondly is the I think EV sales is also reflected nationwide—
Consolidation.
—consolidation number that was published a while ago. I think leisure and entertainment also dropped. I think last year, we had a good movie and all that. This year, I think the movie, we haven't seen any big blockbusters, right? I think that's that. Thirdly, I think home livings, we also. But that's a very small trade cat within this.
Home livings has also seen a little bit of decline year-on-year. I think these are the three main ones that we see drop. The rest is a bit more like a mixed bag. There are malls that do better, say, home or fashion. I think Gerry mentioned, overall, we see a slight positive, but between malls and malls, we see differences, right? Some of the stronger malls do better. I think our same sales, we see a negative. I think the rest, I wouldn't be able to generalize too much, I think.
Yeah. In summary, I think this quarter, particularly the positive has more than the negatives.
Yeah.
Yeah.
Yeah. I think it almost sounds like the negatives are not that negative broadly—
Sorry?
—like it is a range from slight negative to as positive as it gets for toys and hobbies.
We hope the trend continues.
Yeah.
We don't want to call a trend, but this is one quarter.
Okay. Next question. Remind us of the RMB hedge policy again, and I guess what would be the effective hedge rate on this first quarter results?
Okay, I will turn that question to Lintong. The hedge policy and—
FX hedge policy, sorry.
You are talking about the income, right?
Sorry, RMB to SGD.
Okay. Yeah. We look at our renminbi exposure and cash flow, right? We typically forward looking at our upcoming distribution from China, right? We typically hedge about, I mean, 75%-90%, and then probably 6 - 12 months ahead. That actually really depends on the hedging cost because, renminbi and Singapore dollar depends on the tenure that might have some positive carry, which means the forward premium is in our favor. Sometimes the forward premium is actually quite expensive. We actually look into these hedging costs to decide how much we hedge and for how long we hedge. But generally, it is about looking forward, right? So 6 - 12 months, and then hedge about 75%-90%. As you can see that actually renminbi versus Singapore dollar recently has actually stabilized.
That actually has helped us in terms of our hedging position as well. Yeah.
Oh, if you could help us make our job easier, what would be the effective rate for first quarter or even first half?
Wait, you mean-
The hedging.
Oh, okay.
Hedged into.
Yeah. We hedge about 80% of our forward rate. Our rate hedge is about 5.4. Yeah—
Yeah.
—around that kind of level.
Okay. That is weaker than spot.
Yeah, because some of these hedges was actually done at the second half of last year, and some are actually done at the beginning of this year. You can actually see that the spot rate has actually strengthened, especially after the Lianghui. Towards March, the renminbi has actually reached, I think, 5.35 kind of level. Some of our hedges was actually done before that.
Usually 6 - 12 months.
Yeah. We got to do it 6 - 12 months before.
Got it. Maybe just going back to the comment by Gerry, about wanting to buy first before doing securitization. Just a question on the rationale, why isn't this more so done at the CLI level? I guess a little bit more related to capital deployment, is there not more value you see in buying back your stock now?
The first question you were asking, why is it not more with the CLI level? Sorry, I did not get that.
Meaning to say, if the plan was to so-called buy or source for, let us say, malls in the market to buy, improve and then sell, why would this not be done at the CLI level? What is the strategic rationale for doing this at the CLCT level?
Oh, okay. Same strategy, why CLI is not doing it and why CLCT is doing it. Is that the question?
Or rather, why would it be done at both levels as well?
I think it is- Okay. I think first of all, I would say the objective and strategy for China-focused REIT will be very different from the objective and the strategy of a global asset management or fund management platform, which CLI is positioned for, basically. From CLI's perspective, I am sure you have heard Paul and Chee Koon talk about it. They not only have China business, they got business basically across different jurisdictions. They asset allocate their business according to where it may bring them the best growth. So it may or may not be China. In China, they may have different strategies than us. We are quite straightforward because we are China-focused. China for us is Greater China, which means Mainland China, Hong Kong, and Macau.
These are the three places that we can look for assets. We will portfolio reconstitute within these countries, across asset class that we currently play in. We may, in future, but perhaps not immediate future, to look at other asset class. Our acquisition, our divestment, our value add would therefore be contained within China. So that is quite clear for us. I think the other thing that the relationship between us and the sponsor is that the sponsor have different strategies, but one thing that it is certain is that they are supportive of our objective. You would recall we still have historical ROFOs with the sponsor, right? When we are looking for assets to basically inject into the REIT, those assets are of course up for consideration together with third-party pipeline that we generate from team. That is in terms, I think, the strategy.
Second question is unique buyback. I think I address this in this manner. Of course, stock price is sort of volatile. Sometimes it is down, sometimes it is up. Therefore, the trading use present itself accordingly. Right now, our trading is about 7%. In terms of capital allocation, for the same dollar, which we know we are using the same gearing headroom, we have got to decide for ourselves whether we can find a deal that is basically accretive against the trading yield. That is our ultimate test. We saw an asset only end of last year. You Hong is still working hard. Just now I talked about the pipelines that we have access to see whether indeed we can find something that we can buy and add value. Of course, if you buy back our stock, it could be immediate.
But if you buy something that is an asset that is accretive, that means we are basically buying at a yield higher than our trading yield. Plus, as I said, we want to have some value add angle, plus the potential to improve on the assets that we buy in. That could actually prove to be a better proposition for the same unit of gearing headroom that we use.
Okay, got it. Thank you.
Thanks, Terence. The next question is from Ada. Please proceed.
Hi, Gerry and team. Thanks a lot for the presentation. I have two questions from me. First, how do you see rental reversions for the business park assets trending for the rest of this year, and how is leasing sentiment like on the ground? Second question is more on aggregate leverage. Was the increase in the total debt a temporary bump to pay out the FY 2025 distributions? What is the ceiling that you will be comfortable with if you were to acquire an asset and fund it with debt?
First question, I let You Hong take then I come in on the second question.
Yeah. On the reversion side, business park, I think between the assets we see that Ascendas Xinsu Portfolio is still the stronger one, although it also had slight negative this quarter. But the stress really comes from, I would say, Hangzhou. The situation on the ground, I think we have shared before. For the last couple of years, I think there were quite a bit of supply coming on board. But it has sort of, I think the last bit of the supply should be already in that sub-market, let's say. So I think within the sub-market, we look at how the other people are doing. I think generally we are looking at close to 70% already. We are also at slightly above 70%. So I think the kind of competition that we see probably will last a bit longer, but hopefully not that long.
For this year, I still expect that reversion to stay within this kind of range, level. But hopefully by the time when all the supply glut have been absorbed by the market, I think then we will see a more healthy situation going forward.
Okay, thanks. On the leverage, indeed, yes, 1Q is affected by the fact that we drew on some loans for distributions. We do expect over the next few quarters some money to come back as we extract dividends from our assets in China. That's something to look out for. In terms of for acquisition, what's our limit? I think, generally speaking, the S-REIT environment, although MAS guideline is 50%, most S-REIT will try to contain themselves within 45%. I think that we are now about 41%.
Yeah.
Different REITs have different level of gearings. Also, we have to look at it a little bit with regards to maybe the cost of debt as well. I think our ICR is still quite healthy. Good buffer above the 1.5% required by MAS. I think generally speaking, our financial metrics still look quite stable. That will be how I think about basically the leverage that we can take on.
That's clear. Thanks a lot, both.
Okay. The next question is from [Joel]. Please proceed.
Hi, can you hear me?
Yes.
Hi. Yes. Thanks, Gerry and team for the presentation and the opportunity. I just have two questions. The first is regarding electricity prices. Noted from your AGM Q&A is more impacted by coal prices rather than oil prices. I believe coal prices is probably up about 15% higher year-to-date. So I'm just wondering what is CLCT doing, any proactive actions to handle the higher electricity cost going forward?
That's one. Okay. That's the first question?
Yeah.
Okay.
Yeah.
You Hong can take that. I think main thing is basically electricity trend in China as well as I think maybe we can talk about our ability to cut electricity consumption at the ground. Yeah.
I think for the electricity price so far based on our survey, it has not been affected by the Middle East situation. In China generally, I think we have seen news that oil price, the gasoline price has gone up, but not the electricity. I think the government also would want to keep that stable for obvious reasons. I think that's number one. I think for the ways to reduce consumption, I think this has been always something that we have discussed and hopefully drive. Over the years, I think we have also tapped on the site onboard automation or data analytics to actually help our technicians to be able to drive that efficiency on the same chiller, same electricity level. Of course, sometimes the weather condition fluctuates, so I think that cannot be helped.
From our point of view, I think we do what we can in terms of equipping our technicians with smarter and better tools to analyze and to drive the utility rate down. The other thing I just want to share a little bit, but I think this is still probably up and coming. We are trying to source our electricity, a portion of it, from green renewable sources. In China, some of the cities, this has become available at a rate that's equivalent, not more expensive than the equivalent non-green energy. We are also—
Which is non-coal.
Non-coal. You're right. I would say that so far we have procured a portion, I think around slightly above 10%, of our energy from the green sources. I think this is something that we are also watching and experimenting without increasing our costs.
All right. Thank you. That is quite clear. My next question is regarding new leases versus renewed leases. Noted that roughly it is 40% new lease, 60% renewed lease across all your segments. Is that a preference? Also follow up on that, any incentives that you are giving on the ground?
Yeah. You Hong, this question, sir.
Okay. Sure. For retail, I think we would generally like to see a healthy level of renewals. Right? It ranges between, or rather new brands, I would say. Right? New brand injects the new vibrancies and interesting ideas to the malls. So, I think between 40%- 50% of new brands is actually quite common. We have seen before. Right? In times that is a bit more challenging, of course, then we tend to renew more. But if we have a choice, we do want to get new brands in. That is retail. But for business park and logistic, I think our preference is more sticky tenants. Right? So I think generally, the pie will shrink to more fit, I would say, renew. Right? So I think usually we see that figure between 60% - 70% renewal, another 30 %- 40% in the new tenants. Yeah.
Okay. There is some more question asked about incentives .
Oh—
Incentives.
—Okay. We do what we can to drive up occupancy and rent. I think generally, we are also watchful of not going over the line. I think generally our, say, control the rent free or the, b asically, we do say control market type of—
Rent free.
—rent free or incentives. It is quite typical that we have first one to two months—
Yeah. For the renovation.
—renovation. It could also be some of the market where it requires. It can be about one month of rent free. That also happens. I think that is something that we will do.
Apart from incentive, I think what we want to do is to be responsive to the tenant needs. Right? In some situations where they need additional power, they need better transportation. We may upgrade power, we may upgrade lifts.
Yeah.
Yeah, for them, if the tenant is serious and a strong tenant. These are the kind of things that we do take into consideration.
Okay. Thank you. That is all from me.
Thanks, [Joel]. We have a final question from [Vijay]. Please go ahead.
Yeah. Hi. Morning, Gerry. Can you hear me?
Yes, very well.
Yeah. Morning. I have three quick questions. Maybe I will take it one by one. Firstly, in terms of this Middle East conflict, have you seen any impacts to your portfolio tenants? Is there any tenants who are exposed to energy, logistics, shipping, et cetera, in business parks logistics, that is facing some pressure? From my understanding, China has a cash flow issue. Are you seeing in terms of rent collection, is this been improving and your rent collection is much more on time at this point of time compared to one year before?
Okay. I think for the Middle East conflict, one thing that has really stand out for me is China seems to be quite well controlled in terms of the effect. Utilities, I think You Hong has covered. That is really keep our eyes open in terms of their own self-sufficiency. Supply chains are being disrupted. By and large, what we hear in China is things are still available. In terms of businesses. Direct businesses to our tenants, retail, there is actually no issues because just like in last year when we talked about tariff wall. Most of our retailers, many of them are local buyers, local sellers basically selling to local crowd, buying from local producers. The international brands, they do not typically ship from Middle East. Middle East is not a- the merchandise producing area. So retail is not definitely an issue.
Business parks, there are a handful who have businesses or sell particularly to Middle East, but that is not a big portion of their business. Nobody really went out of business because of that in our business parks. In terms of logistics, again, our logistics portfolio maybe half of it service domestic distribution, half of it export-facing, based in Shanghai. Again, not much to report in terms of disruption from Middle East because they do not have that much business going with Middle East. What we do say is second order effects you cannot ignore, which is in our outlook slide. Because petrochemicals, which come from Middle East, are a feedstock to some manufacturing inputs for some of the factories in China, for example, plastics and so on and so forth.
But as many economies and China watchers would also inform, even China has a solution because actually you can produce the same petrochemical with coal. It depends on the cost of production, basically. But with the prices that the petrochemicals are from oil, we are talking about it is making the coal chemicals quite actually a good alternative. So in an economy and production base as diversified as China, actually, we had just one economist spoke to us yesterday. In fact, you would say that strategically favors China to withstand the pressures that come from the Iranian war. That is my take on it. Sorry, the second?
Arrears.
Arrears. No, no problem with arrears.
Yeah, we do not see any major change in pattern in terms of arrears.
Okay. My second and third question, earlier you touched upon acquisitions. Maybe can you touch upon which segments you would be looking at and what kind of yield benchmarks you would be looking at for potential acquisitions ahead? And third question is: Is there a trend of retail tenants signing a slightly longer lease? Because I notice your WALE going up a bit. Are the tenants trying to lock in the rents at these levels, in the retail segment, especially?
The first thing to answer maybe before getting to the last one. The type of assets we are looking at, and then the new levels. Actually, we spoke about it, the type of assets that we are looking at. Today, if you know, we have three asset classes: retail, business park, and logistics. We are more focused on the more defensive part, which is retail. 70% of our portfolio is in retail. We look at the trends. Retail have been more resilient, particularly our subset, which I call the bread-and-butter malls. Not the luxury malls, but maybe more the middle market ones. We are looking more in terms of that segment, but that doesn't stop us from looking at other asset classes. For example, why business park in general are not doing so well.
You would have, because of the manufacturing drive in China, would have seen factories actually doing quite well. Then on and off, there may be industrial properties that are not so much decentralized offices, but more of the R&D, more of catering to actual production that may be available for sale. Those, if they are at the quality of our Ascendas Xinsu Portfolio, which have been very strong. Certainly is something that we can look at. But as a priority, of course, I think we want to stick to where we add the most value, which is really retail. So that's one thing that I can share. The other thing in terms of view, I think it's very simple. As a REIT, we want to look for something that is yield accretive. Today, our trading yield is about 7%. Just one way that you look at it.
The last deal that we sold of our retail mall, we sold it at NPI cap of about 6% +. So definitely want to beat those metrics in order to basically over time improve the average yield of our assets. You Hong, you want to touch on the next question?
Yeah.
WALE.
The once—
WALE.
WALE.
I don't think we have. Indeed, some of the retailers do ask for longer locking for both, trying to see that the rent is rather favorable and reasonable. Secondly, to have a reasonable period of recovery of their investments. But we have been more careful in not lock ourselves in if we deem that the rent is softer side. I think that will protect us and give us the chance of course, to go back in terms of negotiating rent on the higher side when the cycle is due. I think we don't see a big trend in having to lock in very long leases. Fair to say that, yeah.
The bump you see in the first two property is the two anchors—
Yeah.
—that we sort of resigned.
Correct.
Got it. Thank you. That's all I have.
Okay, thanks, [Vijay], and thank you, everyone. Since we have no further questions, this concludes our session for today. Please feel free to reach out to me or my team if you have any questions. Thank you all, and have a good day.
Thank you.
Thank you.