Good morning, and welcome to Keppel Pacific Oak US REIT's first half 2025 financial results broadcast. My name is Zach, and I represent KORE on the investor relations front. Before we begin, let me introduce the management team on the session. We have CEO, Mr. David Snyder. As announced in April this year, Mr. Andy Gwee has stepped down as Chief Financial Officer on 16th June 2025 to assume a new role in KORE. We would like to take this opportunity to thank Andy for his contributions to KORE, having played a critical role in the REIT since its listing in 2017, and to wish him success in his new role. Ms. See, Ai Lin has taken over Andy's role and is also joining us for this session. She has been with KORE since 2017, shortly after listing.
We will start off the webcast with an overview of KORE's financial and operational performance for the first half of 2025, followed by a question and answer session. Before we begin, we would like to run through some housekeeping. For analysts who are joining us on Teams, please be reminded to mute your mic throughout the presentation. If you would like to ask a question, please click on the raise hand button and wait for a cue before you pose your question. For those joining us via the webcast platform, please type your questions via the chat box provided. Without further ado, I will hand the time over to CEO, Mr. David Snyder.
Good morning, everyone, and thank you for joining us today. Let's go ahead and start on slide two. Here we present KORE's first half 2025 key highlights. We leased more than 281,000 sq ft of space in the first half of 2025, equivalent to 5.9% portfolio NLA. The majority of the leases were signed in Bellevue, Redmond, Denver, and Dallas. Portfolio committed occupancy was 88.2% as of June 30, 2025, a slight decrease from last quarter and December 2024 due to some of the known vacates we have previously noted. Rental reversion was a + 3.3% for the second quarter 2025. Positive result was driven by leases in Dallas, Bellevue, Redmond, and Bellaire Park in Houston. Rental reversion for the first half of 2025 was a + 0.5%.
NPI was 3.2% lower year-on-year, mainly increased repair and maintenance expenses, as well as amortization of leasing commissions, partially offset by lower property taxes. In the first half of 2025, no distribution has been declared in accordance with the recapitalization plan. I will now hand it over to Ai Lin to elaborate on KORE's financial performance.
Thank you, David. I will now provide an update on KORE's financial performance for the first half of 2025. Income available for distribution was 16.2% lower in the first half of 2025, mainly due to a decrease in adjusted NPI. The lower adjusted NPI was largely driven by lower rental income, resulting from higher free rents due to timing differences in leases completed for the respective periods, as well as increased repair and maintenance expenses offset by lower property tax. Additionally, there was also higher other trust expenses, largely due to higher professional fees and accrued withholding tax resulting from unitholders who failed to submit their U.S. tax form. Slide four is a snapshot of our balance sheet at 30th June 2025 and 31st December 2024.
As at the end of June 2025, total assets was $1.4 billion and NAV was $0.70. Moving on to slide five on KORE's capital management. KORE's aggregate leverage maintained at 43.7% as at 30th June 2025. The all-in average cost of debt was 4.45% per annum or 4.32% per annum when excluding the amortization of the upfront debt financing costs. KORE's current interest coverage ratio is 2.5 x, and both sensitivity scenarios for ICR remain above the regulatory requirement of 1.5 x. The weighted average term to maturity of KORE's debt stands at two years. 75.7% of KORE's loans have been hedged, and every 50 basis points increase in SOFR translates to approximately $0.89 million decrease in income available for distribution per annum.
I will now pass the time back to David to provide updates on KORE's operational performance.
Thanks, Ai Lin. Slide six highlights some of the reasons why we invest in the key growth markets we do and not in the gateway cities. These key growth markets have increased attractiveness to companies and individuals because of their low income tax rates, lower cost of living, better employment opportunities, and more attractive lifestyles, among other factors. Six of our eight markets are in the top 25 markets to watch in 2025. Moving to slide seven. Here you can see the changes in committed occupancy by property. This quarter, KORE's committed occupancy dipped slightly to 88.2%, with six out of 13 properties having had stable or increased occupancy. For this quarter, we managed to backfill some of the known vacates that we have been mentioning for some time.
For the third and fourth quarter, we do still have some significant known vacates at the Plaza Building, Bellaire Park, and Westmoor. We continue to hope to end 2025 with occupancy in the mid- to high- 80% range. As you can see on slide eight, KORE's occupancy rate remains well above the U.S. average, the average of the gateway cities, and I would note, both of our peers in Singapore who were below 80% occupancy as of the first quarter of 2025. Let's move to slide nine. The second quarter of 2025 saw us lease around 155,000 sq ft of space or 3.2% portfolio NLA, bringing the total leased space for the first half of 2025 to around 281,000 sq ft or 5.9% of the portfolio. New leases represented 35.3% of the space leased during the first half of the year, with renewals making up another 47.6%.
The big news is that 17.1% of the space leased was from expansions by existing tenants, which is encouraging and reflective of what we're seeing and hearing about in the U.S. in terms of business plans for growth. Our built-in average annual rental escalation of 2.6% continues to provide growth for KORE. slide 10 highlights KORE's geographic and industry diversification, which you are all familiar with and which remain consistent. Turning to slide 11. Here we highlight our relatively low tenant concentration risk, which you're also all very familiar with, including how much lower it is than our peers, whose top 10 tenant concentrations are about 50% higher. Turning over to the submarket outlook on slide 12. Office fundamentals remain relatively sound in KORE's key growth markets.
The projects under construction in Bellevue and Redmond continue to primarily represent Amazon and Microsoft's related development, while the amount in Las Colinas represents the build-to-suits for Wells Fargo and CHRISTUS Health. Next, let's move on to the market outlook on slide 14. This new slide highlights estimates by JLL of where various markets are in the property clock cycle. Ideally, we would like our markets to be toward the bottom of the bottoming phase or early in the rising phase at this stage of the U.S. economy. Dallas, Nashville, Bellevue, Redmond, which are listed as Seattle, Austin, and Houston, are fortunately at that stage. Denver is the only location of ours that still has some room to fall, but that may not reflect some of the positives in our submarket in the Northwest, which might put it closer to the bottom.
All in all, this is good news for our portfolio's future growth opportunities. On slide 15, we have seen more data points supporting a broad-based leasing recovery with firm demand and higher rents. Office using industries have been resilient to date, in spite of uncertainty arising from the Trump administration's trade policy shifts, which have increased economic uncertainty and lowered the probability of monetary easing. Regardless, strong signals remain that office demand will bounce back even further if macroeconomic headwinds abate. Tenant requirements in the U.S. market grew by 5.8% quarter-over-quarter, and currently reflect the highest levels of active demand since the fourth quarter of 2021. In the same vein, the slowdown in leasing activities in the first half of 2025 show signs of being a temporary disruption that will return to a path of recovery in the second half of the year.
We continue to see increased office attendance policies with an average weekly in-office requirement of 3.8 days. Office traffic, as indicated by cellphone data, has grown to 72.6% of the pre-pandemic average, corroborating the strengthening return to office trend. This figure was at 67% in 2024 and 52% in 2022, for reference. Even with the job market somewhat softening this year, the finance and tech sectors are leading the charge in pushing for office returns. Some examples are JPMorgan Chase in the first quarter and Bank of New York Mellon in the second quarter. Many of the largest companies in those sectors have implemented five-day in-office policies. In the transactions market, groups that had deprioritized the office sector are beginning to consider acquisitions. Institutional groups comprise more than 25% of acquisitions in the second quarter, the highest share of the buyer pool since mid-2022.
We also observed that executed rents on leases being signed are continuing to trend upwards and concession rates have stabilized after a significant run-up in the past decade. We did not see a big increase in concessions in our portfolio during that time frame. Slide 16 highlights several U.S. economic fundamentals. All indicators remain relatively stable at the end of June as the effects of tariffs have been limited, at least so far, and the Federal Reserve has held the federal funds rate constant, despite every pressure from President Trump to cut the rate to below 4%. Moving on to slide 17. Gateway cities and the states in which they are located continue to lose luster, with California and New York being troubled by political turmoil. California's lost over 54,000 jobs in the first quarter of 2025, largely due to deportations ordered by President Trump.
New stricter laws on immigration have also led to multiple riots in Los Angeles. If these protests continue, California's GDP can be expected to take a $275 billion hit due to its heavy reliance on immigrant labor. Over in New York City, the winning of New York's mayoral Democratic primary election by Zohran Mamdani, a socialist Democrat, has led to uncertainty. There is concern by business owners who believe his socialist viewpoint will lead to unfavorable policies. Firms are also considering shifting to more business-friendly markets such as Miami, Dallas, or Nashville. There are also renewed questions about whether Wall Street executives would stay in New York or if Mamdani's plans for the city would send more financers to states such as Florida and Texas. Higher taxes, crime, and fears of rising antisemitism have all been cited as concerns.
Finally, on slide 18, we close off with a summary of KORE's unique value propositions, including its strategic presence in several of the fastest-growing states in the U.S., its exposure to the fast-growing TAMI and medical and healthcare sectors, our highly diversified portfolio with low tenant concentration risk. As well as our resilient operations with built-in average rental escalations for further organic growth. That wraps up the presentation. Back to you, Zach, to start the Q&A.
Thanks, David. With that, we will begin the Q&A session. Analysts with questions, please click on the raise hand function, and we will cue you to unmute yourselves to ask your questions. First, we have [Derrick]. I think, [Derrick], you can unmute yourself and ask your question.
Hey, [Derrick]. How you doing?
Hi, David. Can you hear me?
We can hear you just fine.
Yeah. Hey, thanks for the opportunity. I just wanted to ask a few questions. Firstly, I'm just looking at your demand profile. You mentioned that some optimism with regards to expansion. There is also strong renewals at certain sites. Could you just give us a little bit more color on where are the expansions coming from and just some more color on that would be great? [ Recent visa], essentially. Yeah.
We had, I think, five different expansions, over the course of the quarter, which was pleasant to see. It was at a mix of buildings, and I'm trying to dig up something here that's going to show me where those were. We had Denver, we had Bellevue. Those are both with technology companies. We had another expansion in Austin with a professional services company, we had expansions in Houston. I guess the other two were both in Houston. Those were other types, so the finance and insurance, that sort of thing. There's a mix, which is good.
At this point, we'd love to see expansions in the tech companies and those sorts of markets, which we are, as well as some professional services and other types where that growth actually speaks even better about maybe the overall U.S. economy when we're seeing it in some of those other industries that are maybe not as dynamic in the first place.
I see. Okay. Thanks for that. How about TIs at this moment in time? For, let's say, if you could split up the TIs that you probably have to provide for renewals and new leases, what's the range for us to get a sense, if we can?
We haven't seen much change for a while. Our average TI, across the portfolio is, call it $10 or $11 a foot per year on new, on renewals, it's about half that. Somewhere between $5 and $6 a foot. Realistically, I think we've spent less than that in general, across the course of this year. We've had a number of leases this year where we've had zero. I think we've had one that's been above that average. Everything else has been at or well below those averages I just gave you. I think we're looking pretty good on the TI front. A decent portion of that is for smaller leases where we've had previous spec suites we've built, moved somebody into it where we really don't have to spend much, if anything, to put a tenant into that space.
Hopefully we'll continue to see some good luck on that front. For the larger spaces that we've got that we've told people are known vacates and things like that. Some of those are going to have those standard types of TIs, when they come back, because those big spaces will need to get refitted out for different tenants, maybe even different types of tenants. At this point, things are going really well for us on that TI front.
Okay. Got it. Sorry, just two more. I think you mentioned about known vacates, right? Largely in Seattle, if I'm not wrong, and Iron Point, you mentioned, for your Seattle buildings, especially for Plaza and Bellevue, how long do you think? Are we seeing enough demand to bring occupancy back up? Or you think it'll still be a long drawn kind of affair with regards to occupancy trends going forward?
Yeah. For Plaza Buildings, when UiPath eventually, finally, we think vacates, I don't know, they've been building out this space for a long time. I think they've expired in April, and they continue to be month to month as they're trying to build that space. We've enjoyed that. That space, along with the other large spaces at Plaza, may take. A little while. Our estimate is that that's 2026 leasing for much of what's happening at Plaza. Some of that space, UiPath space is two full floors at Plaza Buildings, and it is stunning. If we were to find the right tenant, the good news is, there's nothing really to be done. It'll be low TIs. To find full floor tenants is much more complicated than finding smaller three, four, 5,000 sq ft .
We've had good success, with the spec suites we built out at Plaza on the fifth floor in our Greenhouse. Two of those were signed. A couple more of those are signed or about to be signed. Five of them are essentially negotiated with a six with some interest. I think we're in good shape on that front. It'll take a little while there. Denver is interesting. We had an expansion in Denver. We had a company that moved from our 105 building into Westmoor and took over about half of the space that we're getting back at the end of October. That's a plus. They're now thinking sometime in the next six to nine months, they might want the other half of that space. I think Denver is looking more positive than we had previously thought.
Things change, and not everybody gets what they want, and people don't always expand as quickly as they think. We remain relatively hopeful there. In Plaza, what I would tell you is once we get to the time where we're doing budgets, if we haven't leased some of those full floors, we're going to pick another full floor at Plaza, and we'll do something similar to, not quite as high-end probably as The Greenhouse, but something similar. We'll build another full spec floor out there. We know we'll lease those much more quickly than full floors. Maybe we might do that to a couple of floors if we think that makes sense. We'll keep working on that. Sacramento, the market's still strong. Let me be clear. Downtown Sacramento is not strong. We're not in downtown.
The sub-market that we are in is still strong with over 90% leased for the sub-market. Our problem has been numerous, in a row, for the last several years, large tenants vacated. They've been in a few different industries. A couple have been related for mortgage-type companies and a couple related sets. Then we had a company called PRO Unlimited that vacated a significant space. Some banking in general. They vacated, but we're starting to see some interest in that market, and even for some larger spaces. I think our success there, most recently, has been in our spec suites that we built out last year. Those were all leased. We leased the other smaller space in that building. We've now got some interest that's running anywhere from 7,000 sq ft to something that. There's a potential tenant there that might be 28,000 sq ft.
We don't know yet if those things are going to come to roost, we've got some movement there at least. We're feeling better about that. It's not that we've ever had a problem, really. The market's been somewhat strong. There just hasn't been a lot of new demand in it since we started losing tenants, but the others are still 95% occupied because their leases roll at different times. I think we're seeing that sort of return to normalcy there, and I think we'll start to see some movement in that location, much like we've seen in Austin. We're at Westech 360. We've started to see a lot of momentum. It's not going to pick up maybe that quickly, but we expect to start seeing some momentum there, and we expect to continue to see that in Austin, where leasing has been going very well at Westech 360.
Got it. Thanks, David, for the answers. Sorry, just one very quick one. Could you just give us a guidance on your CapEx? I remember last quarter you mentioned about $50 million to be spent, right? Is this still the case, or?
That is still the plan. The $50 million, we expect will still be spent. It's not all going to end up being paid in cash before the end of the year. Much like last year, we had some carryover. I think we talked about that at year-end last year. We'll have some carryover that the projects will be started or maybe even finished, but not all billed. We do think that the current projects that are underway or about to be started now will spend that $50 million. I mean, to give you an example, the U.S. Bank building, which is part of Plaza Buildings in downtown Bellevue, we have a complete redo of that lobby scheduled for this year, and it just takes forever with the city to get all the approvals that we need.
We have not started that work, which we thought would be well underway by now, through no fault of our own, just dealing with getting approvals. We'll spend that money. It's just much later in the year and might push into next year for some of the payments. We're still hopeful we'll get the work done this year, but that's just the easiest example I can give of why some of this stuff just isn't being spent at the pace we might have thought it would be spent.
Okay. Got it. I think it's something that you want to keep that float on your balance sheet. Essentially, that's how I should think about that $50 million, just in case you need to use it?
We think we will. The biggest piece of it, I think, I don't have it right in front of me, but I think the biggest piece of that is for TIs. That's money you really hope that we spend, as do we, right? That means new leasing. That means we end the year where we hope for in terms of occupancy and the rest. Leasing has been a bit slower than I had hoped for this part of the year. Again, I mentioned in some of the comments earlier, we've seen a bit of a pickup. We certainly leased more in the second quarter than first. We're seeing that across the U.S., and we expect the second half of the year to be better. Hopefully, we will sign leases that have TIs that total everything we budgeted.
That work won't all get completed before the end of the year, but the leases will hopefully get signed if things are going well.
Got it. Okay. Thanks for this. I'll pass the time to [Vijay]. I think I have more questions. Yeah, thanks.
No fret. Thanks a lot, [Derrick].
Thanks, [Derrick]. Yep, [Vijay], you're up next.
Hey, [Vijay]. How you doing?
Hey. Morning, David. Morning, Ai Lin, and morning, Zach. Good to see the tariff fears have receded and lots of green shoots appearing. Just a couple of questions from me. Firstly, on the refinancing front, has there been any progress for the refinancing of the fourth quarter and 2026 loans? On the same vein, any changes to your DPU payout, possibly looking at the second half? Is there any guidance in 2026? Is there any guidance you can provide?
I'm going to go ahead and let Ai Lin take a stab at these questions for you, my friend.
Yes. Hi, [Vijay].
Hi, there.
On your first question on the refinancing, we are actually currently still in active discussions with the banks, with existing and new lenders as well, and finalizing some terms for some of them. Basically, we can't say much now, but when we have good news, we will let you know.
Okay. I will take it as a positive?
Truly active discussions. We expect to have some good news on that front by next quarter, although we may not have good news on all of it by then. We will almost certainly have some. In terms of starting a distribution, I think on that front, we're still on target for first half 2026, as we had announced back when we announced the whole plan, the recapitalization plan.
Earlier you guided there could be a possibility of second half dividend payout. Is it still there?
I think I was pretty clear that that was completely dependent upon getting all the refinancings done, which have not occurred. That is still a possibility, if that were to happen, that we might do something for some portion of the second half of the year. We will see where we fall on refinancings. If that's all done early, yeah, there still remains the possibility that we could restart a bit early.
Okay. If refinancing is announced, there will be some possibility of payout in the second half as well as the first half the payout is still on track for 2026 onwards?
You got it.
Any guidance in terms of what kind of early indications which you can give at this point of time in terms of payout or something?
When we do restart, it will be something that is substantially smaller than what our full distributions used to be. That's something we intend to start low and declare an amount that we're confident will continue and that will continue to grow over time as well. I can't give better guidance than that, but it's going to be a relatively small number. The target we have is to set a distribution that will be consistent across all four quarters of a given year or the two halves of the year, if you will. In future years, grow until we get back up somewhere up into that 80%-90ish% range over time.
It will be a start small and then ramp up over the years to a more consistent range?
Yeah. We want to be consistent and growing. We want to be a lot like the U.S. REITs where you saw they had a lot of issues in the U.S. and all that, but you didn't see any of the big U.S. office REITs cutting distributions. We want to do the same thing. We want to get people to understand what we're doing and why in that front, because they deserve to know. The fluctuations that we see in distributions in Singapore really don't give unit holders the ability to count on what's coming. We want to restart a distribution, and from that point forward, have people be able to, barring some really wildly bad circumstance, count on those distributions as we move forward. We'll start a little bit lower. We'll build up, but those will be declared and consistent throughout each year.
We expect the two halves to be the same distributions. As I said, for the first several years, that would then grow year-over-year.
Got it. On the leasing front, I look at JLL data and other consultants' data. First half was quite strong in terms of overall U.S. office market, but your portfolio seems to have softened a bit. If you look at slide nine, I think the leasing front has been a bit slow. Any specific reason why this is so? Can you also guide in terms of what would be the known vacates and occupancy outlook for the end of the year? Earlier, we were looking at high 80s, but it seems to have gone to mid-80s. Is that something, it's a conservative range or what should we look at?
Yeah. I think last quarter, I was talking about mid- to high- 80s, last quarter as well, because I talked about significant known vacates last quarter. We're still sitting on about, call it 170 ,000 sq ft of known vacates in the portfolio, so about 3.6% of NLA. That's just the big tenants. We'll have some small amount of small tenants that we'll lose, but most of those we typically replace relatively quickly compared to the big spaces. If you apply that, you can do that math. That kind of gives you a floor, and then we hope to be above that. Leasing has picked up. Let's keep in mind that we're starting at a much higher lease rate than the U.S. average.
It's not that our leasing is poor, it's other folks that have been at really low leasing percentages. We've got, and I'm trying to find it here, a percentage of where U.S. office leasing was, and it's supposed to be somewhere for me to be able to look at. I think someone will pull it up for me here in just a second. I've got a slide that shows an average of U.S. office REITs that we've looked at, and we're significantly above those guys. The fact that we've got some concerns and things like that. They just pulled it up for me.
The U.S. REITs that we average, which isn't every U.S. office REIT, but it's all the ones that are comparable to us, as well as a lot of the big boys like SL Green and stuff like that. Are averaging about 84% of occupancy. The strengthening that we're seeing in the U.S. is going to help lift them up towards us. We're going to have a temporary drop here, but we won't have all of that vacant at the end of the year. We'll still, in my mind, I would expect to be above where we find these U.S. REITs. We'll certainly still be outperforming our Singapore competitors, who are in very different places than we are. It has been a slow quarter for us.
We've been beating the U.S. average leasing, quarte- after- quarter- after- quarter- after- quarter because our markets are strong and our buildings are really strong as well. All we're seeing right now is a little bit of a slowdown. In terms of some of our leasing, we've got some folks that are just taking longer to sign leases. I've got some leases that are sitting out for signature, have been sitting out for signature for several months, and they tell us that leases are coming, and we know they can't leave the space in the case of one tenant, they don't have a choice, but they still haven't signed. Some of that slowness is just a little bit of people concerned about what's going on with tariffs and everything else, and people just want to feel safe and confident before they sign what's a long-term commitment for them.
We do expect second half to be stronger. We've got a couple of pretty decent prospects for a couple chunks of space that if we can sign those would be certainly helping us get back up towards the higher end of the range in the 80s. If you figure we're somewhere between 85% and 88% at the end of the year, which I'm pretty sure that's the same range I gave last quarter, or I know we had said it couldn't be above 88% just due to the number of vacates that are going to happen in the fourth quarter. I think that gives you the range that we're looking at, and we do feel pretty good about being within that range, and the hope is really to be somewhere in the mid to the high end of that range.
Got it. One last question. I think in terms of return to office rents, maybe can you give some guidance in terms of physical occupancy in your portfolio? The rent seems to have turned a corner. Is this sustainable?
I think the rent is definitely sustainable for us. I really don't see rents declining at this point from where they are. That doesn't mean that we wouldn't have negative rental reversions continuing in certain buildings where the market rents have remained flat, where we've had growth in our leasing, our leases rather. They've had that built-in growth that's taken them above that. In terms of the actual market rent decline, I don't think we have a market where there's much potential of future decline, obviously, unless there's a downturn or something like that that happens. Rent is definitely moving in the right direction. We've got some real positives, even at Plaza Building.
We've hit rent levels on some of those spec suites that are numbers that we probably didn't think we were going to see for a couple more years, just given that it's been quite slow and rough. We're doing quite well on the rental front. In terms of physical occupancy, our portfolio is about 77% right now. If you figure 90% occupied and deduct out people that are traveling for work, that are on vacation, that are out sick, that have meetings, the whole list of reasons why people aren't in the office on a given day, that takes you down to about this level.
I think we feel really good about where we're at physically, and I think the statistic that I gave earlier in the presentation itself, which I'm going to try to dig up here, but may take me one sec. I think I know where the page is. Just a matter of my fingers getting there. 72% of the pre-pandemic average is the office traffic based on cell phone data. That's for the U.S. I think that's a really positive number. That is showing you that all these businesses and government agencies that have told people to be back in the office have gotten what they've asked for. That's dramatically better than where we were in 2022, which was 52%. It's 5% higher than the end of 2024. That's a lot of really good movement, especially when you're already that high.
Again, you take those other factors I talked about for reasons why people aren't in an office, you're getting to something that's in the high 80% of occupancy to get to a 72% physical occupancy. We feel pretty good about all of that.
Okay. That's great. Thank you. That's all I have.
All right. Thanks, [Vijay].
Thanks, [Vijay]. [John], you're up next.
Hey, [John], how you doing?
Yeah, good. Morning, David and management team. My first question relates to outlook for the office market. Are you feeling more confident that recovery will strengthen in the second half? What are some of the positive catalysts that you are seeing for the office market?
I think we're feeling pretty good about second half. I think office recovery is just going to continue. As we look through the end of 2025 into 2026, I think we expect to see good leasing momentum, not just for us, but across the U.S., which is good for us since unfortunately, regardless of the fact that we've been beating every U.S. average you can think of, including U.S. office REITs for forever, we still trade poorly because nobody gives us any credit for it. Once they start to see the rest of the U.S., maybe we'll start to get some of the credit that we have deserved for all these years we've been way above everybody else that you can think of in terms of occupancy and performance. I think that's looking good.
Some of the things that we see are articles that we're seeing and people we're talking to, where we're seeing a lot more expansion going on in the U.S. A lot of businesses saying, we see growth in the future. That's even with all the crazy that's been going on with tariff talks and everything else. We've seen that move to a very large percentage of U.S. businesses saying they expect to see growth. We've seen significant growth just this quarter with five expansions. Within the portfolio, one of those folks telling us they may take just as much space again. That's definitely moving in the right direction. We're seeing it across the U.S., we're seeing it in our portfolio. We found out another large tenant of ours is going to be touring some other space that we're going to have.
We've got a significant vacate of a big piece of a portfolio that will be coming in 2026. There's been a potential tenant touring. One of our existing tenants in another building is going to be touring that space this week, I think. It's big space. That's the Meta space at Westp ark. We've got two folks that have already expressed some interest in that. It's big space that they conceivably, in both cases, want to take all of it. We don't know if we're going to get it all back, but that's pretty positive. We're seeing that elsewhere. We're seeing a few other tenants telling us they're looking to expand. We're seeing tenants coming to us and talking about early renewals and extensions. There's only two reasons why a tenant would do that.
Number one, they need space immediately, they want an expansion and extension. Number two, they see the market strengthening, they want to try to lock in today's lease rates rather than wait until their lease expires in maybe three years, they know lease rates are going to be worse, they want to try to negotiate something now. We're seeing that. We've got one of our significant tenants that's pushing on us on that front as well right now. It's an interesting time. Things are definitely, across the board, feeling better and stronger than they have.
Some of this potential expansion that you are looking at, which industry sector are they from?
That's primarily tech where we're hearing it. In terms of expansion, that's where a lot of that would come from, and that's not surprising to me. We did have a couple this last quarter that were professional services and others that were doing some expansions as well. We'll see as we go through, but I expect to see it sort of in general. It's not industry specific. It's companies that are doing well driving this. I think we'll see it kind of across the board with various different types of companies expanding, with tech leading the way, though.
Sorry. Earlier you mentioned known vacate square footage for known vacate. I missed the number?
I don't think I gave the actual number because off the top of my head, I probably don't know the actual number. It's the Meta space. Top 10? I'm just trying to find our top 10, so I can earlier. The known vacates is what you're asking, not that one. Yeah. Known vacates total is 170-ish, call it 170,000 sq ft.
Yep. Thank you. Last question. Could you share, let's say, if you were to get a new U.S. dollar loan, what would be the interest rate now? If you could guide us on average cost of debt, say by end of the year. Where do you see that trending? Thank you.
I just appreciate you asking Ai Lin another question. That's fantastic.
Yes, [John]. For a five-year loan, the pricing currently is about 200 basis points- 250 basis points. For a three-year loan, it's about 118 basis points to about 220 basis points for a new loan. In terms of where our interest rate will be at the year-end, it will range about 4.8%. Do bear in mind that we do have IRS of about $100 million that will be rolling off in 3Q this year. That's why there will be an increase in rate.
Thank you, Ai Lin, and also thank you, David. Thank you very much. Thank you.
Thanks, [John].
Thanks, [John]. We have a question from the public webcast. How do you see the Big Beautiful Bill influencing rental demand in the cities it's located in?
I don't think the Big Beautiful Bill, just one way of looking at it, I don't think there's much in there that's going to have any particular impact. The biggest piece of that bill is sort of stabilizing personal income tax rates and a little bit to the business taxes. It just gives, I guess, people and businesses a little bit of comfort that tax rates aren't going to change, tax rates aren't going to impact our markets any more than anybody else's markets. That's sort of a nationwide impact. I don't really think there's anything that we're going to see from that that's going to do much to increase, decrease demand anywhere, but more specifically within our markets.
Thanks, David. Next question is: What is the progress on the recapitalization plan, noting that the first half 2025 leverage is at 43.7% compared to second half 2023 at 43.2%?
The leverage level really doesn't have much to do with the recapitalization plan. Those percentages just are what they are. The recapitalization plan is making sure that we reinvest into the portfolio so that we build out spaces, maintain occupancy, maintain operating cash flow, if you will, income, that sort of a thing. We've been doing well on that front in terms of leasing. I mean, we're still head and shoulders above U.S. averages, much farther than that above our peers or competitors here in Singapore, depending on how you want to look at them. That's been going well. In terms of getting to a point where all of the refinancing is done, we're progressing. Ai Lin already addressed the fact that we're in discussions on all of the 2025 and 2026 maturities with those various lenders.
We hope to have at least some good news on that front in the third quarter. That leverage is going to fluctuate. If you think about it, when you refinance one loan with another, your leverage doesn't change. Nothing we're doing on that aspect is going to change leverage. What could potentially change leverage is if we're able to get the leasing up, get it really strong. If that's the case and we've got strong future income, valuations could potentially improve at the end of the year, which would decrease that leverage ratio. If interest rates were to come down and cap rates were to come down, that would also increase valuations, which could help decrease that leverage ratio. I don't know that either one of those two things is going to happen.
I'm feeling a lot less optimistic about rate cuts today than I was maybe six or nine months ago. Given that we're seeing a whole bunch of 15% tariff rates being set with most of the industrialized world, that is going to drive some inflation. I don't think the Fed has any reason to cut rates, and I'm not sure that the Fed cutting rates is going to actually change the long end of the curve anyway. From that perspective, not a lot of hope. From the perspective of leasing, if we've got a strong second half like we expect, I do think there's the chance at this point that we could see improvements in valuations at the end of the year. I think declines are a lot less likely. They could certainly happen.
We're not the individual appraisers, and we're going to have a whole 13 different individuals that are out there setting cap and discount rates, and some of them may be more pessimistic, some may be more optimistic. We'll see where valuations come in. I think we'll feel a little closer to that in the third quarter. I think our expectation at the moment is that they remain relatively flat, which would mean year-end leverage would remain relatively flat to today as well.
Thanks, David. Just checking in with the analysts on the call. Are there any further questions? Okay, we have one question on the public webcast. Are you refinancing leverage to Fed funds rate or the 10-year UST? If Fed cuts and yield curves steepens, would that be a negative?
I think the question being asked is what rate are we tied to? If the Fed cuts rates, is that going to have any effect? Is that essentially what they're asking? We'll let Ai Lin go ahead and answer that.
Oh, yes. If the Fed cuts rate, our rates are actually tied to SOFR. If the Feds do cut their rates, we will see a cut in our rate as well.
Thanks, Ai Lin. Any further questions from the analysts? I think we are good. We have come to the end of the session. I believe we've answered most of the questions, including the ones on the public webcast. If we have not managed to address your questions during this session, please feel free to get in touch with us. Thank you for joining us and have a good day.
Thanks very much, everybody. We appreciate your time.