Good morning, everyone. I hope everyone is well today. Thank you for attending FCT's third quarter FY 2025 business update. We have the full team here with us today. Mr. Richard Ng, Chief Executive Officer. Ms. Annie Khung, Chief Financial Officer. Ms. Pauline Lim, Head of Investment and Asset Management. Without further ado, I will now hand over the session to Richard to kick off today's briefing. Richard, please.
Thanks, Judy. Good morning, everybody. I understand that you guys are having a very busy day today. Hopefully, you have some time to go through our deck. We're going to run through quickly and we'll move on to Q&A after that. Okay, Judy, let's move on to the first slide, please. Thanks. Just a very quick summary of what has happened during the third quarter. A lot has happened actually. If you look at the third quarter, a very busy quarter for FCT. Of course, on the organic front, the team continues to work very hard to ensure that the mall is trading well. We'll share a little bit afterwards in terms of the traffic flow, the sales performance, and so on. The key highlight of this quarter, of course, is the acquisition of Northpoint City South Wing, which has been successfully completed.
As part of this transaction, we also did an equity fund raising of about SGD 421 million and issued perpetual securities amounting to about SGD 200 million at a competitive pricing of 3.98%. So we are very happy with what has happened. As we go through the deck, you'll see that, with this acquisition, you start to see the flow of income from South Wing coming into the portfolio as well. The other point that I wanted to highlight is also, as expected on the market, that the cost of debt continues to come down and has reduced to 3.7% in the third quarter of 2025. Next slide, please. Okay. This is about Northpoint City South Wing. I'm not going to go into detail. I'm sure all of you are very familiar. Of course, it helps to consolidate our position as the leading prime suburban retail space owner.
We are very happy that now we fully own both the north wing as well as south wing, and we have shared as part of the acquisition, there are various opportunities for us to unlock value. We will start to do some of this work and progressively, some of the lower hanging fruit will be producing its result along the next couple of quarters. Okay. So these are just a very high-level focus on the KPI or the key metrics that we have achieved for this quarter. Occupancy is at 99.9%. I think it moves between 99.5%, 99.7% to 99.9%. Sometimes it's a function of the void period and so on. So it's frictional vacancy, really, because the mall is running almost 100%. Some of them are actually at 100% as we speak. So again, a very high committed occupancy rate.
A testament to the portfolio that we have, a testament to the strong demand we continue to see from the retail market, especially for prime suburban malls. The shopper numbers came in about 2.1% increase. While we did see some softening in the month of June, et cetera, as a result of the school holidays, overall, the quarter again, was a positive quarter for us. Sales came in at 4.4%, a number that we think is very strong given the headlines and given some of the headline numbers coming from the overall retail sector as a whole for Singapore. Average leverage, you see two numbers there. At 30th of June, our leverage number was about 42.8%, but that is because our perps securities financing or the completion, and the money came in only after the 30th of June.
If you take that into consideration, our gearing is now at 40.4%. I mentioned about cost of debt for this quarter. It has come down to 3.7%. Again, that would be very helpful for our bottom line as well. Another further update for Hougang Mall. We shared this earlier on, but this is again, as part of our continuous update, very happy to see that over 74% of the AEI spaces has already been pre-committed right before the completion of work. Next slide. A big picture of the market. GDP grew by 4.3% year-on-year in second quarter 2025. Of course, I am aware that, overall, in terms of the estimate, it has come down to between 0% to 2%, but we still see very strong growth for the quarter. For the first half itself, the average was 4.2%.
Unless something really significant happen in the second half or the next five months, I think we still probably will at least achieve the higher end of the 0% to 2%, if not more. What is also interesting to see is that inflation number is continuing to ease down to 0.8%. That is also something that we watch out for because that affects our retailers. It also affects our consumer sentiments. Retail sales index, and this is the number that I was referring to. Of course, we are just showing here on the month of May on the broader sales index wide, it actually was a flat figure. For F&B, sales for May, and also it is a 1.4% year-on-year increase.
If you look at our sales number, it came in about 6.2%, just for the month of May, and for F&B sales, it came in about 5.6% year-on-year. Rental continue its positive trajectory. If you look at the prime suburban prime retail rents, it has kind of gone up to about 1.7% year-on-year, and a slight increase of 0.5% quarter-on-quarter. Again, all this points to the fact that the prime suburban retail malls continue to be very resilient, continue to be on a positive trajectory. Partly, as we speak, and this is something that we have shared before as well, one of the main contributor is strong demand, but at the same time, there continues to be very limited stock that comes to the market. This is an updated number that we just recently gotten from CBRE that shows all the way to 2028.
From now to 2028, you are looking at in total, prime and suburban and downtown core and also rest of central area, et cetera. It amounts to about 1 million sq ft for the entire period, and this is barely 2% increase from existing total stock. If you look at just suburban itself, it is about 340-plus thousand sq ft. These are spread out across various malls. Some of them, it is actually very smallish scale, 40,000, 56,000. Nothing significant or sizable is coming on stream for the next three years or so. This is when you put together the story where you see limited supply, strong demand, and that is the end result of seeing actually a positive trajectory in terms of the rental for the sector itself. The red line denotes the rental for prime suburban mall. It sits on a positive trajectory.
I shared about the supply and of course, in terms of demand for the occupancy rate. The suburban for the industry wide is coming in about 95.6%, but that is the total right across Singapore. If you look at FCT's portfolio alone, we registered 99.9%. Next slide. We are going to move on to financial highlights. I am just going to hand over to Annie to share some details with you. Over to you, Annie.
Thank you, Richard. Good morning, everyone. I will take you through the financial metrics for this quarter. We continue to deliver a healthy financial position for this quarter with the improved average cost of debt. As mentioned by Richard earlier, gearing has increased to 42.8% as at 30th June versus 38.6%. This is mainly because of the acquisition of Northpoint City Southwing. If we take into account the repayment of borrowings, which happened, where the proceed came in just after our quarter, the gearing is about 40.4%. Cost of debt on a nine-month basis is 3.8%. On a quarter basis, it is 3.7%, about 10 basis points lower than the previous quarter.
Average debt to maturity has also lengthened to 3.38 years as a result of the new facility that was taken for the acquisition of Northpoint City Southwing, as well as the loan from the newly acquired subsidiary, North Gem Trust, which matures in FY 2029. 76.2% of our debt has been hedged to fixed rate, and our total undrawn facilities is at SGD 780 million. Credit rating remains unchanged at Baa2. Next slide, please. Total borrowings stood at SGD 2.8 billion, of which 58.2% is unsecured, 39.1% is secured, with the remaining balance in NPN. The increase in secured borrowings was from the newly acquired loan from Northpoint City Southwing. Approximately SGD 459 million of our debt is maturing in FY 2026, and our refinancing discussion with the banks have commenced.
The higher debt maturity that you can see in FY 2029 is attributable to the loan that was consolidated following the acquisition of Northpoint City South Wing. I will now hand over to Pauline, who will go through the portfolio highlights.
Thank you, Annie. Good morning, everyone. I am very delighted to provide some details on the very good set of results that Richard touched on briefly earlier. For this slide, you see that our portfolio is almost at full occupancy. In fact, that is the case for several of our malls across the 10 retail assets that we own. This is actually, I would say, a reflection of the fact that we have a very good quality portfolio, that is well located, that is trading very well, and also highly sought after by the retailer. Next slide, please, Judy. In terms of the fundamentals of retail performance, when we look at shopper traffic, we look at tenant sales, you will see that over the third quarter of this financial year, the strong performance has actually maintained.
Also, with the main numbers in terms of sales, it has actually been improving, right? The other point to note is that in terms of the FCT performance, and if we were to compare it to the general Singapore suburban or Singapore retail performance, it does tell a story of outperformance based on the kind of year-on-year improvements in the sales that we have achieved. And this can be attributed to various factors. I think Richard touched on some of the strong macro factors, the government support to defray the higher cost of living. And I would say also most importantly, to the proactive strategies that we have actually undertaken to drive the growth beyond just organic growth. We recently completed, or rather we completed the asset enhancement of Tampines 1 last year. And admittedly, this has helped to continue to drive the strong performance of our portfolio.
We continue our strategy of value enhancement with the announcement of the Hougang Mall AEI at the start of this financial year. So this is very much part of our focus to continue to sustain the strong performance going forward. Next slide, please. Government support for Singaporeans' expenditure on essentials. So I think everyone is generally very excited and delighted with the various support that the government has dispensed over the course of this year. I think the policies are largely targeted to ensure that the cost of living of the average Singaporean is at a sustainable level. And admittedly, this has also helped our portfolio in terms of a good performance because of our offering and our positioning, which is very much targeted towards the convenience and also the non-discretionary spending of Singaporeans. And it is also heartening to note that the retailers are also self-help.
For example, supermarkets, aside from the reliance on the CDC, the various supermarket operators have actually also stacked some of the incentives and all that. All that builds into the overall ecosystem for retail sales. Next slide, please. Yep. I spoke about the Hougang Mall AEI. This is one aspect of our focus on sustainable performance with inorganic tickets. For the Hougang Mall AEI, I am very happy to also share that in terms of the various targets that we are looking at in terms of the construction progress, in terms of the leasing results, and also the cost of the CapEx is all generally tracking to target. We are on track to deliver on the 7% ROI that we have promised the investors when we announced the start of this AEI.
On the softer aspect or on the software aspect, there is a lot of focus on ensuring that we continue to offer a good mix, and a refreshed mix to our shoppers living within the Hougang precinct. You see that on this slide, we have actually showcased some of the brands, and the concepts that we will be bringing to Hougang post-AEI. Some of these are actually returning concepts, which have actually shown to be very popular and in high demand by the Hougang population. Others are popular and trending concepts to infuse that freshness and that variety into Hougang Mall post-AEI. That will help to sustain the performance. Okay, next slide. This focus on ensuring the sustainability of the performance extends beyond just the asset enhancement aspect.
One of the key focus would be also bring new concepts, popular concepts, trending concepts to all our malls on an ongoing basis. You will see on this slide that we have showcased some of the new concepts that we have brought to our malls across the portfolio. On a year-to-date basis, we have 59 new-to-portfolio tenancies, meaning tenancies which are first time to our portfolio of malls. This is a very interesting, varied mix of both F&B as well as non-F&B retail offering. You see on the right-hand side, these are the [Non-English content] , the upcoming new-to-portfolio brands that have already been committed, but which have not commenced as yet within our portfolio. Next slide, please. Another key aspect of our strategy in order to sustain the strong performance is actually to weave our malls into the social fabric of the various communities that they serve.
There is a lot of focus on engaging, enriching, exciting the community. This is done across our malls. There are signature events. There are also events that actually play to the heart of the community that has a more local flavor for the particular catchment. What you see here would be this [Charity] fun walk that we held at Waterway Point on the left-hand side. There is also emphasis on art, creativity, family bonding, as seen in this Colours on Shores at Waterway Point. This is a very engaging program or event that we brought to Waterway Point in collaboration with an external partner. That helped to liven the lifestyle within the suburban state. Next slide, please, Judy. More examples, the Beach Party focused on CSR as well. We have got this LINE FRIENDS whereby we have also embedded some CSR initiatives in the programming as well.
Next slide, Judy. With this, I will hand over to Richard to take us through the final wrap-up of today's presentation. Thank you.
Yeah, thanks, Pauline. Just a very quick roundup of what we have shared today. Again, just wanted to emphasize the fact that the demand for prime suburban retail space is still strong amid the tight supply, reopening of more outlets from some of the retailers, bringing in new brands, et cetera. So we continue to see robust operating performance from our end. Northpoint City Southwing, again, is going to start contributing towards our bottom line. And we are seeing the positive results coming through that. Proactive capital management is something that is ongoing. It's something that we continue to watch these days. As what Annie has shared just now, we have got some refinancing coming up for our FY 2026. Again, we will try to optimize that as well. Drive enhancement growth, something that we always look at, and this is something, again, a very critical part of our business.
Besides organic growth, besides acquisition, I think AEI is another area that we put a lot of emphasis and focus on because this actually helps to create additional value, additional income, that we can add to our bottom line, right? For example, we achieved 8% for our Tampines 1 AEI, and as Pauline shared, we are on target, on track to achieve for 7% for our current AEI. So if you look at the contribution from all this AEI itself, it's ranging 7%-8%, which is a very good return, even as compared to acquiring any asset, right? So we continue to explore alternatives. We shared about NEX, going into AEI for FY 2026. We are also looking at our other assets within the portfolio that we can start on our AEI once Our Tampines Mall is done.
This is an area that I cannot overemphasize the importance of our AEI contributing to our growth as well. On the organic front, the team is, again, very focused on driving footfall, driving tenant sales, because at the end of the day, we want to make sure that not only are we getting very good occupancy, but our retailers are thriving, they are doing well, and our shoppers are happy to see all the new brands that we are bringing in, all the changes that we have done as part of our AEI. All right. With that, I'll end our presentation. Back to you, Judy, so we can do the Q&A. Thank you.
Thank you, Richard. Now, we will move on to Q&A, and I do see that Mervin has a question. Mervin, please.
Hey, good morning, Richard and team. Thanks for the call. Can we just start on Cathay? An update there, how much are they exactly in arrears? Contingency plans you may have if Cathay actually closes. How much of the security deposit have been drawn down, and have you been paying out the rents that were in arrears? The second question I have is, any updates on AEI plans at Northpoint South Wing and note the sponsor has bought Yishun 10 site as well, and what are the plans for that property? Thanks.
Okay. I think there are quite a few parts to your question, Mervin. Let me try to address them, and then, Pauline, we can come in and chip in as well. The situation with Cathay, as you are probably aware, we did a letter of demand or whether we actually sent in the letter of demand at the beginning of this year. With that, they actually made an announcement as well. At that point in time, when we did that, we had some discussions, some negotiation, and progressively, I would say that they have made payments on a monthly basis. Of course, we expected more, but in the current situation, I think they were able to pay us whatever that they could. You probably follow the news as well. They came out to say that they are going to be doing some placement, et cetera.
It is an ongoing discussion. By and large, if you look at it, they continue to operate in the two malls, and one of the primary reasons is because we feel that our shoppers are still going for cinema. There is still a demand for cinema, especially there is a lot of movies happening during this period. So we do not want to disrupt that. Like what I say, at the same time, Cathay have continued to pay on a monthly basis. The amount, various amount. This discussion is something that we will continue to talk to them and continue to work with them. Right? At the moment, this is on the basis of what I have spoken about. As far as financials are concerned, we have fully provided for the amount up to today, and we continue to provide amount going henceforth.
We also did talk about this in the last quarter, that the contribution from Cathay towards our overall GRI is not material. It is actually not significant, less than 1%. What I would like to emphasize is it is not going to impact our bottom line for our full-year results coming out in the next quarter. That is for Cathay. For AEI update for NEX and South Wing, I will leave that to Pauline to share a little bit more. In terms of Y 10, yes, FPL or Frasers Property, our sponsor, has actually acquired or rather has entered into a contract to acquire the portion that is owned by Golden Village, operating as a cinema. As part of the transaction, when it is completed or if it proceeds, Golden Village will continue to operate the cinema for 18 months.
As far as we are concerned, we are still evaluating all options. Nothing to update at this point in time, but if anything develops further, we will come back to the market and share with the market.
Yes. Maybe I will just elaborate on the NEX AEI. I think over the course of the past few months or so, we shared that we are on track to commence the AEI. We are still looking at a commencement date sometime in May or June. Essentially now the process is in terms of getting the necessary authority approval. We are working through that as we speak. In terms of the target commencement, no push out. We are still looking at May or June for the major works to start. For Northpoint City South Wing, I think during the acquisition we did mention that there is value to be extracted through single ownership, and there are many parts or several parts to that value extraction. Some of it would entail remixing some of the brands or the offerings.
I would like to say that is on an ongoing basis. As and when we see the opportunities with lease expiries and so forth, we will work to extract value. Also the smaller scope enhancements, reconfiguration of space, that is something that is also very much at the top of our mind as the leases comes up. In terms of the bigger asset enhancement, that would have to go through a due process. We did share that as well in our earlier sharing. As part of the lead up to the AEI commencement, we will have to go through various processes including feasibility. It is not just financial feasibility, it is also retail positioning feasibility to ensure that we deliver not just the quantitative outcome, but we also position the retail mall to do better going forward.
That is a due process that we expect to take based on our past experience with major AEIs. We are looking at, say, 12- 18 months from the commencement of some of these initiatives. It may vary from one project to the other, depending on the complexity and also the sources of value that we are seeking to extract. Mervin, I hope I have given you some perspective on your question.
Sir, in terms of the Yishun 10, is there a possibility to remove the road or is it possible during discussions with the authorities?
I think it's something that probably need to, again, work with the authorities. It depends on what is going to be done, what is going to be proposed for the site. As of now, it is just a proposal to acquire the Golden Village portion of the building. So there's possibilities, depending on what is the approval like and what is going to be built, how much is going to be built. I suppose the engagement of the authorities will have to continue if there's a plan for that.
The ideal would be getting rid of the road, right? A bit like Junction 8.
Possibly as one, but of course, we have to be mindful that we do have access, ingress, egress into Northpoint City North Wing from that side. Our delivery for the North Wing is also done at that corner. I guess it is not as simple as just removing the road, but I think there are also some other considerations that has to be considered.
Okay. Thanks for that. Thanks.
Thanks, Mervin, for your question. Next up, we have Geraldine from DBS. Geraldine, can you unmute yourself to ask the questions, please? Thanks.
Hey, good morning, Richard and Judy. Thank you for the chance. Maybe just a follow-up to Mervin's question. When talking about Y 10 potential extension of the mall, I understand is it as feasible as just speaking? I have got to understand the windshield part of the mall is at that side facing the road as well.
Yeah, Geraldine, we are not even talking about expansion of the mall at this point in time. Like what I said, the sponsor is in the process, and hopefully, it goes through to acquire the portion that is owned by Golden Village, and then they will continue to operate it. These are public information anyway. At this point in time, I think we are just exploring various possibilities. That could be one option potentially, but I am not saying that that is something that we are looking at today. That is something that we are going to do. That is something that we are going to be fixed of doing. We are just exploring various possibility at this point in time.
Okay. Thank you, Richard. Maybe just on the retail sales, 4%, I believe there will be some upside from Tampines 1, as well as Far East. Are you able to give us a more organic number if you look at [inaudible] ?
Okay. We do include both. But Southwing itself, what we did is also we actually incorporated in the baseline the numbers from last year. If you strip out Tampines 1, I saw the number, I think it is still pretty positive, right? The total contribution of T1 is not that significant because it is a smallish asset considered the whole portfolio that we have. Again, for Southwing, because you put in the base on both this year and last year. Again, it is about the whole portfolio actually saw an uplift in sales.
Geraldine, maybe if I can add on to that. If we were to strip out some of that or rather, if we exclude the new acquisition as well as the upside from the asset enhancement, we are still looking at positive growth for the rest of our portfolio on a year-on-year basis. We also monitor the general market very closely. So in terms of the performance of our portfolio over the past month or so, it is generally ahead of the overall retail market as benchmarked by the retail sales index.
Okay. Thanks, [Olivia]. Seems very healthy and more to come with the SG60. If I could just squeeze in one more for the cinema space. What is the ongoing plans now? Is there any plans to reposition that space? I know it is at a very high level, so there is some difficulty there.
Yeah, I think that for us, what is happening now, we have to review the entire trade mix that we have in our assets. Of course, certain trades is also facing challenges, cinema being one of them. They have not really fully recovered since the pandemic. But the bigger question for us is also going forward, do we see that there is a need for us to continue having cinema in some of our malls? Currently, we have five of them. So the question is, do we need all five of them to have cinemas? Maybe not all. So some of those, we can look at opportunity to repurpose the space.
Definitely, I think we are looking at currently at those two occupied by cinema for us to look at opportunity to repurpose, bringing new tenant, bringing new trade that we believe could be a better traffic generator than what cinema could offer today. So those works are ongoing. It takes a little bit longer because of the complexity of converting a cinema space. If you know the way the cinema space is being structured, so there are tiering level, steps, and so on. That is being built up, so it is a little bit more work involved, a bit more structural work involved, and also technical requirements, et cetera, that we need to go through. But by and large, I think we are looking at it as an opportunity because cinema typically, they take very big space. They are located on a higher floor.
They do not pay you a very high rent. So for us, it is about finding a good opportunity to repurpose the space, bringing in tenants, like what I said, that could be a better traffic generator. And of course, we also hope that as part of the work, we get an uplift in terms of value and also rental income from the space that we are working on. But it is going to take a while for the work to be put in place because there is a lot of technical requirement, technical studies that have to be explored, and we got to go through our consultants.
Good. Okay. Thanks, Richard. That's all for me.
Thanks, Geraldine, for your questions. The next one, we've got Vijay from RHB Research. Vijay, can you unmute yourself and ask your questions, please? Thank you.
Yeah. Hi, good morning. Thanks for the call. A couple of questions. Firstly, on the NEX, is there any update on the income transparency? On the same mall, in terms of AEIs, what are your plans? Is there a plan to increase the GFA? Is that possible? What sort of CapEx we should expect for this?
Yeah. Okay, Vijay. A very quick straight answer for the income transparency. Again, it's something that's ongoing. It depends on both parties or the parties in this whole entire ownership that have to agree on any changes in terms of structuring. So there's nothing that has been concluded. It's an ongoing process that we engage, and we re-engage, and anytime we have opportunity, we will speak to them about this. So in summary, there isn't an update on that. For the NEX AEI, I believe we did share some numbers previously. I think we're looking at potentially being able to work on about 60,000 sq ft of GFA, 50% of which is going to be for retail, 50% of it is going to be commercial use.
The plan is in a very advanced stage as what Pauline has mentioned, because we are right at the tail end of finalizing some approval from different agencies, because in order to go through such a massive AEI, you need to go through different agencies. You go through URA, you go through NEA, you go through LTA. We need to go through the process to make sure that we get the approval or agreements for us to proceed. At some point in time, we will be able to come back and share ideas on what we are developing, what kind of space that we are creating, where is it going to be created. By and large, I think we did indicate that the overall CapEx was between SGD 80 million- SGD 100 million in the past. We are keeping it to that amount.
Again, just to also reinforce that the funding for this CapEx will be coming from the joint venture company that owns the asset, so we do not need to pump in any additional equity from FCT itself. Right.
Got it. Thanks. My next question is in terms of debt, is there an updated guidance in terms of what debt cost you are looking at for FY 2025 and FY 2026? Also, FY 2026, you have about 16% of the loans. If you have to refinance these loans based on the current market rates, what kind of cost savings or cost you would be looking at?
Any of you want to take that?
Yeah. I will take the questions. For FY 2025 guidance, it is going to be around 3.8% because there is only one quarter left, and 76% of our debt has been hedged. For FY 2026, I think our guidance for that is about mid 3%. That has taken into consideration the repricing of the loan.
Got it. You will be maintaining the hedged ratio at current level, 75%, 76%?
Yeah. We will monitor and see what is the interest rate and put in place a hedge when there is an opportunity. But by and large, it should be around the 70% region.
Okay. Mid 3% for next year.
Mid 3%. Yeah.
Okay. Thank you. My last question is in terms of divestments. Is there any still potential divestments which you are looking at in your portfolio? I think earlier you mentioned that Central Plaza office could be considered if it is optimized. Is that something which you are looking at?
Again, okay, I did not say specifically that the asset has been identified. The question came out, we said we are still working through our portfolio. Central Plaza, we mean as an integral part of Tiong Bahru Plaza. We believe that holding the asset at this point in time, it's important. It's beneficial for us because there are a few opportunities, I believe, to unlock some GFA. So I'd rather keep that space with us. At the same time, you are right. If you look at the occupancy, it's not fully occupied. There's still room for us to improve the performance of Central Plaza. So we'll continue to work on that asset. Divestment is something, again, it's just like acquisition, right? Sometimes it's about opportunity.
We do look at our portfolio every year to assess in terms of wholesale analysis to determine whether is there any assets that we think that is really optimal, something that we don't think we want to keep in the longer term. That having said, yeah, we also need to look at the market. Is there a market for us? Even if we choose to divest, is there an opportunity for us to do so? Is there demand from the market to acquire, we give more assets, because typically the quantum is higher and so on. So those are the various variables that we need to look at, we need to consider before we talk about that. Of course, if today somebody comes in and say, "Look, I'm prepared to offer you X amount," we will look at that opportunity also.
Okay. Thanks, Richard. Just from a gearing perspective, you are at 40.4%, which is slightly higher than your normal range. Are you comfortable with this range for now? Is there a need to lower it?
I think it is a question that today we have managed to do a couple of things, to bring it from 42 point something down to 40.4%. We continue again to explore if there is possibility to bring it down. Ideally, we would like our gearing to be below 40%.
Okay. Got it. Thank you. That is all I have.
Thanks, Vijay, for your questions. Next up, we have got Rayson from HSBC. Rayson, can you unmute yourself, please? Thank you.
Hi, Richard and management team. Maybe just a few quick follow-ups. Firstly, on the gearing side. I understand that ideally it should be below 40%. Just wondering, in terms of your discussions with your valuers, are you expecting some valuation uplift for your entire portfolio? That is the first question.
Okay. If I put it in a very general perspective, our income or NPI has grown. Our assets are performing better. As we started the conversations with the valuers, one thing that we have established is there is unlikely any change in the cap rate. Even if the cap rate remains the same and if your income, your bottom line has improved, the trajectory of our income has improved, the potential for rental revision is also positive, as I have shared some of the data points with you. I believe, from that perspective, we should see some positive growth from valuation side, but it is still work in progress.
I see. That is good to hear. Maybe just a quick follow-up on the interest cost guidance, which is 3.8% for this year. Because I do recall that for the proceeds from the perpetual securities, they have not been used to pay down debt as at the end of the third quarter, right? Just wondering, the cost of the debt that you are going to repay for this SGD 200 million in the perps. If there is going to be any potential savings in the interest cost due to the overall debt, that interest cost.
Rayson, I have taken that into account with the repayment of the perps proceeds. Because if you can see, the first three quarter interest rate is high. Even if it is at 3.5%, if you blend it for the full- year basis, it will be around the 3.8%. That has already taken into account the repayment of the perps using the—
I see.
—same fee.
Okay, got it. Thanks for that. Maybe just a few questions. Just basically on the AEIs, I understand that you do have quite a few AEI opportunities. Typically there has been usually just one AEI, and then if that is completed, it will be followed by another AEI. Given that we do see that based on the Draft Master Plan, there is a lot of new rezonings to residential at Northpoint City. How does that actually change how you think about the timeline of implementing AEIs? Would you be open to doing two or maybe more AEIs contact?
I think that is definitely something we consider given the timeline, the opportunity, et cetera. One thing we also have to be mindful is we do not want to stretch ourselves too much, and it very much is also depending on the various scale of AEIs, right? If it is something not too big, we could definitely squeeze in another one. The timing, like what you clearly pointed out, is also important. Is there opportunity for us perhaps to even stage out, right? Maybe some AEI, we can stage it to make sure that the overall impact to our bottom line, which is crucial, is not that significant. Having said that, we are always mindful that NEX AEI is going to be quite a huge AEI project, quite significant, and so on.
Whatever that we're going to put in place has to make sense in terms of timing, in terms of the overall management of the bottom line, gearing, cost. All of this has to be considered in totality.
I see. Got it. Maybe just one final question. Sorry, just back to Cathay. Since you guys actually escalated it from being a demand letter to a statutory demand, just wondering what's the thought process behind this and if it allows you to actually terminate their lease ahead of their expiry, which I think you shared earlier was 2028.
Yeah. Pauline, do you want to take this?
Yeah, I think, Rayson, earlier when Richard spoke about Cathay, he did mention that one of the considerations that we had was also to a certain extent, the sustainability of the business of one of our retailers and also to meet the needs of our shoppers, right? Why did we then escalate the letter of demand to a statutory demand? I think that is part of the legal process because we also have this fiduciary obligation. We need to balance this fiduciary obligation to preserve our legal rights as well, but as much as possible, and in fact, we've been doing this over the course of since the earlier situation actually started.
We have been actually working very closely with the operator in terms of their cash flows, their ability to sustain the business, because we also don't want a situation where we disrupt them, and we take away one form of retail offering to the shoppers.
Okay. It doesn't allow you to terminate the lease?
Yes. We can terminate the lease, but it's a function of the alternative use for the space.
I see. Okay, got it. Thank you so much, Richard and team, for sharing. Thank you.
Okay, thanks Rayson. We've got questions from Derek, DBS. Derek, can you unmute yourself to ask a question?
Hi.
Thank you.
Thanks, Judy. Can you hear me?
Yes. All good.
Hi, Richard and team. Good morning. I just wanted to have a few follow-up questions. I hope you can give us some guidance on your reversion this quarter. Usually, I know you do not do it, but are you pacing in line compared to first half, or are you stronger?
I would say, as I mentioned during the first half sharing, that we came in at a pretty strong reversion. I also alluded to the fact that I foresee the full year is going to end between what we achieved last year, which is 7.7%- 9%. I think we are still on track to do that.
Okay. Sounds good. Maybe a second question that I wanted to get a sense on is on your margins, right? Is there any opportunity for you to achieve some form of margin expansion in the second half? The reason being where utilities rates are versus what contracted. Is there an opportunity for you to capture some savings, or that has already been done?
For utilities, I think we have pretty much locked in all the way to FY 2026 except for water for one or two of the assets. The rest are all locked in.
I see. Okay. Stable.
Yeah.
Then the last one.
Yeah.
Actually, Richard, on yield curve, we do see the rates coming down—
Yeah.
—based on the locking rate—
Yeah.
—for apartments.
I see. Okay, no problem. Yeah, thanks for that. Last one is on the Hougang. I understand that the pre-leasing is really strong. I think you're just in the midway to the AEI, right? Could you let us know whether, are you above your underwriting assumptions, and what kind of ROI you think you can achieve?
Okay. We shared, the whole project is estimated to come in at about 7% ROI. Happy to say that we are still pretty much on track or slightly above underwriting at this point in time.
Okay. Your underwriting is conservative. That's how we can say. I'm trying to find positives from some numbers.
Yeah. I think we always, of course, have a little bit of a built-in conservativeness into the projection. At the same time, we are also mindful because there are certain tenants that we think it is important, tenants that we want to have in the mall. As we progress through the negotiations, there will be some ups, some downs, but we are confident of at least achieving our target that we have shared.
Yeah. I think the other function of returns would be the CapEx as well, right? Until the project is completed, we cannot fully anticipate whether there could be surprises, whether there are variations and so forth. It is not exactly being conservative as well. It is also taking a more practical approach to what we indicate to our investors. Yeah.
Got it. Sorry, just one last one. I may have missed this, but for Cathay, did you all do a provision for that or is that something that we should look out for in the second half?
No. Whatever, up to date has been fully provided for.
Oh.
We will continue to provide. I mentioned just now, the actual fact is that the overall effect to the bottom line is very immaterial.
It is very small.
It is less than 1% of our total GRI. We do not see that impacting our full year numbers at all.
Okay. No negative surprise. That is good. That is all from me. Thank you.
All right.
Yeah. Very good. Thank you.
Thanks, Derek, for your questions. Next up, we have Joel from DBS. Can you unmute yourself, please? Thank you.
Good morning. Can you hear me?
Yeah. Good morning. Yes.
Yes. Hey. Thanks, Richard and team for the presentation. I just had two questions regarding debt. The first question is, just wondering, how does the funding market look currently on a cost perspective comparing, say, bond issuance versus bank loans? My second question is, I understand you use some secured bank loans. Just wondering from a credit rating agency angle, is there a limit to this? I understand you want to keep your investment-grade rating. Yeah, those are my two questions.
Yeah. Hi, Joel. In terms of the loans and the bond, there is still some slight difference between the two pricing, but the bond market has been very, very active. I think the other differentiating point is that, you have a slightly longer tenure if you tap into the capital market for the bond side of things. If you were to compare against just the margin alone, I think there is some slight advantage in the bond versus loan at the moment. Okay. The second question is on the secured borrowings. Yeah, our secured borrowings has increased to 36%. From a rating perspective, I think there isn't a direct impact to the rating. What Moody's has rated has really taken into account the parameters of our secured borrowings. Yeah.
Okay. Thanks for that. I'm just wondering, so for, say, if you are looking at the bond market, will you be looking to issue more? I know you have maybe 3% currently in bonds.
Yeah, we will continue to watch the market and then, if there is an opportunity at an attractive rate compared to our loan, we will do that.
Okay. Yeah. That is all from me. Thank you.
Thanks, Joel, for your questions. We have come to the end of the Q&A, but I will hand it over to Richard for his concluding remarks. Richard, please.
Yeah. Thanks everyone for joining us this morning, and I think the questions that we have is also around some of the areas of perhaps some issues, some concerns that you guys have, and we hope that we have answered and given you more clarity. Maybe I just very quickly summarize a couple of things. Cathay, we spoke about it. Again, just want to reemphasize that it is not going to impact our bottom line because it is not material. We continue to engage the operator. We continue to look at other opportunity or possibilities for us to repurpose the space. In terms of the market performance, something that we have shared, the results have been very positive. We are getting good traction in terms of our demand for space, 99.9%. We see strong sales pick up as well for our portfolio.
Bottom line is, it's part of our portfolio being the main provider for basic essentials, necessities, products. We are not so much impacted by the market volatility, et cetera. We saw traffic also increase in our malls. All this pretty much a positive direction that the malls are operating at. Financing, it's coming down, even though we would have liked it to be faster. But again, the fact that we have to wait for refinancing to come in, we have a certain proportion of our rates are fixed. We are happy to see that at least the rates are trending downwards, and I hope to see that they will continue to trend that way. Again, as what Derek was asking, we don't expect any shock for the next couple of months, unless some unforeseen circumstances comes up.
Other than that, I think we probably will be ending the year in a good position. With that, we thank you once again for joining us this morning. Thank you.
Thank you everyone for joining us again this morning. We've come to the end of FCT's 3Q25 business update. Any other questions, feel free to reach out to all of us. Thank you. Have a nice day ahead.