Morning, everyone. On behalf of the manager of Frasers Centrepoint Trust, thank you for joining us for this morning's analyst briefing for FCT's first half 2025 financial results, which was uploaded on SGXNet this morning. We have with us today Mr. Richard Ng, CEO of the Manager, Ms. Annie Khung, Chief Financial Officer, and Ms. Pauline Lim, Head Investment and Asset Management. Please be reminded that we will be recording all the analyst briefing and also uploading an audio recording of the briefing on FCT's website later today. I would now like to invite Richard to discuss the results and go through the presentation. Over to you, Richard.
Yeah. Hey. Hi. Thanks so much, [Yi Ting], and good morning, everyone. Thanks for joining us this morning. It looks like it's going to be a very eventful this week. First and foremost, I would like to share that we are very happy again to share a set of very strong results, especially from the operating performance and that translates into the financial performance as well. Perhaps we could go straight out to the first slide, please. Yes. Here again, we have put it in a way where it's easy for you to go through the different numbers. First and foremost, in terms of retail occupancy, again, remaining very stable, steady at over 99% occupancy rate. We continue to see improvements in terms of our shopper traffic, a marginal 1% up. Sales for this first half itself came in about 3.3%.
Again, pretty strong sales growth for our portfolio. Rental reversion, you could see that last year this time we actually achieved about 7.5%, and for this year, we were able to do 9%. From the debt side of things, gearing, we remain at about 38%, 39% thereabout. The other thing to note is also our cost of debt for this quarter, second quarter 2025, came down to 3.8%. With this backdrop, we were able to deliver at the same time a set of strong financial performance as well.
Next slide, please. From gross revenue perspective, we grew by over 7% to SGD 184.4 million, and that translates to a NPI of about SGD 133.7 million, which is also about 7% higher than same period last year. Next slide. On DPU perspective, our distribution to unitholders grew by close to 5% to SGD 110.1 million, and our DPU grew by about 0.5% to SGD 0.06054 for this first half of 2025.
Next slide. Another important highlight, we just want to have this as a recap, what we did sometime in March of the proposed acquisition of 100% of Northpoint City South Wing. And we also went out to do a EFR of a private placement and also preferential offering. The private placement was about 4x covered, and the preferential offering was about 1.2x covered. In total, we raised over SGD 420 million. I am not going to go through the details because we have gone through this before, but we can certainly take questions if you do have on this acquisition. We are scheduled to have our EGM sometime at the end of May. The date, once finalized, will of course be announced as well.
Next slide, please. Okay. A little bit about macroeconomics. I think most of us are pretty familiar with this information that you have before you. In terms of GDP, of course, we still see pretty strong performance from our Singapore market as a whole. But with all the uncertainties, I think MTI has kind of taken a little bit more conservative stance and reduced or downgraded the GDP forecast to between 0%-2%. But at the same time, it is also important to note that the CPI continues to ease, and that is an important element for us to look at and important number for us to continue to monitor. Retail sales for January, February, that is usually the case. We look at the two months because it differs from year to year when our CNY falls.
For this particular year, for the RSI sales as a whole, came in at marginal drop of 0.5% year-on-year. However, if you look at some, again, some bright sparks within the sector itself, in particular the F&B sales continue to do pretty well with a growth of over 2% year-on-year. Overall rental rents, this is looking at just prime space. Suburban prime retail rents continue to grow at about 1.6% year-on-year. This is slightly different from our set of numbers because ours is on a overall portfolio reversion perspective.
Next slide, please. Again, if you look at supply, the numbers are still pretty much the same that we have shared before. Pretty muted if you look at the next three years. So on the average, it is about coming in less than 0.3 million sq ft per annum in total. But if you look at just strictly on suburban space that is coming up, it is looking at probably around slightly over 200,000 sq ft for the whole three years in total. Again, supply is pretty muted. Demand continues to be very strong, in particular, if you look at our occupancy rate. That is one of the reason why it also contributed to the strong reversion that you have seen just now at the start of my presentation. Next slide, please. For financial highlights, I would like to ask Annie to help to go through the section, please. Annie?
Yeah. Thank you, Richard. Good morning, everyone. Let me take you through the financial highlights for the first half of this financial year. We are pleased to share the improved performance in one half 2025. For the first half, gross revenue is 7.1% higher as compared to the same period last year. This was mainly due to the completion of AEI at Tampines 1, partially offset by the divestment of Changi City Point on 31st October 2023. If you exclude the effect of the Changi City Point and Tampines 1, gross revenue is 2.4% higher, mainly due to the higher occupancy and higher rents across most malls. Operating expenses for the six months period is 6.5% higher compared to the same period last year. Excluding the effect of the Changi City Point and T1, operating expenses is 4.7% higher, mainly due to the higher marketing, maintenance, and utilities expenses.
This translates to 7.3% higher compared to the same period last year. If you exclude the effect of Changi City Point and T1, the NPI is about 1.6% higher than the same period last year. Distribution from investment relates to the distribution from a JV, which holds the Waterway Point and NEX. It is 83.2% higher due to the six full months contribution from the acquisition of the additional 24.5% in NEX in March 2024. Of course, the better performance in Waterway Point and NEX. DPU is SGD 0.06054 for this one half. Next slide, please. There is no material variance in balance sheet. The net asset value remains stable at SGD 2.28 as at 31st March 2025. Next slide, please. We are pleased to report the healthy financial position with the improved average cost of debt.
As at 31st March, the aggregate leverage is at 38.6%, which is 0.7 percentage point lower than last quarter. The interest coverage ratio is healthy at 3.28x , and the average cost of debt is 3.9% for the first half. It has dropped 20 basis points to 3.8% on a quarter basis. Average debt to maturity stood at 2.95 years, and during the quarter, we took the opportunity to increase the percentage of the debt hedge, bringing it to 75.8%. Undrawn facilities is at SGD 596 million, and credit ratings remain unchanged. Next slide, please. We have a well spread debt maturity with no refinancing risk for this financial year. In March 2025, this year, we also took the opportunity to issue a seven-year SGD 80 million green bond at 3.3% to diversify our sources of funding. Next slide, please. Yep.
DPU for the first half is at SGD 0.0605 , which will be paid on the 30th May. I will now hand over to Pauline, who will take you through the portfolio highlights.
Thank you, Annie. Good morning, everyone. I will deep dive into some of the good performance that Richard actually shared in his highlights earlier. On this slide, you see committed occupancy continuing its very strong level. The high portfolio committed occupancy actually reflects the healthy demand that we are seeing for quality suburban retail spaces. Across the portfolio, all the malls have exceeded 99%. The vacancies in some of these assets are largely frictional for tenancy change-out. Next slide, please. Again, this slide shows a very strong set of financial performance. I think Annie shared earlier on the broad portfolio level improvements in revenue. Again, you see that this performance is broad-based across all our assets. On a year-on-year basis, all the malls have reflected strengthened revenue.
Next slide, please. Thanks. Shopper t raffic as well as tenant sales continues its trajectory of growth extending into the first half of this year. It reflects the quality of our portfolio of malls. The growth in traffic as well as tenant sales is a result of proactive management. It comes from both the organic growth within our catchment, as well as active asset enhancement. Case in point, we completed the Tampines 1 AEI towards the end of 2024, and that has actually reaped upside in terms of stronger traffic as well as tenant sales.
Next slide, please. Government support, I think we are very happy that the government continues to support the general populace. Various disbursement schemes that were announced in the recent budget announcement include CDC SG60 vouchers.
I think in terms of total quantum, we are looking at SGD 3 billion to be disbursed, of which 50% actually comes back to the brick-and-mortars, the supermarkets. That would be something that would continue to support the sales of our supermarket retailers going forward. In addition, the government has also announced the disbursement of climate vouchers amounting to SGD 400 per household. That would then also support some of our retailers, electronic retailers, the likes of Harvey Norman, Best, Courts, and so forth. Also interesting fact is that, these vouchers can only be used for brick and mortar. These benefits would accrue directly to our malls.
Next slide, please. Over here, you do see the very strong rental reversion that we have achieved across our portfolio in the first half of this year. So 9%. By way of comparison, we looked at first half 2024, same period, the rental reversion that was achieved was 7.5%, and we ended FY 2024 at 7.7%. You do see from this set of numbers that demand remains strong. That is also underpinned by the healthy trading performance of our malls, as well as the high occupancy.
Next slide, please. I think a key focus for us would be to also continue to engage as well as enrich our community. I think we see ourselves, our malls, as vibrant social hubs that connects the community that we serve. We have various community themed events that encourage participation of the local residents from all walks of life. Also signature events that seek to actually draw catchment or shoppers from a wider catchment.
Essentially, this is to elicit a strong sense of space association with the mall, is very much in line with our positioning, in the heart of the heartlands as a community mall. In terms of the themes, we look at engaging our shoppers with the latest social interests as well as some of the social focus. You see here that, the picture on the left was something that we did at Waterway Point, with Emerald Hill, which is one of the shows that is going viral within Singapore. Also on the right-hand side, the theme of healthy living, as well as CSR at Waterway Point as well.
Next slide, please. Sustainability continues to be a key focus. We conducted events along the lines of sustainability, recycling at Tiong Bahru Plaza, Waterway Point, Northpoint City, also conservation of water. And also another social trend that we've recognized is also graceful aging. Our population is also aging. So, in terms of engaging some of the seniors within our population as well.
Next slide, please. Aside from being community hubs, we also do position and vision our malls as dynamic drivers of sustainability impact. This is in line with one of our key corporate goals, to champion sustainability. So what you see here is the participation of two of our malls in the inaugural DDC, Distributed District Cooling, Brownfield project in Tampines, which actually connects seven commercial buildings into this network. In terms of the benefits that we reap from our assets from here would include CapEx savings and also concessionary GFAs. So there are commercial merits as well in our sustainability initiative.
Next slide, please. Yeah. Whilst we continue to engage and enrich our community, we have also not lost sight of the need to excite our shoppers. Over the course of the first half of this financial year, we brought in 41 new-to-portfolio tenancies into our portfolio of malls. Some of these new concepts are actually also new entrants to the Singapore scene. So we continue to roll out some of these new concepts across the malls within our portfolio. Next slide, please. I think we've shared on various occasions that our strategy is not just about driving organic growth at our malls. We do actively look at opportunities to enhance the performance significantly on an inorganic basis, on an enhancement basis. So in April, we have commenced the AEI for Hougang Mall, which we announced the end of financial year.
I'm happy to share that, on a to-date basis, we have garnered 64% pre-commitment in terms of leasing. A component of these new commitments are actually new to the Hougang market. So again, with AEIs, we continue our focus to bring exciting new concepts to the shoppers. The AEI is also on track to complete by third quarter of 2026. As we roll out our enhancement initiative, we also continue to engage with the local community to tap their ideas on what they are looking for in their community mall. So what you see here in the pictures, your journey with Hougang Mall, it seeks to engage the tenants as well as the shoppers on what they seek to look for in the post-AEI Hougang Mall. Next slide, please. With this, I will hand over to Richard to wrap up the presentation. Thank you.
Thanks, Pauline. Let's move on to the next slide. Looking ahead. This is something that we shared before, but we just wanted to reemphasize the fact that looking at especially portfolio like ours, there continues to be positive factors to support our long-term growth. These are the three key elements that we spoke about. And this is something that is ongoing, it's happening. For example, the continued building of flats, BTOs across Singapore, and in particular in areas where we are located. You can expect additional households to be coming into the nearby community areas that we are located at. So in particular, the north region, northeast region, and the east region. This will underpin the traffic that is going to come to the mall, the spending that we can expect to see in the mall.
The next bit is about growing income across the population base. And in particular, again, the focus is on the mass market, and this is where our community that we serve, in particular in terms of the slightly lower income, where you have this Progressive Wage Model to support the growth of income over the years as well. This is something that is entrenched, something that we can see happening over the next couple of years. In particular, every year itself, the population will expect a certain growth in their income. And this is where they could then spend this additional income at the mall that's nearest to them to get the basic essentials. The other one is also in terms of support, the ad hoc support or the continued support that we are seeing from the government, as what Pauline has mentioned.
There is also certain vouchers that's been given out, and in this instance, in particular for this year, the amount is actually very significant. Next slide, please. The other aspect is about supply, demand, and rent. If you look at this slide that we have put together, some of the information was shared earlier on. In terms of supply, as I mentioned, very much a muted supply for the next three years, and more so in particular for suburban malls. And even if you look at in 2026, there's potentially 90,000 sq ft, 2027, 97,000 sq ft. But some of them are actually small neighborhood centers, and they're not even a sizable mall at all. So very muted supply that we can expect for the next three years. Occupancy rate, this is where we are showing the island-wide occupancy rate for suburban is about 95.4%.
Our portfolio certainly outperformed this number. We have consistently been coming in about 99% or even close to 100%. So demand strong, supply limited. That also accounts for the fact that you see on the extreme right, the chart itself, where CBRE continues to project the movement or the trending of the rental to continue to be on a positive trajectory. The red line indicates the suburban retail space. This is again, something that we are seeing even for our own portfolio.
Next, please. In closing, what I'd like to share, just to reiterate some of the element that we have shared with you for this presentation. Of course, we understand that there is certain market uncertainties. But if you look at the foundation that we have built, the operations metrics that we have continued to be able to perform, that kind of underpins the position that we are in to continue to deliver a healthy performance for our investors. We shared about the revenue, we shared about the NPI, the DPU. Again, this is something that it came about because of the continuous performance from our operation. Of course, for Northpoint City South Wing, we are going to have the EGM, and when it is completed, which we expect towards the end of May, this will again be able to contribute to the bottom line of our portfolio.
I spoke about demand, I spoke about supply. This will again be a positive factor for us going forward. Also very important, as Pauline mentioned and shared with you, that we have taken a lot of effort in creating activities, doing placemaking, bringing in shoppers into the mall. Not only bringing in them to the mall, but we also want them to be able to stay in the mall longer, to spend quality time in the mall, to find purpose in coming to the mall, because the more they come to the mall, the likelihood for them to spend and spend more at the mall is better, right? So this is an effort that the team is really focusing on, driving traffic, driving sales.
The last bit we talk about, in terms of a bit on the macroeconomic perspective, where we see, again, opportunity for us because there is going to be increased housing going to be built around malls. We can expect more population to come or to reside closer to our portfolio. The growth in median household income is something that we have been seeing that is happening and that continues to be going forward. Finally, of course, the various measures that we ourself are experiencing as well. So, this is where we feel that while there are certain market uncertainties, FCT is well-positioned to continue to deliver a healthy set of performance. With that, I will end our presentations, and happy to take on questions. Maybe I will hand back to [Yi Ting], who will help to moderate this session. Back to you, [Yi Ting].
Thank you. Thanks, Richard. We already have a queue, right? So let us invite our first analyst, Terence. Terence from JP Morgan. Please unmute yourself.
Thanks so much, [Yi Ting], and thanks Richard and team. Congrats on the numbers. Maybe two sets of questions from me. Perhaps the slightly more difficult one first. I wanted to ask what drove the doubling of the distributions from the JVs. It is about SGD 38 million from the slides, and it is up from about SGD 21 million in the first half and SGD 28 million in the second half.
Also, can you share specifically on what are the other items in the net tax and other adjustments? What is this -SGD 7.2 million in the first half of 2025, and was there any tax-exempt income distributed in the first half of 2025? So that is my first question. The second question is, can we get an update on Cathay Cineplexes? Are we recognizing any revenue on NPI from Cathay or paying out anything in NPI? Yeah. Thanks.
Okay. Maybe I would take on the second question first, and then Annie could respond to the first question. In terms of Cathay, what I would say is that since in February, when we put in a certain request, and that is shared by mm2 Asia when they made an announcement as well, we have been receiving partial payment from the operator. We have been working with them to see how we can help them manage the current cash flow situation that they have. The long and short of it is our position has improved since we first issued a notice to them back in February. Yep, and which is why they continue to operate in our mall, and which is why we continue to engage them very frequently.
We are still working out with them probably a midterm kind of arrangement to help them tide through this period.
For this, sorry, can I just check that the small BAU kind of thing, there is no indication that they may exit any of the malls?
At the moment, so far as our engagement are concerned, they have not indicated otherwise. In fact, they have been telling us that they really very much would like to stay in our two malls. If you look at what is happening to their business where they have exited Jem. Currently there are only four cinemas under the group, under Cathay's branding. Two of the malls are actually their key locations, right? They very much would like to continue to stay in our mall, which is why we continue to engage them.
Okay, thanks.
Hi, Terence. On the questions on the distribution from investment, I think it is higher because we include the post the 24.5% increase in the acquisition. I think one half 2025 has the full effect, so it is higher. The contribution from Waterway Point is also slightly higher in one half.
Because it does look like it is a big jump even versus second half of 2024. Second half of 2024, if I am not wrong, it was about SGD 28 million, so now you are recognizing SGD 38 million. What drove that? Is there any one-off with that number?
There isn't any one-off.
Okay. This would be sort of like a normalized number going forward?
Yeah.
Also, any tax-exempt income distributed or one-off income distributed in the first half?
No, there isn't any.
Okay, great. Thanks. That is all I have.
Terence, the other thing is we saw some outperformance from NEX and also from Waterway Point as part of the contribution, right? So better performance during this period as well.
The SGD 7.2 million deduction on the net tax and other, there is a -SGD 7.2 in the first half of 2025.
Yes. It includes some of the upfront fee that is being paid when we refinance the loan in this one half, as well as we set aside the provisions for the Cathay's debt as well.
Okay, great. Thanks.
Thanks, Terence. We move on to Rachel from Macquarie. Rachel?
Good morning, Richard and team. Thanks for the call, and congrats on the good set of numbers. My first question is on your tenant sales have been very strong, +3%. Just wondering in terms of trade segment, what specifically drove this +3% tenant sales? If I were to strip out Tampines' AEI, the impact from Tampines, what would be your tenant sales?
I will take this question, and then Pauline could chime in as well as give a little bit more flavor. If you look at overall tenant sales, I would say that if we strip out Tampines 1, we still see a marginal increase over the same period, right? So one of the key driver for this year definitely is contributed by Tampines 1. Sector-wise, I think, some of the sectors that continue to do well include your health, wellness sectors, include your F&B, even in a wider market perspective. But maybe, I will hand this to Pauline, who could probably share a little bit more here.
Yep. I think, Richard, you are right. I think F&B, in particular, certain segments of F&B, like the food court operators and all that, they have done well. In terms of the other essential trades like supermarket also, we do see that the performance of this trade continues to remain very resilient, albeit over a high base. The sales for this segment have actually grown over the past few years also. These are some of the bright spots that we do see. The smaller sectors within our portfolio, the likes of jewelry and watches, these trades are also doing well as well. Yeah.
Thanks for the color. My second question is on Hougang Mall AEI. You have gotten quite good pre-commitments already. Just wondering, the rents that you are probably locking, is it trending ahead of your budget? Yeah.
The short answer is currently it is. We hope that it continues to have the same trajectory for the rest of the uncommitted spaces.
Rachel, I think as we speak, if we look at the cost of the AEI, as well as some of the rents that we are achieving, we are on track to deliver the financial results that we had indicated when we announced this AEI.
Okay, thanks. Just one last one to squeeze in. Interest cost guidance. It has come off in the first half, and the second quarter as well. What is your new guidance for this year?
Annie, you want to take that?
The interest is likely to be remaining below 4%. We are reporting 3.9% already. If the interest rate continue to be at this low environment, it will be below that reported figures.
Okay. All right. Thank you so much. Yeah. Go ahead.
Just an extension on what she said. Our numbers are pretty transparent, right? You see that it's about 75% hedge, and then we have a 25% floating. From that perspective, you know that it's not going to have a very significant impact for the rest of the six months unless rates suddenly just drop significantly. Otherwise, I think the impact for this year, as what Annie has mentioned, it's not going to be moving very far from what we currently have.
Okay. Thanks so much, Richard and Annie. Thank you.
Thanks, [Richard]. We move on to Brandon. Brandon from Citi.
Hey, Brandon.
Richard, can you hear me?
Yeah. I can.
Yeah.
Morning.
Hi. Hey, thanks. Richard, just going back to the debt cost assumption, right?
Yes.
When you look at your Northpoint City South Wing acquisition back in March, the debt cost was 3.3%, and the perp coupon was 4.2%. I think given what you've seen the last couple of months, do you see any changes to that number?
Okay. Maybe for a start, the debt cost we assumed was actually about 3.4% for the acquisition. What we were able to do is probably closer to 3.25%. That is for the debt. Of course, the perp, we have not gone out because we are just getting out of a blackout period. We start to reengage with the banks in the market. That is something that we have not have visibility yet. Of course, our assumption is at a 4.2% for the perps.
Correct me if I am wrong. Both the bank loan and the perp, you only start to engage once your EGM passes successfully, is it?
Yes. The perp is not even done yet. Yeah.
Okay, but the plan is still to issue a perp.
The plan is still to do it, but of course, when and at what rate is something that we have to continue to monitor.
Okay. Can- and j ust going back to the reversions, right? I think given this macro uncertainty, should we still expect full year to come in at the high single-digit level? Has there been any change in your leasing strategy for the remaining 7.4% of space for second half of this year?
Okay. Strategy-wise, no. Strategy-wise, we are still pretty much focused on strengthening every one of our assets. If you recall, our strategy has always been not just renewing our tenants, but to also bring freshness, to bring in new products, new brands, and so on to our portfolio. We continue to do that. In terms of reversion, I am actually very happy to see that, for the first half, we actually did a very good reversion rate. If you ask me going forward, the next six months, whether we could still achieve 9%, I would like to be a little bit more conservative and say that perhaps, we should be looking at least what we achieved last year, at 7.7%, which is also a very strong reversion numbers, right? It is between those two.
We continue to stay very focused, continue to build up our strength in basic essentials, and at the same time understanding what is happening in the market and work with our retailers as well. Pauline, is there anything you want to add on that?
No, I think, Richard, you're on the spot. Yeah.
I just want to finish off with one last question. I think obviously we have seen a couple of new things happening at the Tampines site with the recently announced master plan, as well as your competitor announcing a new AEI for Tampines Mall. I just want to hear your thoughts on your strategy for both Century Square and Tampines 1 going forward. Yeah. Thanks.
Okay. Fundamentally, when we look at Tampines as a whole, firstly, it's the first regional center and still the most successful regional center. The good thing about Tampines is not only does it have a very strong population catchment, it also has a very strong working population. If you go to Tampines, it's vibrant day or night, weekday or weekend. The benefit of that is it can actually accommodate. Today it's about 1 million sq ft between the three malls we spoke about, plus Our Tampines Hub, which has about, I believe, about 200,000 sq ft of retail space. As a whole, it has a very strong catchment market, as I mentioned. What we have done is for Tampines 1, we recognized that it was getting a little bit tired. We refreshed it.
We bring in a slew of all the new brands, which is very different from what you would be looking at for our competitor mall or our neighbor. Their focus is slightly different vis-à-vis our Tampines 1. We have done it. It has been proven to be very successful, very well received, which is why the traffic has returned very strongly and the performance has indicated as well. For Century Square, that is slightly different. It is more family-focused. Again, our idea here is to complement the neighbor, what they have and what they don't have, and what is it that is lacking in the overall perspective from the Tampines community, what are they looking for. We were able to bring in a couple of interesting brands as well.
I would say that if you recall, maybe last two years or so, we were having a little bit of issues with occupancy rate as well, and so on for Century Square. But that has since picked up, and we continue to see a positive trend for that. So while they will probably upgrade, and it is nothing new for malls to continue to look at upgrading after a while to do some refresh. I think it is good for the entire area, if all the malls upgraded, bring in interesting trades, interesting products, that will then again be able to bring in even more shoppers to around the area. Usually shoppers will go around. They do not just go to one mall, but they move from mall to mall because it is so convenient.
Okay. Thanks so much, Richard. Thank you.
Cheers.
Thanks, Pauline. Thank you.
Thank you. Right. Now, we move on to [Geraldine] from DBS. [Geraldine]?
Hi. Good morning. Are you able to hear me?
Yes. Hi.
Okay. Hi. Good morning, Richard and team. Just two questions from me. I think first on the cost of debt, 3.8% in 2Q is an average number, right? Are you able to give us the number as at quarter end?
[Geraldine], the cost of debt for the quarter is 3.8%.
Okay. How about the quarter end? Are you able to share that?
You want the particular one day number?
The one day? Is that the one day?
I think first, the intention was to pare down the higher portfolio debt alongside the Northpoint City South Wing acquisition. Just wondering if that-
Oh, okay.
[inaudible] 3.8% number.
Yeah. The paring down of debt hasn't happened. It's happened post 31st March because our placement and preferential offering happens in April. So even if it's the quarter end, the 31st March, you will not see the effect of the parring down of the loans.
Okay. Understand. It's the next quarter that we should look out for-
Yes, that's right.
-for this.
Yeah, that is right.
Thank you. Maybe just one question for Pauline. I think upcoming anchors, do you see any potential non-renewals? I am asking this because a department tenant left actually at Junction 8. Just wondering if it is a one-off or do you see similar stance within your tenants?
To keep it straightforward, that is no, we do not see any risk from our anchors at this point. Like you have mentioned department stores and all that, we have two within our portfolio. There is no immediate risk. In fact, some of the anchors that we are looking at renewing in the second half of this year, I think the indication in terms of the renewal terms have generally come in rather positive. Yeah.
Okay. Thanks so much.
Thanks.
Thanks, [Geraldine]. [Derrick], over to you.
Hi. Morning. Just got one or two follow-ups for Annie on the provisioning. For provisioning, why is Cathay, is it SGD 2.7 million of the rental owed that you have put in place for the SGD 7 million overall provisions? Also for the PERPs, I was just wondering why continue to take on PERPs instead of borrowings, which are cheaper. We have heard from Suntec that they are considering taking on borrowings instead of PERPs. I noticed Richard is also saying there is 100 basis point differential between borrowings and PERPs.
Okay. Maybe I will take the PERPs question first, then Annie could answer the question on the provision. When we look at our acquisition for South Wing, you look at it from the perspective, what is the optimum capital structure? Of course, the easiest way out is to say, let us gear up, and that will bring our gearing to about 42%. Correct me if I am wrong, about 42.8%, thereabout. Between 42.6%- 42.8%, if I remember correctly. That will change a little bit of perspective from the eyes of investors, also from the eyes of rating agencies. One of our aim is to continue to remain as an IG, investment grade, so that we can widen our scope of borrowings, whether we want to do bonds or whatever, when the opportunities arise.
But once you hit that kind of level, it is quite difficult for you to maintain as an IG. So that is something that it is important for us. So we are not only looking at the short term. Honestly, if the only short term, yeah, why not just go for the cheapest and then gear up 42% 43%, and then see what happens. But we look at it from a more sustainable, a longer-term perspective that maybe perhaps we want to look at the optimum, which is why we actually introduced perps. And the amount that we are introducing is a very small amount. It is only SGD 200 million. Looking at the whole perspective of [FCT] and our borrowing. So even from our borrowing, it is less than 10%. So this is something that we felt it is reasonable to do it.
It is not the cheapest, but I think overall scheme of things, it actually works for us better and it is something that is more sustainable for us for at least the next four to five years. Annie, the question on capital.
Hi. The provisions for Cathay is, I think the Cathay announcement disclosed previously that it was SGD 2.7 million. So during the quarter, the arrears has since reduced because we have collected some of the collections. So the provision that was made is lower than SGD 2.7 million.
Okay, got it. And just one other question on fees in units. I think it has come down to about 30%. I suppose with the Hougang Mall AEI in place, is it fair to assume that this will continue to be at the 30% level up until completion of the AEI next year?
No. In fact, this 30% is probably about the base. Because if you recall, when we made acquisition for the NEX as well as the acquisition for South Wing, we also indicated the same that for those two acquisitions, the AM fees will be paid in units fully, 100%. Overall 30% is about the mix of the old portfolio at 20% and the new acquisitions at 100%. As we embark on the AEI for Hougang Mall and as the progress continues and the payment for the construction continues to come in, and the impact on the AEI affecting the NPI itself, then these AM fees in units will actually go up progressively.
Okay. So, what kind of level are you looking at? I mean, now it's 30%. As it continues, what kind of more stable levels are you looking at?
Okay. So this is probably on a stable state. What is going to happen is the AM fees will go up to a level probably about, if I remember, it's about 50-ish, 50%+ before it comes back down again, when the impact is reduced, right? Once we complete certain section, we open up, we start getting income. So the overall income of Hougang Mall is going to be less affected, and then we reduce the AM fees. If you look at it, the AM fee is used to cover the gap happen during the AEI period. If the gap is wider, we just need to use more AM fees. If the gap starts to come down, then we will cut back down correspondingly.
Right. The second half is where we'll see AM fees at 50%. Second half results?
Probably second half you may not see the full impact as yet. Probably it will spread into even the first half of next year.
Oh, okay. Got it. Thank you. That's helpful . All right. That is all the questions I have. Thanks so much.
Thank you. Derek Tan from DBS.
Hi. Good morning. Can you hear me?
Yes. Hi, Derek.
Hi, Richard. Just a few questions, if I may. First one, could you share what is your cost currently that is trending for the portfolio?
Below 16%.
Below 16%. Oh, excellent. The second one is on your capital structure, right? I understand you have given a guidance about perps, et cetera. Are you still going through your thoughts around that kind of capital structure, or are you potentially considering asset divestments as an alternate plan given where the market currently is trending?
At the moment, we are still pretty much sticking to our capital structure that we have shared with the market. Divestment sometimes it is opportunistic, right? If tomorrow somebody comes in and give us an offer that we cannot refuse and that works out for us, then of course things would change. But until such time, we will still stick to our current idea of how we want to have an optimal infrastructure for the acquisition of South Wing.
Got it. We should be modeling in some form of perps in our numbers.
Yes.
You will be very strategic in terms of your timing.
Yes, of course.
Okay.
We may drag a little bit longer because if the rate is not conducive, the market's not conducive, then we don't want to force ourselves to do it.
Got it. Got it. Sorry, my last one is, if you can help us a little bit more. I think Annie has given guidance that your interest rates remain stable, right? But given your guidance in the acquisition, I am sure you will replace your expensive debt. Do you think your year-end rate interest costs could go down to the mid-3% level? Is that a level that we can put in into our numbers?
Yeah. I will take that. I don't think it is mid-tier because the South Wing, the North Gem Trust has a loan that is 75% hedged. So, we can only pay off the floating interest rate. Whatever that is fixed there is already at the moment is 3.8%.
I see. But certainly better than what you report as of 2Q, right?
Yeah.
Okay. That's all I need. All right. Thanks for your answers. Thank you.
Thanks, Derek. We move on to [Rayson] from HSBC.
Hey. Hi, Richard. Morning, everyone. Just wanted to double-click into the distributions from joint ventures and the investments there, SGD 38 million again. Sorry about this because just trying to reconcile. I'm just looking at the presentation slides, slide 19, and then I'm looking at NEX and Waterway Point's NPI of SGD 50.4 million and SGD 32.3 million. If I'm just taking a 50% out of this SGD 82- odd million, it's probably about SGD 40 million. So between SGD 38 million and the SGD 41 million is just about SGD 3 million. Are we just saying that this is due to the interest cost at the JV level?
Annie, do you want to address this?
Yeah. The borrowing cost at the JV level is slightly lower because they have hedges that is lower.
Okay. From what I recall, JV debt is sitting at about SGD 1 billion or so. So we are just having about the SGD 3 million of interest cost on that SGD 1 billion of debt?
Yeah, but I think as we explained earlier, there is some outperformance from the two JV, coupled with the fact that the one half includes the additional contributions of the 24.5%. So it is not like on a like-to-like basis.
Okay. Maybe just moving on to the second question regarding cinemas, because we have actually seen quite a number of cinema terminations, be it from Jem or be it from Seletar Mall as well. Just wondering, what is the long-term strategy for the cinema exposure? Are we still trying to retain them in our malls, especially since we still have Shaw over at NEX as well as Waterway Point?
Okay. I will give our perspective and then Pauline, if you want to chip in as well. I think if you look at in the past, the key driver for malls would come from cinemas, department stores, supermarket. I think those are the three components that would be the key drivers. Over time, we've seen the effect of this cinema and even department store has been reduced. Cinema, of course, because of the lack of blockbusters and with the competition of the various platforms and so on that you could be entertained. In the long term, we think that maybe, in Singapore as a whole, you may not need as many cinemas, but whatever cinemas that remain could potentially still be relevant. But it's a case of maybe perhaps today we have just too many screens in cinema in Singapore.
From our mall's perspective, we always look at opportunity, right? If we don't want to keep cinemas, what would be the other possibilities that we can bring in? Of course, this is where from mall to mall, from Causeway perspective, there could be a different set of opportunities that we could possibly explore, and the team is exploring all these possibilities. Likewise, for Waterway Point. It's a case of when we have a good concept, we think that's something that can again be a more important traffic drivers bringing in something differentiated to our community. That's when we would then weigh the pros and cons of keeping a cinema versus repurposing the space that's currently occupied by the cinema. Pauline, anything else you want to add on?
Yeah. Maybe just to share my perspective. I think the question is whether cinemas are still relevant. I think the answer to that is yes and no, right? In a way, the current consolidation that we are seeing in the market is good, right? Because it ensures the survival of this trade. Also, I think Richard spoke about cinemas as a USP. With consolidation, I think this USP will be sharpened. But it doesn't cut across all malls. It probably applies for larger malls which are dominant, bigger scale, enjoy a wider catchment. Cinemas is a USP. For the smaller malls, I do agree with Richard that it's an opportunity. As an anchor, the rents from cinema trade is definitely below the average rents of the mall. So there's actually opportunity to convert the space and repurpose it to other trades.
With that, you actually expand on the variety of offering within the mall itself. Also for the landlord, it would also entail higher sales productivity, higher rents. Yeah. So, that is my take on that question.
Thanks for the color. Maybe if I can just slip one in, just following up on the opportunities around the cinema space. For the Yishun 10 or the GV Yishun, just wondering if you have seen any recent opportunities around there. Thank you.
For Yishun 10, we only own the ground floor retail spaces. It is like a strata title building. The higher level is all owned by GV, including the cinema and the common area. For us, we own only the retail space on the ground floor. It is something that we continue to engage with them, to see potentially what could we do with that space. If you ask me now, at the moment, is there a plan for us to look at building more retail space for that location? The answer is probably not, because I think with 530,000 sq ft, hopefully, with the successful EGM, we complete the acquisition of South Wing, that would give us a combined area of 530,000 sq ft, which is sizable. Which I think is good enough for that area.
Again, it is to see how can we then optimize the value for that space. It is an ongoing conversation we have with GV, because whatever we want to do or whatever they want to do, we need to work with each other.
Thanks, Richard and team. Thanks for the color.
Right. Thanks, [Rayson]. We are coming almost close to 10:30 A.M. We have Darren from Phillip Securities. Darren, would you like to just quickly ask a few questions?
Yeah. Hi, just one question for me. Good morning, Richard and team. Just wondering, are there any specific measures that you take to attract the CDC vouchers and SG60 vouchers or any government payouts to your malls, or is it just mainly dependent on the supermarkets?
Yeah. Okay. For the usage of those two vouchers in particular, it's either you used it outside HDB shops, hawker centers or supermarket. It's very much driven by the operator themselves. I think they have been very aggressive in terms of their promotion and so on. A very attractive promotion they roll out. I guess the whole idea here is to help the residents, the population in overcoming some of the rise in costs and so on. It is very much, I would say, driven by the supermarket, but as and when there are opportunities, we are always there to work with our operators and see how can we even stretch that further. It's a bit of a combination for both.
So, any specific measures currently that you take to perhaps attract these to your malls?
Not in particular, but some of our malls, when they do certain events, they then will work with the supermarket operators. But usually, if you notice that it is quite fast. At the moment, the CDC vouchers issued, especially for the usage in supermarket, it goes up very quickly. So you do not really need to, again, do a lot of activities around that. Whatever that has been done by the operators themselves are actually quite sufficient or in some instances, are actually very attractive.
I see. Yeah. Thanks for that, Richard. That is all from me.
Thanks, Darren. Brandon, I see that you have raised hand. Do you want to [crosstalk]
Yeah. Just one quick one. Just going back to Cathay. Are you able to share the percentage of NLA and their lease expiry for both Causeway Point and Century Square?
Pauline, do you have a ballpark? Off the top of my head, I cannot recall, but maybe Pauline, you could chime in on that.
Yeah. I think in terms of the NLA, it is not significant. If we look at the percentage of GRI contribution, it is in the low, maybe in the region of 2%. So impact wise on the top line it is not significant. That comes back to my earlier point, Brandon. I think in some instances, we do see that there are opportunities for us to convert this space. Yep. I think that was one of your question. What is your second question?
Oh, I am actually looking at the composition in terms of NLA, not so much on GRI.
I see.
Yeah.
Right. I think NLA would be around 3% in the low single digit across our malls.
Can you share their lease expiry?
Yep. Lease expiries would be for both cinemas, I think sometime in 2028.
Okay, great. Thanks so much, Pauline. Thank you.
Thank you, everyone. That is all the time that we have today. Thanks everyone for your participation. If you have any further questions, please feel free to reach out to us.
Thank you. Have a nice day. Bye.
Thank you. Bye.