Good morning, everyone. Welcome to Frasers Centrepoint business update for the third quarter, ended 30th of June 2024. Today, we are very happy to have the management team here to give you an update of the progress that we have made in the last quarter. With us, we have the CEO, Richard Ng. We have the CFO, Audrey Tan, and our head of investment and asset management, Ms. Pauline Lim. I will be your host today, and happy to hand this over to Richard to kick off the presentation. Richard, please.
Thanks, Fung Leng, and good morning, everyone. Thanks for joining us bright and early today. Hopefully, you had the opportunity to look through our deck. As you know, this quarter is more on business update, looking at the operations and how have we fared so far this quarter. Before I proceed further, I just wanted to note that Audrey, our CFO, will be joining us for the last analyst update session before she steps down on the 8th of August. Okay. Coming back to our deck here, as you can see, we have done some changes.
Fung Leng has also created a little bit more of a dashboard look, and that is fundamentally to help in terms of visual aspects so that you guys could really see not just a number, but the trend in terms of where we are, how we have been performing so far. Okay. In terms of the overall operational update, you can see that occupancy remains very healthy, 99.7% overall. What's also more important is we have a couple of hundred pointers, and all our malls achieve at least 99% and above. Shopper traffic, tenant sales, we will go into more detail later on, where Pauline will share. Just a very quick snapshot, we are still ahead if you compare year-on-year in terms of sales. It fluctuates a little bit quarter to quarter, but nonetheless, I think it is still on a positive trend.
Similarly for shopper traffic, we are probably about 5% off pre-COVID. Some of our malls, the more dominant ones like Causeway Point or The Poiz Centre, have actually achieved pre-COVID levels. Something we continue to focus, something we continue to work on. Financial position, our gearing is at 39.1%. Again, this is partly due to some drawdown as we pay off the CAPEX for our T1 AEI. Average cost of debt as of this quarter, it came in at 4.1%, but you can see that for year to date, it is actually at 4.2%. It has been moving down marginally from 4.3, the peak of 4.3 in first Q 2024, came down to 4.1 for the last two quarters. We are going to be giving you an update of Tampines 1 AEI. We are very excited about this completion because it is going to be something new for Tampines area.
We are able to bring in 68 new-to-mall and 46 new-to-FCT retail concepts. For those of you who have the opportunity, I would like to invite you to take a look at some of the new brands that we have brought in for this mall. It is still very much on track to complete fully by September. Most of the work has already been completed, actually. It is now some of the tenants are doing their fit-out and so on. Happy to also share that the ROI, as what we mentioned before, it is about 8% on the cost of the work, on the AEI work, but we are likely to outperform that. In terms of our ESG front, we continue to do our best where we can, focusing on the environment and also not forgetting the other element as well.
Specifically in this particular update, we will focus a little bit more on our social aspect of the ESG. All right, Fung Leng. Macroeconomy, I am not going to touch in greater details. Probably you guys have all the same details as what you are seeing here. Just some key points. Wanted to highlight that the GDP actually grew to 2.9% in the second quarter. This is very much in line with what MTI has earlier maintained the forecast of 1%-3%. More importantly, also looking at core inflation has moderated to 2.9%. I think we are seeing signs of this coming down, which bodes well for both our consumers and also our retailers. That is another space that we continue to watch and continue to focus on. For retail sales from the RSI for May, that is actually a flat number, no change year-on-year.
Actually for FCT, our portfolio has seen an increase. Similarly for F&B sales for May 2024, for the broader market perspective, we saw a 2.9% increase year-on-year, but our own internal numbers actually surpassed that figure. Rents, suburban prime retail, 0.3% quarter-over-quarter and 2.6% year-on-year. In the last quarter, we actually shared that our reversion came in at 7.5%. Again, happy to say that we are very much on track with that level. New supply, not much has changed since our last discussion. Very much, again, very limited supply we are expecting to come on stream for the next three to four years. That again helps underpin the demand, which is why we are saying all our malls are at least 99% occupied. Audrey, I will hand back to you now for the financial highlights.
Thank you, Richard. Good morning, everybody. I will run through the financial metrics. Aggregate leverage is up to 39.1%. This is because of the loan that has been drawn down to finance the CapEx requirement and for the ongoing AEI at Tampines 1, and also for working capital purposes. The ICR is stable at 3.26x , and our cost of debt is about 4.2% average for the nine months ended 30th of June. For the quarter itself, we registered 4.1%. This has since come down as compared to the first quarter, where we registered 4.3%. About 67.2% of debt is hedged to fixed rate interest, and 68% of our loans are actually green loans. We have undrawn facilities about SGD 546 million, and rated by S&P and Moody's.
Following next slide. This shows you our debt maturity profile. Well spread debt maturity profile, and there is no refinancing in FY 2024. Now, we are looking at the refinancing in FY 2025, and we are already in talks with the banks for the refinancing requirements. With this, I will hand over to Pauline, who will share more on the portfolio updates.
Yep. Thanks, Audrey. Good morning, everyone. I think Richard had given a little bit of a preview on the good set of results that I will be sharing and going into a little bit of details in the subsequent slide. I believe that this is a fruition of the hard work that collectively the team had undertaken, and also together with the tenants as well. It is a testament to the proactive asset management and portfolio management for the portfolio of assets. Going into committed occupancy, a very strong set of occupancy, which underscores the quality of our malls. We are looking at 99.7% as at the end of the third quarter. It is a 1% point increase on a year-on-year basis. And across all our malls, occupancy has actually maintained at a very good level of more than 99%.
And in fact, there are a few malls, the likes of Causeway Point, Waterway Point, Northpoint City, Tiong Bahru Plaza. These malls have actually hit 100% as at the end of this quarter. And what is worth mentioning is also Tampines 1. So Tampines 1 has been undergoing AEI for the past year or so. And it has, at the conclusion of the AEI, it is actually coming back with 100% committed occupancy, not just on the spaces that are affected by the AEI, but across the mall. Okay. I will talk a little bit about the portfolio footfall and sales. So we do see footfall continuing its recovery trend. It has actually reached a level that is very close to pre-COVID, overall, across the portfolio. And in fact, a few of the malls have exceeded the FY 2019 footfall numbers.
So, very close to full recovery to pre-pandemic numbers. On the sales front, we do see that sales continue to increase, and that is despite coming off a higher base. So if we look at sales levels now for our portfolio compared to pre-COVID, it is at 20% higher than pre-COVID levels. And notwithstanding that, we do see that the upward trajectory is maintained over the course of this year. On this note, we would also like to acknowledge the support of the Singapore government with regards to various payouts from the assurance package, cost of living supporting package. And on top of this, we are looking, they have also dispensed a fair bit of CDC vouchers, and also climate vouchers. And that is with the intent to support the general populace that is facing a higher inflation, higher cost of living.
But what is worthwhile to note is that the beneficiaries of this government support, the bulk of these beneficiaries are actually the mass market consumers who spend at our suburban malls. This has actually also helped to support or sustain the sales at our malls. There has been several rounds of top-ups, and what has been announced to date actually extends into 2025. Next slide, please. Thank you. Our belief is that retail is about remaining relevant to our catchment, and it's also about delighting shoppers. Our focus remains on continuing to bring in new offerings, concepts, and brands to excite our shoppers. We do see new tenants or new brands and new concepts coming in across various trades. F&B has been doing very well, but the new entrance to our malls has not just been limited to this particular trade.
The various aspects of retail, as you can see from this compilation of samples or examples of new to portfolio malls. The takeaway is that the Singapore retail scene still remains very vibrant. Retailers have come out stronger from the pandemic, and they are constantly reinventing, improving their offering, and their concepts. Fung Leng, next slide. Now, we have always mentioned that we position our malls to be relevant to the community heartland. We want to be the heart of the heartland. So there's a lot of focus on placemaking and programming to engage our shopper community tenants, as well as various stakeholders. And over the course of this quarter, we have actually carried out various thematic programs, as well as events in our malls.
And this is with the objective to bring footfall from a wider catchment, and also to continue to instill the shopper loyalty such that they continue to come back. So on the focus on returning or recurring footfall. Next slide, please. Fung . All right. Tampines 1 AEI. I'm very happy to share the outcome of Tampines 1 AEI. I think it has been a long one year plus or so of remaking the mall, repositioning the mall, and it has ended well. We are on track to complete by September this year. And I mentioned earlier that notwithstanding the disruption of the AEI, we are looking at 100% committed occupancy across the entire mall.
In terms of value that has been crystallized through this AEI, there's additional 9,000 sq ft of NLA, which we have realized through the CSFS scheme, and this additional GFA has been largely deployed to the prime retail floors to bring in the ROI that I mentioned earlier. When we announced the AEI, the target ROI was at 8%, and we have exceeded that target. In terms of the retail positioning, I think one of the key objective and focus of this AEI is to strengthen Tampines 1's positioning and also competitive strength within a very competitive Tampines Hub market. So with the AEI, we have brought in 68 new to mall concepts, of which 46 are new to FCT portfolio. Now, the initial response from both retailers as well as shoppers has been very positive. So we are very, very much heartened and encouraged.
This is also a demonstration of our commitment to unlock value from the existing portfolio to our investors. Next slide, please Fung . Some pictures to show what are some of the key areas of enhancement and changes. One of the focus is the rejuvenation of the common areas, the walkways, the toilets, the entrance to the mall, enhancing the overall lighting to improve the shopping ambiance within the mall itself, and refreshing some of the key shopper touchpoints. We have brought in a myriad of new F&B options. Hawker Street, some F&B, and also retail options. Through the AEI, we have actually right-sized some of the spaces, and this has resulted in an increase in the retail offering, and also strengthened the ability of the retailers to trade more productively. Next slide please, Fung . All right.
With this, I will hand over to Fung Leng to take us through the ESG segment. Thank you.
Thank you, Pauline. Happy to share this section on the ESG, in particular emphasis on the social part of the ESG. We have been constantly and continuously strengthening our bonding with the community and stakeholders, and a lot of the activities that we do are actually at the mall level, reaching out to our shoppers, as well as through the partnership with our tenants. On the picture on the left, you can see that we have held a Retail Sparks Awards. That is basically to recognize the efforts and the support from our tenants in supporting our food waste valorisation, as well as the Inclusion Champions program. On the picture on the right, this is a part of our program to train our retailers as Inclusion Champions, and part of the reason is also to expand our reach to our shoppers who are disadvantaged.
For example, those with autism, dementia, and also with disabilities. This has also been very strong in attracting the strong participation from our retailers. We have just concluded our Paint it Forward, an annual program that attracted a lot of participants, both from the stakeholders as well as the tenants alike, across the nine Frasers Property malls that we have over the months of periods. This attempt also helped raise funds to support Community Chest and also to support art programs for persons with disabilities. With this, I will hand this over to Richard to wrap up the presentation this morning. Richard.
Yeah. Hi. Thanks. A very quick wrap-up before we can move on to Q&A. Again, just reinforcing the fact that the performance at our mall continue to remain very healthy. We see improvements across the various metrics that we focus on. Asset management, property management, again, our very key focus on driving some of these performances. As also what Pauline mentioned, that part of that includes the AEI that we undertook. What we intend to do is to target to announce another upcoming AEI project in due course as we go through some of the processes that is being put in place. The idea is for us to complete one AEI, and then the ability to roll out another AEI. This is where we always talk about our three key pillars of growth.
One is organic, the other one is AEI, and then the third one is, of course, the inorganic growth. If we have the ability to continue to churn out AEI, that will again add value to, both in terms of the valuation and also the overall performance for our portfolio of assets. The other two aspects is, of course, in terms of the contribution to our bottom line this year itself. We wouldn't see the full year of contribution, but it's going to come from, for example, for the NEX 24.5% acquisition is going to come in for the full second half of 2024 and then the full year next year. Similarly, for the Tampines 1 AEI, the full uplift or benefits will then be felt in 2025. With that, I'll end my presentation, and I'm happy to take any questions.
Thank you, Richard. We are now ready to move into the Q&A session. We have the first question coming from Terence from JP Morgan. Terence, please unmute yourself and go ahead with your question.
Hey. Thanks so much, Richard and team. Congrats on the results. I just wanted to ask on two aspects. Firstly, on Pasir Ris Mall. There's been a lot of resistance on Pasir Ris Mall, and I understand it just opened. Could you give us a sense of how the impact is, especially on White Sands? Second question, just wanted to ask a bit more on the interest costs, whether Audrey can give some guidance on expectation for this year. I guess this year is almost up. How are you seeing interest costs for next year? Yeah.
Yeah. Good morning, Terence. Let me take the first part of your questions, and Audrey can jump in for the second part. PRM opened in June, and they just had their official opening not too long ago. So far what we have seen is that our initial theory, which we shared with all of you, is that we always felt that White Sands being a mall of 150,000 sq ft size was not able to provide a very holistic trade mix to people living in Pasir Ris. Which is why you get people going to Downtown East, people going to other parts of Singapore to shop. With the opening of PRM today, the total retail space available is in excess of 400,000 sq ft. So that's about the size of Causeway Point.
With that, we feel that collectively, both White Sands and Pasir Ris Mall can then be providing enough options for Pasir Ris residents to really shop at Pasir Ris. Happy to note that the traffic has gone up, in fact, and that's what we have anticipated. The sales is pretty flat, and I think for the month of June, generally, the market has seen a pretty flat sale. So far from what we have seen is our effort to kind of refresh our mall a little bit, our effort to put in different or revisit our trade mix and improve our trade mix. At the same time, the focus of being complementary to PRM is bearing fruit. But this is something that we continue to watch.
We continue to work on any areas of improvement, and in due course, we'll have a better sensing on what's the overall impact. But the initial impact has been positive as far as we are concerned as of now. Audrey, you want to take on the second part?
Okay. Terence, for this FY, we maintain that the interest rate should be at a low 4s. As for next FY, I think we have a very good chance that we'll maintain at the low 4 level.
Okay. Thanks so much. That's all I have for now.
Thank you, Terence. Our next question from Geraldine Wong, DBS. Please go ahead.
Okay. Thank you. Good morning, Richard and management team. My first question will be on reversions. I think last quarter, the reversions was a positive surprise. Just wondering how this quarter stacks, if you are able to share some color. My second question will be on lease negotiations. Has the upcoming RTS to JB actually appeared in your conversations? Potentially still early. If you are able to share some feedback from tenants to give us some guidance on what to expect. Thank you.
Okay. Reversion, very straightforward response to that. In the first half result announcement, we shared that we achieved 7.5% average to average reversion, and happy to say that we are still hitting that kind of number as of now for this quarter. We have another quarter to go. In the full year, we'll be able to share the full results. But we are on the same trajectory. Coming back to RTS negotiation of our retailers. So far, as what you rightly pointed up, it hasn't featured in our discussion with our retailers thus far. We know that this is a topic that is much talked about because there's a lot of publicity around the construction of RTS. When is it going to be ready? We have ministers visiting the sites, et cetera. I think this will continue.
The focus will be there as we near the completion of RTS. If you ask me, what is our perspective? Definitely something we are watching very closely, while we try to also look at what are the things that we can do before the RTS is completed. For my own perspective, I think a couple of things that comes to mind. Firstly, we also recognize that the travel between Singapore to Malaysia is nothing new, right? Today, we have various mode of transport. You can go by car, you can go by bus, you can go by train. It is already there. We have also recognized that there is a lot of cross-border, a lot of people are going to Malaysia, in particular to JB. This has been ongoing since the day they started the Causeway link, if you recall.
What is new and what is coming out is this additional link, the RTS link, that maybe perhaps may actually make it slightly easier for people who want to go there, and also vice versa for people coming to Singapore. From my perspective, I look at it from two angle. One is the overall economy. I see that as a big plus for Singapore, because what it means is that probably we can expect to be able to benefit by having more people from Malaysia coming over to Singapore to work. As we know that the productivity of the Malaysian worker, it is higher than what we typically get elsewhere. That is one. Secondly is if we can get more people working on a transient basis rather than having to work in Singapore and stay in Singapore, that also will, overall perspective, help to reduce costs, right?
Because then you do not have to factor in lodging costs as well. Also to help the overall market perspective in terms of the pressure on rental properties. From that perspective, we see it as a benefit for the overall market, and retailers may also benefit as a result of that, because this manpower crunch is here to stay. If they can get better quality and even potentially more people coming through from Malaysian side, that is going to help overall. That is from the overall market perspective. The other view that we are focusing on is the potential or likelihood, what would be the impact to the retail market per se. That is where we look at various aspect. Firstly, trade mixing, where we understand that people are going there for certain services, people are going there for certain purposes.
We have to review our own assets. We have to, in a way, from now till the time when it is fully completed, to make adjustments to some of our trade mix, focusing more on areas where we believe will continue to generate good sales, generate or attract traffics to come to the mall. This is an ongoing basis for all our assets. Retailers action. We have also spoken to retailers who, especially those who have both businesses in Singapore and Malaysia. We want to understand what is their thinking, how do they differentiate. By and large, we are comforted by the fact that a lot of these retailers, again, to them, this is nothing new. They have been doing this for a long time. It is just that now the publicity becomes more prominent. Otherwise, it is an ongoing thing.
They do internally have their different ways of differentiation. For example, we spoke to one fashion retailers. They told us that generally in Singapore, the latest trend, the latest product will be launched in Singapore first before it goes to Malaysia, for example. That is how they differentiate. In terms of pricing, typically, they see very little differentiation. It is comforted by the fact that when we talk to these retailers, they know what they are doing, and they are able to differentiate. This is something that we will continue to work with them. The other thing is we have also looked at it and analyzed the impact, and we recognize that it is not going to be a zero-sum game.
While we expect some leakages to happen or a little bit more leakages to happen as a result of RTS, we also see this as an opportunity. What is going to happen is the whole area around Woodlands, being a regional center, is also going to be rejuvenated. There is a lot of plans, a lot of development that is going to happen around there. We see ourself as potentially a connecting hub, because this is where we serve as an interchange node where there are two lines, MRT lines that comes to this place. One is where potentially if you take the red line, if you need to change to RTS, you will stop here and make that switch. The bus interchange is also just a step away from Causeway Point.
We see Causeway Point being a connecting hub and likely to see more traffic actually coming through the mall. At the same time, with all the developments that is coming around Woodlands area, as I mentioned, business park and so on. Again, we expect to see a growth in overall catchment market for Causeway Point, and not forgetting that there is going to be about another 10,000 units of apartments, both BTO and also one private apartment that is going to be coming on stream in the next five years. As mentioned, about 10,000 units. If you walk out on the street, we are expecting another 30,000 people to come and live very close by to Causeway Point. The other aspect that we are working on is also trying to expand our catchment market, as Pauline mentioned just now, in terms of place making, creating activities.
We hope to also expand our current catchment market beyond the immediate catchment market that we are expecting to date. We hope that can also make up some of the potential leakages of traffic over the next couple of years once the RTS is completed. The other positive signs that we are also seeing is that Malaysian retailers are also taking interest in Singapore. That is the irony, right? We are talking about people going to Malaysia, and why are they coming to Singapore? You have already seen brands like Tao Yuan, for example, the one that sells all the snacks, coming to Singapore. You have the bakery brand, Lavender, has already opened in Singapore, and we understand people like even Oriental Kopi is making inroads in Singapore.
Those of you who have gone there, you probably would have tried it anyway, right? That is where we see opportunity. Not only are we looking at it as a negative, but we are seeing even retailers in Malaysia recognize the fact that once they become known to Singaporeans, they also want to have a presence in Singapore because you do not have to wait for a weekend to just have your Oriental Kopi. You can have it every day if you are in Singapore. So we see those as positive signs as well. Finally, what I would also add is that it always has this equilibrium. Today, we say that it is a lot more affordable going to JB because of rental, because of cost of labor.
But if everything goes up, the demand goes up, the landlord in Malaysia are not going to stay as it is today. The staff being able to come to Singapore to work, they are not going to demand the same level of salary. So there will be another round of equilibrium. But by and large, what we are focusing on is what we think we should do. We continue to work on our assets, continue to work on the retailers. I hope, Geraldine, that gives you a broader perspective than what you have asked.
Yeah. Thanks, Richard. Hope to see Oriental Kopi at Causeway Point. Thank you.
Thank you. For those who are just busy trying to catch up with what Richard said, happy to say that there will be an archive playback right after the call, so you can listen to the response again. All right, we have next in the queue, Derek from DBS as well. Derek, please go ahead.
All right. Thanks, Fung Leng. Can you hear me?
Yes, Derek. Hi, good morning.
Hi, Richard and team. Good morning. Congrats on strong results. Just two questions. My first one is on tenant sales. I noticed there's about 20% and it's sticky. I think this is probably the new normal. But I'm just wondering whether, given where we are now going forward, RTS, et cetera, competition from other malls, are you on a more defensive stance to keep this 20% tenant sales versus pre-COVID, or do you think there's an avenue for your malls to, let's say, hit 30%, 40%? I'm just curious your thoughts on that. That's my first question. Second question is on Woodleigh Mall. It's available for sale. The pricing may be expensive, but just curious whether Bidadari Estate makes you excited? Just curious. Yeah, just these two questions. Thanks.
Yeah. Hi, Derek. To answer your first question, simple answer is we will always look at improving our sales beyond what we have today. The team is tasked to, again, look at how can we continue to drive sales, and that is our aim. Because the higher the sales level we can drive, the higher sales productivity our retailers can do, that would translate to a better reversion for us down the road. Our focus is no, we are not going to stick to the level we are today. The focus is again, to continue to see how can we drive traffic? How can we drive sales? As mentioned just now, some of those activities, place making, very targeted focus on driving sales events will continue to take place. As I also mentioned, we are also looking at not just keeping to our immediate catchment.
We are focusing on how can we also attract catchment market beyond our immediate catchment. By and large, the focus is driving sales. That is the first question. The second question is Woodleigh Mall. Yes. It is in the market, and it is a mall of more than 200,000 sq ft. It has got connectivity to key transportation nodes, et cetera. Definitely something that we will look at. We have to review and see whether it makes sense. It is in Bidadari estate, a growing estate. Today, it may not be at its full capacity. There are still potential for growth. At the same time, we also look at it and say that it is one station away from NEX. NEX is 635,000 sq ft. It is 3x larger than Woodleigh. All this we will bear in mind as we look at sales opportunity.
Okay. Thank you. Excellent. All right, thanks.
Great. Thank you. Moving on to the next question from Yu Qiang , CICC.
Hi. Congrats, Richard, on the good set of results, but sad to see Audrey going.
Thank you.
Just a few questions. On the tenant sales, they are 20% higher than pre-COVID. Does this include online sales as well? The second question is on, I see that some of your malls in the Pasir Ris, Tampines area are slightly dipping in terms of occupancy. Would you attribute this to PRM? Lastly, the question on Tampines 1, what is the average rents that you signed for the new additional 9K of NLA?
Yeah. Okay, Yu Qiang . Hi. First question, tenant sales. Yeah, it does include online sales, and this is something that we also talk about as part of our strategy. It is to create an environment where we see omni-channel going forward. That means our retailers also participate in online sales as well. Their online sales, if it happened at the mall, if the transaction is recorded or the pickup is done at the mall, it will be registered as a sale. That is also one of the reasons why we have seen an increase in overall sales.
So that goes into your GTO if it is done at the mall.
That is right.
Okay.
Yeah, it does. So, it is a question of now, it is not just brick-and-mortar, so it is a combination of both online and offline. This is something that we continue to try to get as many of our tenants to come on board or to also look at other channels. Because at the end of the day, we recognize that the fact that our mall is so close to its catchment market, it makes sense to also be used as a fulfillment hub for some of these retailers. Whether it be F&B, especially F&B, I think it is a no-brainer. It is easier for delivery, it is easier for click and collect to pick up and so on.
You have also seen that as part of our rejuvenation in Tampines 1, we brought in quite a few retailers who used to be online retailers, but today they are also taking on board brick-and-mortar. So it is really about omni-channel marketing. So that is the first question. The second one is dipping in occupancy in Tampines area. I do not actually see a dip in occupancy per se.
Century Square, White Sands .
Century Square.
A slight dip.
Yeah.
Is this the start of something that we should be expecting?
Actually, Century Square, we are also quite happy with some of the things that we have worked on. For example, we have changed out the anchor tenant. We brought in NTUC FairPrice Finest, a lot more stable today. We have changed out the cinema operator, brought in Cathay as well. With those changes, we actually have been getting more inquiries, more demand for spaces. If you recall, maybe 12 months or 24 months before, the occupancy rate was much lower. We have progressively been able to increase the occupancy for Century Square. So that's on Century Square. For Tampines Mall, as Pauline mentioned, is 100% committed. We don't really see that as an impact. But being retail malls, we always have to look at improving our trade mix, creating interesting ambience and activities around it.
It's an ongoing basis, whether it be PRM opening or any other malls opening and so on. That's something that's ongoing, but the long and short of it is we don't see PRM's opening having an impact on their occupancy so far. Okay, the third question was, sorry, can you repeat the third question again?
The average signing rents that you did for the new AEI at Tampines.
Oh, it varies. Because depending on the size of the tenant, some of them could be as small as a kiosk and as large as some of the F&B spaces. By and large, I would only add that it's an improvement to our overall average, meaning that whatever we sign has come in higher than what we were previously able to achieve.
Okay.
Richard, if I may add on to that. You can recall when we announced the AEI, we had a target 8% ROI, and today we are saying that we are looking on track to exceed that target. Some of that has actually come through from the higher rents. When we set that 8% ROI, there were a certain set of rents that were pegged to the new spaces that comes back from the AEI. As well as the affected spaces, those rents have actually come in higher than target, and that is flowing down to the higher than targeted 8%.
Okay, thanks. I just want to slip in one last one. Any guidance for rent reversions in FY 2025?
FY 2025. What we are seeing so far on the back of the first half is we still see very strong demand for spaces in our malls, which is why we are doing 99.7%, 100%, and you have seen on the slide, there is actually a couple of hundred pointers in there as well. What it boils down to is that means that the ability for us to negotiate rent is there, is positive on our side. At the same time, if our focus on driving sales continue to bear fruits, I think it gives us a good opportunity to continue on track or align with what we have been achieving so far. That is barring any unforeseen circumstances or what is happening potentially in the market next year.
Okay. Thanks. That is it from me.
Great. Thank you, Yu Qiang. Next question from Terence. Terence, please go ahead. Terence, you are on mute.
Hi. Hello. Just to follow up, is it a problem that the tenant sales growth is lagging your reversions currently? I remember your reversions is what you are saying, it is close to 7% plus now. Yet, if I look at your tenant sales trend, it is somewhere in the low single digits.
Okay. Not so much as a problem. This is where we also were responding to various questions from you guys, even one or two years ago, and say, "Well, why is it that sales has been increasing but the rental is below?" Right. And usually there is a lag time, right? Sales will move first before the rental recovery comes in. And this is where we are picking up some of the lag before when sales were going up double digit, but the rental reversion was low single digit. I think this is where we are catching up for some of this lag. And this is where we hope that we can continue to drive the sales, so that we can then look at the reversion to also improve at the same time. So there is always this lag time.
Sorry, when does this thing catch up? Is it a cycle of one year, two years?
Not really. It depends on the occupancy cost at the end of the day. Like what we say, we have to work on the sales in order for us to continue the positive trajectory of our rental reversion. It is not really about there is a fixed cycle, a year or two. It depends very much on how can we continue our rental reversion. What is important is also to look at what is occupancy cost today, where we reported 15.6% occupancy cost at the end of last year. As of now, our occupancy cost is still below 16%. So that kind of give us a bit of runway before occupancy cost could go up. This is where we feel that there is still opportunity for us to continue on the same trajectory.
Got it. Just looking at potential acquisitions, what is your take on the asking prices of some of these retail assets on the market? Does it suggest that it is harder for you to acquire from sponsors or elsewhere?
I think the first reaction I have is, firstly, this category of asset is very highly regarded and very much sought after by investors. One of the main reason is also because you have always this issue of a limited supply of good quality suburban mall. We are fortunate today that we have either fully own or partially own nine of which, four are 10 of the largest malls in Singapore. For me, it is a testament that this sector, the investors expect this sector to continue to do well. This sector is resilient and also this sector has got the opportunity for growth. So that is how I would view it. In terms of our own trajectory of growing our portfolio, we have our own strategy to look at.
We believe that we still are able to grow, and we have identified, we shared before, we have our sponsor assets, Northpoint City, South Wing with its partner. We have other partners in Waterway Point, and also now we have a ROFR for NEX. So it is a case of over time working through these numbers, and be able to then grow our portfolio.
Got it. Thank you.
Thank you, Terence. Moving on to the next question from Vincent Tsui. Vincent, please go ahead.
Hey. Morning to you. Just three questions. I think just on NEX, it has been about one and a half years since you own this asset. Can you sort of give us an update on what is the latest for the corporate tax transparency, that SGD 80 million AEI which you sort of pointed out, I think, when you acquired it? That is my first question. The second would be, do you think that in this current environment, where we are seeing a bit of a tenant sales slowdown, should we still expect FCT to have its occupancy cost normalized to that 17%-19% level that we saw in the past few years? That is my second one. The third one would be, are you able to share any rough estimate of whether there has been any leakage from this whole Johor trade? Yep. From your malls. Yep. Thanks.
Okay. NEX update, tax transparency, we do not have any update from there. We did share that this is a process whereby all partners in this investment company has to agree on any changes. So, there is no update on that. AEI, we are currently going through the process of getting authority's approval. So we are engaging them, and it is progressing in terms of we need to get through these few levels to know that at the end of the day, how much really can we build and to what extent can we do before we can then, specifically come out with, to share the plans for that. But it is ongoing and it is in a way, as far as we are concerned, timeline-wise, it is on track. As we have mentioned before, the gestation period for this AEI would take a while.
While that is happening, which is why we are also focusing on doing AEI for our existing portfolio. That is going to continue. That is for NEX update. I am happy to say that as you rightly pointed out, we have owned at least the part of the NEX longer than the full 50%. We are very positive on that because we are seeing better performance than what we have underwritten. Effectively, it has a path on underwriting in terms of rental reversions, in terms of overall performance of the mall. That is an update on NEX.
For tenant sales, yes, you rightly pointed out that we see that the current occupancy cost of under 16% is an opportunity for us, and at some point in time, it should then normalize back to your 17%-19% or, we always say 16%-18% kind of range. What that means is actually it gives us opportunity to further, as we progress in our rental reversion cycle, to again capitalize on that to help us with our positive rental reversion, which is why I alluded to the fact that we hope in terms of the trajectory that we are expecting will continue. That is to respond to your questions on sales. The third one is rough estimates on leakage. At the moment, honestly, we do not really feel the leakage because like what I said, this thing about people shopping in JB is nothing new.
It has been there for a very long time. It is just that because of publicity, because of what is happening around RTS, it kind of being elevated in a way. People start talking a lot more. What we are seeing, the sales performance for Causeway Point continue to remain very resilient. Shopper traffic is back to pre-COVID. The short answer is we have not really seen significant difference in terms of this leakage.
Got it. Okay, thanks so much, Richard. Thanks.
All right. Thank you, Vincent. Next question from RHB, Vijay. We have about approximately seven minutes left, so, we will probably take just one more question after the last one. Thank you. Vijay, please go ahead.
Yeah. Hi. Morning, Richard, Audrey, Pauline, and Fung Leng. Just two quick questions. I think, the first one is, again, a bit on the tenant sales perspective. If I look at the last few quarters, there has been some slight reversals in the trend. I think earlier, tenant sales used to go up much higher than the shoppers traffic. These last two quarters, it seems like shoppers traffic is going up a bit more and tenant sales is growing slightly lower. Is this a broader trend of belt-tightening by buyers post this GST increase, et cetera? Or your curation of mall mix towards slightly different brands? How do you see this, and what would be the trend we can expect? My second question is on Central Plaza office. Maybe can you give a bit more color in terms of the occupancy dip?
Has there been tenant downsizing or tenants moving towards CBD? Earlier you mentioned that this is an asset which you would like to stabilize and take a long-term call on this. What should we expect as a long-term stabilized occupancy rates, and what is the long-term plans for this asset? To keep it or to sell it? Thanks.
Yeah. Hi, Vijay. I will take the first question and then maybe a little bit on the second question before I pass to Pauline in terms of the trends and the occupancy for Central Plaza. So tenant sales trend. You are right in the sense that we used to see very strong double-digit growth year-on-year sales. But I think the reality is we are now coming off on a very high base. So the sales cannot possibly continue on a 15%, 18% growth. But what we are seeing now is a little bit more stabilized, per se. But if you compare to 2019, it is 20% growth for the last couple of years. Every year we have been achieving that. So if you compare that, it is still very strong. But of course, you compare year-on-year where we have been progressively increasing 15%, 18%, and so on.
That definitely will see a tapering because you are on a high base, right? It's just like a question of when you do an exam, if you hit 90%, every percentage increase is going to be harder than if you were doing 60% before that. By and large, what we are seeing is that we want to make sure that this growth continues for our retailers because that's important. That kind of supports the underlying occupancy cost. That's where we'll be refocusing our efforts in getting also at the same time, you are right, looking at our trade mix, getting rid of non-performing tenants who is a drag to our sales. We want to bring in tenants that can generate sales. Because if they can generate sales, meaning that they are actually attracting people. If they are losing sales, that means we are also losing customers.
All this has to come into play, and we are doing both front in terms of leasing, in terms of trade mixing, and at the same time in terms of, again, emphasis on place making, marketing, drive for traffic and for sales, right? That's the first part of your question. The second part on Central Plaza. What I'd like to share with you is the view of us for this asset. As mentioned before, this asset is an integral part of Tiong Bahru Plaza. It also kind of provide customers going into Tiong Bahru Plaza for lunch, for dinner, et cetera, right? It is an integral part of it, and at the moment, we feel that it's important for us to keep it as a whole. It's doing well. Pauline will share with you in terms of occupancy and where we see this asset going forward.
But until such time that we really see that there's a better option for us to review that, then we will review it at that point in time. But as of now, we felt that keeping it as an integral part of Tiong Bahru Plaza makes sense for us. Right. Pauline, maybe you can chip in in terms of the occupancy.
Yep. Sure, Richard. So actually, in terms of the occupancy for Central Plaza, it's still trading well. It's still doing well at above 90%. In fact, when we look at the commitments to date, we are seeing the overall occupancy increasing come next quarter when we update our next quarter. I would like to say that in terms of its positioning or rather the segment of the office market that it caters to, it is quite unique. It's different from some of the retail stock or the retail space in the city area. It's in the city fringe. It's very well-connected to some of the amenities. The mall is just next door. Also the fact that it's within a very strong residential catchment as well.
I would say that one of the differentiating factor is although it is not Grade A, the rents are palatable and it does cater to a segment of the office users. Yes. I hope I addressed your question.
Thank you. Just if I may slip in, what is the rent reversion on this? Is this still positive? Much positive?
Yes, it is still holding up. Yes. The rents.
Okay. Thank you.
Well, thank you. Moving on to the second last question from Colin. Please go ahead.
Yeah. Just got a question in terms of valuations. Coming to year-end, should we be expecting higher valuations and the changes in REIT regulations? Will FCT be pushing gearing above 40%? Thanks.
Okay. Valuation, by and large, we do not expect any adjustment to cap rate from what we are seeing in the market, conversations we have with valuers. So that cap rate will likely remain. So we will probably see some positive valuation because our NPI, our numbers have grown. So that is what we are seeing, and that is what we hope to also achieve. In terms of gearing, I think the fact that whether it be 45% or 50%, at the end of the day, I think as REIT manager, we will remain disciplined to kind of keep to the level that we are most comfortable with. That is the 36% to where we are today. That kind of level. We are not looking at pushing our gearing unnecessarily high to 50%.
Unless, it is an investment opportunity where we think it is a temporary thing that we can do and then before we readjust the balance sheet again. Otherwise, I do not see that as a change because even in the past, you could go up to 50% so long as you have your ICR supported with that. So to us, it is actually nothing that changes.
Sorry, just one more question. Just push you in terms of the mix between floating and fixed rate debt. Why not just take more fixed rate debt today to achieve your interest cost savings? Because even if the Fed cuts, let's say 100 basis points, 150 basis points, the SORA may not necessarily fall by the same amount, maybe 100 basis points. So actually, you already achieved the same outcome by waiting for the floating rate to come down.
Yep, you are right. I think that is something that Audrey and her team is watching very closely, which is why, the last couple of weeks when there was opportunity for us to go into the market, we actually tapped the market. We put in SGD 100 million to secure at a pretty attractive rate. So the question is not that we do not want to do it, we are just looking at opportunity because we still feel that we potentially could get a little bit of savings before we put in or increase significantly the hedging. We will be increasing our hedging. That is something that we are looking at. But it is a question of whether do we want to do it today? Do we wait for another week to see opportunity? Because it has been a little bit volatile. It came down from 3 to almost 2.7+.
So it is like 20 basis points. If you can catch it, 20 basis points over five years is quite significant for us. So this is where we are watching the market very closely. I would not say that we are not doing anything, but we are really focusing on that.
Okay. Look forward to Audrey giving us a farewell present, 20 basis points savings, hopefully soon. Yeah. And then she can beat that 4.2.
I'm still monitoring the market, yeah.
All right. Thank you, Colin, for the very heartwarming comments, as usual. Okay, last question from Derek, Morgan Stanley. Please go ahead.
Thanks, Fung Leng. I just wanted to follow up on RTS. Sorry to harp on it, but I guess investors are just concerned, drawing parallels between Shenzhen and Johor. Just now, Richard, you mentioned that you're looking to rejig some of the tenant mix. Could you share more details around that? Are you looking to lower exposure to, say, F&B, beauty? Given that that's half of your current rental income, that could be significant down the road.
Yeah. We are still working through the plans, but by and large, I think a couple of areas that it's a bit of everybody expect this to happen. But for F&B perspective, we don't really see it necessary to reduce. In fact, I think F&B will continue to do well. It's a case of, say, for example, we give the example of Oriental Kopi- Malaysia, they are looking at coming to Singapore because you can eat every day in Singapore, right? You don't have to wait until you go to JB to consume that. Even for food, again, the casual dining that usually you see in our suburban malls, something that you eat on a weekday basis, you don't have to wait for a weekend to go. I think F&B will continue to thrive.
It's a question of maybe we find interesting F&B concepts to bring in so that we rejuvenate, giving something new to our catchment market. But definitely there's to stay. Beauty services, yes, we probably want to be a little bit more selective. Maybe instead of having five nail parlor today, we may reduce it. We may look at different type of offering services, massage and foot reflexology. Again, instead of having three or four, we may reduce that and give the space to something else. So those are the things that we will work on.
We will look at it, but even as we look at this, as I mentioned just now, when we approach our tenants and say, "Look, maybe you guys don't need so many." But the reality is they actually told us that for some of this, even some of these services, the services that they provide there is different from what you can get in Singapore. So they are differentiating their product, and they know what they are doing. So this is where we have to work through the process with them and understand how that differentiation will continue to allow us to bring in more sales. But this is an ongoing basis. Again, coming back to the same point, that it's nothing new about people shopping in JB. It's just that you have three hours jam, four hours jam. It's going to be a little bit easier.
We potentially see more people going on weekend, but on weekday, really, I don't see a significant impact. Even in Hong Kong, the general experience that we have been touching base and understand from some of the consultants says, really the weekend, Saturday is the one that a lot of people go there. But generally on weekday, there are some leakages, but not significant. So, that's where we are right now.
Right. Thanks, Richard.
All right. Thank you very much. We have come to the end of this quarter's briefing, and we would like to thank everyone for your time and your patience for being through. If you have missed any of the part of this conference or this call, please be reassured that we will put up the recording. With this, we would like to thank everyone and have a good day ahead.
Thank you. Bye.