Good morning. On behalf of the management team of Frasers Centrepoint Asset Management, welcome to FCT's full year results analyst briefing. The presentation deck that you see on the screen right now has been released on the SGXNet as well as on our website this morning. If you do not have a copy, please go to our website to download a copy. Today, we are pleased to have the management team here led by CEO, Richard Ng, CFO, Ms. Audrey Tan, and Head of Asset and Investment Management, Pauline Lim, and myself, I'm the Head of IR. Without further ado, let me pass this over to Richard to kick off the presentation. Thank you. Richard, please.
Yeah, thanks, Fung-Leng. Very good morning to you, ladies and gentlemen. Thanks for joining us again today. First start, maybe let me quickly run through some of the key highlights. Again, I'm happy to share the fact that FCT has again delivered a pretty strong set of results, both financially as well as from our operating metrics. Very quickly, let's run through some quick numbers. Gross revenue up 3.6%, NPI 2.7%, and we are delivering a DPU for the full year at SGD 0.1215. We have done a lot this year. I'm going to share a little bit more about all the activities we have done.
But all these actions, what has happened is that we were able to bring our aggregate leverage down from 39.3% to 36.1% upon completion of some of the divestment that we have done recently. Average cost of borrowing stands at 3.8%, and then the ICR and so on is stated there. The other thing that we are happy to also inform all of you is that we have completed our refinancing for the FY 2024. So for this entire FY, we don't have to be worried about refinancing. Operating metrics, very strong performance. Committed occupancy remain very high at 99.7%. Committed reversion average to average, we are looking at 4.7%. That compares to FY 2022 at 4.2%.
Shopper traffic has gone up almost 25% year on year, and tenant sales continue to show very good, healthy growth at 10.3% year on year. We have also achieved a pretty stable set of valuation numbers. At the same time, as I mentioned just now, we talk a little bit about our strategy in terms of portfolio reconstitution. AEI work has started. It's on schedule at Tampines 1. From the ESG side of things, we again happy to announce that we have achieved a five-star rating for GRESB for the year 2023. Fung-Leng, next. I'm not going to go to all these details. Audrey will take us through later on, but maybe we just stop at the DPU. Okay, so if you look at from a DPU perspective, for this year, we are distributing SGD 0.1215.
Of course, if you compare to last year, we did SGD 0.1227 . That is a drop of 0.6%. I guess if you look at it from a different perspective, if you compare year on year, we are down 0.6%. But if you just take a step back and perhaps look a little bit further prior to this, maybe if you look at pre-COVID in 2019, we actually delivered a DPU of SGD 0.1207 . At that point in time, the average cost of debt at the end of the year was 2.6%. But today, our average cost of debt is at 3.8%.
What I am saying is that despite a very challenging environment, high interest rate environment, high inflation cost, we are still able to deliver a SGD 0.1215 , which is about 0.6% incidentally higher than 2019. I guess it is about how you measure the performance. I would like to say that what we have been very focused on is to continue to do as well as we can in areas that we have control. Right? Definitely the sets of financial results as well as the operating metrics will show and demonstrate the fact that we have been doing very well in areas that we can control. Right? From that perspective, I think in terms of both financially and operating metrics, we are happy to announce a set of results that we have delivered today. Okay.
This is where I wanted to also, again, as a summary of what we have done this year. It started off with our acquisition of 25.5% in NEX at the start of February. That was also followed very closely with the completion of 10% additional stake in Waterway Point. We announced the commencement of AEI at Tampines 1 sometime also during that same period, end of second quarter. We divested Changi City Point, and that was announced quite recently, as well as the divestment of Hektar REIT. If you look at in totality for FY 2023, the accumulated amount that we have done in terms of both investment and divestment, as well as AEI, amounts to almost close to SGD 1.1 billion. I am not very sure how many other REITs have done this. Probably one or two would have done something quite close to this.
But definitely in the current market condition, very choppy condition, very volatile, I believe we have demonstrated our ability to execute deals both in terms of investment and also able to reconstitute our portfolio by improving the quality of our portfolio as a whole by divesting some of the assets that we felt not something that we want to hold for the long term. Next slide, please. Okay, if you look at over the last five, six years from the start of FY 2018 till now, our AUM has grown by 2.3 x. At that point in time, it was about SGD 2.8 billion, and today we are about SGD 6.5 billion. But if you look at the transaction value itself, both investment and divestment, as part of our reconstitution, the amount will go up probably by about more than SGD 5 billion.
We have done over SGD 5 billion worth of transaction in this period of time. Considering the fact that, of which about two or three years was also down with pandemic. Of course, for FY 2023 itself, it is all about interest rate and high inflationary market condition. Just to look at the trajectory that we have done over this period of time, and this is also a result of where I mentioned just now, despite the fact that if you compare to 2019, our DPU actually grows. One of the resultant is because of our ability to buy well, and also reconstitute our portfolio by switching out less performing assets with better performing assets. This is also a very interesting slide to put us in perspective. Today, we are the largest owner operators of prime suburban malls in Singapore.
If you look at out of the 10 prime suburban malls across Singapore, Jurong Point being the largest in the market, and if you go down that chart itself, Waterway Point being the 10th largest. Out of this 10, we actually have four in our portfolio. Again, that is a testament of the quality of assets that we have now in our portfolio as compared to 2018. It is a very different perspective with a very different set of portfolio or set of assets that we have in our portfolio. Of course, Northpoint City, you see here, is a combination of ourselves and also the sponsor making up the total of 520,000 sq ft. We have a significant number of the key prime suburban malls in Singapore. In terms of macroeconomy, not going to touch a lot about this.
We all know about the market condition in terms of GDP, but maybe a little bit more focus on retail sales as a whole. If you look at the RSV, retail sales value, that was produced by the SingStat, year to date from October to August for FY 2023, there was an increase of about 5.7%. At FCT level, we actually managed to achieve a 7.3%. On track, slightly, in fact, ahead of the overall general market perspective. Our tenants are actually performing better at our portfolio. In terms of rentals, retail rentals, again, if you look at CBRE stats, you can see that for suburban prime retail rents, it is about 1% quarter-on-quarter and 3.1% year-on-year. For us, we achieved a 4.7% average to average for a full year this time around.
At the same time, if you look at the supply that is coming on stream, again, it is pretty muted. We have been sharing this for quite a while now. What we have decided to do is also provide a little bit more information as to where are this supply coming from. By and large, you see that most of the supply are actually very smallish retail offering that we are expecting. The only significant one is probably in Pasir Ris. Pasir Ris Mall, that is due for completion sometime in 2024. Other than that, as a whole, the new supply is looking at about 1.2 million through to 2025, which is actually a very small proportion of what we have today. Again, we are seeing very strong demand. Our occupancy is 99.7%, and at the same time, a pretty muted supply that is coming to the market.
If you look at what is happening around us today, there is a lot of negative noises, geopolitical issues, and this is something that, like what I said, things that is not really our control. You look at headwinds, there is an uptick in oil prices because of all the wars that is happening around the world. Interest rate, the new term is higher for longer. Nobody really knows which direction it is going to. Inflationary costs, higher manpower costs, higher water prices, et cetera, that we are expecting. Those are the negative or headwinds that we are hearing today. But at the same time, I think we must also not lose sight on some of the positive factors. For retail, it is very important in terms of some of the key stats that we are seeing today. There is a growth in population finally. We are reaching close to 6 million people.
There is also income growth. While we talk about higher manpower costs, but at the same time, what does that mean? It means that there is actually an income growth because of the Progressive Wage Model. Overall, the income perspective for Singaporean is still pretty bright because there is this Progressive Wage Model that will underpin the income prospect for the population at large. Consumer spending remains healthy, especially for our prime suburban malls because, again, coming back to the basic provision that we have is essential products. This is, again, a very strong part of the nature of our malls that we have in our portfolio. 1 percentage point GST increase in 2024. What we have seen last year is towards the end, somewhere in December, you see a little bit of a rush into buying some of the big ticket item. Probably we may see this again coming through.
That will again help to propel the sales for the calendar year end of 2023. At the same time, we are also aware that the government has various schemes and also various initiative packages, or whatever you might like to call it, in terms of helping Singaporeans to overcome the current high cost of living. And one of which is the Assurance Package. If you recall, last year as well, we also had a similar package where the distribution of CDC vouchers is such that half of it is meant for spending at HDB shophouses, hawker centers, et cetera. But the other half you could actually spend in supermarkets like NTUC and so on. And that is where, again, we are likely to be a key beneficiary as a result. Because those spending would then come back to our malls, where we have our supermarket operators like NTUC.
By and large, what I am saying is that while we have headwinds, we have some stresses, some challenges in the market, we are also seeing some positive factors offshoot that is coming our way. Okay. Maybe I will hand over to Audrey to take us through the financial highlights. Audrey, please.
Thank you, Richard. Good morning, everyone. Let's get on to the financials. I have six points on these financials. The first three points, gross revenue is up year-on-year for the second half due to higher occupancy rates for the portfolio, also higher rental rates, except for Tampines 1, which is undergoing asset enhancement work. We also seen higher atrium income with higher take-up rates by the tenants for the space, higher car park income as we revised the car park rates in last December. Secondly, property expenses is up year-on-year with higher maintenance, utilities, and also higher staff costs. However, this is offset by the property tax rebates that we have received and lower marketing spends. This translates to higher NPI and with higher property expenses cushioned by the higher gross revenue. For the next three points.
First, distributions from associates and joint ventures is higher year-on-year with the acquisitions of the 25.5% stake in NEX and also the additional 10% stake in Waterway Point. The lower distributions to unitholders is mainly due to the higher financing costs with the higher average cost of debt as compared to last year, and also the higher loan that was drawn down to fund the acquisitions. DPU for the second half is at SGD 0.0602 . The DPU is after the release of the SGD 3 million that we have retained in the first half, and we have also retained SGD 1.1 million, which relates to the tax-exempt income from Hektar REIT that was only received in October. We will be releasing this in next financial year. Next slide.
For the financial highlights for the year, firstly, the portfolio has registered higher gross revenue with higher occupancy and demand underpinned by the recovery from the pandemic and higher rental reversions and step-up rents. Atrium also resumed on March 29th last year and as a result, this year, FY 2023, it's registered a full year contribution with return and coupled with the higher take-ups of the space. However, this was offset by the lower gross revenue from Tampines 1 with the asset enhancement work. Secondly, the portfolio registered higher property expenses in maintenance, utilities, and staff costs in view of the inflationary cost pressures, however, cushioned by the property tax refunds that we received. Overall, the portfolio registered a margin, an NPI margin of close to 72%, which is comparable to last year. Finally, distributable income is lower year-on-year due to the higher financing costs.
DPU for the year is at SGD 0.1215 . Based on yesterday's closing price, the yield is about 5.7%. Let's move on to the next slide, the financial positions. Firstly, the increase in net current assets and net current liabilities are mainly due to the acquisitions of NEX and also the additional stake in Waterway Point, and the loans that's drawn down to fund the acquisitions. Secondly, the announced divestments of Changi City Point and the investments in Hektar REIT is currently regarded as asset held for sale. As such, it has been reclassed to current assets. In the case of Hektar REIT, we have written down the value to SGD 0.89 per unit for the 143 million units. On October, we have also entered into an SPA to divest the balance 10 million in Hektar REIT.
As such, we are looking forward to the divestment, and is expected to be completed for the quarter ended December 2023 this year. Finally, the NAV is at 2.32 and also the adjusted NAV at 2.26. If you look at it, the net assets actually increased year-on-year. However, because of the higher number of units, the NAV and adjusted NAV has come down slightly. Let's look at the metrics. There are six points on this metrics. Aggregate leverage at 39.3%. After using the proceeds from the announced divestments, pro forma gearing will be coming down to 36.1%. The ICR is healthy at 3.47 x, slightly lower as compared to last quarter, mainly due to the higher interest expense. Average cost of debt is about 3.8%. 63% of our debt are hedged to fixed rate as at end September. Our total undrawn facility is about SGD 488 million.
Finally, the credit ratings by S&P and Moody's remain unchanged. We are investment grade and rated stable. Next slide. Let's focus on the debt maturity profile on the right-hand side of the slides. We have refinanced the debt that is due in FY 2024 with the five-year facilities. As such, there is no refinancing risk for FY 2024. The debt maturity profile is well spread out with no concentration risk in any one year, with less than one-third that is due for refinancing. So together with the bank facilities, it provides resilience to the portfolio. Let's move on to the valuations. I'd like to focus on the comparison of the appraised value and the capitalization rate. The appraised value is stable in Singapore, with slight uplift in some of the valuations for our portfolio, driven by the stronger asset performance.
In the case of Tampines 1, the increase is in line with the asset enhancement work that we have put in place. The capitalization rates remain unchanged as compared to last year, and valuers have also maintained the view that there is no expansion of discount rates. Next. Importantly, the distribution to the unitholders is at SGD 0.0602 . The book closure date is on November 3rd, and payment to unitholders is on November 29th. With this, I thank you for your time, and I'll pass it on to Pauline.
Thank you, Audrey. Good morning, everyone. I'm very happy to share what I think is a good set of report card ending the year FY 2023. I'll talk about committed occupancy. For overall portfolio, our retail portfolio, we have ended the year with a committed occupancy of 99.7%. A very stellar performance, and it does demonstrate the portfolio actually improving in tandem with the market and also driven by the various proactive management that has been undertaken by the team. One observation from the slide is that across the portfolio of retail assets, occupancy are all north of 99%. It's our belief that the robust occupancy will actually underpin stronger asset performance and also drive the growth in the core revenue for our portfolio. Next slide please, Fung-Le ng. With this slide shows the NPI performance of our assets. A couple of observations.
We do see revenue and NPI increasing year-on-year across all the assets. Again, that is supported by the strong asset performance and also the healthy retailer demand for quality spaces in well-managed retail properties. Despite the inflationary stresses that we are facing, which I think Richard spoke about earlier, our assets have generally managed to maintain very healthy margins on an individual as well as a portfolio basis. Next slide, please, Fung-Le ng . I think we are all very well-versed with this slide. In terms of the shopper traffic, that has improved, but it is still maintaining about 10% below pre-COVID level. On a year-on-year basis, it has actually improved by 24.7%. When we look at the picture on the sales side, we see a story of good growth, both on a year-on-year basis as well as compared to pre-COVID 2019.
Our portfolio tenant sales have surpassed FY 2019 by 17%, and on a year-on-year basis by 7%. This is reflective of our focus on driving footfall with the reopening to provide further impetus to sales growth that will provide then the headroom for further revenue strengthening. Next slide, please. Look at the portfolio composition. I think a point to highlight is that our focus has actually not shifted away from being essential. This positioning had underpinned our strong asset performance over the pandemic period and also over this current market volatilities that we are facing. If I may draw your attention to the chart on the left-hand side. What we see is that across our portfolio, there is no concentration risk in any single asset.
Also the scale, the growth that we have actually achieved over the past few years, notwithstanding the market volatility, has actually accorded our portfolio with more resilience in terms of stability, and diversification of risks. Next slide, please. Speak about reversion. I think an observation is that our rental reversion has actually been improving over time compared to the first half of this year and over the past few years since FY 2019. I think our portfolio rental reversion has actually remained generally healthy and mostly in the positive region. We continue this trajectory. Just a few points to highlight in terms of the rental reversion performance for FY 2023. So over the year, we have successfully renewed or committed about 780,000 sq ft in our portfolio.
This represents about 31% of the NLA and achieved that 4.7% average to average positive rental reversion for our retail assets. Next slide, please, Fung-Leng. Occupancy cost has actually improved to a very sustainable level of 15.6%. For a suburban retail portfolio, and compared to, say, the pre-COVID levels, or pre-COVID days of pre-FY 2019, we are looking at a sustainable portfolio occupancy of around 16%-18%. So 15.6% is a very healthy level. It is our belief that this actually accords further headroom or headroom for further rental growth. With the reopening, a key focus is to bring the shoppers back in a bigger way to incentivize spending that will drive sales, ensure that our retailers trade even more sustainably. Basically, the landlord then would be able to partake in some of this upside in sales through better rents.
Okay, next slide, please, Fung-Leng. We wanted to make the point that, notwithstanding some of the uncertainties in the market and so forth, the Singapore suburban retail market remains generally very vibrant. We do see retailers actually with intention to grow and expand across the different trade offerings, not just F&B, but in the various other retail trade mix as well. As you can see from this compilation or collation of some of the new brands that we have actually brought to our malls, some of which are new to market, and some of which are refreshed concepts by the retailers. So it's generally still a very vibrant retail scene in the suburban space. Okay, next slide, please. Yep. Just an example of some of the initiatives that our respective malls have undertaken to actually bring the footfall back to the malls.
In all these signature events, we are playing to our DNA as a heartland mall, right? And we are seeking to entrench ourselves within the community that we serve and become the third place to the various communities. Next slide, please. Yep. So I won't go into this. This is just a sample of what we have done. Next slide. All right. Talking about Tampines 1 AEI. The AEI commenced sometime in the late second quarter of this financial year. I'm happy to share that it is progressing well in terms of the progress, the timeliness. We have also managed to secure, or rather achieve some increase in the overall NLA. If you recall the indication when we announced the commencement of the AEI, was we were targeting an ROI of sub 8%.
I think based on the leasing progress to date, we are cautiously optimistic that we will outperform this ROI target. Right? The phase I under this AEI will actually be unveiled at the end of this calendar year, sometime in November, December, before the start of the festive period. Next slide, please. All right. Thank you. So with this, I end my segment of the presentation. I'll hand over to Fung-Leng for the next segment. Thank you very much.
Right. Thank you, Pauline. I'll cover very quickly the sustainability highlights of FCT's initiative during the FY 2023. This is a summary of some of the operating initiatives that we are leveraging our innovation and technology to help to introduce some of the new ways of doing things in order to improve our operating efficiency, as well as to achieve cost reduction and the journey towards our ESG. Some of this we have already mentioned before, the DDC. The others are like food waste valorization, the smart lift, and the water valve. All these initiatives, excluding the DDC, is expected to get us annual savings of about SGD 1 million in operating expense when it's fully implemented. Moving on towards some of the initiatives towards the green goals. You can see there are various ways that we are doing, some of which you're already familiar with.
The Green Mark certifications, green financing, which is expected to go above 50%, has already gone beyond 50% at 55.6% at the end of September this year. Richard has also mentioned that we have continued to achieve the five-star rating, the highest rating in the GRESB assessment for the third consecutive year, and the green mobility as well as the green energy. On the ESG front, you can see we have multiple programs held at our malls, and this is really to build interactions, inclusiveness with our communities in line with our ESG goals of the Frasers Property Group and FCT. With this, I will hand over to Richard to close out the presentation before we move to the Q&A session. Richard, please.
Yeah. Thanks, Fung- Leng. Just to close up, a quick summary, because in terms of what we have done this year, as indicated, as shown, this is another very strong result for 2023, both financially and also in terms of our operating metrics. Financial position, capital management-wise, if you look at post-completion of those divestments that we have announced, we will be able to bring our leverage level back down to 36.1%, putting us in a very strong position. As part of doing all this, we are also able to then continue to improve the quality of our portfolio by reconstituting what we already have. Also as a testament to the strong demand, we were able to, again, bring in about 72 new FCT brands for the full year FY 2023.
Going forward, where we are looking at right now is we remain positive on the outlook for Singapore's suburban prime retail sector. This is where we have been able to strengthen our portfolio. We have been able to also strengthen the trade mix as Pauline has gone through. All right. Again, if you look at both in terms of demand, continuing to remain very robust, very strong, more than 99%. That is also on the back of a pretty muted supply that is coming on stream to the market. I have also shared some of the factors that we feel that we must not forget going forward, because despite all the headwinds, we are also seeing some positive factors that will help us mitigate some of this.
At the same time, again, the very strong focus that we are going to place onto in terms of asset management, property management, as I mentioned, and reiterate the fact that we want to focus on what we can control and we want to do well in areas that we have been doing very well and continue to do well. So the team on the ground are working very hard to make sure that we are achieving the numbers that we are able to share with you today. In addition, of course, we are not losing sight in terms of our journey towards achieving net zero carbon. That is where, as Fung- Leng has shared, besides the initiatives that we are putting in place, we are also looking at opportunity for us to continue with our cost savings, efficiency, and initiatives as well.
With that, I will end our presentation and happy to take questions from the floor. Thank you. Back to you, Fung- Leng.
Right. Thank you, Richard. We are going to the Q&A session. We see the queue. Terence, as usual, you are the first in the line. Please go ahead with your question.
Hey, thanks so much, Fung- Leng , Richard, and team. Just a couple of questions from me. I think, firstly on financing costs, given that you have hit 3.8% financing cost for this year, and understand that there is still some debt repayment coming up for next year following the proceeds from some of these divestments coming in. What is our expectation of financing cost for next year? Maybe I will ask one by one.
Audrey, you want to take that?
Yeah. Okay. Terence, for the financing cost for the new year, we are expecting it to be higher than 4%. We are looking at low 4%. As we refinance the debt that is due in FY 2024, the current borrowings, the previous cost of debt was about 3.6%. Currently, the refinance amount is still currently capped at float. Yeah, the cost of debt based on today's one-month SOFR is about 4.9%. All in cost of debt, we still reckon that it will be at the low 4%. I hope I answered your question, Terence.
Yes. That's very helpful, Audrey. Thanks. I wanted to ask also on electricity costs. I understand that we had some of the electricity contracts rolling into the new contracts for the second half of this year. I wanted to check if we should expect electricity costs to have peaked out, or are we still expecting higher electricity costs going forward?
Yeah. Thanks, Terence. I guess this is something that, again, the market is very volatile. It moves up to very close back to SGD 100, then it came back down to SGD 80. It's still very volatile, but what I can share is as of now, on the average, our cost is about SGD 0.20. I think that compares to some of our peers, it is a pretty good rate that we have managed to secure. Going forward, this SGD 0.20 itself actually accounts for, if you look at the percentage of utilities as an overall percentage of our OpEx, it's about 10% today. Going forward, we saw the renewals or the expiry of hedging coming forward. We are looking at potentially about under 1% or under one percentage point increase from the 10% that we are seeing today. So not significant increase going forward.
Thanks so much, Richard. That's very helpful. I guess on a final question, I wanted to ask, with occupancy costs so low, and I think Pauline had alluded to it, how much harder can we push rents going forward then? Yeah. Just wanted to get a sense.
Yeah. I would just share with you my view and then Pauline can also jump in. I guess there is always this balance that we want to achieve, and we shared this before. While we look at occupancy cost as one where it gives us opportunity, at least, when we negotiate with our retailers or tenants, we are able to prove that what we have done for the malls, the various activities that we have done, we are able to increase footfall or increase spending at the mall. That also account for the fact that their overall sales have increased very strongly, 17% compared to pre-COVID. So that is a testament of the ability of our portfolio to generate that kind of sales. If you ask me, it is a progressive step. We have achieved this year 4.7% average to average. Is that really a fantastic figure?
I would say not exactly, but is that a bad number? I would also say it is not. We are approaching it on a balanced basis where we see opportunity, we will try to also change out retailers. We mix the trade mix. Again, I think it is both the effect that we are trying to achieve is increase in our rental reversion or increase in our overall rental that we can achieve, but at the same time also improving the quality of the tenants that we have at our malls. But what definitely for sure is having that level of occupancy has put us in a good position to achieve this both as a balancing act going forward.
Okay, Richard, if I may add on. So Terence, you see Richard drives us very hard, not just rents across all aspects of revenue. But I think jokes aside, with some of these inflationary pressures that we are facing, it is very important that we drive the revenue harder. But we have not lost sight of the sustainability, right? Which is why in some of the slides that I shared, we are looking at driving the footfall back. It is not just about footfall, it is actually converting the sales, right? Because when tenants do better, the landlord does better as well. It is a very symbiotic relationship for retail. We have also watched actually the sales of the various tenants very closely. This is a key area of focus for us. It is not just by the individual tenancies, it is also by trades and overall and so forth.
We have taken a look at some of the leases that have been renewed or committed over the past year or so, and based on the stats, and it differs from trade to trade. Our belief is that the current OC, there is still a catch-up because actually sales have moved forward compared to some of the lease renewals, because we have a three years average lease tenure. So it would take a bit of time for some of the reversions to flow through and bring the OC to a higher level. That is my own assessment based on some of the renewals and the new commitments. Yeah. So I hope I have answered your question, Terence. Thank you.
Thanks for that. Very helpful.
Right. Thank you. Moving on to the next question from Geraldine, DBS.
Hi. Morning. Congrats on the very positive set of results. I have two questions. The first question, post the repayment of debt from divestment proceeds, where do you see the ICR ratio improving to?
Okay. What happened is that we are using the proceeds from the divestment to pay off the higher interest rate debts that is currently floating. That is about 5.1%. It really depends on how the market actually moves. Generally, we think that ICR ratio should be around 3x for the new year.
Okay.
Yeah.
This takes into account the higher average cost of debt that we should expect at above 4%.
Yeah. It really depends on how the markets move. As we know in today's market, it is very volatile and there is really uncertainty also. So, barring any unforeseen circumstances, that is what our in-house view is. Yeah.
Okay. Thanks, Audrey. If I can just ask another question. The divestment really helped to free up capital, but is there still any reasons to look at EFR? If so, what are the thresholds that you would like to pass before you consider raising?
Yeah, Geraldine. I guess as indicated in my presentation just now, we have done a lot this year, over SGD 1.1 billion worth of transactions, both investment and divestment, to bring us a couple of objective, to achieve a couple objectives. One is to buy a very strong asset in NEX, to accumulate our ownership in Waterway Point, which is also an excellent asset. At the same time, by reconstituting our portfolio, it put us in a position whereby we continue to look at improving the quality of what we have. As mentioned, we have four out of 10 prime suburban mall in Singapore, the top 10 prime suburban mall in Singapore. So we are at this level, 36.1% gearing level post-completion of the divestment. If you ask me whether we will raise EFR, I guess it is a question of what do we do with the fund.
If we have opportunity, then we have to view the opportunity, assess the opportunity at that point in time to see what makes sense, right? Definitely we are not going to go out and just raise funds for no reason because we are now at a pretty comfortable gearing level.
I understand. Thank you.
Right. Thank you. Moving on quickly to Joel, next in the queue. Joel, please go ahead.
Hi. Thank you for the opportunity, and congrats on the positive set of results. I just have two questions. The first is regarding your composition of borrowings. I understand that your MTN bonds have declined to a low 3.2%, so I was wondering what are your current thoughts on, say, tapping the bond market. My second question is regarding the I think there was a new law passed in Parliament regarding the lease agreement for retail premises bill, and this will be effective in February 2024. I understand you guys adopted some of these guidelines already. I understand some will also become mandatory going forward. So wondering what are your thoughts on this? Yep. Thanks.
Right. Joel, if I may, I will take the second question first, and then Audrey perhaps could chip in on the first. In terms of the changes to the lease agreement or what we call a Code of Conduct, structure or framework. This is something that Frasers as a whole has already adopted since it was first mooted. I remember probably back in 2021, if I am not mistaken. We have already adopted, implemented. It is a question of progressively as and when the leases expire, then they will then be switched to the new template or the new framework. Right. Today, if you ask me, we probably have about almost 60% of our leases are already on the CoC framework. Right. We adopted 100%. As far as we are concerned, there is no changes for us. It is something that we have already incorporated.
So-
That is the second question. Yeah. Audrey?
Yeah. Joel, on your questions of the bonds market, I think it is always the intention from our side to tap all different sources of funding, including MTNs, bonds, the likes of bank loans, facilities. But in today's market, the MTN is actually more expensive than bank loans. As such, it makes sense for us to tap bank loans. However, when the market reopens and the rates become more palatable, it is something that definitely we evaluated, and we tap. Bonds always talk about longer tenure, so that will also stretch our debt maturity profile.
Understand. Thank you. Thank you, Richard and Audrey. That is all from me.
Right. Thank you. Right. Thank you, Joel. Moving on to Xuan Tan .
Hi. My first question is on 2024. If we look at 2024, we should expect to see organic growth pushing through, but on the flip side, there is also higher financing costs and also loss of income post-divestments. Just want to hear your thoughts on where do you see as the offsetting factors on higher cost. Second question is on acquisitions. What are your current thoughts there? Thank you.
Yeah. Hi, Xuan Tan . I think the first bit about going into 2024, I think if you look at how our results have come out, they are multifold. One is in terms of organic perspective, we continue to drive and work very hard on the ground, both from the asset management team as well as the property management team. We continue to look at the various metrics, continue to drive sales, and that helps us with rental reversion. So organic growth is continuing to be a key element. As we reach towards the end of 2024, progressively some of the AEI space at Tampines 1 will then come back, and will be leased out and start operating. So those will be, again, another flow of revenue coming back.
From CCP divestment perspective, we shared before the amount of proceeds that we are taking back, it will give us probably about close to SGD 16 million savings versus the SGD 13 million, SGD 14 million debt cost that is embedded in. That we are able to refi. So again, that is actually a positive gain for us as part of the portfolio constitution. The other element we spoke about also looking at the cost management perspective, some of the initiatives that we are rolling out as Fung-Leng mentioned, that will continue to help us to again, be more efficient, continue to drive savings. We are looking at the energy side of things where the team will continue to also push on. Right. So all those are things that is going to continue, initiatives and so on, that is going to continue to help us mitigate.
And also at the same time, we spoke about some of the potential factors, the positive factors that may help us. Again, as sales increase, our GTO also increases. That is another element from the top line. Beyond all the organic growth, we also spoke about potentially, of course, in terms of the higher cost of debt that could actually affect our bottom line as part of a distribution. We again, will look at where we are at the end of the year if really there is a need. We mentioned before, as part of our divestment, we actually has accumulated a capital gain from CCP of about SGD 20 million. The question is, will we tap onto that?
And if we look at the market condition and if there is a certain requirement or there is a need for us to tap into debt, we have the ability and funds or rather, source available for us to tap into the capital gains that we have achieved as part of the divestment. That is the first part of the question, Xuan Tan . The second question is in terms of acquisition. Again, acquisition, it is opportunistic. We put ourselves in a good position at this current gearing level. If you look at our headroom, we have about close to probably SGD 460 million thereabout of headroom from here to 40%. But again, acquisition depends on whether there is opportunity for us, whether be it the sponsor or the market, whether there are good opportunity for us to add into our portfolio.
Something that we will evaluate when that options become available to us. As far as FCT is concerned, we will continue to look out for opportunities that make sense for the portfolio. Hope I answer your questions, Xuan Tan .
Yes. Yeah. Thank you.
Right. Thank you. Sorry I missed Michael just now, so I will come back to Michael. Michael, apologies.
Hey, thanks. No problem. I have got two questions. The first one is just on this FCT Sigma Holdings. There was a dividend of SGD 4 million from that entity. Can you just give us some color on that?
Audrey?
Okay. Sigma was actually set up in 2019 to acquire the stake in ARF portfolio. During the period before the conversions of the ARF and extracting the assets out into FCT, there was a special dividends that was actually distributed for the sale of First Avenue. Progressively, we have distributed the dividend and with the finalization of the capital gains tax in Malaysia, so we are making out the final dividend which relates to this First Avenue.
Is there any other capital amount in FCT Sigma that you can distribute in 2024?
No. This is the final amount in relations to the special dividend that we have received in relation to the sale of First Avenue.
Okay, great. Just the other question would be the fees taken in units. Richard, how high can you guys take this in terms of managing your distributions?
Okay. What we have done so far, Michael, is we will tap onto the AEI or we increase the AEI when we do an AEI. In this instance, the increase is really to plug the gap because Tampines 1 is undergoing AEI and there is a disruption to the income. That is why you see for this particular quarter, the AEI went up to about 55% or on the average about 32% +. This is what we have been using. Of course, we can also use this to tap onto the AEI to be increased, to a level whereby we can also plug the gap that is caused by interest rate. That is a consideration that we can also look at potentially.
Okay. Just a clarification. On your rent reversions, did you say that it can be maintained or is next year likely to see a more normalized pace?
I think at this rate, we remain quite positive in terms of the performance of the portfolio that we have. We believe that this is a level that is sustainable.
Okay. Very clear. Thank you.
All right. Thank you. Moving on to David. Sorry to keep you waiting.
Yeah. Morning, Fung- Leng. Do you have an in-house view on what is the long-term normalized average funding cost you would expect? Is it around like low fours or do you think it should be lower?
Again, this is crystal balling, but if you look at our own view at this point in time, we are probably looking at about the 3%-ish over the longer period of time. But again, it's anybody's guess.
Okay, and my follow-up is a short one. With the shares trading below your NAV, how do you view raising equity? Are you going to be a lot more cautious, even if it's an attractive acquisition? If it's NAV dilutive, would you still consider it? Thanks.
Okay. David, I think this question will also depend very much on the opportunity that we have, right? For a start, we have built up some headroom from our gearing level. That is something we can tap on to, meaning that, even if, let's say, there's a good opportunity, we need to go to the market, we are looking at probably a much smaller size, if there's a need for that. Or if we could fully utilize our headroom to fund the acquisition. But bottom line is, it's very much depending on what is the opportunity, right? Do we see that opportunity as something that is going to be the critical part of our portfolio? Is the investment that's going to give us a long-term positive impact, we're going to be able to derive more benefit as a result of this acquisition? How will it look like in terms of our overall perspective?
As your first question alluded about going forward, where do we see the interest rate? Of course, at the moment, it's anybody's guess where it's going to land and when is it going to start turning, but I would probably agree that with most of the people that we spoke to is very much the fact that at some point in time, I think there should be some stabilization and normalization, right? Whether the question is, would it go back to before? Probably not to that level, but again, it's definitely not going to be staying at the elevated level at this point in time. What makes sense then is to look at investment that is for the long-term sustainability of the REIT, and for the benefit of the shareholders.
We will look at it at that point in time, what is the investment like, how will it fit in, whether there is any growth potential, and where we see it going forward and how do we fund it. It could be a combination, it could be debt fund, it could be EFR, if the market is suitable at that point in time.
Yeah. Thanks, Richard.
Right. Thank you. Moving on to the last question in the queue. Vijay from RHB.
Yeah. Hi. Good morning. A couple of questions from me. My first question is in terms of property tax rebates. Can you give us the quantum, and is this a one-off property tax rebate? Also, considering that the increased utility expenses which you are going to face in FY 2024, what kind of margins can we expect for 2024? Would it be in the low 70% levels?
Vijay, maybe I will take the second question in terms of margin. You are right. We are seeing increase in cost pressure to an increase in cost that puts pressure on our margin. At the same time, we are also improving the top line as we spoke about from the various perspective from increase in our rental reversion in terms of getting more sales done, so increase our GTO, increase our atrium revenue, other income, and so on. At the moment, I think we are probably about on the average, 74% thereabout of our margin. We may experience a little bit drop in the margin, but I think over time, when some of these initiatives have kicked in, we hope to then again bring back the margin to a level to where it is today. There could be a slight dip in the margin going forward.
Okay.
Vijay, can I just clarify your questions? Is it relating to the property tax refund that we have received?
Yeah. What is the sum and is that a one-off?
Yeah. This is a one-off, and it is about SGD 4 million.
Okay. Can I just clarify where do these rebates come from? What is the reason for these rebates?
This is rebates relating to the annual value that was previously assessed, and then there was a downward revision, as such we have received the rental refunds, property tax refunds.
Got it.
Yeah.
Yeah. Sorry, Audrey, maybe I add on. Vijay, this review of the property tax, right, is actually an ongoing process, right? Every year when we submit the prop tax and so forth, there will be a process whereby we review the rates, the AV, and if the AV is deemed not to be at market, that is something that we would engage IRAS on. Whilst it is one-off, it is a process that is ongoing every year for our prop tax bill.
Understood. Yeah. Understood.
Thanks.
Yeah. My second question is in terms of borrowings. I think you have shifted the FY 2024 borrowings to FY 2029. I noticed that this loan is secured. Was this also secured before, and is there a change in cost between a secured and unsecured at this point of time? Yeah. Maybe I will follow up next. Yeah.
Okay, Vijay. The secured borrowings at Tampines 1, which is due in FY 2024, is refinanced with unsecured loan borrowings. In terms of the margin-wise, what we have done successfully is to negotiate for a very, very low margin, and which is very comparable to a secured loan margin. So, with this same margin level, we are still able to unencumber the assets. And we will be about 80% of the IPs will be unencumbered following the Tampines 1 refinancing.
Okay. So this is being replaced by unsecured borrowing.
That's right.
Just to check, the 63% fixed, does that include this refinancing or would the refinancing, the float percentage of fixed would drop below 63% once this refinancing is completed?
The 63% is as at the date of September. Currently, the T1's refinancing is currently on floating. We are looking for opportunities to hedge the floating progressively to increase our hedge percentage. We will look for opportunity moments to enter into a hedge.
Okay. Until then, this percentage would drop, the percentage of fixed position would drop, correct?
That's right.
Okay.
Yeah. Until we refinance and further hedge the positions.
Understood.
Yeah.
My last question is, I just want to clarify if I heard it right. Would you be using some of the divestment gains to top up or offset the DPU from Is that what you mentioned, Richard?
Vijay, from what I've shared is probably is more from the angle that we have an option. We have it available to us if the need or if it's necessary for us to look at using part of the capital gains as a distribution for going forward. Right.
Okay. But at this point of time, you are not planning to top up Changi City Point's income loss.
The income loss I do not see it as something that we need to do today, because as I mentioned, it is actually net positive because
Yeah
when we use it to pay off debt, it is actually a positive. We actually make about SGD 2 million or SGD 3 million more than the contribution we had from the asset.
Got it. Thank you. That is all I have.
All right. We have come to. Sorry. Yes?
Yeah. Fung- Leng, I just want to have clarifications for Geraldine. Geraldine, earlier on you asked about the forward ICR. We reckon that it may come down below 3x , but it really depends on how the mall outperforms and how interest rates will run. Yeah. I just want to clarify on this note.
Okay.
Right.
Thanks, Audrey. Yeah.
Thank you, Audrey. We have one last question set up for Terence. Terence, please keep it short. Thank you.
Hey. Thanks, Fung- Leng. Thanks. Just wanted to ask on NEX. Thank you so much for sharing some of the financial data. I am just doing some back-of-the-envelope calculation. It seems the NPI margins are close to 80%, and if we annualize the NPI contributions it is about 4.9% yield on the current valuation. Could you share as to whether these numbers are sustainable and what is the outlook on NEX going forward from here?
Yeah. Okay. I think for a start, that is the reason why we have always said that NEX is an excellent opportunity that we managed to secure, right? Because strong yield, strong performance, very high margin. That is also on the back of the fact that it is one of the largest mall in Singapore, 630,000 sq ft. So your efficiency tends to go up the larger the mall is. It is just like if you look at Causeway Point and so on, it is also one of the highest margin. This is where they have done very well. Going forward, like all the other assets that we have, the cost pressure is also going to be there. We would expect maybe potentially the margin may come down a little bit from where we are today.
At the same time, on the same token, like what we are doing, the team will continue to drive revenue. We are hoping that some of this will mitigate the increase in cost. You are right. If you look at on a backward basis, that will give you a perspective of the yield that we are getting from such an excellent asset.
Thanks so much.
All right. Thank you, everyone. We have come to the end of this analyst briefing, and thank you for your presence. You may log off now, and we will see you in the next analyst briefing.
Thank you.
Thank you.