Hi, good morning, everyone. Thank you for taking the time to join us this morning for Keppel REIT's first half 2024 results briefing. I am Tong Yan Leng from the IR team. Before we begin, I would like to introduce the management team on the session. We have Mr. Koh Wee Lih, Chief Executive Officer, Mr. Sebastian Song, Chief Financial Officer, Ms. Teo Xuan Lin, Head of Investment, and Mr. Rodney Yeo, Head of Asset Management. We will start the briefing with a presentation by the management team, followed by a Q&A session. Please be reminded to only unmute your mic during the Q&A. I will now hand over the time to the CEO. Wee Lih, please.
Thank you, Tong Yan Leng, and a very good morning to everyone. Thank you for joining us today for the Keppel REIT's first half 2024 results briefing. Starting with the key highlights on slide three. Property income grew 9% year-on-year to SGD 135 million, and net property income grew 7.7% year-on-year to SGD 96.8 million. It is driven by higher rental contributions as well as our new acquisition. However, DPU decreased to SGD 0.028 due mainly to higher borrowing costs. Our financial position remained healthy. Aggregate leverage was 41.3%, and with all-in interest rate at 3.31% per annum for the first half of 2024. Borrowings on fixed rate was 65% as at June 30, 2024. Moving on to slide number four. Keppel REIT's portfolio continued to deliver robust performance in the first half of 2024.
Rental reversion was 9.3%, with portfolio committed occupancy increased to 97% from 96.4% in the previous quarter. Portfolio weighted average lease expiry or WALE remained at 4.6 years, while top 10 tenants' WALE remained long at 8.3 years. As at June 30, portfolio valuation was SGD 9.6 billion, with Singapore remaining as Keppel REIT's largest market at 77%. I will now hand the time to Sebastian, who will bring you through our financial results.
Thank you, Wee Lih. Moving on to slide six. Property income and net property income for the first half of 2024 increased 8.9% and 7.7% year-on-year respectively, due mainly to higher occupancy of Ocean Financial Centre and KR Ginza II, as well as contributions from 2 Blue Street and the newly acquired 255 George Street. Share of results of associates increased 7.8% year-on-year. The increase is due mainly to higher rentals and occupancy, offset partially by higher borrowing costs and property expenses. The decrease in share of results of joint ventures is due mainly to a weaker Australian dollar against the Singapore dollar. Borrowing costs increased 29.8% year-on-year, largely in tandem with the high interest rate environment, coupled with the cessation of capitalization of borrowing costs for 2 Blue Street following its practical completion in April 2023.
Distributable income and DPU for the first half of 2024 decreased 1.9% and 3.4% year-on-year to SGD 106.9 million and SGD 0.028 respectively. Slide seven provides the record date for the distribution, which will be on August 7, with the payment date on September 13. On slide eight, the increase in deposited property and borrowings is mainly due to the acquisition of 255 George Street. Adjusted net asset value per unit as at June 30, 2024, is SGD 1.27. Slide nine provides the key capital management metrics and debt maturity profile. Aggregate leverage was 41.3% as at June 30, 2024, and all-in interest rate increased to 3.31% per annum for the first half of 2024. Borrowings on fixed rates and sustainability-focused funding formed 65% and 82% of our total borrowings respectively.
We have refinanced most of the loans that are expiring in 2024 and do not have any major refinancing requirement until the first half of 2025. Slide 11 shows the portfolio breakdown as at June 30, 2024, by geographical locations. Singapore remains the largest market at 77%, while Australia, South Korea, and Japan are at 19%, 3.1%, and 0.9% respectively. After securing a new tenant from the technology, media, and telecommunications sector, occupancy of 2 Blue Street increased from 66.4% to 77.7%. T Tower also achieved full occupancy after securing new tenants from the banking, insurance, and financial services, as well as government agency sectors. Slide 12 shows a breakdown of our performance by geography. Net property income figures comprise those of directly held properties as well as our attributable share of net property income of associates and joint ventures.
The Singapore portfolio recorded an increase in net property income due to higher rentals and occupancy. Net property income for the Australia portfolio also increased due to contributions from 2 Blue Street and 255 George Street, partially offset by a stronger Singapore dollar. The North Asia portfolio, which consists of T Tower and KR Ginza II, recorded an increase in net property income.
It is mainly due to the increased occupancy of KR Ginza II. I will now hand the time to Rodney and Teo Xuan Lin, who will talk through our portfolio and market updates.
Thank you, Sebastian. Moving on to slide 13, please note that we are disclosing the information based on gross rent instead of net lettable area. You can find the information based on net lettable area in the additional information section. In the first half of 2024, we committed more than 546,000 sq ft of space and achieved portfolio rental reversion of 9.3%. Tenant retention rate was 64%. New leasing demand and expansions were mainly from the banking, insurance, and financial services, technology, media and telecoms, and legal sectors. As at 30th June 2024, Keppel REIT's portfolio maintained a high committed occupancy of 97% and a long WALE of 4.6 years and 8.3 years, respectively, for the portfolio and the top 10 tenants. Slide 14, we continue to maintain a well-staggered lease expiring profile.
The weighted average signing rent achieved for our Singapore CBD office leases was SGD 12.63 per sq ft per month in the first half of 2024. The average rent for the leases expiring at our Singapore properties was SGD 10.77 per sq ft per month, which is below both our signing rent and CBRE's average core CBD Grade A office rent of SGD 11.95 per sq ft per month. Remaining expiries for 2024 is 7.2% by attributable gross rent and 6.2% by attributable NLA. Slide 15 shows our established and diversified tenant base, comprising established blue-chip corporations and government tenants that provide long-term stability for the portfolio. The next three slides provide a summary of our mid-year property valuations. On slide 16, valuation for our Singapore portfolio increased 0.6% as compared to the December 2023 valuation.
This is mainly contributed by the increase in valuations for CBD Tower 3 and Keppel Bay Tower due to higher passing rents and rental growth expectations. Slide 17 shows our Australia portfolio valuations. Including our newly acquired 255 George Street, the valuation of our Australia portfolio as at 30th of June 2024 increased 16.6% as compared to the valuation as at 31st December 2023. Excluding 255 George Street, the valuation would have been AUD 1.6555 billion, a decrease of AUD 76.2 million or 4.4%. This decrease in valuation is due to softer cap rates. Moving on to slide 18. Valuation for T Tower in Seoul remains stable, while valuation for KR Ginza II increased by 0.7% in local currency terms. Overall, in Singapore dollar terms, our portfolio valuation increased by 3.3%, and excluding 255 George Street, our valuation would have been slightly lower by 0.2%.
I now hand the time to Teo Xuan Lin.
Thank you, Rodney. Moving on to slide 19. Building on our sustainability efforts, various activities were organized in the second quarter of 2024. 8 Exhibition Street organized an activity aimed to create awareness and encourage behavioral change on waste management for our tenants. 8 Exhibition Street also held a meet and greet session for the Melbourne City Mission, the fundraiser for the Sleep at the 'G, to provide tenants an opportunity to find out more about ending youth homelessness. Over at Marina Bay Link Mall, close to 5,500 kg of used clothes were collected from January to June 2024 for an upcycling initiative. The next few slides summarize key trends in the office markets which Keppel REIT has presence in.
On slide 21, the average rent of core CBD Grade A office in Singapore remained at SGD 11.95 per sq ft per month, with an average occupancy in the core CBD at 94.4%. Moving on to slide 22, prime grade occupancies in North Sydney and Macquarie Park increased, while occupancies in Sydney CBD, Melbourne CBD, and Perth CBD were slightly lower as at 30th June 2024. The next slide, 23, shows the office space market trend in Seoul. Seoul continues to exhibit resilience with high occupancy of 98.4%, while net effective rents increased 1.2%. Moving on to the last slide on the Tokyo office market. Both office occupancies and rents for Grade A and B offices improved during the quarter. Occupancies of Grade A and B office within the central five wards of Tokyo increased to 96.4% and 97%, respectively.
Net effective rents for Grade A and B offices also increased 1.8% and 3.4% quarter-on-quarter, respectively. That concludes our presentation.
We will now open up the floor for Q&A. If you have any questions, please raise your hand and we will prompt you. You can unmute your mic, and then you can proceed to ask the question.
Good.
We have the first question from Brandon. Brandon, you can go ahead.
Yeah. I think I saw Terence's hand up first. Do you want to get him to ask first?
It's all good.
It's okay. You go ahead.
Oh, no problem.
Usually I go by alphabetical order.
Oh, okay. Thankfully, I'm B. Can I just get a sense of the cap rate that you revalue Australia this half year? Is it sufficient as we go into second half, given that you got 255 at 6.5, but your ask doesn't seem to be nearing that kind of level yet. Thanks.
Yeah, good question, Brandon. I think the valuers think that it's sufficient for now. But the Australian market obviously is, as with a number of markets around the world, is probably in a state of a bit of a flux. As far as we know the valuers think this is sufficient for now.
Yeah. Just to add, following our transactions, there are some other transactions that came out to the market as well, like 5 Martin Place probably transacted at around 6.1% kind of cap rate. Like what Rodney says, we are fluxed and seems like cap rate has tightened since our purchase itself. We'll continue to see the thing. Again, I think we engage third-party valuers to do the valuation this round. This is as objective as it can get.
Are you able to share the rental growth assumptions that the valuers have priced in?
For which market and for— We typically don't share that, because it gets into a suite-by-suite kind of conversation, and that's a lot of detail. We typically don't share that.
But maybe to give you a bit more color. For Australia, again, I think headline rent continued to trend ups, and it's expected that incentives would tighten from the current mid-30s kind of range itself. Things are definitely optimistic at the time.
Got it. Okay. Thanks for that. Going back to the funding source, right? Looking at your gearing this quarter is up above 40%.
Obviously, I think it seems that we have seen the perp market opening up again.
Just on acquisitions front, are you looking to use that source again or even pare down some of your debt using that avenue?
Again, I think we are definitely mindful of our leverage, and we will continue to look at ways to how to pare it down. Again, there are a few methods and would not rule out asset recycling as one of those methods as well.
Basically perps are off?
No, I do not think we want to commit to anything right now, but no plans for us at this point in time. Like what I think we communicated previously, we are looking at ways to pare down leverage, and asset recycling would be one of those methods that we look to do it.
Okay. Great. Thanks. I will pass it on to the next one.
Sure.
Thanks, Wee.
No problem.
Thanks, Brandon. Terence, go ahead.
Thanks so much, Wee and team. I just wanted to ask on NPI. On a quarter-on-quarter basis, NPI, if you strip out the addition from 255 George Street, actually looks like it has declined. Could you give us a sense of what drove the decline in NPI? On the second question, there are media reports which suggest that you are stepping away from the divestment of T Tower. Could you give us maybe an update on how you see asset recycling plans and what is the timeline to bring gearing down below that 40%?
Maybe I will start with the second question first, then my team will answer the first one. Again, we typically do not comment on market rumors or unconfirmed press journalist reporting itself. What we can say is we are still committed to bring down the gearing. Again, I want to stress that we are not a distressed seller. We wanted to make sure that we want to negotiate the best deal for unitholders in this current time. Again, like I said, the overall trend is hopefully interest rate comes down soon, but we will definitely, long term-wise, we want to keep our gearing at a lower level than where we are right now. Maybe back to the first question.
Terence, just to clarify, you are comparing first quarter and second quarter of this year?
Yes, just first quarter and second quarter, excluding, let us say, 255 George.
Okay, sure. In the first quarter, we received also a sum of one-off income from one of our assets in Australia. That might have caused 1Q to be higher. But all in all, I think, the asset performance in terms of NPI for all assets are generally quite stable. We have seen some property tax increases in Australia. But that said, I think in terms of PI, it is still pretty stable if we strip out 255 George Street.
Could you give us a sense of the one-off in the first quarter?
That came from Pinnacle Office Park in Australia. That was about AUD 1 million.
Okay, thanks. That is all I have for now.
Okay. Thanks, Terence.
Thanks, Terence. Dale, you want to go ahead?
Yeah. Thanks, Tong Yan. Hey, morning Wee and team. Thanks for the presentation. Just two quick questions from me. Firstly, can you remind us on the funding of this 255 George Street? What was the mix of SGD and AUD you used for the acquisition?
Yeah. Hi, Dale. So at the onset, I think we said we try to balance the economics and the currency exposure. So that was at about 30-ish AUD funding. After that, we issued an AUD green note, if you picked that up. So now the mix is close to half. It is about high 40s for AUD debt funding.
Okay. Got it. Still on the financing cost. The 3.31%, that is the year-to-date figure. Could you give us an idea of what 2Q number looks like?
Yeah, I think previously we guided, we are looking at the mid five for the full year.
No, not mid five.
Oh, sorry. Mid threes. Sorry. My apology.
It's okay. I almost had a heart attack.
Yeah. Sorry, I got desk stairs around. Yeah, mid threes. I think we're still sticking to that. Of course, the past 2- 3 weeks, we've received some encouraging news and also some encouraging movements in the interest rates. But I think we would still hold to that mid three guidance. If anything happens in September, and also depending how SORA and the Aussie interest rates react to that, yep, still mid threes for now.
Just a quick follow-up on that. At the mid 3.5 levels, just wondering with your current hedging of 65%, is that a comfortable level or you're looking to increase or lower it?
Yeah, it has reduced to 65% because due to some refinancing exercise this quarter. There were a number of fixed rate loans that were refinanced, and we have not hedged all of them. I think it has fallen to 65%. Ideally, we would like to maintain a higher fixed rate ratio, maybe in the range of 70%-75%. I think that provides a lot more certainty. I think, given what the environment is right now with the favorable sentiment setting in, we are just monitoring what happens over the next eight weeks to see if there's an opportunity for us to increase that ratio.
Okay. Got it. Okay. That is clear. That is all from me. Thank you.
Thanks, Dale.
Thank you. Thanks, Dale. Joy, you want to go ahead?
Sure. Thanks. Just two questions from me. First on Singapore leasing, could you share the rental reversion number for the quarter itself and also guidance for the second half? Probably, where are you seeing most amount coming from? The second question is, you did have quite a bit of a jump in the temporary adjustments in your DPU. Can I understand, is there in relation to specific leases, or these are as you sign out more leases, these are tenancy incentives? Thanks.
All right. I will take the leasing questions. Singapore leasing rental reversions was 7.2% in the second quarter of 2024. Leasing demand, view on second half of the year. I think second half of the year, the way we look at things is probably flat to slightly up in terms of rental rates in what we sign at. That said, we actually do not really have very much new leasing to do because there is just a few more renewals for the rest of the year, and our portfolio in Singapore is pretty well occupied. Not much new leasing to do at the moment.
Yeah. To add to that, I think from renewals in the second half, we expect to continue to see strong rental reversion at that front. Yeah.
Yeah. Joy, on your question on the net tax adjustment. The temporary difference in our adjustments this half year is slightly higher due to reversal of deferred tax. We typically provide capital gains tax for our foreign assets. Because of the decrease in valuation of our Aussie assets, we made some reversals. That was reflected in that line.
Thanks. This is largely all adjustments made for Aussie assets, right?
That's right.
Okay. Thank you.
Joy, do you have any more questions?
I'm good. Thank you.
Okay, thanks. Vijay, you want to go ahead with your question?
Yeah. Hi. Morning to you and team. A couple of quick questions for me. Firstly, in terms of overall occupancy, I think you have done a good job in terms of keeping the occupancy high. Looking at second half, any color? I understand that IOI Properties Group is still about 45%-65% kind of occupancy level. Is this still considered a challenge? Can you give some color in terms of where the occupancy, leases are expiring in the second half?
Yes. We have, in the second half, a few kind of major leases, larger leases that we are in the midst of renewing. I think we are quite settled there for the rest of the year in terms of retention of our Singapore portfolio. From what we understand, IOI Properties Group also has raised their quoting rents. It's in the sense between SGD 12 to SGD 14, depending on where you are in the stack. That compares actually very favorably with what we're seeing, what we're getting in our buildings. I think, the value proposition has to be, I think, quite large for the tenant to want to move to IOI Properties Group, seeing that rents probably-- There's not much savings by moving is what I'm trying to say.
Okay. Can we expect occupancy to be around here moving into second half?
It's a bit of a forecast that we don't normally like to give out. I think occupancy should stay stable for the rest of the year.
Okay. Thank you. I think earlier you mentioned about the gearing levels. Maybe can you give some color in terms of what is your target gearing levels moving into second half? You mentioned divestment is a strategy which you'll be looking at. Can you just pick out some assets which you think are potential for divestments? Is T Tower still a divestment candidate?
Like you said, I think we definitely committed to bring down the gearing and to enable us to negotiate a good position. We don't want to give specific timeline, things like that. We're definitely committed to bring down gearing and to negotiate a good deal for unitholders itself. Truth be told, I think we have more than one asset in our portfolio that is ripe for divestment. We are concurrently exploring that. We hope to be able to bring the gearing to below 40% in the medium term. Again, we are under no pressure right now due to financing, and we want to make sure that we secure the best deal for our investors.
Okay, thanks. My last question, with gearing at these levels, would you still consider buybacks considering the share discount?
It really depends, but I think you know that we borrow to fund the buybacks, so we might take a pause for now depending on where unit price hits. Probably not for now.
Yeah. Okay, got it. Thank you. That is all I have.
Thank you, Vijay. Shen, do you want to go ahead?
Hi. Morning. My first question is on cost of debt. Can you give us a sense for 2025 debt expiry? What are the expiring rates? How should we think about cost of debt in the next year? My second question is on leverage limits. If the leverage limit is changed to 50%, will you still be looking to divest to improve gearing, or will you be more comfortable at 41%? Thanks.
Yeah, probably I will take on the first question. I do not think we are able to share too much color on the expiring rates of the loans that are falling due next year. I think, definitely they will be refinanced at higher rates. Large proportion of this are currently hedged at pretty favorable rates. But I think it is slightly premature for us to actually estimate or actually provide any current guidance for 2025. I think it is important that we see what happens in the next six months. And I think, if what is predicted right now falls through, I think we will be optimistic that we will be able to refinance some 2025 loans at pretty decent rates.
Yeah. As to MAS thing, I think it is just a consultation paper for now. But long-term wise, strategy is to maintain a strong balance sheet. And like what I have shared with Vijay earlier, long term, we hope to be able to keep the leverage below 40%, regardless of where MAS set the benchmark.
Got it. Thank you.
Sorry. Thanks, Teo Xuan Lin. Brandon, you still have your hand raised. Do you have further question?
Yeah, just one more. Can you sort of comment on just this NPI margin or some of your Aussie assets like 8 Exhibition Street, Victoria Police Centre, as well as Pinnacle Office Park? If you look at the margins for this first half, and if you compare to second half of last year and even the previous semi-annual periods, they seem to be on a downward trend. Is it purely because of property tax, or is there something else that we are missing here? Is this just a one-off?
Yeah. For 8 Exhibition Street and was it Victoria Police Centre, you said?
Yeah.
Yeah. Okay, so these are the state of Victoria. Land tax has increased. I think this in tandem with the annual value as assessed by the State Revenue Office. This is also coupled with the increase in absentee surcharge. I think that has contributed largely to the increase in land tax and then consequently the NPI margin.
Oh, okay. Can I take it that for this first half of 61%, that is a new norm, is it?
It really depends. I think the land tax rates are here to stay, but it is also largely driven by property income fluctuations as well. It should be in this range, on the average of this half and previous halves, I guess.
Yeah. But also bear in mind that long-term leases like VPC, they have annual escalation. That will help as well.
How about Pinnacle Office Park? Is it purely a function of occupancy?
Pinnacle Office Park, it is largely driven by higher property expenses in general.
Okay. All right. Okay. Hey, thanks.
Sure.
Thanks, Brandon.
Thanks, Brandon. I think we are done. Can I check if there are any more questions?
Hi, it is Mervyn here from JP Morgan.
Hi, Mervyn.
Hi. Just a question on the changes in thin capitalisation rules in Australia. I understand from last quarter that you are trying to restructure it to reduce tax leakage. Can you give us an update in terms of what you are doing in terms of the structuring as well as any quantified impact of maybe higher taxes? Thanks.
That is still in the works. We are still working with our tax advisor on the optimal restructuring method. We think we can only complete the exercise maybe in the next few months. I think, but the conclusion is, there will definitely be an increase in withholding tax that we have to pay, but we are unable to quantify that right now until we have arrived at a conclusion what the optimal restructuring mix will be.
What is the current effective tax for Australia then? If you can just share that with us.
The current effective tax rate. It's, I don't know, 12%, 13%?
Okay.
It's a blend between 10% and 15%.
I guess, what, worst case, 1%, 2% from here? Or you think you can best case scenario, you can keep it flat.
Sorry, keep it flat?
I mean, best case scenario, would it be flat or do you think it would still increase?
No, I think it will increase. I think without giving too much, the rules are quite clear. There is a threshold to how much deductions you can claim. I think it is more likely than not withholding tax will increase.
Can I check what is the borrowing cost for the various JVs you have at this point in time, and how high could it go? Thanks.
Sorry, JVs meaning?
Your wanted stakes in One Raffles Quay and CBD. Thanks.
Unfortunately, we are not able to provide that information. We carried out a refinancing exercise this first half. The margins were very nice. We are still getting very tight margins for our refinancing exercises, regardless whether it is at Keppel REIT level or our associated company level.
Is there more further refinancing to come for One Raffles Quay and CBD? I mean, meaning that you reset everything to today's rates really, or there is still some lower costs to come through.
We are done for this year. We did CBD this year. One Raffles Quay will be due next year. We will be working on that maybe later part of the year.
Net-net, we still should see increases at the JV structure in terms of borrowing cost next year?
Assuming interest rates stay this way, don't come down as fast as we would like them to be, they will probably be refinanced at higher rates than current.
Okay. I know it's hard to guide for next year, but let's say we have a 100 basis point cut next year from the Fed, would we still see higher borrowing costs or you think you can maintain current levels or actually fall?
I will need to work my sums. I don't have the information right now, sorry.
Oh, okay. All right. No worries. I thought you guys would have done some sensitivity analysis on the level of rate cuts. Okay. Anyway, look forward to better results ahead. Thanks.
Thanks, Mervin.
Thank you, Mervin. Donald, do you want to go ahead? You have a question?
Donald? Yeah.
Yeah. Can you hear me?
Yes, we can hear you now.
Okay. A couple of questions on Australia. Wee Lih, any reason why your 8 Chifley cap rate is so much tighter than your 255 George of 75 basis points?
Yeah. Sorry, I will take this question. For 255 George, that was, I guess, a sort of market transaction. Things have, as Wee Lih mentioned, may have tightened since then. Also 8 Chifley is also now fully 100% leased and is stable for at least the next three, four years. There is not much leasing to be done, so I do not think there is much exposure to the market. I think the valuer probably took that in account also.
Okay. Any risk of further expansion here from 8 Chifley or in fact most of the other portfolio?
I guess there's always the risk because the state of the market in Australia is in flux. With the Reserve Bank of Australia perhaps wanting to increase 25 basis points, maybe not. The risk is always there.
But again, we can't quantify that risk. The valuers wouldn't even try. As far as we know, it's the right cap rate to use for now.
Yeah, but the saving grace seems to be we probably have invested right at the bottom of the market because recent actions indicate that the cap rate has tightened from where we invested in. Let's see how things go. I think Australia, again, for the prime and Grade A office continues to have heavy demand.
Like I said, 8 Chifley obviously is a newer vintage than 255 George. But 255 George obviously have gone through extensive upgrades. 255 George is just one transaction point. Let's see for more transaction before. I think the valuers can extrapolate a trend to see really where the cap rate should be.
Mm-hmm. Okay. For your 2 Blue Street, your new tenant, what's our incentive? How does it compare to the previous ones?
Actually, incentives actually seem to be trending downwards. I think for that particular tenant, we were quite happy with the result. It's in the mid-30s.
We are-
Any timeline for the remaining 23%?
Well, we still have rental guarantee on the rest of the space until April of the year after next. We are not rushing the process. We want to get the right tenant. We have got income in place.
Essentially, we have 100% leased building. I think we shouldn't try and rush this, because getting that building leased out with quality tenants is our main focus.
Wee Lih , you mentioned that there's more than one asset in the portfolio that you give up for divestment, besides T Tower. Will this be in Australia? Not in Singapore, right?
Again, we do not want to commit to any specific building, but even in the past, that is obviously before my time, there is possibility of divesting some partial stake in some of the assets itself, which I think the previous team has done. We do not want to rule out any possibility. Let us continue to see. I think right now we went through Chifley itself. Like I said, we have done all the refinancing we wanted for this year. I think the banks continue to be supportive. We definitely have an eye on the gearing over the long term. But let us see how the market unfolds itself. We definitely, long-term wise, try to bring down the gearing to below 40%.
Sure. Okay. Last question from me, very quickly. What is your prevailing AUD cost of debt at this point in time if you go out to borrow a three or five-year?
Okay. If we are to get a loan, an AUD facility right now, the margin can be between 150- 200 basis points from an Australian bank. I think the Singaporean banks, the local banks are slightly kinder. We can probably-
Sorry, could you repeat that again? What is the margin to get from Australian bank?
If we had to go out right now, the Aussie bank may offer a margin of about 150-200 basis points.
150-200
Yeah, the local banks are slightly lower. I think about 120-150 basis points margin.
No material changes for the margin.
They are all in probably closer to 6% at this point.
All in closer to 6%. If we are to get a borrowing today, 4.35. High 5s.
High 5.
We need to high 5s.
Okay.
If.
All right. Thank you. That's all from me.
Yeah.
Thanks a lot.
Thanks a lot. Derek from Morgan Stanley.
Derek, go ahead. Unmute yourself please.
Derek, you are on mute.
Do we need this one?
Derek, can you hear us? Wei Kian, do you want to go ahead first? I think Derek is having sound problems.
Yeah. Hi. I just have one question. With the revaluation exercise data, I am sorry I might have missed this. But does it mean that you might not want to do one later part of this year?
No. I think the full year valuation is mandatory. In fact, with the mid-year, I think we just did it for better transparency, and especially there is some movements in the Australian market. But yeah, we'll be doing a full year valuation at the end of the year.
Okay. All right. Thanks.
Hey, Derek, do you want to go ahead?
Hi, can you hear me now?
Yes, we can.
Oh, sorry. Some technical issues earlier. I just want to follow up on Ronnie's comment from the second half reversions being flat to slight positive because I think some of your key tenant expiries end of this year would include the likes of BHP. I would think that by backselling those leases, you would probably see pretty healthy reversions, possibly double digits. That is my question.
Actually, I was answering the question of the market rent outlook for the second half of the year. So it was flat or slightly up, not reversions.
Oh, sorry. I heard reversions. So on the 2024 expiries for BHP, is there any sense of how much they are likely to give up?
Due to tenant confidentiality reasons, we are unable to comment on something like this. The negotiations are not final yet, so we cannot comment on it also.
Hey Derek, if I may point you to slide number 14. There we disclose the average expiring rent for 2024 is SGD 10.77.
Perfect.
If you look at where the spot rent is or where we have signed average rent for the first half, there is a good, healthy rental reversion there.
Based on that, I guess we should expect those double-digit reversions for second half.
That is what we aiming for as well. Yes.
Okay. Got it. Thank you.
Yes.
Thanks, Derek. Krishna, do you want to go ahead with your question?
Thank you very much. Just a couple of quick questions. What is the physical occupancy of the offices in Singapore and Australia, if you can share the number? Just one general question, just from the valuation, has ESG sort of played any role in the valuation as yet?
Okay. On the ESG thing on valuation.
Play a role, I think it does play a role. For what we do to our buildings in terms of energy savings, it allows us to lower our utility costs as much as possible. Aside from the increase in the utility rate, we are using actually less energy. That would actually flow through to the operating expenses and a higher NPI number. I think that there is a difference in our valuations, a positive difference.
Yeah. I think that is obviously on the expense side. In terms of revenue, like I say, we are targeting those Fortune 500 companies, and these companies, they only move into an ESG-certified, and all our buildings in Singapore are certified BCA Green Mark to them. That is why you see that our rental is also on an average higher than the rest in CBD.
Okay. Thank you very much.
Thank you. Thanks, Krishna. Wei Kian and Derek, you both still have your hands up. Do you have further questions?
I guess not.
Okay, I think we are good. We don't have any more questions. Oh, Mervyn.
Hi, it's Mervyn here.
Yeah, go ahead.
Can we touch on the Melbourne market? The vacancy rate is quite elevated, and obviously there's a lot of supply headwinds. Any guidance in terms of 8 Exhibition Street, in terms of occupancy from here? Should we expect further slippages, or you think you can hold around that 89%? Yeah.
Yeah, we definitely are in the midst of trying to lease up those remaining suites and remaining 10-odd percent. I think in terms of guidance, we're still going through quite a number of deals in terms of negotiation. I guess hopefully in the next quarter, we hope to report something a little bit better.
Yeah. Safe to say, obviously, the east end or Paris end of the Melbourne CBD is doing much better than the Docklands itself. We still see continued people moving to Grade A and higher quality building on the east side. East side is also not populated by government tenants.
Sure. In terms of your Australian exposure, I think based on your commentary, it seemed to be a bit more positive on the Sydney market. Is it time to perhaps sell Victoria Police Centre and David Malcolm Justice Centre? Those are stable income, but maybe you want to sell those and reinvest into Sydney or CBD to capture the uptick.
Yeah, we note your comments. Thanks, Mervyn Fong.
Is that something you are considering or I do not know?
Again, I say we don't want to put a tag on any properties or things like that. I think we're constantly looking at portfolio optimization, and we'll continue to do so. But again, we don't want to label any building and things like that. Otherwise, it may compromise our negotiation position.
Yeah, sure. Understand. Yeah. Okay. All right, thanks very much.
Okay, thank you. Thanks, Mervyn. I don't think we have any more questions, so we've come to the end of our briefing. If you have further question, you can contact me. Yeah. Thank you. Thanks, everyone. Have a good day.
Okay. Thanks, everybody.
Thank you. Bye.
Bye.