Q2 23/24

Oct 25, 2023

Hi, good morning. Welcome. Just before I start, Sharifa, I would like to test. Are you able to hear me well? Yep. I can hear you. Okay, good. Hi, good morning. Welcome to our results briefing for the second quarter and first half of FY 2023/2024. The full management team is here with us, Kiat, Charmaine, and James. Charmaine will kick off the presentation. Hi. Morning, everyone. Okay, I will bring you through the key highlights for the quarter first. Morning. In 2Q this year, we completed the divestment of four assets, two in Malaysia, one in Singapore, and one in Japan. The net proceeds that we received were used to pay down loans. This brings our total number of properties from 193 at the beginning of the quarter to 189 at the end of the quarter itself. 2Q financial performance remains stable. Gross revenue is higher by 1.5% year-on-year, MPI is higher by 1.2%, and DPU, we are declaring SGD 2.268 cents, which is 0.9% higher than 2Q last year. Our diversified portfolio continues to be resilient. Portfolio occupancy remains stable, 96.9%. Average rental reversion is a positive 2.2% on a portfolio basis, excluding China. We are looking at 9.1% higher year-on-year. WALE is stable at 3 years. With the repayment of loans with divestment proceeds, our aggregate leverage as of September 30 stands at 38.9%. About 83% of our total debt has been hedged into fixed rate, with a debt maturity of 3.8 years, and about 80% of our income has been hedged for the next 12 months. Moving on to details of the 2Q results. Gross revenue is 1.5% higher, while MPI is higher by 1.2%. This is mainly due to higher contribution from our same-store portfolio, as well as acquisitions completed in 1Q. This is partly offset by lower contribution from our China assets, as well as a loss on revenue for assets that we have taken off for AEI upgrading purposes. FX impact at the top-line level is a negative SGD 8.4 million FX loss. After taking into account hedging gains of about SGD 4 million, we are looking at an overall FX impact of SGD 4 million. Borrowing costs increased of 10.2%. About two-third of this is due to interest costs incurred on additional borrowings to fund our acquisitions in 1Q, and the remaining one-third is due to higher interest rates on existing debt. Divestment gains for the quarter, SGD 8.8 million. Including this divestment gain, we are looking at DPU of SGD 2.268 cents, 10.9% higher than last year. Full year basis, gross revenue is lower by 0.7%, and MPI lower by 1%. This is mainly due to the loss of revenue from divestment assets, as well as an FX loss of about SGD 18 million. The lower gross revenue on a same-store basis is offset by contributions from acquisitions made in 1Q. Hedging gains for the period, about SGD 8 million. Net-net, we are looking at FX impact of SGD 8 million. After taking into account divestment gains, we are looking at a DPU of SGD 4.539 cents versus SGD 4.516 cents last year on a one-half basis. Quarter-on-quarter, gross revenue is 2.5% higher, and 2.4% higher as compared to 1Q. In terms of FX, we are looking at minimal impact between the two quarters. DPU is marginally lower as compared to SGD 2.271 cents last quarter. Our balance sheet. Moving on to slide 9. Investment properties as well as total assets, lower by about SGD 200 million, mainly due to divestments of about SGD 100 million, as well as translation loss on our investment properties of about SGD 100 million. Total debt is also lower, from SGD 5.6 billion to SGD 5.4 billion, mainly due to the repayment of debt with our divestment proceeds. Accordingly, gearing ratio decreased from 39.5% to 38.9%. As for interest rate, we are able to hold it stable at 2.5% versus last quarter. Debt duration, interest cover, as well as adjusted interest cover ratio, this remains stable as compared to last quarter. Moving on to the next slide. Our debt maturity profile remains well staggered with about SGD 1 billion of available committed credit facilities on hand. This is more than sufficient to meet our refinancing needs for the remaining half of this year as well as next year. In terms of our interest rate and Forex hedging, about 83% of our total debt has been hedged into fixed rate. With every 25 basis point increase in base rate, we are looking at an impact of SGD 0.01 to DPU per quarter. As for FX, we have hedged about 80% of our DI for the next 12 months into Sing Dollars. James will bring us through the portfolio update. In terms of assets under management in 2Q, the developed markets, you see, it's still contributing a fairly high, 73%, to our overall portfolio. These developed markets are giving us a lot of stability and resilience to our portfolio. Next slide. Overall, in terms of the operational environment in 2Q, we still registered a fairly high occupancy rate of 96.9%. Most of the markets still remain as close to 100% occupancy. However, we continue to be dragged down by China's lower occupancy as compared to 1Q. China came in at 93%, compared to 93.4% earlier on. This is mainly due to the weaker occupancies in the tier 2 cities, where we're experiencing excess supply coming in from North, West, and Central China. Overall, the operational situation in China itself, we expect to recover, hopefully in four quarters, around there, and earlier if the government has to stimulate the economy with a booster. In terms of rental reversions, we are registering high rental reversions in markets like Singapore, Korea, and Hong Kong. In China itself, the rental reversion still remains fairly weak. In fact, China's reversion was -8.6% in 2Q as compared to flat reversion in 1Q. Next. Without China's rental reversion, just to share a bit more, the rent reversion for MLT will come in at a positive 9.1% for 2Q. This shows the lease expiry profile for our leases in the next few years. Next year, we have a fairly high lease expiry coming up due to the shorter leases coming in from renewals from China. We are trying to do the early renewals and extensions of these leases for the rest of this year so that we can move and lower these bill expiries for next year. From quarter to quarter, you should see this bill expiry tower in FY 2024 coming down. The top 10 tenants accounts for about 22% of our total gross revenue, and most of them are across these consumption sectors and e-commerce sectors. We have customers coming, like from Woolworths and Coles in Australia. CWT continues to be the number one customer, but in terms of their contribution has been pared down in 2Q. Our diversified trade sectors contributes about 900 over customers that we have, and 75% of them are serving the consumer-related sectors. That gives the stability on the domestic consumption demand that we are targeting in our portfolio. Before we go on to rejuvenation, I would like James to give more details on the rental reversions across the different countries. For 2Q, the rental reversions, I will start from the highest. Singapore was. Hang on. Sorry. I will start from the highest rent reversion in our portfolio. Overall, portfolio registered 0.2% rent reversion. Hong Kong came in at 16.5%, Singapore 8.1%, Korea 7.7%, Vietnam 4.8%, Malaysia 3.2%, and China negative 8.6%. Hong Kong, the reversion was very strong coming in from one of the lease expiries and renewals that we recorded for the quarter. Okay, you go back to the chart on the revenue diversification. This is Kiat here. I think what we are seeing is the diversification of our portfolio on the revenue side. This way. Right. You can see that the diversification of MLT as a platform is supporting our results in a very resilient and stable way. While we see China being hit by a negative rental reversion of about 8.6 8.6, right. We have Hong Kong, Singapore, and the other countries pushing it up. I think this diversification will continue to serve us very well. I have read some of the reports that have come in from the analysts, and I think some of them are still not understanding how MLT as a platform works. Our year-on-year performance, the revenue is up only by SGD 2.8 million, but without FX impact of SGD 8.4 million, our revenue would have increased by SGD 11.2 million, which is a 6.1% increase. I think in this current climate, to register positive revenue growth across the different markets, I think you all know it's very challenging. While you look at the results from when we report the gross revenue, can we have that slide? The revenue slide. Slide 6. Yeah. If you look at it, 186 to 183, you would think that we have only increased it by 2.8. What is included inside is the SGD 8.4 million Forex loss. Without the Forex loss, the increase would have been SGD 11.2 million, and that proves the resilience of the diversification of MLT portfolio. That's the first point that I want to make. The second point that I want to make is, I think there is some misconception that divestment gains is the one lifting our DPU. If you have that conception, it is wrong. Without Forex, our revenue would have increased by SGD 11.2 million. Our divestment gain for the period only increased by SGD 7 million. That divestment increase is not even enough to cover the Forex loss that we are experiencing. That is the first point. The second point is, for those who have been following us, you would have known that we have divested SGD 700 million of assets to date, and we are in the process of divesting another SGD 500 million. The reason we are doing that is not because we are keen to harvest and distribute divestment gain to unitholders. The reason we are doing that is because we were listed in 2005, and we are a very old REIT. Some of our assets, whether we like it or not, their specifications are going to be more and more irrelevant as we move forward. You know that there was a structural shift in logistics. The specifications have taken leaps and bounds in terms of automation, in terms of design, in terms of speed, velocity of turnaround goods within the warehouse. With that, in order to keep MLT relevant, this divestment strategy will be a critical tool to keep our platform young, relevant, and competitive for the next 10 years. You will continue to see this. The divestment is not coming in as, oh, it is part of something that we need to do when we need to fix our DPU. It is not. It is an ongoing process. Whatever our DPU is, the rejuvenation of our portfolio cannot stop. Whether there is Forex impact, whether there is interest cost increase, the rejuvenation cannot stop. The reason is because, very simple, our tenants are not stopping. I think to be able to understand where MLT is going, because after that, you will want to talk about the outlook, right? You have to understand what is our strategy. You have to understand what is our objective and what are the tools that we are pulling, what are the levers that we are pulling to drive this platform forward. We are not looking at the next year. We are not looking at the next two years. We are looking at the next five to 10 years. The objective is to deliver a stable and resilient DPU to our unitholders. Having said that, James, can you continue with the rejuvenation? We are doing a rejuvenation. In the next few slides, we will show you. This slide actually, just to help recall, we did an acquisition of Avalon assets in the last two quarters ago. Six properties in Japan, one each in Seoul and Sydney. These are very good properties, help to rejuvenate our asset portfolio, particularly in countries of Japan, Seoul, and Sydney. These are young properties with good specs and good underlying tenants. In terms of rejuvenation, value creation. If you can recall, this is a site we acquired next to our existing properties in Malaysia, Subang. This, we are in the process of seeking approval for land amalgamation of these four sites from government authorities. This process should be completed by middle of next year. That is when we start the redevelopment of a mega hub of a six-story building, and it will increase our GFA by about four to five times to 700,000 sq ft. This project is about SGD 570 million. This is a core location for last-mile logistics, which we foresee very strong tenants demand. Next. This is a project in west side of Singapore, Benoi. We started the construction just this month, and this project should see us completing it in mid of 2025. It is a six-story mega hub, modern specs building. We are going to attract all the multinationals and the 3PLs that is interested in this property. At the moment, this modern spec, ramp-up properties in Singapore is still shortage in supply. Yeah. You look at the momentum we have in Singapore due to the supply situation. This quarter, rental reversion for Singapore is? Close to 10%. Yeah. If this trend continues to 2025, then this AEI of 51 Benoi, can we show 51 Benoi please? Will augment our revenue contribution from Singapore very well. It's again, the timing, right? It's that we look at what is the supply situation in Singapore, and then this project came up. It was a good time for us to do the rejuvenation and the ability to take a five-year view on this property when we spoke to JTC Corporation and bring it up in the year of 2025, where Singapore logistic market should be on an upward trend. As Kiat has mentioned, we have divested some of our older properties to rejuvenate our current portfolio, and these are our lower-yielding assets. We also achieved a divestment gain reflected in the tables there. These are two properties in Malaysia, one in Singapore, and one in Japan, Moriya Centre. Yeah. On an ongoing process, I think with the interest rate environment increasing, the challenge for MLT will be to find buyers who has still the liquidity and the ability to buy some of our assets. So far, we have been fortunate. Portfolio sale, about SGD 400 million-SGD 500 million. The buyers, in our view, have dropped off a lot. But if you are looking at the local SMEs with the ability to buy SGD 20 million-SGD 50 million, and even in more expensive countries like in Hong Kong, somewhere the, what you call the ticket price can even be higher. We are still fortunate to see that bracket of buyers, and that is the part that we will take advantage of to rejuvenate our portfolio. The next slide is on sustainability. I think I went go through, just as James has already shared about our GRESB rating has gone up to four star, and also our green space and all that. So let's go to Q&A. Can we have the first question? Hi. Do we have first question? Yes, Brandon, is it? Yeah. Hi. Hey. Morning, Kiat. Hey, morning. Just have a few questions, I think, this morning. Just wanted to ask about China, basically. I think this quarter, the negative 8.6% reversion Yeah as well as the 93% occupancy, is it correct to say that this could be the worst that we have seen, or do you think that the negative 10%, which you guided earlier, is still going to hold for the next three to six months? That is my first question. Brandon, this is James here. The signs of a recovery are still not there. It is still very soft in terms of some of the on the ground feedback we get from tenants. The consumer confidence currently is still pretty weak, right? It is not clear. Even the recent Golden Week holiday spendings and all that is more services related and tourism related rather than goods purchase related. In terms of the forecast, we expect the reversion to remain negative, at least for the near term. Yeah. The reason is very simple. We are trying to keep our tenants, right, in many of these tier 2 cities where we are experiencing excess supply and competition is much tougher. Yeah. If not for the more incentives they are giving to the tenants, this 93% you see will even be worse. Yeah, James, give a flavor on the tier 1 and tier 2 occupancy. In terms of tier 1 occupancies, it is in the mid-90s, 95% and above. For tier 2, it is low 90s, about 90%-92%. We can see that the tier 1 occupancies is still holding up because the supply is still more or less balanced. We experience positive but smaller rent reversions of 2% or so. Brandon, what MLT Management is looking at is for the next 12 months, we expect China to continue to be soft. That is where the uniqueness of our platform come in. From this chart, you will see that the revenue contribution from China is about 20%. We are going to be banking on the 80% that is outside of China to lift China's weakness. So far for this quarter, you will see that overall revenue increased by SGD 11 million. That resilience and that stability from the revenue from the other countries should be able to help us to provide some stability. I would not say some, I would say provide a certain significant level of stability while we navigate through China's weakness. Does that answer your question, Brandon? Yeah. Are you able to just quantify that? Because do you still think that we will still see the negative 10% for the next four quarters in just saying that next 12 months it will be soft? Or you think that is going to be Yeah negative 5%, negative 10%, or that kind of Okay. It will be negative high single digit to negative low double digit, depending on the city you are in, especially the second tier. Yeah. Does that answer your question? Does it give you some guidance on how you are going to Yeah. Yeah. Okay. Thanks. And also just second question would be, I think the earlier acquisition of the two Jiaxing property and the divestment of the Hong Kong one, are those still in the process or are you trying to probably delay that? Yeah. So for the Jiaxing properties, the vendor is unable to satisfy certain conditions in the legal agreements. Therefore, the deal is no longer on the table. So we are walking away from the Jiaxing purchase. And then on the Hong Kong one, it is still ongoing. We hope to close the transaction, meaning sign the SPA, hopefully in the next few weeks. The reason being that there was authorities approval that need to be sought for certain conversion of use that we are putting on the property. Got it. Okay. Just one last one. I think going forward, we know that you are still divesting, but how about acquisitions then, given this higher for longer environment, are you still Yeah looking to buy? Yeah, we will be buying some more. Before the year ends, you should hear us buying some more. The reason is that we have a very strong balance sheet, and we are having a very active recycling program. The proceeds from the sale, the divestments, together with the gearing headroom that we have, will enable us to make further acquisitions. In this current climate where interest rate cost is very, very high, the good part is we are Mapletree Logistics. The name itself is giving a lot of comfort to bankers. The differentiation between a blue-chip borrower and a not-so-blue-chip borrower, I think that importance to the banks is coming into play. In fact, I have got bankers asking us to draw more on the lines, and the rates they are giving us will be one of the best in the market. That being said, it allows us to take advantage of this current market. I would say a substantial portion of the buyers, especially speculative buyers, have dropped off. We expect to see some cap rate expansion. We want to take this opportunity to get some good value properties from both third party and our sponsor. Can you share the specific geography they are looking in? What we are seeing in Asia is we continue to see very strong growing tigers in places like India, Vietnam, and Malaysia. Obviously, acquisitions coming out from these three markets will be of great interest to us. We look across the different markets. We see Korea and Australia has seen cap rate expansion, so that gives us an opportunity. Do we think that the cap rate expansion has reached the bottom? We do not think so. Maybe we will wait a bit, but if it is a good asset in a good location, and we are able to get it at a good price, we will do that. Then of course, you have the other countries like Japan, Hong Kong, which continue to see tight supply in very prime locations, for example, in Greater Tokyo. Because the not so high interest rate environment in Japan is going to make Japan acquisitions more accretive. I think using the recycle proceeds, using our gearing headroom and the preferential interest rates that we will get from banks, that will enable us to make quite substantial acquisitions over the next few years. Sorry, just pardon me. Just one more. I realize for this quarter, you did not sort of guide how you are going to distribute the gains for the divestments. Will you be doing that going forward? Sorry, what is the question? Did not guide on the gains. That means we did not break it out at all. Like- Yeah. I think, like we- No, I understand. How are you going to distribute it? Over how many quarters and whatnot? Right. If you- Many years? The divestment gain that we have been distributing is usually distributed over four quarters to eight quarters. It depends on when the divestment gains come in, and then we will be distributing over four quarters or eight quarters. That's the general. Okay. All right. That's it. Okay, thanks so much. Yeah. Okay. Yeah, thanks so much. Very clear now. Thank you. Yeah. That is it. Yeah. Okay, we have got a question. I think, Tan Chuan, you have raised your hand. Would you like to proceed with your question? Yes, Tan Chuan, come. Yes. Hi. Morning. Can I ask a bit more about acquisition? What kind of size are you looking at this year from sponsor and also third party? Okay. Is this year in this financial year which half has gone? Is that the year you are talking about? Yes, or the 12 months whichever. Okay. We have already done SGD 900 million. Right? Yep. We will be looking at another SGD 200 million to SGD 300 million. Is this largely from sponsor or third party? Depending, but it will be from the countries that I highlighted earlier. Malaysia, Vietnam, India. What about divestments? Divestments, I think if you are in the local markets where we are operating, you will hear of us putting out what we call assets with specifications that we feel are no longer going to be relevant for our growth. So countries like Hong Kong, Japan, Singapore, Malaysia, Korea, Australia, you will hear that. As to which one will come into fruition, it depends very much on that specific buyer and the price. So there are ongoing discussions. So there will be further divestments that we announce for the later part of this year. But at this point, it's going to be difficult for me to give you an exact number. But over the next few years, we're looking at SGD 500 million. So each year, SGD 100 million, SGD 200 million, if you need it for your numbers. Okay, got it. That is very helpful. Just one last question. Can you guide us on cost of debt for this and next year? This year, we are looking at about 2%. We report on a quarter by quarter rolling basis. This quarter we are reporting 2.5%, probably by end of this quarter 2.7%, and then next year, about 3%. Okay, got it. That is all from me. Thank you so much. Thank you. Okay, we've got a question from the online audience. How much capital gains do we have remaining? Divestment gains or capital gains? Yeah. Divestment gains. Capital gains. About 20 that is not distributed yet. Yeah, that is for now. Excluding. Yeah. Excluding this quarter's distribution, this quarter's DG, we still have about 20. Yeah. From completed projects. Yeah. Okay. Mervin, you put up your hand. Can you ask now? Yeah. Thanks for the opportunity. Hi, Mervin. Yeah. I think maybe can you turn to slide 32. Sorry? Yeah. Congrats on a very strong. Sorry, Mervin. Slide. Mervin, slide. 32. 32. 32. 32. 22. 22? 32. Sorry? 32. Huh? 32. Yeah, 3-2 so far. Okay. With expiry, is it? Yeah. Yeah. Just trying to understand, obviously, you guided in terms of the rental reversions for China this financial year. Any color in terms of the weightage for China next year? Is it first half, second half? And how does the expiring rents compare to market rents at this point in time? Yeah. So usually for in this chart here, the expiries for China to be more precise for next year, about 40% is coming from China by NLA in FY 2024. In terms of the spread, typically it is quite evenly spread out. That is how we manage our concentration risk of bill or expiries each quarter. So you can assume it is fairly spread out first half and second half. Yeah. Sure. And how does the expiring rent compare to market? Sorry, Mervin, what is your question? How do the expiring rents for China, how do they compare against market at this point in time for the leases up for renewal in FY 2025? As we go through this financial year, the negative reversions we experience is coming from the new leases and replacement leases and some renewal leases. Come next year, we should see a full cycle. Yeah. More or less. Yeah. Mervin, I think your question is, if you look at this chart, you see a tall bar, green color coming out from China. China, because of the softness in the market, the tenants have taken a very cautious view. So what we are experiencing is shorter leases, like what James elaborated, a year. They are going to do a year, 15 months, 18 months kind of extension. So that tall bar from FY 2024 will continue to remain as we push out some of the green bars coming out from 2023. Then I think it is your question whether our rental reversions is in line with the market. Is that the question? No, I am just trying to guess. Will the rental reversions get worse or actually improve? Yes, it will get worse. Into next financial year? Our outlook is for the next 12 months. We expect China to continue to soften, meaning that we continue to see negative rental reversions, and we are looking at high single digit or low double-digit negative rental reversions, like I told Brendan earlier. Okay. Well, at least 80% of your portfolio still has very strong, so I think that is a Yes, correct. positive. Yes. This is where the diversification sometimes does not work very much for MLT, especially in the golden days of China, right? Because we are very small exposure in China. When China was booming, we only had a small exposure, so we were not able to capture that completely on our platform. On the flip side, which is what we are seeing now, is that China makes up 20%, but we have 80%. Hong Kong was doing 16% rental reversion. Singapore is doing 8% rental reversion. I think James read to you all these. The 80% is the one that will lift the overall portfolio from China's weakness. That is one part. I think investors need to understand what MLT platform is about, right? It is not about a single country-focused kind of platform. It is a multi-country providing diversification to the investors. Like I mentioned, we have got tenants who want to move out from China, go to Vietnam, go to Malaysia. We have got American companies wanting to come to Vietnam, India. You have seen Apple, you have seen Google, right, James? Then you have seen Samsung doing very intense expansion in Vietnam. You will see that. Then the other part is, investors need to understand we are not a stagnant platform. Meaning that we have these assets, and we are going to pretend that these assets that we have are going to be relevant for the next 5 to 10 years. The logistic industry has taken a very big structural shift, especially during COVID. The requirements for automation, the requirements for design, the flexibility of expansion, removal of walls, increase of dock levelers, right? The ability to call us and say, 6 months later, we want to expand, double the space by taking the next unit. These are all the things that our platform has to be ready. Because of that, we are not going to pretend and tell investors that the assets that we have since 2005 are going to be relevant in 2025. That is why divestment will be a critical part of MLT's strategy, which is rejuvenation, keeping our platform competitive and relevant for the long term. Not the short term, but for the long term. I think the rejuvenation, I cannot overemphasize the importance of this rejuvenation. For MLT to continue to compete, we must rejuvenate. We must admit that some of our assets are going to be irrelevant. What are we going to do? We are going to tear it down. We are going to rebuild it. We are going to sell them if we cannot rebuild. Then we are going to recycle all these capital into better assets. That has to be the case. Those investors who have been with us will have known that we have divested SGD 700 million and there is more to come. Right. Yeah, I think We're not interested in growing AUM. We're not interested to be the biggest AUM boy in town. But we are interested to have the most modern fleet of warehouses that we can offer to our tenants in as diversified locations as they need. They want five locations, they can come to us. Right now, our repeat customers across locations is 43 43%, and that's not good enough for me. I have I think 43% tenants in different countries, but that's not good enough. The uniqueness for them to come to us and said, "You want to talk to us in Vietnam, China, Singapore?" No problem. You want to talk to us in India, China, U.S.? Of course, that's a different platform, but Mapletree has presence there. We have the ability to serve. I think that diversification is going to be our core strategy and the rejuvenation as well. Yeah, I think most investors understand your strategy, and you've done a fabulous job when you took over. Yes from all the SUA to MTB conversions. Yeah. Just want a sense of, yeah. Sorry, Mervin, if I may add. If we make divestment gains, we will distribute to investors. If we do not make divestment gains, we will not distribute. It is not about divestment gains that we are doing it. We are not trading. We are not interested in trading. It is rejuvenation. We have kept to the principle that we recycle the capital and share with our loyal investors any divestment gains that we make, right? That we have bought the assets in 2005, and now we are able to sell it for a gain. We share that benefit with our investors. That is the whole strategy about Mapletree Logistics Trust. Yeah, just on the divestment gains, it is much higher than historical. Just follow on Brendan's question, basically commentary that you typically pay out over 4, 8 quarters. Yeah. Should we be expecting like SGD 8.8 million per quarter going forward? How much do you have in the bank to still pay out? The other question. I have in terms of the fees and units, it is much higher than what we are used to. Is there a guidance in terms of fees and units that we should be assuming in terms of our models? Yeah, Shimme. For fees and units? About 55% of our fees are paid in units. This is the guidance going forward, is it? Or because this- Okay. Yeah, we're looking about 55, 60. Yes. Okay. I think the question was in this quarter, we have reported a higher proportion. I believe that is taken from the cash flow statement. On a technical basis, performance fees are paid once a year in 1Q. If you take that component, performance fees for the whole of last financial year is included in that adjustment for this quarter's result. If you take that component aside, it will be about 50% plus 55%. Yeah. I think it is a discussion we had with the sponsor about alignment of interest. While we make acquisitions, while we manage this platform, we want them to have a long-term interest in us. That's why the management fees in units of a proportion about 50%, 55% is something that we will continue to manage, Mervin. Okay. Back to my question on divestments fees. Divestment? Uh-huh. Divestment, yeah. Divestment gains, sorry. We have about SGD 20 million. Yeah, we mentioned earlier. We have about SGD 20 million left, excluding whatever is announced this quarter. Yeah. This SGD 20 million is coming out of completed transactions Yeah and announced transactions. Yeah. More to come. Yeah. I think, the question, Mervin, that you have is, do you expect our divestment gains to become bigger or smaller as we move forward? If you look at what we have divested earlier, the SGD 700 million, a lot of them are smaller assets. Therefore, the gains are smaller in dollar value. As we move, we are buying bigger assets in Hong Kong. We are buying bigger assets in Japan. What was considered small back then of SGD 20 million, what is small to us is SGD 50 million. The SGD 50 million guys will get divested. The SGD 50 million guys will get divested at a gain that will be higher. Depending on what we divest, we expect that to come. What is important, Mervin, is not every divestment will have a gain. I think that is the part that I am trying to say. We are not doing it for divestment gain. We are doing it to rejuvenate our portfolio. What is the point of keeping an asset in our portfolio when it is not going to be able to compete in the market? That is what we are doing. As we get bigger, the assets that we have already sold the 20 odd million. What is going to be left is going to be the bigger assets, like 30, 40, SGD 50 million. These will get sold over time, because their site is going to be too small for efficiency, you are going to have cargo lifts, you are not going to have automation. The velocity of goods turnaround time in the warehouse is slower. These are all the considerations. I think on the divestment, there will be gains when we are able to divest at a higher price, but there will be cases where we will not be able to make a gain. That is the part that we need our investors and the audience to understand. Sure. I think everyone understands you need to rejuvenate portfolio. Just that, because historically, Brendan mentioned you disclose that you pay this X amount for next few quarters. Yeah. It is just that this time around, we have no visibility. That is the issue. I think if you take the guidance. But this one, clarifying, yeah. Yeah. I think, Mervin, you take the guidance four quarters to eight quarters. There is no. So 20. benefit to us to hold the divestment gains on our books for too long. If it is a small divestment gain, four quarters, if it is a bigger divestment gain, eight quarters. If it is a very, very big divestment gain, which we will be very, very happy, I think we will try to keep it to eight quarters as well. Can I assume- Does that help you? Can I assume you got now SGD 20 million that you could still pay out, Yeah. It will be about SGD 5 million per quarter going forward? Is that something that is conservative for- For the SGD 20 million- what we see? For the SGD 20 million that have been announced, yes, you can assume SGD 5 million for the next four quarters. There will be more divestment that will be announced over the next six months, Mervin. Sure. Yes. I have projected divestment gains even though you haven't announced any divestments yet, because I know this is a- Thank you for having faith in us. No, no, I know it's very consistent, just that it was much higher than what I thought. So I just don't know how to forecast. Yeah, I just need your guidance. Okay. I've taken a lot of time. I'll just hand it over to other people. Thanks. Thank you. Okay, Joy, would you like to pose your question? Yeah. Thank you. Just a few questions. Keat, I think one on rental reversion. We have seen out of China, we have actually seen acceleration in a few locations like Hong Kong and Korea. How much of those are going to sustain and how much were one-off? Can we get a bit of guidance? Yeah. For example, in Hong Kong, we know the market is not like pre-COVID days, where it is growing like 4%-5%. In fact, this is a kind of a once off, right, because one of the tenant, Equinix, in one-north. Yeah All the properties actually renewed the lease with us. Yeah. And so those up to market. Yeah. Yeah. I think it is- Maybe we can- Yeah take opportunity. Yeah. I think what you are saying is the 16% will be what we call at the top range of Hong Kong reversion. Right? What will be a typical one for ramp-up like our Tsing Yi? We will be looking at 5%, maybe 8%. For those cargo lifts, maybe 2%-3%. Does that help you, Joy? Yes, it does. For Korea? Yes, for Korea, we have reversions coming up from two of our assets in Bucheon and Pyeongtaek. Yeah. It is again the same thing. The range will be for the highest specs assets, we should be looking at above 5%. Okay. Cool. That is very helpful. Second question on, just to help us think through acquisition and also redevelopment. Looking at your Malaysia Subang redevelopment, what sort of targeted return would you focus on? Also, how does that compare with outright acquisition? Okay. We are looking at high 7% to over 8% on MPI yield for the Subang redevelopment. That will be a gap versus current market. Yeah a gap versus current market. The acquisitions that we have made in Malaysia is about 6%. If you do your own AEI, we probably can make about 150-200 bps by taking on that development risk, because the developer's profit you know is going to be around that kind of range. How much opportunity do you have in your existing portfolio? The low-hanging fruit. The low-hanging fruits. The problem I have with the low-hanging fruits is my main obstacle are the authorities. There are actually quite a number of properties that we are keen to do AEI, but we need to engage the authorities over a significant period of time. On that front, I think over the next 12 months, we don't think there will be another AEI that we will announce because we won't be able to get the authority's approval in time. But over the next two to three years, there'll be more AEIs for sure. I see. These authorities are any localized countries, Singapore, Malaysia, or other countries as well? Across the board. We are speaking about Guangzhou, we are speaking about Korea, we are speaking about Japan. We are speaking about Kyoto in Japan. That is how extensive, and of course, with Malaysia in sight as well. Malaysia is also, there's a redevelop potential for Shah Alam one. It's a single story. In Malaysia, you know we have started to build four stories. Oh, I see. Yeah. That's how the market has grown. In Shah Alam, it's single story. But today, the next door, a few minutes down the road, we're having a four-story warehouses. Got it. For all these markets, you're looking at speculative- Sorry? You are looking at speculative redevelopment, right? Yes. For both- Because I think our lesson that we have learnt, especially for us, is multi-tenanted speculative developments have served us very well. For example, 5B Toh Guan. We have Amazon inside, we have all the top players inside, and we also have 5A Toh Guan, which is just next to us. They are all multi-tenanted. Sure. Yeah. One last question, if I may. Just on cost of fund. I guess you mentioned around about remixed currency, or sort of denomination. Is this part of when you guide 3%, is it already including sort of mixing some of the currency from high cost to lower cost? Yes, to a certain extent. I think to clarify on this, the 2.5% that we are achieving right now, that is really an outcome of what we have done in the past. We have always been proactive in locking rates at between about 7% at least, hedge rates. 7.5%. Yes. This is really an outcome of our past efforts, where we are able to lock in lower rates at less than 1% for non-JPY currencies. But this will slowly be replaced. It is also part of our strategy, as what we have previously shared, that we will, as all this Aussie dollar, Hong Kong dollar, Sing dollar IRSs come due, we will replace with lower costs such as CNY borrowings. That is already incorporated in our forecast. Yes. To, yep. Okay, cool. Thank you. That has been very helpful. Thank you. Thank you, Joy. Okay, Derek, did you have a question for us? Hi, Derek. Hello. Hi, Kate. Can you hear me? Yes. Hi. I can hear you all the way in Tokyo. I'm in Tokyo now. Okay. Good morning. Just two questions from me. Can I circle to Singapore? Just want to understand whether you think reversion is still going to be about 8%+, given that next year's fair amount leases are for renewal. Yeah. Is it? Yeah, I think, Derek, if you look at the supply situation in Singapore, it's going to remain tight for the next 12 months. I think high single-digit reversion is something that we're optimistic about, especially for our ramp-up. That's what I was trying to say, the region. Our cargo lift, I'm not going to say they're going to give us good rental reversions. I'm talking about the ramp-ups that we have, like 5A, 5B, Pioneer, and all that. So these are the ones that we will see high single-digit reversions the next 12 months. Okay. Sounds good. Can you remind us again for CWT lease, right? Are they going to expire soon, and is there something where you may take over? We have started to take over, like Pandan. Yeah, two properties we have taken over. Pandan and Pandan and Penjuru. Yeah. Yeah. The other balance three is, one is next year, and the other two are further down the road. Yeah. This is- Ever since acquisition, I think I have told everyone the objective of buying CWT is they are some of the top quality in terms of specification in Singapore. The second thing that we were interested in are the underlying tenants that are occupying these properties. We have been talking to them. They have been aware of our intention, and so we have started taking over the underlying leases. Okay. You will take over next year, essentially. It will be an MTB for you, just to clarify. Okay. We have taken over two, next year one more, and the following about- 5-8 years more. Yeah. Yeah. Oh, okay. The balance. Yeah. Okay. Sorry, just last one. I believe that when you did this acquisition, the opportunity also was for you to acquire the Benoi property, right? Is that still on the pipeline for you? Mega Hub, right? You are talking about the- Yeah CWT Mega Hub. Correct. The main challenge we have is the underlying lease, which is going below. It is now about 22 or 24 years remaining land lease. Okay. That is something that we are not comfortable with. Unless they sell you at 8%. Derek, you know me well. Okay. Understood. Okay, that is all for me. All right. Thank you. Okay. We have a few questions from the webcast audience. One is about the exit NOI cap rates for the divestments announced, presented on page 23. They range from about 3.5% to 4% for these five transactions that are presented here. Okay? There is another question on whether for the plan or potential acquisitions, whether we will be doing any capital raising. No. Also what would be the comfortable gearing ratio? We will not be doing any EFR in the near future, because looking at our cost of equity now, looking at our share price, it is becoming very expensive. So it will be from recycled proceeds, our existing cash, or the new cash generated from the properties that we will use. The gearing ratio, we will keep it at the comfortable level of below 40%. Okay. Do we have any more questions? Come, just read the question. Give me. 63% income tax this quarter. Yeah. Okay. Sorry. There is a question that says, 63% increase in income tax this quarter, which was partially attributed to divestment in Singapore. In Japan. What happened this quarter would be because, we mentioned just now, earlier, that we divested two assets, one in Singapore and one in Japan. In Singapore, we would usually put aside 17%, pending confirmation of IRAS that this can be distributed. In Japan, there is actually withholding tax on my capital gains. That one we also have to put aside. The increase is really because of tax provided on this divestment gains. Okay. Any more questions from the analyst? If not, we call it a day. Okay. I think to summarize, the environment going ahead will be very volatile. What we can see is China is not going to recover very soon. But the other countries, we continue to see resilience and stability coming out from them. On the operating front, we are confident that we will be able to maintain that growth that we have achieved so far. What is keeping me awake at night is the interest cost and the Forex. These are the two elements that we do not have much control over, but these are the two elements that can impact our DPU performance. On the operating front, we continue to be very stable, very strong, very resilient. It will take quite a lot of market changes to impact that. But the Forex and the borrowing costs will be the ones that we may be in for some surprises. Like I said, for this quarter results, if it is not for Forex, our revenue would have increased by 6.1% versus the current 1.5%. You can see how big that impact is. I think we are cautious, we remain vigilant, and we continue to be very active. We intend to continue to be very active on the recycling front, meaning acquisitions, meaning divestment. If we make divestment gains, we will be more than happy to share with the investors. Okay. Thank you for joining us. Bye. Thank you.