Hi, good evening. Welcome to MLT's results presentation for the quarter ended September 30th, 2026. Charmaine will take us through the key highlights.
Hi, everyone. Thank you for joining the call. For second Q year-on-year, our gross revenue and NPI are higher by 1.4% and 1% year-on-year respectively, mainly driven by contribution from our Singapore AEI, contribution from the India acquisition that we completed end of last financial year, as well as organic growth offset by absence of contribution from divestment. DPU is at SGD 0.01816 , slightly higher than last year.
Operating metrics wise, our portfolio occupancy is at 96.4%. Portfolio rental reversion + 2.1%, and WALE is stable at two point five years. On the capital management front, our aggregate leverage is at 37.5%, lower than 1Q, mainly because we have temporarily parked down our borrowings with our Perps proceeds we raised in August. We will be drawing back the loans to repay and redeem our existing tranche in early November.
If we remove the effect of this temporary repayment, our gearing would have been 40.4%. Debt hedged into fixed rate about 90%, and our average cost of debt is at 2.7%. 74% of our income for the next 12 months has been hedged into Singapore dollars. On the capital management front, we have two initiatives that we did in 2Q. One would be the SGD 400 million Perps raised in August. That is at a coupon of 3.5%. Intention is to use this to redeem the SGD 400 million that's coming due in November, which had a coupon of 3.725%.
We also had our maiden CNY 500 million offshore renminbi bond issued at a coupon of 2.1%. In terms of portfolio rejuvenation, we will be embarking on our AEI in Changi South. We have also executed SGD 243 million of divestments at a 2.1% premium above valuation, and also deferred our sponsor's call option at 201 Keppel Road, which is the Prima property within the portfolio. Moving on to slide six. Gross revenue, as mentioned earlier, is higher by 1.4%, mainly due to contribution from our Joo Koon AEI, India acquisition, as well as organic growth in Singapore, and currency appreciation of the renminbi and Aussie dollar, partly offset by absence of revenue contribution from divestments.
Property expenses increased mainly due to higher property taxes. Consequently, NPI is higher by 1%. Borrowing costs increased due to the interest incurred on incremental borrowings to fund our India acquisition, CapEx and land premium in Singapore, as well as higher rates for JPY loans and replacement hedges. Partially offset by lower base rate on unhedged Singapore dollars loans, as well as interest savings from the temporary repayment of loans with Perps proceeds.
Our amount due to coupon to Perps securities holders is higher, mainly due to the overlap of the early raise, and consequently our DI to unitholders is at SGD 93.3 million versus SGD 92.5 million last year, and our DPU is slightly higher, SGD 0.01816 versus SGD 0.01815 . The reasons behind our first half this year versus first half last year results are largely the same as 2Q year-on-year. Gross revenue higher by 1.1% and NPI higher by 1.5%. Consequently, borrowing costs decreased slightly by 0.9%, mainly due to base rates on unhedged Singapore dollar borrowings, interest savings from temporary repayment of loans with Perp proceeds, offset by interest incurred on incremental borrowings to fund India acquisition, CapEx and land premium.
After taking into account the higher Perps distribution and the enlarged unit base, our distribution DPU for the first half is SGD 0.03632 versus SGD 0.03627 . Moving on to quarter-on-quarter results. Gross revenue increased by 0.6%, mainly due to organic growth from our existing portfolio, mainly in Singapore, as well as appreciation of renminbi and Korean won. Property expenses increased mainly due to higher property taxes and absence of one-time adjustment to utilities expenses in 1Q. This resulted in lower NPI, SGD 155 million versus SGD 156 million in 1Q.
Borrowing costs increased mainly due to interest incurred on incremental borrowings to fund capital expenditure, as well as higher base rate for SGD unhedged loans and JPY loans. This is partly offset by the interest savings from the temporary repayment of loans with Perp proceeds. After accounting for higher Perps distribution, other adjustments, and the enlarged unit base, DPU is the same as last quarter at SGD 0.01816 . Moving on to the balance sheet. Our NAV is at SGD 1.27, this is slightly higher than the SGD 1.26 last quarter.
Leverage 37.5%. If we exclude the impact of the temporary repayment of repurchased set at 40.4%, comparable to last quarter. Borrowing cost 2.7% versus 2.6% last quarter. Our debt maturity profile remains well-staggered. We have about SGD 90 million or 2% of loans that are expiring in this financial year. We have about SGD 1.15 billion of available committed credit facilities on hand, which is more than sufficient to refinance our debt due this year. Moving on to our interest rate as well as FX hedging. About 90% of our total debt has been hedged into fixed rate.
If we exclude the impact of the lower borrowings due to the temporary repayment of loans, the percentage hedge would have been about closer to 83%. If you look at the currencies that remain unhedged, our unhedged currencies are mainly denominated in Singapore dollar and JPY, which are of the lower cost as compared to the other currencies. I think where we are looking at is we will continue to be impacted by higher borrowing costs. It is now currently at 2.7%. We expect this to increase to about 2.8% by the end of the financial year. On the income hedge portion, about 74% of our DI has been hedged into Singapore dollar. I will pass the mic over now to James.
Good evening, everyone. James here. I will update our operational performance. This slide shows that 70% of our MLT's portfolio by AUM and revenue is anchored by developed markets and providing a stable earnings foundation and maintaining exposure also to faster-growing emerging markets. Next. Our diversified tenant base of 900 over customers are mainly engaged in handling consumer-related goods.
Around 85% of our revenue is derived from tenants serving domestic distribution, with the balance 15% catering to exports. Next. Our occupancy in 2Q remained healthy. High occupancy rate of 96.4% in 2Q, reflecting healthy demand across our portfolio. China occupancy improved to 94.4% in 2Q, amid continued challenging market conditions. India occupancy decreased due to transitional downtime, with occupancy expected to touch in the next quarter. Next. In terms of our portfolio rental reversions, we registered 2.1% positive reversion in 2Q as compared to 0.9% in the last quarter.
Excluding China, the portfolio reversion improved 4.2% in the second quarter. Going by countries, in the second quarter, Singapore's revenue reversion improved against the first quarter with 5.3%. Going down the list, Hong Kong 0.5%, China -1.7%, which is a slight improvement from the first quarter's reversion of -1.8%. Japan 1.8%, Korea 6.3%, much stronger than the first quarter. Malaysia 2.8%, Vietnam higher compared to the first quarter at 5.3%, India 3.3%. Next. We continue to have a diversified tenant base supporting our income resilience.
Our low tenant concentration and a well-staggered lease expiry profile provided visibility of income and reduced renewal risk. In FY 2027, we have 34% of our leases due for expiry. This increase came mainly from the shorter one-year leases coming from China. Our average WALE is two point five years by NLA, 19.9% of our total gross revenue contributed by our top 10 tenants. More than 900 over tenants are serving our consumer-related sectors, giving us a stable tenant demand base. Next. Changi South redevelopment is our ongoing redevelopment project.
It will drive Singapore's growth and portfolio rejuvenation strategy. It transforms two mature assets into a five-story ramp-up logistics facility, increasing our GFA by 34% to 500,000 sq ft. It is designed for sustainability and resilience. It is going to be earmarked for Green Mark Super Low Energy certification. The TDC is estimated to be about SGD 141 million. Construction is expected to commence in 1Q 2027 and complete in 2Q 2029. I will now hand over to Mun Leong to share the divestments year-to-date.
Thanks, Jim. Hi, this is Mun Leong. For the financial year FY 2027, we have executed divestments amount SGD 243 million and at the average of 3.1% premium to valuation. As a recap, early on we have actually sold two Wuxi assets to our sponsors, first Renminbi fund, and then during the quarter we have also completed the 39 Changi South and also Derrimut in Australia. Both of these assets are older assets we have upgraded specs. And recently we have also announced that we have sold to a third party another asset in China, Mapletree Northwest Logistics Park. Also to add is that we have also managed to sell two strata units in the Grandtech Centre in Hong Kong in this FY as well. With this, I hand over to our CEO, Jean, to wrap up discussion.
Thank you Mun Leong. This is Jean here. Hi. Good evening, everyone. For second quarter, it has been a busy quarter for us. You have heard from our team in terms of the few corporate activities that the team has presented earlier on. Just let me quickly recap the key highlights. MLT has delivered a resilient performance, very much supported by a healthy leasing demand and discipline. We continue to be very disciplined in our asset and prudent capital management. These set of results reflect the underlying strength of our diversified portfolio, anchored by Singapore, our largest core market. We continue to rejuvenate the portfolio through disciplined capital recycling.
Like what Mun Leong has mentioned, year- to- date, we have done around SGD 240 million, average premium to valuation 3%. The deferment of the sponsor call option at 201 Keppel Road of Prima also preserve our ability to unlock further value from the asset over time. These transactions demonstrate our ability to unlock capital from mature assets, giving us greater capacity to pursue attractive investment opportunities when they arise. The sponsor continue to lend and provide strong support for MLT.
The sponsor-led Renminbi fund has given us an additional avenue to unlock value from two mature assets in Wuxi while enhancing our financial flexibility. We will continue to explore similar opportunities with the sponsor going forward. More broadly, the sponsor-established logistic platform gives MLT the visibility over a potential pipeline across the emerging growth markets such as India, Vietnam, and Malaysia. Any acquisition will remain subject to our investment criteria, due diligence, and must create value for our unitholders.
Singapore remains our largest core market and key anchor for MLT. Through acquisitions and redevelopments, we have grown our presence significant over the years. No doubt, over SGD 300 million of divestments has been done, establishing MLT as the largest logistic space provider in Singapore. We continue to see opportunities to strengthen and rejuvenate our Singapore portfolio. The new Changi South redevelopment is the latest example of this and our fifth project in Singapore, and this will further reinforce our market leading position.
To wrap up, looking ahead, the operating environment remains uncertain with geopolitical tension, inflation, currency volatility, and elevated borrowing costs will continue to present headwinds. Our priorities are to sustain healthy occupancy and rental stability, maintain prudent capital management. At the same time, we will continue our portfolio rejuvenation, strengthen our presence in Singapore, and leverage sponsor regional platform where it can create value for MLT. With a strong Singapore base, a diversified regional portfolio, and the support of an established sponsor, MLT remains well positioned to navigate the near-term challenges and deliver long-term value for unitholders. With that, I wrap up my remarks.
Okay. I think, okay, now we would like to open the floor to questions. Okay, Derek, DBS, would you like to start us?
Hi, good evening. Can you hear me?
Yes, yes, Derek.
Hey. Hi, Jean and team, and congrats on a very resilient set of results. My two questions are, so first one is on Singapore. Could you give us a sense on the return on investments for Changi South? And also for Prima, it is a significant opportunity of value unlocking for the group. Just wondering whether is it going to be more near term, or do you have to wait for 2028 before we can look at you unveiling this Christmas present? I am just wondering. And my second question is on, I think you have done a lot of developments. I think that I felt to be something unique to MLT. You get a lot additional return apart from buying income. Are you going to extend this redevelopment expertise to your other markets? And if any, which markets? Yeah, that is all.
Okay. You have about three questions for me, Derek.
Oh.
Firstly, on the AEI returns, like what we have achieved in the past, just like our 5A Joo Koon Circle, we have achieved around close to 6.5%. Similarly, we are expecting similar 6%-6.5% returns for this Changi project.
Okay.
As to the Christmas present, it is going to be more a medium term because, firstly, it depends on the Prima expiry. We have mentioned it is 2028, and at the same time, the sponsor is also looking at some redevelopment opportunities in the Southern Waterfront region. That will take some time because it involves various planning scenarios, as well as taking into consideration the conservation guidelines as required. So more likely a medium term closer towards 2028 or 2029 where we will have a more clearer visibility in terms of the pricing.
Okay.
Okay. The AEI expertise extending beyond Singapore, if you recall, we had done one in Ouluo, China a few years back. We have announced the Malaysia one. The Malaysia one, it is progressing on track, but very slowly. But I think, in terms of the amalgamation process, it should be probably by next year, and then we could look at commencing the project. As to the other countries, there are also potential opportunities. So we are also reviewing existing assets in Australia and Japan. There are some pockets of assets where we are either able to do an extension to create an additional uplift in the GFA, or we could actually do some phased development over time. So there are still some assets where we are able to unlock value from our existing portfolio.
Okay, sounds good. Sorry, Prima, you will sell with the new type of development, right? Not current value, right? Just to be very clear.
Yeah. So for Prima—
Yeah. Okay.
So for Prima, under the call option, it is to sell based on the change of use to commercial or residential development. So that's in the terms of the call option.
Okay. Excellent.
Based on the core parameters. Yeah. By URA. Yeah.
Okay. Thank you very much. That is all from me. Thank you.
Okay. Next we have Rachel. Please go ahead.
Hello, good evening. Can you hear me?
Yes, Rachel.
Okay, great. Yeah. Congrats on the very stable set of results. Just maybe if you didn't have that timing issue with the Perps, potentially your DPU would have been higher, right?
Yes, of course.
Yeah. Okay. Okay, my first question is, I am quite excited on the Changi redevelopment, but just to understand a little bit further, how much does it contribute to GRI now? Would we see any earnings drag with the redevelopment?
Okay. I think if you look at from the occupancy perspective, right now, these two assets are not fully occupied because it is under planning over time. Over time, we have also tried to transit our tenants to other assets within our portfolio as much as possible. Right now, in terms of the occupancy, one of them is less than 50%, the other one is around 70%. The NPI impact to the portfolio is not significant.
Okay.
Yeah.
Probably less than 1%?
Less than 1%. Yes, correct. In terms of NPI. In fact, much less. Yeah.
Okay. Got it.
Rachel, maybe I just want to add on the question that you had earlier on whether our DPU has been higher. The coupon on the Perps is at 3.5%. We are temporarily paring down unhedged loans about below 2%. So there is that negative carry for that two and a half months. But I think on the longer-term basis, we are replacing a 3.725% Perps with 3.5%, so there will be longer term benefits.
Sounds good. Okay. Then maybe just my second question is on the divestments. I know you have worked very hard. Congrats hitting the SGD 243 million of divestments. Your target was SGD 200 million-SGD 300 million. You are almost there. So I guess the next question is, what is next? Is it time for you to look at acquisition already or no, you still want to do some more divestments here?
It will be a combination of both. Based on what we have on hand so far, definitely we are looking to redeploy this recycled proceeds to growth opportunity. So right now, the markets where we are looking at, we are evaluating deals in Singapore and similarly in the emerging growth markets like Vietnam, India. So for the immediate term, as well as Japan. So these are the markets that we are having more focus in terms of our capital allocation. Divestment will continue because we still have some more that we have identified that we would still want to roll out. In terms of getting prospective tenants, we have some traction. So, that will continue. But in the meantime, with this SGD 240 million of recycled capital, we will look to redeploy as well.
Okay. And the remaining divestments, are they mostly coming from Hong Kong, China still?
Okay. I think for China, we are more or less there, probably one or two more. Hong Kong, we have some strata units. As you see, we sold two units, and it is something that we will want to continue selling because the strata units have no strategic value. So as and when there are interest, we will want to continue our divestment pace in this shorter unit. Ideally, we would want to sell on an en bloc, but I think realistically, the buyers out there, some are the existing tenants, some are more on the owner occupiers. So that will continue. So in terms of the other remaining pipeline, we still have a handful coming out from Singapore, Australia, and Japan. So I think that will be the other pipeline that we are still working on.
Oh, okay. So if, let us say, I add everything together, it could be more than the SGD 300 million now, right?
More or less.
If everything is successful. Yeah.
Yes. Yeah. Correct. That means I am now working on next year because it will take some time for us to generate leads for rent negotiation, and I am looking about next year.
Okay. Sounds good. All right. I will let others ask questions. Thank you.
Okay. Thank you.
Thanks. Okay, next we have Mervin.
Hi, Jean and team. Congrats on the very strong reversions. Can we get some commentary on China? Are we expecting low single-digit negative rental reversions over the next few quarters, or are we getting closer to hopefully zero soon? Any guidance also in terms of reversions for the portfolio outside China? Finally, cost of debt. Do you have a guidance for next year, FY 2027, FY 2028? Thanks.
Hi, Mervin. James here. For China, yes, the rate of decline in the negative reversion has slowed down. That is a good sign. In terms of how fast we can hit flat, I think we still are watching very closely to the market situation because there are certain spots of China in terms of region dynamic, whereby some of the reversion are bottoming out. For example, west side of China, the reversions have bottomed. That is a good sign. In terms of other regions, we see East China stabilizing because there is less supply coming upstream in the next one, two years.
Demand has outstripped supply, and there is a positive net demand absorption in the East China region at the moment, the last few months. That is a good sign. The reversion has not turned positive yet. North, the rate of decline in terms of reversion are showing signs of bottoming out. That is a good thing. In south, there is still excess supply in the south, so the rents are expected to decline further. Vacancy rates are expected to increase. For MLT, our exposure in the south is still very limited. That is for China. I think—
Net what? -1 , - 1.6 next few quarters or what are we thinking about this?
We will be still trending around this range, I believe.
Similar range like that.
Next year, any chance of zero or it is still -1 ?
It is too early to say at this juncture because our lease duration in China, it is pretty short, about a year. The visibility right now is quite limited.
Sure.
Perhaps maybe closer to the end of the financial year, we have better visibility to give that indication.
Okay, cool. If you can just run through the rest of the countries.
Okay. Run through the rest of the countries. James, I will leave it to James.
All right. For Singapore, the market continues to be strong in terms of demand, and that is driven by the strong economy export growth, and also the export growth is driven by the manufacturing activity. Overall, we expect the reversions to be still very healthy in the range of 3%-5%. Hong Kong, we experience a positive net absorption in the market. Market vacancy has dropped slightly to 9.5%, and rent declines are expected to moderate in the latter half of this year. China, I already spoke about. In Japan, leasing demand continued to be strong in core markets like Greater Tokyo and Osaka.
The vacancy rates have declined also in these two core markets, Tokyo and Osaka. However, the leasing activity in Greater Nagoya is still muted because of excess supplier situation. South Korea is experiencing, I would say, a recovery. There is less supply coming on stream, and leasing demand has remained robust. So there will be expectations of rental growth and stabilizing vacancy. Australia is still fairly resilient even though economic situation is uncertain. Why I say that is the rising inflation is dampening a bit of a demand.
So the demand for large spaces of warehouse, I would say in terms of more than 10,000 sq m and above, at the moment is fairly muted. But overall, the underlying demand is still stable in Australia. For Malaysia, Vietnam, and India, they are still going through. These are emerging markets for us. Consumption demand is definitely outstripping supply, and we will see positive reversions between 3%-5% going forward in these three markets. So that is all for my update.
Over the next two quarters, is there some monster reversion to be expecting from leases that signed 10 years ago that could be a positive surprise?
I wish there will be, but unfortunately at this stage, Mervin, I do not think so.
Okay. All right. Thanks. Yeah, I think anyway, can we move on to the cost of debt for next year? Thanks.
On the cost of debt, we are looking at 2.9%-3%.
Okay, sounds good. Handing over to the rest.
Okay, Brandon, please go ahead.
Hey. Hi. Evening. Can we talk a bit about your Hong Kong divestment of the nine assets that you have right now? How many are strata title, and for Grandtech itself, how much more of its NOI can you further divest?
Our strata assets besides Grandtech Centre, we have the Shatin also strata unit. But in terms of the unit size, the Shatin per unit size are a little bit larger. The Grandtech ones are the very smallish kind of unit configuration. In terms of the number of strata units, we have about 140 units. And that is the extent that we have for the strata unit in Grandtech, and that is close to about half of that building area for that project. And the other stratas, like I mentioned, is the Shatin where in terms of the strata ownership, it doesn't cut so thinly. It is a bit larger unit sizes. Brandon, did I answer your question? I hope that answered your question.
Okay. But when you say the Shatin , is it two, three, four, five? They are all strata, is it?
Yes.
Yeah. Correct. It's more one, two, four. Not three.
One, two, four. Oh, is there a one? I thought it was only two, three, four, five. There's a one. Okay. Can. It's just one, two, four. Okay. Going back to the China reversion. If I look at it on a quarter-on-quarter basis, is it correct to say that the outlook has worsened?
Which one? Sorry, I didn't get the point.
China reversions. Just judging from the guidance that you gave Mervin earlier and compared to what you said three months ago, is it telling us that the outlook has kind of worsened? Because now it seems that you are less certain about giving us guidance until maybe six months later.
No. Not that on the ground conditions it has worsened. To me, from what we are seeing on the ground, it remains the same. It's just that I think in terms of when we will turn neutral, we think it is more prudent to actually give a view later. If you look at some of the tenant retention rate, the occupancy, in fact, occupancy for this quarter in China, it has improved. Tenant retention has also consistently remained high. It's more of we are just conservative at this point, but it doesn't mean that the leasing ground conditions have worsened. To me, it is still about the same as about the six months or three months ago kind of market condition.
Okay. Just one last question about your acquisitions. Is it likelier to come from the pipeline on your deck?
The sponsor pipeline?
Yeah, correct.
Okay. In the sponsor pipeline, there are a few countries. But I think in terms of the opportunities, we would be more focusing on the emerging growth markets, Vietnam, India, for completed projects. Australia right now, I think where the interest rate outlook is versus the cap rates, I think the yield spread is not there. So that is not something we are looking at as a current focus. So more on Vietnam, India from the IPT. Third party, we are also exploring opportunities other than Singapore. We are also exploring Japan as well as India third party as well.
Okay. Thank you so much, Jean. That is all from me. Thank you.
Brandon, sorry to clarify, I think the team just told me in terms of the strata units other than GTC is Shatin two and four.
Okay. So there is no one, right? Okay.
Yeah. So not this, James. Yeah. It is two and four.
Okay. I thought it is the Shatin , number one or something. Yeah. Okay, can. Thank you.
Yeah. Okay. Thank you, Brandon.
Okay, next we have Geraldine.
Hey, good evening, Jean and management team. Maybe just on the acquisition, I think you have shortlisted four countries. Are you able to share with the rate hike environment, which is still giving you the best in terms of yield spread?
Okay. Like what I emphasized earlier, Singapore will be the core market in terms of where the wider margin of yield spread, that should be the largest yield spread that we are looking at in Singapore. That will remain our core market that we will continue to want to pursue. For Japan, although the interest rate is on the upward trend, structurally it is also a tight market with low vacancies in markets like Osaka and Greater Tokyo, the vacancy is tapering down. We are still seeing resilient demand that is supporting the steady rental growth.
We will also look out for deals with strong rent growth potential. That is Japan. The three markets are Vietnam, Malaysia, India, which is more the prime beneficiaries of the China Plus One strategy. That is the growth momentum that we are looking at. Structurally, in terms of the supply, it is relatively undersupplied for modern logistics specs as compared to the developed economy. Like I mentioned, Australia, not really, there is a negative yield spread, likewise for Hong Kong and Korea. I hope that answers your question, Geraldine.
Okay. Thank you for the color. Given that supply is tight and rents are still climbing, we should not expect you to actually acquire at a higher cap rate even with the rate hike environment. Is that right to say?
You are talking about which market?
The three. Vietnam, Malaysia, India, the China Plus One trio.
It has to also provide that positive yield spread before we will want to look at acquisition, because accretive acquisitions is important as well. We will factor that in our evaluation criteria and the accretion that is going to be generated up from that opportunities.
Okay. I may not have caught this. Are you able to share the yield on cost for the Changi South redevelopment?
Okay. I was sharing earlier on our past projects, typically like the recent one that we just completed, we are generating about the 6.5% yield on cost. For the Changi one, we are also looking at around the similar range, 6%-6.5% yield on cost.
Okay. This will be the benchmark for future redevelopments?
Future benchmark. But I think if we look at the projected kind of rents versus the construction cost, in the recent years, that has been the case. So it really also depends on the construction cost element. So it is very hard to really set that benchmark. Of course, the higher yield on cost, the better. So it really depends on the cost environment. But based on what we have seen—
Okay.
—we are looking at around similar levels.
Okay. As in, so both climbing, I just see which one is climbing faster.
Okay. Any more question, Geraldine?
No, that's it from me. Thank you.
Okay. Let's move to Dale.
Thanks. Hey, hi, Jean and team. Congrats on the strong results. Just a few follow-up questions from me. With regards to the redevelopment, I'm assuming that the land tenure will be topped up?
Yes.
Yes.
Okay. Got it. With regards to this redevelopment also, how should we be looking at your financing of this? I guess it is relatively paid down, but should we be expecting you to ramp up your divestments to fund this redevelopment?
Yeah. Earlier on, I have mentioned that we are working towards the next financial year pipeline. We need to start now so that we are able to generate sufficient pipeline to translate the lead into execution. That is something that we are continually working. Definitely, divestment continues in terms of the momentum. If you look at in terms of the actual spending, the CapEx spending for the AEI, it is progressive, and it is generally more back-loaded towards the end of the completion.
We are looking at commencing in quarter one in the new financial year with TOP about two years later. We think with that timing versus the divestment pipeline and opportunities that we are right now doing, we should be able to manage that in terms from the gearing perspective. Which has been the case, if you look at what we have done for 5A Joo Koon, progressively, we have been incurring the CapEx and simultaneously, we have also been selling. That is how we have been able to execute and manage our gearing over time.
Okay. That is clear. Over in China, I just wanted to check, I think, versus maybe a few quarters ago, last quarter, in terms of the lease renewals or even new leases signed, has the terms changed, for example, in terms of the length of the leases or, I don't know, if there is any so-called incentives or take-up period? Has any of these terms actually changed?
So far, we don't see any material changes, but there are cases whereby in general, it's still about one year or less, but there are cases whereby we see there's more than one year, even two, three years. It could be a sign that the tenants want to lock in at the current rates, or the market is, they're expecting to go up. So, no material changes at this stage. It's still a one-year leases in general.
Okay, and the incentives or rent-free periods has not changed also?
In terms of rent incentives for certain markets which are bottoming out and also recovering like the West, we see lesser incentives are given. So in those cases, there are less incentives. But other cases are in the North, it still remains to be, still we think, see the incentives are being reduced for competitive reasons.
Okay. Sounds good. Sorry. Last one I wanted to also slip in is, I saw your management fees in units for first half 2027. It seems lower compared to a year ago. Should this be the new rate we should be expecting going forward?
To build up a statutory infrastructure to support a basic constitutional principle. Some are trickier than that. Look at pardons. They have utterly corrupted the pardon power. As everybody knows, he pardoned more than 1,500 Proud Boys, Oath Keepers, violent insurrectionists—
Sorry, can you mute your line?
Without looking at the individual case of what they did, what their criminal record was.
Hi, Dale, where did you get that piece of information from?
Well, just looking at your financial statements, just broadly looking on the six months this year versus last year. Has the management fees in units actually came off?
Hey, not that to our—
Yeah.
—knowledge, but we'll come back to you while we—
Okay.
—look for the specific piece of information.
Shall we move on to—
Can. Thank you.
Vijay, would you like to pose your question?
Yeah. Hi. Hi, evening management team. Three questions from me. Maybe I will just pose it one by one. In terms of second quarter property expenses, it jumped a bit between first quarter and the second quarter. Is there any one-offs quarter-on-quarter or something that should take note of?
Okay. I think on the property expenses, in 1Q, it is lower than usual because we had a one-time adjustment on utilities. We had previously, before 1Q, overaccrued, and then there was like a one-time reversal of overaccrual in 1Q. In 2Q, we have higher property expenses because there is another one-time accrual adjustment for prior periods under accrual of property taxes now that we have received the assessment from IRAS. Your 2Q is much higher, mainly because of a double effect from the lower adjustment in 1Q and the higher adjustment in 2Q.
Got it. Basically, these are one-offs and strip off it.
Yes. One-offs.
There is no specific changes to margins. Okay.
Yeah. You are right.
Thank you. My second question is, I noticed that there was one-off adjustments of SGD 8.7 million to a distributable income this quarter. Is there anything specific to take note of?
Sorry, which page is that in the SGX announcement?
No, in the quantum other non-tax deductible items and other adjustments of SGD 8.7 million.
No, you broke off. Can you repeat your question?
One-off adjustments in the distributable income for this quarter was significantly higher than the previous quarters, like SGD 8.7 million. Is there anything specific, one-off adjustments for this quarter to be taken note of in distributable income?
No. You are referring to page eight, right?
Yeah.
Of the SGX announcement. It is not anything unusual from the norm, mainly arising from rental amortization adjustments as well as other tax adjustments, but nothing exceptionally to note.
My last question is, your loss on disposal of subsidiaries of SGD 6 million versus your divestment gains typically on your assets, which you have reported, especially on China. How should we reconcile this? Is this because of entity unwinding in China?
Are you referring to the SGD 6.8 million on page?
Yes.
We will come back. CFO, has she located that number?
Okay. For the loss on the disposal of subsidiaries, this relates mainly from our China divestments, where the two China assets were divested via the divestments of the onshore entities rather than the sale of asset itself. It relates to the divestment of the Chinese asset.
Okay, so these are taxes on the Is that how we should look at it?
Not really taxes. It relates to FX, divestment cost and everything in there.
Okay. Thank you. That is all I have.
Okay. Next we have, Mervin, you have another question?
Yeah. Sorry. Do you have a chance to calculate the expected rents for the Changi South redevelopment? What will be the targeted rents? Thanks.
In terms of square feet—
Assuming 6%- 6.5% on cost, yeah.
Oh, you will be typically looking at close to 2.5, 2.6.
Okay.
Sorry, about between 2.3 to 2.5.
Thanks. Second question I have is in terms of overall strategy. I know Joy has joined you guys. I do not know whether she has advised you in terms of how we can drive improved performance or cause a rerating, because obviously sponsor is looking to do a listing next year, so they need to demonstrate AUM growth. Any thoughts on how we can drive DPU and rerating the stock? Thanks.
Maybe you should pose the question to Joy. Or we should invite her to this call. But Jean, anything you wish to share?
No. I think in terms of the rerating, we have been trying to execute our portfolio rejuvenation strategy, right? In terms of once we have the recycled proceeds, we want to look to redeploy the recycled proceed to the growth markets, which I mentioned earlier on. We want to continue to have Singapore as our anchor, our core market. Which is why I think we will continue to look to improve and enhance the specifications of our assets in Singapore, via whether organic growth or inorganic growth.
In terms of our market focus, we have always been maintaining it is the 70/30 kind of capital allocation, where 70% is on developed markets and 30% is the emerging markets. I think the other thing is on the sponsor support. In terms of the recycling to the Renminbi fund, it is something like I mentioned earlier on, if there are opportunities, and it is something that we will want to continue to look to explore.
Sure. Just in terms of acquisitions in Vietnam, Malaysia, India, are any of these coming from a sponsor? If it is, yeah, just curious why is it taking so long? Yeah.
There are combination of the third party as well as sponsor. If we look at the quantum, it is pretty sizable. Right now, the priority is focusing more on the third party. Whereas on the sponsor side, they can afford to wait a bit.
Okay. Look forward to improved performance going forward.
I think we invite the complete item to say Okay, any more follow-on questions? Oh, Wilson. No one.
Hi. Greetings, Jean and the team. Can you hear me?
Yes, but can you speak a bit louder?
Yeah. Is this better?
Yeah. Okay, good.
All right, just one quick question on occupancy. At the portfolio level, I think it is at 96%. Do you expect that to be broadly stable moving forward and specifically for China? I think last quarter you guys were looking at maybe having it at 93%-94%. Is the outlook for China's occupancy looking a bit better than you are expecting?
For China itself, yeah, we are looking at around this range of about 94% and, because going forward, we will be looking selectively to increase rents for those higher occupied properties, pushing for rents. Because in the past we have been trying to, there was sacrifice of rents for the sake of occupancy because we want the tenants to remain sticky with us. So we are looking at a range of 94% still going forward. In terms of portfolio-wise, we do not see any major changes to this range around 96%, the portfolio level.
Got it. Thank you.
Okay, looks like no more questions. Shall we end the call unless somebody raise hand now? If not, okay. Thank you, guys. Thanks for joining us on the call. Any more questions, you can always email me. Thank you. Thank you. Bye.