Morning, everyone. Thank you for joining us for MIT full year FY 2025, 2026 financial results briefing. I will bring you through the financial performance and update on management. Thereafter, Lily will go through portfolio update and give you some color on MIT's outlook. For a full year, during the year, we divested three properties in Singapore. The lower NPI is actually due to absence of income from these three properties.
There is also lower contribution from non-renewal of leases in the North American portfolio and weaker U.S. dollar against Sing dollar. These were actually offset by higher contribution from Japan portfolio, mainly full year contribution from our Tokyo property, which we acquired in November 2024, and completion of final fit-out works at Osaka data center, which was completed in May 2025, as well as renewals and new leases from Singapore portfolio.
Borrowing costs, this mainly due to repayment of borrowings with the divestment proceeds, lower interest on unhedged floating rate loans, and effects of weaker U.S. dollar against Sing dollar. These were partially offset by higher borrowing costs in relation to the Japan portfolio.
Cash declared by joint venture decreased due to higher borrowing costs from the repricing of matured interest rate swaps, which were previously locked in when interest rates were lower.
On a full year basis, MIT DPU for FY 2025, 2026 is at 12.71 cents, which is 6.3% lower than prior financial year. However, if we exclude the divestment gains that were distributed in FY 2024, 2025, our DPU would have been lower by 3.2% instead.
For quarter-on-quarter, our net property income decreased due to non-renewal of leases at North American portfolio, higher property maintenance and property taxes, partially offset by full quarter impact of renewals and new leases from Singapore portfolio. Cost decreased due to temporary repayment of borrowings with the proceeds from the new perpetual securities that we issued in March, ahead of redemption of the existing perpetual securities.
Cash distribution declared by joint venture decreased due to higher borrowing costs from the repricing of mature interest rate swaps. Accordingly, DPU, quarter-on-quarter, decreased slightly 2.5% to 3.09 cents. Our NAV per unit is lower by about 4.0% to SGD 1.63 as compared to prior year, partially due to revaluation loss, weaker U.S. dollar, and lower mark-to-market on derivatives.
As at March 31st 2026, total valuation of the 136 properties in MIT's portfolio stands at SGD 8.2 billion, a decrease of about SGD 330 million as compared to SGD 9 billion as at 31st March 2025. Excluding the SGD 535 million properties divested and lower translated asset value of SGD 234 million from the weaker U.S. dollar and Japanese yen, our portfolio valuation decreased by SGD 58.5 million year-on-year.
So within our North American portfolio, we do have some properties that are vacant or with impending non-renewal. For some of these properties, the valuer has adopted sales comparison approach, hence the lower valuation. This was partly mitigated by the completion of the final phase of the fitting-out works at the Osaka data center and the improved operational performance of the Singapore portfolio.
During the quarter, we successfully issued SGD 300 million of perpetual at 3.25% ahead of the redemption of the existing perp in May 2026. In the interim, we have paid down debt with the proceeds, and accordingly, leverage is lower at 34%. While this is expected to increase to around 37.5% when we draw the SGD 300 million debt to redeem the existing perp in May, we still have ample debt headroom for growth.
With the SGD 300 million debt, the hedge ratio is also expected to reduce to around 80% level. Average borrowing costs increased slightly to 3.2% as compared to prior quarter, mainly due to higher interest on expiring interest rate swaps, which were previously locked in when interest rates were much lower.
With about SGD 600 million of IRS coming due in financial year 2026, 2027, these were previously locked in when interest rates were lower. Assuming if we replace these maturing IRS with a new five-year rate today, and these are about 3.6%, 3.7%, the borrowing cost is expected to increase to about 3.4%- 3.5% in FY 2026 to 2027.
As we pursue further divestments and we use the divestment proceeds to pay down loans in the interim, we will be able to reduce the impact of these expiring hedges on borrowing costs. Of course, we will continue to monitor the market and be nimble when entering into replacement hedges, say, SGD 20 million, SGD 30 million each tranche when opportunity arises, i.e., when any dip in interest rates.
On our debt maturity profile, it remains well staggered with average debt duration of about 3.4 years. We have sufficient committed credit facilities to refi loans in FY 2026/2027. On the FX front, as much as local currency loans to provide for natural hedge.
This helps to mitigate impact on FX fluctuation on our NAV and DPU. For example, about 50% to 52% of our U.S. portfolio is funded with U.S. dollar loans, while our exposure to the U.S. by AUM is around 47%, net of the onshore U.S. dollar borrowings. Our DI exposure is reduced to around 80/20%. Just to give a sense, for every 5% depreciation in U.S. dollar, the impact to DPU is not 5%, but it is only around 1%- 1.5%.
Good morning, everyone. I will bring you through the operating performance for the portfolio. To start off with, that would be the occupancy. If you look on the overall basis, the overall portfolio occupancy has declined very marginally from 91.4%- 91.2% as compared to last quarter.
As you can see, the Singapore and Japan portfolio remains the stable base. If we focus a bit on the Singapore portfolio at this point, the Singapore portfolio occupancy has actually improved by about 0.4 percentage point across both the high tech and the business park segment, as well as the industrial segment. These two segments continue to see positive rental revision.
I think on the weighted average basis, you are looking at about 6.2%. Between the two segments, we are seeing both rental revision 5%-6%. Update on the Kallang Way occupancy. Committed occupancy at this point is about 65.5%. If you compare to last quarter, it has improved marginally, very slightly.
Having said that, we do continue to have a few discussion that is ongoing. We do hope that we are able to bring the occupancy up further by next financial year, maybe somewhere around the 75%.
Looking at North American data center portfolio, the average occupancy went down from 87.5% last quarter to 86.1%. I think this is mainly arising from the full effect of the expiry at 2005 East Technology Circle, which the lease has actually expired in December 2025.
As well as a tenant in 250 Williams Street NW, who has renewed its data center space but returned its office space with effect from February 2026. I think this is something that we have flagged up earlier. In terms of the lease renewal, if you look at the portfolio view, portfolio WALE declined marginally by about 0.1 WALE from last quarter.
That is largely due to the natural progressions of time for Singapore and Japan portfolio. If you look at the North American portfolio, there is actually a decrease with the commencement of a long-term lease at Morrisville. I think that is something that the team has put in place some time ago. Now that the lease has commenced, it actually starts to contribute towards the WALE.
On a year-on-year basis, our portfolio WALE has maintained across all geographies, including the North American, with these efforts on getting some of the lease renewals done. Our focus during the year was very much to address the re-leasing challenges. About 400,000 sq ft of leases were executed in FY 2025, 2026.
That is about 5.6% of Mapletree Industrial Trust's North American portfolio NLA. We have also signed these for long lease period ranging from five years to 15 years. About 34.3% of the leases executed were actually new leases, while the balance, 66%, were renewals, which includes also forward renewals at a weighted average rental revision rate of about 3%. If we look at the lease expiry profile, for FY 2026, 2027, 17% of the portfolio GRI will be expiring.
Specifically for North American Data Center, more than half of the leases are set to expire after FY 2030, 2031, which is in more than five years’ time. Within the portfolio or the North American portfolio, 5.4% of the portfolio is expected to expire in FY 2026, 2027.
We have highlighted in the past quarters as well that there are confirmed non-renewals, and that stands around 4.7%. As we all know, these are mainly from three properties. We are actively working on the non-renewals, and in fact, I am quite happy to share that we are in advanced negotiation and quite close to signing a backfill lease.
Although I will not be able to provide any information at this point, I think you understand the sensitivity behind at this point. For the remaining leases due in FY 2026, 2027, we do not think that will be an issue.
Now, beyond what has already been highlighted, there are no new confirmed non-renewals. If you look at the expiry profile, you also note that after FY 2026, 2027, the expiry profile is actually more manageable. We are talking around the 2%-3% range. If you look ahead at the next financial year or FY 2027, 2028, we think that the risk of non-renewal is not high.
We have generally been very focused in managing the expiries. Over the past two years, we have proactively executed forward renewals, which actually helps to spread out the expiry. Say, for example, you have the two leases at Beaumont and Houston, which are both enterprise users. In addition, we have also been signing the leases for new space.
If you look at the vacants or those properties with upcoming non-renewals, divestment backfilling or even reletting to industrial users would be the possible options that we are exploring. We are seeing greater interest from prospects for certain properties in the key data center market or those with potential to increase power capacity.
As I mentioned earlier, we are close to signing one of the backfill, so we do hope that we can bring it across the line and bring the good news soon. In terms of the divestment targets, we continue to look at about SGD 500 million-SGD 600 million.
This would largely be the portfolios with vacancies or upcoming non-renewals. We have pushed out quite a few divestment exercises and I would say that we are starting to make some meaningful progress.
As we pursue this divestment, we are also actively monitoring the market for suitable acquisition opportunities. I think if you look at some of the potential deals in the market that we are seeing, you do have some that is in Asia, say Japan, and of course Europe continue to be area that we would like to expand in.
Our goal very much is to then rebalance the portfolio, achieving the greater geographic diversification and enhancing the overall portfolio quality to ensure that the portfolio is future proof.
I think what you see here is some of the activities that we have done in FY 2025/2026, where we have actually completed more than SGD 500 million of divestments and these are done at a premium to book value. The proactive portfolio rebalancing will continue to be the key strategy that we are pursuing right now. We hope that with this we will be able to provide a better portfolio to the unitholders.
Thanks, Lily and team. Now we will take questions from the analysts. Please raise your hand if you would like to ask a question. May we kindly request each analyst to be three questions? We have Bosun.
Hi, Lily and team. Looks like some exciting developments in terms of backfilling. Just wondering whether you can disclose which properties that related to and were there any updates on potential redevelopments? Second question I have is in terms of FX rates, U.S. Sing, what is the hedge rate that you have for this coming financial year? Thanks.
Okay. I will take the first question. I think at this point, I do not think I will be able to release a lot of information on this. But I think that is something that the team has always been working on. We do really hope that we are able to share the news shortly. But at this point, I think there is some sensitivity, so we would rather keep it as it is right now.
Maybe for the second question. In terms of hedging forward, there is a cost in terms of hedging because given the interest differential between U.S. dollar and Sing dollar rates, so currently it is quite high, 2%-2.5% for one year. For the next 12 months, we have hedged close to 60% of our income at about 1.26 FX rate.
The rest will progressively hedge up with you? Yeah. Throughout the course of the year.
Yeah.
Sorry, just first question, any updates on the redevelopment? Yeah, thanks.
Sorry, again?
Any updates on potential redevelopment in terms of properties you've undertaken title studies, so I do not know whether anything is planned. Yeah.
Nothing that we can say at this point. I think you will also understand that redevelopment is one of the options that we will look at. Although I think the focus perhaps is a little bit more on the divestments and the reletting of the properties.
Okay. Look forward to some positive news soon.
We have Derek from DBS to ask the next question.
Hi, good morning, Lily and team. Can you hear me?
Yes.
Okay. Can hear me out, okay. Just a few questions. Just wondering, Lily, can you give us an update on your plans for San Diego and Hawthorne, given that the leases are coming off, right? I understand Hawthorne has a significant power allocation, right? Any positives around these two assets or what your plan, leasing, selling or what we can think about in terms of your next move?
Maybe that's my first question. Then maybe my second one, if I can. If we look at Singapore portfolio, right? I think your occupancy it appears quite strong already. Is there any room to still move it higher? And in terms of divestments-wise, while you put SGD 500 million or SGD 600 million in largely in the U.S., right? Are you looking to sell Singapore more? Maybe that's all I have for now. Yeah, thanks.
Okay. I think for San Diego, the situation for San Diego, if you look at the market right now, I would say that the interest for data centers or life science in San Diego is not exactly very strong. One of the possible options that we are looking at would be divesting or re-letting to the industrial users. I think that will be something that we will continue to work on.
As for Hawthorne, yes, you are right. Hawthorne is a facility where there potentially can be more power. As it is, that is probably one of the properties where we can see some interest coming through, for people who are looking for more power. There is some bright spot, I guess we can say that, for the Hawthorne.
Sorry. For Hawthorne, the power is secured already, or it is still getting the study?
We have gotten the study. The studies basically show that we are able to bring it up to, I think it is 99-
Megawatt
megawatts. But of course, it is not something that immediately you want it, you get it type. There will be certain time that is required for the power to be brought in. But I think we are seeing prospects who are interested in having such potential of more additional power. I think that basically spells something quite positive for Hawthorne.
Okay. You will relet it at that extra power, right? Is that right? Expect that a lot increase in revenue.
Actually, the structure of our lease is actually more as a real estate.
Yeah.
Not so much on a per megawatt basis.
Okay. Got it. Sorry, Singapore? Yeah.
For Singapore, I think you know that we have divested over SGD 500 million of three properties. I think that one, basically the idea was to maximize or to look at those properties where we have maximized their potential as well as the business park where we know that the demand for the business park is soft and we have always been trying to push up the occupancy. But for the past 10 years, it is not easy to do that.
Hence the rationale behind the portfolio divestment. Whether we will continue to look at Singapore, we will continue to always look at opportunities when it arises, right? Because I think if you look at the Singapore portfolio, there are still some potential that we can unlock. And of course, there is also some of the properties with short land tenure.
But I think having said that, the focus for us at this point would still very much be on the North American portfolio, where we know that that is the area that we need to address at this point. I hope that answered your question.
Yes, sorry. Last one, Singapore organic growth still stable, coming year?
Singapore organic growth, well, I think if you look at the rental revision, we still continue to see or to believe that we are able to achieve a positive rental revision. I think the previous guidance of mid-single digit is still there.
Okay, excellent. That's all I have. Thank you.
Do we have Jonathan from UOB to ask the next question?
Yeah. Good morning, Lily and management team. My first question relates to impact of higher electricity tariff. The 76.5% triple net leases, they are not affected. But what about the other two segments, the double net leases and the gross leases? Are they affected by higher cost of electricity?
My second question relates to renewal. I think for this quarter you renew McCrimmon Parkway and then also Sir Timothy Drive. One of them you renew 11 years. What about the one at Sir Timothy Drive? How many years do you renew and for these two renewals, what's the rental reversion like? Thank you.
Okay. Address the utilities first. I think that one is easier. I think generally, even those for the North American portfolio, even though some of them are on a gross net basis or double net basis, in terms of electricity, it is still very much passed through to the tenants or borne by the tenants. I think from that perspective, we don't expect the effects to filter through on us for the North America and the Japan assets.
I think where it possibly may hit will be basically on the Singapore portfolio, where we have quite a bit of multi-tenanted buildings. But having said that, we have actually done some hedges for the electricity where we have entered into power procurement contracts.
These are in place till December, so that's about 20% of the portfolio. What we are open with would be the 80% portion. Yeah. If you look in terms, just to give some sense in terms of the impact, if the tariff rate were to, say, increase by 50%, the impact on our DPU will probably be
Sorry? So we can't hear you.
Less than 1%
Oh, okay. For double net leases for our data center, does the tenant pay for the 80% unhedged is quite high.
I think, if you look at the numbers in itself, 80% seems quite high. The utilities forms only about 30% of our operating expenses. Of course, I think as things move on, we will always be looking, potentially, at increasing this hedge ratio, if you want. Sorry, the next question is on the renewals that we see.
Yes, this quarter we have the Morrisville, which the lease has commenced in this quarter. But actually, this renewal was signed I think quite some time back. This was signed quite some time back, I think for 11 years. If you talk in terms of reversion, there is actually no reversion because this is a new space. This is not a backfield lease, so we do not have a comparison to make. What we have done then is we have actually filled up an empty space, which is already there. Okay?
The other one that you are talking about, that is the one at Sir Timothy Drive. I think the renewal is actually for a short period, about two years, but this is one of the hyperscalers. I think for them, they tend not to lock in very long, but it is an auto renewal that it just keeps going. I think our past experience is they will just renew when it comes to the expiry.
The new space at Morrisville, does it mean that you added space to the data center?
It added space in terms of the occupancy, yes. But I think this is a small space. I think it is about 34,000 sq ft. I believe this is more for industrial use.
Okay. Thank you, Lily. Thank you very much.
Vijay to ask the next question.
Hi, morning, Lily and team. Just a couple of questions. First one is a bit of a follow-up to Jonathan's question. Quarter-on-quarter, the increase in property maintenance and taxes, was it one-off? How much was it, and do we expect it to recur?
You are talking about quarter-on-quarter, right?
Yeah.
I think for this quarter, you see the margin a bit lower. That's because this is more a timing issue, where we did our first-time maintenance in this quarter. That's why it kind of bumped up a bit in the grand scheme.
Is it a one-off?
It's a one-off for the quarter.
Okay. But looking ahead, you would expect some margin pressure to continue because of utilities, in general. Is that right to say?
Yes, but we think that the impact is not that significant. As I said, even if the tariff were to increase by 50%, the impact on our DPU is less than 1%.
Okay. Got it. My second question is in terms of divestments. You have done quite well last year. This year also you are targeting SGD 500 million, SGD 600 million. What are your plans to redeploy the proceeds, as there will be an income rate vacuum from these divestments?
Yes, we are definitely looking at acquisitions now that we have already divested SGD 500 million. With more divestment on the way, that will actually give us quite a nice headroom for us to look at our acquisitions. I think that will be something that the investment team will always be looking at.
I think in terms of where we want to or what kind of properties we are looking to invest in, we continue to keep our eyes on data centers, but we wanted to have some diversifications in terms of geographies. Hence, we have always been talking about us wanting to look at the Asia Pac region, looking at Europe. As you will note that I think in Europe at this point, we have no presence at all.
When it comes to geographies like the U.S., we tend to be very selective because we already have quite some presence in the U.S. Not so much into the U.S., but for Europe and Asia Pac. I think again, if you look in terms of the yield spread, what seems to make sense at this point is perhaps in Japan and Europe as well.
Okay. Just to confirm that your balance 50% stake on the data center, your priority is focusing on Japan and Europe over this acquisition of balance 50% stake.
I think the 50% also very much depends on whether the sponsors want to let that go, right? I think that is something that we will want to get if the opportunity comes. I think if you look at the portfolio of the joint venture, it is definitely a good quality portfolio where we have almost, I would say about more than 50% of that portfolio are actually the hyperscalers, which is something that we would like to have a little bit more exposure on.
Right? But I guess it's also really, if I'm able to do more diversifications for my portfolio through getting more exposure in hyperscalers, that would be great. In terms of DrawThree, if we are able to get more diversification by looking at other region, that will be something that is quite welcome as well. I believe all this will actually help to improve the resilience of the portfolio.
Just one question. In terms of your data centers, do you expect CapEx for the ones which are re-leased? How much CapEx would it be? Just give some sense in terms of new tenants.
I think it very much depends on who the tenant is and what is the condition of the property at that point of time. For some of the leases that we are talking or we have been discussing or we have executed, the CapEx may not be very huge. Say, for example, the one at Tennessee, I think the CapEx was kept relatively low at about SGD 4 million.
I think for some of those, we do have tenants who are prepared to say that, "It doesn't matter. I'm okay with the structure, with everything that is with this property, and hence, I don't really need a lot of CapEx." Any CapEx will probably come in the form of repaving the driveway, making sure that the walls are not leaking, repainting, that kind of thing. So not significant CapEx, as far as we can see.
Okay. Thank you.
We have Bill to ask the next question.
Okay. Thank you. Hi, Lily and team. Morning. Yes, just a quick question from me. With regards to the renewals and backfilling of the North American portfolio, just wanted to get an idea as a percentage of revenues, how should we look at it?
Meaning?
No. Basically, for the renewals that were done, in the North American portfolio, I think the 400K or so you did mention is about 5% plus of NLA. But as a percentage of revenues, does it differ a lot? Just wanted to get a sense.
Okay. I don't think it will fall very significantly away from that number. I would say most of the leases that we have signed. Okay. Let's say if you're talking about renewal, the renewals are coming through with a positive rental revision.
I think just now I mentioned your revision is about 3%. So if you look in terms of the contribution, it will be higher than what we were looking at least for the renewals. And of course, all these also come with escalation.
On average, do you have average escalations for these renewals and new leases?
Average escalation, I think it actually ranges, I would say largely around 2%-3%.
Okay. Got it.
Earlier, the revision, I think we are looking at is about, at worst, with average, about 3%.
Okay. Got it.
Of course, I think we also highlight that for some of these, there is actually rent-free included. So the real contribution may come in, say, in about 6 to 12 months time.
Okay. On average, safe to assume that rent-free is typically 6-12 months for a five-year lease?
I think it depends. Very generally, rule of thumbs tends to be one year, one month. Right? A lot of this also depends on negotiation. Say, for example, if you look at the Brentwood, the Tennessee property that we have re-leased out to Vanderbilt, the lease was for a good 30 years, but my rent-free is only 12 months.
Okay. Got it. Okay, can. That's all from me. Thank you.
Thank you.
We have Xuan Tan to ask the next question.
Hi. Morning. I understand you mentioned earlier that the risk of non-renewal for FY 2028 is not high. Do you think that the occupancy for the portfolio will actually drop in FY 2027 then?
Of course, we hope so. Well, I think, seriously, if you look at it in terms of your expiry profile, you see that the tower in 2027, 2028 is the highest. That is also where we see we face quite a bit of risk. I think we have mentioned the 4.7 non-renewal. That I think everybody knows, of which the larger component actually comes from San Diego.
If you look going forward, the renewal proportion is actually quite small. A large part of the portfolio, for North American portfolio, is still, I would say more than 50% is actually due in five years' time. If you just look at the next few years, the lease expiry is actually quite manageable. I think the range is around 2%-3%.
Once the non-renewal wave is kind of stabilized, all the efforts that we are putting in into saying divesting some of these vacant or having to be vacant type of properties or our efforts to be able to backfill them is definitely going to have some positive impact.
Following up on FY 2027, 2028, do you see any risk for the Singapore lease expiry?
No. In fact, I think that there is a lease that is coming up for renewal. That is why I think you see the tower a little bit high. We have already commenced our discussion with that tenant, and we are fairly confident that its renewal is there.
Okay. Just one last question on the divestment that you are looking at. Are these assets that are vacant, and also how should we think about gains or loss against book value?
Okay. I think if the SGD 500 million -SGD 600 million, a large part of them would be the vacant and coming due to be vacant type of properties. I mean, naturally, because these are some of the properties that we would want to be able to address the re-leasing challenges.
We have also, if you remember, I have mentioned previously that we have actually taken a very critical look at the list of properties that we have. For some of those which we feel that may not be able to contribute very positively towards the growth will be packed into this potential divestment.
I think some of these may be income producing, but I think if you are looking from a longer term, if there is no, say, on the low power capacity type, or we think that it is not as easy for us to try to gather the re-leasing later on if it ever happens, then I think it is best for us to do the divestment. We have actually taken a very critical look at the portfolio to identify some of these properties. That all in would give us around SGD 500 million -SGD 600 million.
How do you think this will compare against book value? As in divestment price versus book?
I think if you look at our valuation this route, we have actually taken some valuation loss on certain properties. I think those would mainly be the ones which should be vacant type. I think if you are talking about whether will we be insisting that we must sell at book value, I think that is something that we have to be practical and we have to look at what are the alternatives for us, right?
Of course, we hope to be neutral on the overall basis, but we are not insisting that we must die, sell above valuation. I mean, for those property that is not going to contribute, it is actually better for us to just make the hard decision and divest it so that we can recycle it into something that is contributing to the portfolio.
All right. Thank you.
Yeah. Thanks, Xuan.
We have Derrick Heng for the next question
Hello.
He's speaking, I think.
Hi, can you hear me?
Yes. Derrick, you need to speak up a bit or nearer to mic.
Oh.
Now.
Is this better?
Yes.
Okay, cool. Sorry, I missed out the earlier half of the call, but I think I caught something about the impact. There's a 1% DPU number being mentioned. Is it if usually costs were to increase by X percentage, it leads to a 1% DPU impact?
Yes. I think we were saying that if the tariff rate increased by 50%, then the impact on the overall DPU will be less than 1%.
Less than 1%. Okay. From current rates. From current base tariff rates. Okay. Got it. When do you intend to hedge the remaining 80% of the Singapore assets? Oh, sorry, 80% of the, yeah, the rates.
I think the decision to hedge very much is weighing what is the cost of hedging. I think it also require us to do a switch to the same power, but I think it will take some time for us to be able to do that.
Okay. Switching to U.S., the U.S. portfolio, you mentioned that SGD 560 million divestment. Does that include assets which you are currently doing power studies on? Does that SGD 560 million already take into account the effect of the power study or it doesn't?
I think for some of these property, whether we have done power study or not, okay, if we are not seeing significant contribution coming through, then I think they will be in the list. Having said that, I think the power in itself, having the power capacity in itself, doesn't mean that we are going to get it immediately.
So there is going to be some level of CapEx that's required to put through, and time is also required to bring the additional power in. So I think for some of these properties that we have done, we would consider divestment if there is a good value or if there is someone who is prepared. So we are not closed to the option to say that just because I have done power study, there is potential, therefore, I will not divest or I will only do a risk.
I think we have to also weigh the various factors.
Okay. On just that, this Hawthorne, for example, you are looking to intensify to 24 or even potentially 99 megawatts. The current valuation, SGD 315 million, is on current power capacity only, right? Do you expect an uplift in valuation if you were to secure a larger power bank?
As I said, because these are core and shell basis. The rentals are actually based on the area. That means based on the NLA rather than based on the megawatts.
Okay. On basis of power bank.
Sorry.
Do you not sell on the basis of power bank?
We don't charge based on the megawatts.
No, that investment, when you sell the asset, when you put it on market, can you sell based off of power bank?
Sure. I think just to answer the question, this asset is actually on a powered shell basis. What we have done in the power study is that we already spoke to the grid, and they already told us that they can actually increase the power up to 99 MW. With that, there will also be quite a significant capital investment.
But to answer your question, if we do go to the market to sell, the potential buyer will definitely look at the potential uplift of the power to 99 megawatt, but they will also have to consider the CapEx that they will need to put in. But of course, that will increase the attractiveness for the asset on whether are we looking to re-lease it or to sell it.
Okay. So expectations basically would be, probably hoping to sell at around current valuations, even for Hawthorne.
Yeah. That is the current valuation we have. Yes.
Okay, cool. That is all I have. Thank you.
Thanks.
Rachel from Macquarie to ask the next question.
Hello, morning, Lily and team. Can you hear me well?
Yes.
Okay, great. Sorry, I dialed in a bit late. I just want to confirm. The San Diego you are looking to divest, right? San Jose and Alpharetta, what are your plans?
Okay. As I said, San Diego is not exactly in the key data center market, so divestment is definitely on the card. If we are talking about Alpharetta and San Jose, I think these are still very much in a good data center market. Re-leasing is something potentially that we look at. Of course, again, we do not close the door in terms of the divestment.
Okay, got it. My next question is on the divestments. The SGD 500 million and SGD 600 million pot, you said mainly is vacant asset or going to be vacant. Does that mean that it will take a while for you to divest? It is not asset. I do not know. Because I would presume that the interest would be quite low.
We have been cooking this for quite some time already. I think in terms of vacant versus income producing, we are probably looking at a mix of both. I think what we can say is that we are looking at both the vacant and income producing assets for this SGD 500 million- SGD 600 million.
Definitely, this will be our target at least within the next 12 months or so within this FY. I think some of them we are already in slightly more advanced discussion. Hopefully we can have some good news coming out in the next six months or so.
Okay, I understand. If I hear correctly, your interest on acquisitions is still Japan and Europe, right? I think looking at your peers, they have been acquiring some Japan data center assets and from the same seller also. I am just wondering whether you have looked into it, and your decision of not acquiring, is it because you have not done much divestment?
That is part of the decision of that. Of course, as you mentioned, those acquisitions that our peers have done are probably very similar to some of the other acquisitions that we have done. Essentially, this decision was made at that point of time.
We do have a lot of factors that in our mind about, we want to divest more, we want to diversify out of existing countries that we have and so on. It is good that at least we are still keeping some balance sheet for other acquisitions that we are looking at. Again, with more divestment, it will actually improve our balance sheet and our appetite to invest.
Okay. All right. Give me just one last one. FY 2027 interest rate guidance.
For FY 2027.
Oh.
FY 2027. Sorry, is it 2728 or 2627?
2627.
This financial year, coming financial year.
Yeah. Coming financial year.
For FY 2026-2027, we do have SGD 600 million IRS coming due. The interest rate is expected to increase to around 43.5%.
Okay, got it. All right. Thank you so much.
We'll let Brandon from Citi to ask the next question.
Morning. Morning, Lily and team. Can you hear me?
Morning. Yes, we can.
Yes. Hi. Just want to check, on this SGD 300 million -SGD 600 million, does this refer to your carrying value or the expected valuation that you can fetch? Because I think if you look at the latest reval exercise, some of these assets have really taken quite a bit of reval losses, right?
I just want to check there. Also, if you can share with us, is there a rough timing on how fast you can execute these divestments and the general level of interest in this kind of assets in the current market? Thanks.
Okay. I think we address the first question first. These numbers would have taken these properties at around the valuation. Because we will always minimally try to hit the valuation. If the demand is such that we might have to take below valuation, then we take that. But our first stance is always at valuation. For how long it will take, I think generally the SGD 500 million- SGD 600 million, we pr
obably can get it done within the next 1-2 years. To be frank, when we pushed out, I think we would have pushed out a little bit more, so this is what we think we probably can achieve. Am I missing any other questions? I think that's it, right?
Okay. There is a certain kind of interest in these assets, right? Is it correct to say that? Because obviously, you're not selling your best assets, right?
We're not selling the best assets. But I think sometimes we do try to pair a bit the slightly better assets with the not so good assets, and then you sell it out as a portfolio. That is one of the usual divestment strategies that people will look at, right? I think we apply across for all the various strategy that we can when we look at the divestment.
Okay. I just wanted to just double check, for your assets in San Diego, Pewaukee, and San Jose, which saw a very significant fall year-over-year in valuation. That is really because of the vacancy?
That is because of the vacancy. I think when it comes to the valuation, the valuers have taken a slightly different approach. They actually use the sales comparison approach. They look at it from an industrial land perspective. I think that is the reason why value has been dropped for quite some time. But I think we also recognize that these are the properties where we have seen vacancies for quite some time.
Okay. Just one last one. Are you intending to sell anything in Singapore? Should we expect some form of compensation, say, for some of your more prime assets, like your two Kallang assets? I think over this quarter, they did see a very sharp fall in the valuation.
You are talking about Kallang one and two, right?
Yeah. I think it was a 20% fall.
That is because of the short land tenure. Those are the ones, I think the remaining tenure is about seven years.
Five years.
Five years. As the usual valuation it will go, when you hit a certain remaining life, they will start to bring them down quite in a huge jump, all the way down to zero. Because these have a limited kind of lifespan. It is expected that when your land tenure comes closer to the expiry, you will see an impact on the valuation.
Whether we are looking to divest some of this, of course, we will be looking at it. Given that there is a land tenure decay, I think that will be something that we will want to be able to do some divestment because that will then help us in maintaining the capital value for it. I think the question then is always who out there in the market will be prepared to buy?
There are people who would like to look at it, but it is not a very wide market as you would appreciate. Whether we are potentially looking at some of this divestment, yes, we are. I think as I mentioned earlier, the key focus at this point is really on the North American side. The short land tenure is something that we will continuously be looking at.
I think for the short land tenure, what we have been trying to do is to engage JTC as much as we can to see whether there is any possibility for us to do that extension. We have been also looking at seeing whether we are able to find, say, a user which the Singapore government would love to have, and therefore on that basis be willing to extend the land tenure, to land this for us.
I think other than that, divestment is a potential option that we can look at. Of course, the other way to address this structural issue in Singapore is really that you try to dilute the effect by growing elsewhere with freehold land. I think that is a strategy that a lot of the Singapore REITs have done in the past years.
Got it. Okay.
Does that answer your question?
Yeah. Great. Hey, thanks so much. Thank you very much. Thank you.
Maybe we just take one question from the online audience. This question is, while selling assets and paying off debt is important, you balance between selling assets to pay debt versus acquiring assets to increase revenue and DPU. Like to share your strategic approach.
I mean, the best is always that if I divest today, and today in the very same minute I divest, I can buy. That is the best dream transactions that we can have. But unfortunately, we have to be realistic about it, that your divestment and acquisition, it is very difficult for us to time it that way.
There will always be a time difference between the acquisitions and the divestment. In which situation then the question we ask ourselves is what do I do with the. Let us say I do my divestment first.
The question then would be, what can I do with the money? Do I sit on it, put it in the bank, and earn very low interest income? The best option for us to do is actually to repay part of the debt. You take the interest on that component, right?
I think that will be more for temporary. That is why every time when we say we do a divestment, it is really to create the headroom, okay, which will allow us to look at our acquisitions with ease and with flexibility.
At this point, if you look at our gearing, we are about 34%. If you take into consideration the refinancing of the first 37%, which is a very nice headroom that we have created with the divestment of the three properties in Singapore that we have done earlier on.
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