Morning, everyone. Thanks for joining us this morning for MIT second quarter and first half financial year 2025-2026 results briefing. MIT has released its results today after market close. We have the management team to present the key highlights of the results. Ler Lily, CEO. Khoo Geng Foong, CFO. Peter Tan, Head of Investment. Serene Tam, Head of Asset Management. Chng Siok Khim , Head of Marketing. I'll pass to Geng Foong to bring us through the results highlights.
Good morning, everyone. Thanks for joining us today. For second quarter FY 2025-2026, year-on-year, our net property income decreased due to loss of income from the divestments of three industrial properties in Singapore, which we have completed in August. Lower contributions from the North American portfolio from non-renewal of leases in the last quarter. This was partially offset by the higher contributions from acquisitions we did end of last year, as well as the completion of final fit-out works in May 2025. Borrowing costs decreased due to repayment of borrowings with the divestment proceeds, lower interest on unhedged floating rate loans, and effects of weaker U.S. dollar. These were partially offset by higher borrowing costs we took for the portfolio.
Distribution declined by venture decrease due to higher borrowing costs from repricing of matured interest rate swaps, as well as pretermination of lease at one of the joint venture properties in prior year. Overall, our distribution to unitholders decreased 5.3% to SGD 90.7 million, and our distribution per unit [audio distortion] 5.6% to 3.18 cents. By the year, we also distributed about SGD 3.3 million of divestment gain from our divestment of Tanglin Halt . If we exclude that, our DPU would have decreased 2.2% instead. For the first half, most of the reasons are quite similar, I'll skip that. For quarter-on-quarter, our net property income decreased due to loss of income from the divestment of the three industrial properties in Singapore. Full quarter impact of NPI sanitization for the fit-out works at one of the property in Singapore portfolio.
Higher operating expenses at North American and Singapore portfolio. This was partially offset by the full quarter contribution from the final fit-out works at Osaka Data Center. Our borrowing cost is lower, mainly due to repayment of borrowings with the divestment proceeds and lower interest on unhedged floating rate loans. Overall, our distribution to unitholders decreased 2.7% to SGD 90.7 million, and DPU decreased quarter-on-quarter 2.8% to 3.18 cents. From capital management perspective, our total borrowings reduced to SGD 3.1 billion, largely due to the repayment of loans with the divestment proceeds. Accordingly, our aggregate leverage ratio decreased to 37.3%, and our interest rate hedge ratio increased to close to 93%. With a lower leverage ratio, this provide us with ample debt headroom to capture any potential growth opportunities.
Average borrowing cost for the quarter reduced slightly to 3%, largely due to repayment of higher cost debt with the divestment proceeds and lower interest rate on the unhedged floating rate loans. Having said that, we do have interest rate swaps coming due every year. For this financial year as well as next financial year, we do have about SGD 600 million of IRS due or coming due, which we expect to have impact on our borrowing costs, given these interest rate swaps were previously locked in when interest rates were lower. Overall, the borrowing cost for this financial year, we expect to be around 3.1%-3.2%, and for next financial year, the interest cost will be about 3.3%-3.4%. Our debt maturity profile remains well-staggered. No more than 24% of total debt maturing in any single year and a n average debt tenure of three years.
On the FX front, as much as feasible, we try to draw local currency loans to provide natural hedge for our overseas investments. This helps to protect FX fluctuation on our NAV and DPU. For example, about 50%-52% of our portfolio are funded with loans. While our exposure to the U.S. by AUM is about 47%, net of offshore borrowings, our distributable income exposure to U.S. dollar is about 25%-28%. This means that in terms of sensitivity for every 5% depreciation in U.S. dollar, impact to our distributable income is only about 1.5%. For the remaining of the foreign currency side, we enter into FX forwards to hedge the income into Sing dollar. We have about 86% of our next 12 months distributable income is hedged or derived in Sing dollar. To Lily to go through the rest.
Hi. Morning. I will cover the operational performance. If we can start off with the occupancy of the portfolio, I think that is something that is about our entry. On a portfolio basis, the occupancy rate has, I would say, remained relatively flattish. We are looking at 91.3%. If you look at the Singapore portfolio, pretty resilient. We have managed to keep the occupancy flat. For North American portfolio, we do see a bit of slightly marginally down to 7.8%, and that is largely because of the expiry of lease at San Jose, which is something that we have spoke about the last quarter. On the Singapore side, something which I have missed out just now would be the progress of the Kallang Way property. I think that one we have managed to improve the committed occupancy to 64.4%.
That is about one percentage point of improvement from the last quarter we have reported. This quarter we have also seen quite a bit of new leases and renewal that we have actually executed. To date, we have executed about 184,000 sq ft of the space in North America. This is about 2.6% if you look specifically at the North America equity. Of this 184,000 sq ft, we have about 20% of these leases actually pertains to empty units which were previously vacant. We are able to fill up some of the vacant units. The rest of it are basically just renewal, so it basically means that we are able to extend the lease period. If you look in terms of some details for these renewals, weighted average revision comes out to be about 3%.
If you look at the range of the revision, we are talking about from a low single of 2% to a double digit, like about 10%. This renewal also for a relatively long period, so about 5- 11 years. Maybe I just also want to highlight that a lot of these leases or most of these leases will be taking effect only in FY 2026, 2027. That means the next financial year. These are actually forward renewals that we have entered into. The lease commencement actually starts next financial year. We will see the effect. The current financial numbers does not include the effects of these leases. Not significant either. The rental revision in Singapore continues to be quite positive. We are looking at a weighted average of about 6.2% on the average.
Of course, if you look in terms of greater details, the general industrial buildings continue to see encouraging rental revision at about 8%. We do have a little bit of a negative revision in the high-tech building and business space. Specifically, that is more on the business park where we have one particular tenant. I would say not very sizable, but it is not your usual typically one, 2,000 type of spaces. We have actually defended the occupancy by taking a lower rental rate. So that accounts for the negative rental revision that you see. Then if you look at the lease expiry. In terms of the WALE, we will see that there is a slight improvement in terms of the overall portfolio. Last quarter, we reported a 4.5 years. This quarter we actually reported a 4.6 years.
Of course, you also understand that every time you move one quarter, naturally this number will drop. But we have actually managed to improve it, and that is mainly because of one of the renewals which I have mentioned earlier on, that actually take effects towards the end of the financial year. So that has basically lengthened the WALE. If you look in terms of the profile for FY 2025, 2026, in total, we have about 4.6% of our total portfolio expiring. If we look specifically at the North American data center, that would be about 1.8%. Of course, we have spoke about this last quarter as well. Within the 1.8%, there is also a 1.2% that is largely due to the vacant unit. The office spaces that was given up by one of the data center tenants in 250 Williams Street NW, Atlanta.
I think whatever that is left in the remaining of the financial year, we are quite positive in terms of the renewal and backfilling. For next financial year, 2026, 2027, of course, the large part of the expiry for the North American portfolio continues to be the San Diego. That is something that we are keeping an eye on as well. I think in terms of some of the investment, divestment activities, we have completed our divestment, the Singapore divestment of the three properties. That took place on 15th August. I think that is also why this quarter we see some effects of the loss comes from a divestment filtering through the financial numbers. With this, I think we will still continue to look at our divestment for the portfolio, but I think the focus will be more on the North American side.
I think that's something that we have always been looking at as well. I think we probably will be looking at another SGD 500 million- SGD 600 million of divestment for the portfolio. In terms of investment activities, I think since our divestment, we have managed to bring our leverage ratio down. That does give us some headrooms in terms of looking at acquisitions. I think we are seeing quite a few transactions in the market, say, in the Europe and more recently, in fact, we'll see a little bit more on the Japan side. Europe and Asia will continue to be our focus. Of course, the 50% stakes that the sponsor is still holding, it will continue to be something that we will want to look at.
I think if you look at this portfolio specifically, it is a good portfolio, which can help to improve the quality of MIT's portfolio overall. Of course, we also know that is the one where the hyperscalers facilities forms a large part of it. It will be an interesting pipeline for us. With this, I think we hope to be able to recycle the sheets that we have obtained from the divestment. Of course, with further divestment that can come through, that will also help to give us more gunpowder in terms of the acquisitions. Looking ahead, I think our priorities will remain very much centered on improving the occupancy at both the Singapore and the North American site. We have been getting some traction in recent times, so we are quite encouraged by it, hopefully we will continue doing this.
We are still in talks with a few potential renewals or new leases in the North American site. That is something that we hope we can continue to provide some good news next quarter. I think in terms of the interest rate side, as Khoo Foong has said, we do have some repricing refi placements that needs to be managed. We need to be very nimble and we can just adjust the hedge ratio and keep a lookout for any opportunities. I think as we move along, there may be some transitional effects on our results. Some of these, as I said, some of these renewals that we are looking at are actually forward renewals. We are actually paving the way going forward. That's something that hope you guys will understand. I think with this, that will end our presentation. I'll pass the floor back to Mui Lian.
We request analysts who would like to ask question to raise your hand and kindly unmute yourself. Terence, would you like to ask the first question?
Yes, thanks, Mui Lian. Thanks, Lily and team. This is Terence from J.P. Morgan. Just wanted to ask a bit more on the backfilling of the U.S. data centers. Could you share a little bit on how do you see progress? Or how should we expect backfilling for 250 Williams Street NW and the AT&T next year?
I think for 250 Williams Street NW, as you probably note that for the past few quarters, we have been able to lease out some of the office space. Although as I said, these are not very big significant type of areas that we can fill up immediately. But we have been making some progress, and we are actually quite encouraged by it. We are still seeing quite a few inquiries, some people coming to view, et cetera. So it seems like while the office space continues to still be quite weak in terms of the demand, there seems to be some slight recovery that is coming back. So, we hope that we are able to continue this traction.
In terms of the AT&T, we need to talk to them and see actually what is their plan, because if you remember, for AT&T, there is a further option for them to extend another five months. So that's something that we want to get some clarity from them. And of course, the efforts for us to re-lease the building, repurpose the building, or even to do a divestment for the building continues to be something on the card that we look. I hope that answer your question.
Yeah. To give a sense, is there any details on whether we should expect that five-month extension?
There is no clarity at this point, Khi.
Okay, great. Can I ask about the FX hedging? What is the hedge rate for U.S. dollar forex into the second half of the year, and how should we see the FX hedging for next year?
For the income hedges, we have hedged about 53% of our USD income stream for the next 12 months. The average rate is about 1.28, 1.29, hopefully for the next 12 months.
Okay, great. Thanks. Maybe a final question from me. Any thoughts, could you share a little bit more on the acquisitions? I understand that you are looking at both the sponsors, 50%, and also Europe and Asia. Maybe a bit more details in terms of cap rates and how you are seeing any preference.
I think now with the current interest rate environment, where the rate seems to be easing off, it is a development which will, I guess, help in terms of the acquisition cases. I think at least in terms of the yield spread that can start to make sense or make better sense for some of the projects that we are looking. I think in more recent times, we have been seeing transactions that are coming out from Europe, from Japan, and I think even from the U.S. for that matter.
I think for us, we do recognize that it is something that we will want to keep on pursuing in terms of the acquisition, because at the end of the day, now that we have divested a bit of the relatively significant portfolio from the Singapore side, it is something that we will need to be able to replace, or at least it is not part of the income that has been passed. That is something that the team will have to continue to work on. I think if you look in terms of the numbers, I don't think the numbers vary very far out from what you are seeing in the market. Like Japan, you typically will still be looking at around the 4%, sometimes maybe a bit sub 4.
But I think the interest rate side, I think there is still some, I will say that the increase doesn't seem to be coming in so strongly. I think in terms of the yield spread, it still quite makes sense. I think we probably can be looking at a yield spread of around, say, 1.5%- 2% type. You will probably see a similar type of yield spread across the other regions as well. Basically, when your cap rate is there, your cost of funds tends to follow it as well.
And in terms of timing, how should we think about timing? Is there a time or target for acquisitions?
In terms of what, sorry?
Sorry, timing. Timing of acquisitions.
Well, I guess the thing with external acquisition is you either get it or you don't get it. We have evaluated, we have done some submissions, et cetera. I think, we hope that we are able to get something quite soon as well. But as I said, this is something that it will have to continuously be in the works. Of course, what would be easier within which will be the 50% stake that we can look at. I think that is something that we are always in continuous discussion with the sponsor. If they are looking to sell, I think it's something that we will want to look at it seriously as well. I mean, I think-
Okay, that is great. That is all I have. Thank you.
Can we have Tan Xuan from Goldman Sachs to ask the next question?
Hi, morning. Can I ask about the next SGD 500 million- SGD 600 million of divestment? Is that something that we can expect over the next 6- 12 months? Also, is this sufficient to fund for your acquisition, or are you also open to equity fundraising?
Okay, let us address the SGD 500 million- SGD 600 million. I think that is generally the part of the portfolio which we think that we want to do a recycling. As for the timing, in terms of SGD 500 million- SGD 600 million, it is not small. I think if you look at the U.S. trending so far, those properties that we have been selling are generally on individual basis, relatively small. I think we do expect that perhaps we hope that for this financial year, we can do about SGD 100 million- SGD 200 million. To fully divest the entire SGD 500 million- SGD 600 million, I think it will probably take some time. 12 months might be a bit too short for us for that. We will probably take, say, maybe about one or two years or so.
Okay. Funding by acquisition?
Sorry. Whether we will consider, yes, but of course, it is never a case of I must do a divestment before I do an acquisition. It very much depends on the attributes of the projects, and if the market is conducive, we would want to do a bit of equity fundraising. That can basically help us in terms of managing our benefits there. I think it will also depend on the size of these acquisition targets.
Okay, got it. Second question is on debt hedging. Can you explain why is it at 90% currently, and what is a comfortable level for debt hedging?
When we pair down loans with the divestment proceeds, what we have done is, of course, we pair down the unhedged portion, so that brings our interest rate hedge ratio close to 93%. But we do have our IRS coming due remaining financial year, so by March, we will see this closer to about 80%, back to the normal level.
The target is to maintain it at 80%?
By year-end, it will be 80%. Over the next few years, we will see the interest rate environment and recalibrate the hedge ratio.
Okay. Thank you.
Can we have Derek from Morgan Stanley to ask the next question? I think you are on mute.
Yeah. Hi. Morning. Can you hear me now?
We can hear you.
All right. Perfect. Just want to ask on the upcoming lease expiry in FY 2027. For U.S., how much is U.S. account for FY 2027? And of that, how much is the AT&T lease?
Okay. You are talking about FY 2026/2027, right?
Yes.
In total, if you look at the total portfolio, it is 19.2%. Specifically for North America, that would be about 5.5%. Of course, the majority would be for San Diego. I think San Diego generally contributes about 2.4%.
2.4%.
Sorry, 2.5%.
Sorry, 2.4%?
2.5%.
2.5%. Okay. So 2.5%, that one visibility is much lower, but the remaining 3 percentage points, that shouldn't be an issue?
I think it's something that we are continuously looking at. That's why I think if you look at some of the leases that we have signed this quarter or to date, some of these are actually pertaining to FY 2026/2027. We would be able to, I would say, the significant lease is actually more on the San Diego one.
Understood. The ones that you signed, which also pertains to FY 2027, those came at reversion of 3%, right?
Weighted average of 3%, yes.
Okay.
I think in terms of the range, it is a wider range. I would say we're talking about the low 2%-10%. It's about 2%-10%.
2%-10%. On San Jose, is there any update on your power studies over there?
The power study has been done. We understand that the current facilities can take up to 7 megawatts, although I think previously it was running at about 3 megawatts. If we want to bring the facilities up to a 20 megawatt, it is possible, but I think it will mean that the power supplier will need to put in additional CapEx. I think they need to build a new substation and pull the new cabling through. There will be cost involved in getting the 20 megawatts. Of course, that also means that it would take some time.
Are you angling towards just going ahead with the 7 megawatts without having to build a power station? How soon would you expect a lease-up of that asset?
With this, what we have actually done is, with the power study in hand, we wanted to actually sell the properties. I think the response is not as what we expected. We do note that there is quite a number of requirements. Those that come to look at it, the requirements tends to be more for the immediate power. I think some of them are not prepared to wait three, four years for the additional powers to come in. I think this is something that we will have to continue to engage the prospect.
Okay. There is no timing per se that you can guide for at this point in time?
I think we are currently in the progress of actually trying to reach out to the prospect and maybe also to expand the marketing pool.
Okay. Understood. Are there any other power studies for other assets, or it is just San Jose for now?
We have done one for Horton, and I would say that it is quite positive. We are able to bring in much higher power as compared to San Jose.
Okay.
Horton is currently still leased. The lease will end probably next financial year. That is something that we are also talking to a tenant about the renewal of it.
This is in FY26, FY27
This is in FY 2026, 2027, the next financial year.
How much does it account for that 5.5% for U.S., the Horton one?
I think it's about 1.2%.
1.2%. Okay. You're in the process of renewal, and if that doesn't come through, you would use the power studies and increase the IT capacity for the-
[inaudible]
Okay, got it. Okay, thank you. That's all I have.
Derek from DBS Bank to ask the next question.
Hi, good morning. Can you hear me?
Yes, I can hear you.
Hey. Hi, Lily and team. Just a few questions from me. First one is on your rent reversion that you achieve for America. I am just curious whether the leases were like the renewal or backfilling. I just want to get a sense whether there is possible improvements in occupancy.
The rental reversion we talk about is only for the. If you are talking about backfilling as in us trying to fill up additional empty spaces, I think just now I mentioned out of the 184,000 sq ft that we have signed to date, about 23% are actually, I would say, backfilling of empty units.
Thank you.
Yes, you will see some contributions towards the occupancy, but I think we also have to remember that as we say, we will see the full effect-
There is an emergency situation in the building. Tenants from level 35-
Okay. Sounds good. My next question is on your comments on acquisition. You are mentioning that you are scanning, you are potentially divesting, but if you look at, let's say, opportunities that you are keen to execute. How will you rank? The 50% stake will be ranked the highest in value?
This is a difficult question.
That one easiest, I know. What are your thoughts?
Difficult question, I ask Peter to address.
Okay.
Yeah. Like what Lily mentioned earlier, the 50% stake, those are very good properties, and a good portfolio add on to improve our quality of our portfolio. We are also seeing a lot of other decent opportunity that is coming on our table. We will have to assess it. It kind of at least give us some leeway to choose which is the assets or which are the portfolio that we wanted to add on to MIT.
It's not a very easy decision, I guess.
Yeah. To add on, it's like fish and your best pork. Yeah. We have to choose.
Yeah. I guess if we are able to get in other draw three, it will also help in terms of the diversifications for the portfolio. Notwithstanding that, the acquisition of the 50% stake will also increase our exposure to the hyperscalers. I think that is something we have to evaluate when the transactions comes on board.
Okay. Got it. But you are saying that you are also looking for Asia and Europe. Anything that you believe that will rank quite soon? Because I am just thinking about it from a yield spread. Europe and Asia will be higher.
I think there is quite a number of transactions that potentially can be coming out, that will be something that we will be quite keen to pursue. You are right, I think in terms of the yield spread, in this, initial might be similar, but I think the difference also lies in terms of the built-in escalation. I think typically if you look at Europe, you will be around the 2%-3%, which is quite similar to I think Japan generally, we are seeing some between the 1%-2%. That is something that we will have to take into consideration as well. Of course, transactions varies from one another, so it really depends on what is the attributes also.
Got it. Okay, no problem. That is all from me. Thanks. Good luck for that. Yeah, thanks.
We have Rachel from Macquarie to ask the next question.
Hello. Hi, good morning, Lily and team. Thanks for the call. Maybe my first question is on the interest cost. I think at the start of the year, there was like SGD 597 million of IRS that is due this year, and then now there is SGD 600 million due this year and next year. Can you give us a breakdown in terms of how much has already lapsed and has been included in the interest cost? And then, how much are we expecting the rest of this year, and how much are we expecting next year?
Okay. Thanks, Rachel. It is a bit difficult to, h ow do I say? Because we do usually some of the earlier renewal of extension of the hedges. Early this year, we have about close to SGD 600 million IRS coming due this financial year. But of course, all these will progressively due over this financial year. Having said that, whenever interest rate, most likely we will try to lock in a bit. To date, we have locked in maybe about SGD 200 million of IRS, so we see about SGD 400 million to go. Having said that, like I mentioned earlier, our hedge ratio is quite high, so t his SGD 400 million floating rate, and then the hedge ratio will be about 80%.
But net per annum impact, if you look at it, per annum impact, all these replacement hedges for IRS that is due this financial year, per annum is about SGD 9 million-SGD 11 million. But most of these are in U.S. dollars onshore. So we have a bit of tax shield there. So net of the tax shield may be about SGD 7 million, SGD 8 million. So you will see the full year impact probably next year. This year may be half year impact.
Oh, okay. So meaning the net impact SGD 7 million, SGD 8 million this year is half of that, the impact. Then next year will flow through?
Yeah.
Okay. Then the remaining 400 hedges that is expiring this year, you will drop it off. But next year, is there any more IRS?
Yep. So, like I mentioned earlier, we have another SGD 600 million IRS coming due next year.
Oh.
Similarly, we will see impact from these replacement hedges. But having said that, the average interest rate for those IRS coming due next year will be slightly higher than this year's IRS due. We will see some impact, but not as much as this year.
Okay. Got it. Okay, sorry. The next year one is also 600? So 600 this year and then next year 600, right? Okay. Roughly.
Right.
Oh, okay. Okay. Got it. Okay. My next question is, in terms of the San Jose, if I were to follow up, now that the tenant, I think you mentioned that the tenant want a higher power, right? But you are still talking to the tenant. Any intention of you putting in CapEx now that you are talking to a tenant? Or you will still walk away from putting in additional CapEx? And are you able to sell these assets?
Yeah. To clarify, were you referring to San Jose or the one that we mentioned about, we are talking to existing tenant, which is Horton?
No, the San Jose one.
San Jose, the tenant have vacated earlier already. But we did complete the power study. We are now just exploring whether we potential prospects to divest the property essentially.
Oh, okay. I see. Okay. Right. So to divest the property completely with potential tenants. Okay. Got it. Yep. And then, maybe just squeezing one. I remember in terms of acquisitions last quarter, you were actually more positive on E.U., in terms of acquisition. But somehow or other, this quarter seems the narrativeness has changed a little bit. Can I just understand, has something changed along the way?
No, I am still keen on Europe. I think at the end of the day, we do recognize that it will be good to have Europe, which is one of the largest data center market globally. So Europe is definitely something that is on our radar. Similarly for Asia as well. I would say in more recent times, we are seeing a little bit more transaction coming out from Japan. I think Europe there is a few. All know our radar is still on these three: on Europe, Asia, and potentially the 50%.
Okay. Got it. Yeah. Do you still intend to acquire bigger data centers or in terms of the size?
I think in terms of the size, of course, we have done a range of transactions, from SGD 100 million plus, SGD 500 million to about, say, SGD 1 billion plus. So, the range remains similar. Of course, considering where we are, it will be very hard for us to do a 1 gigawatt or 100 megawatt type of data center. But probably a billion-ish or so, or from SGD 100 million plus to a billion-ish remains on our radar.
Okay. Got it. All right. Thank you so much. That's all for me.
We have Yew Kiang from CLSA to ask the next question.
Hi, Lily and team. I just have one question focusing on the 50% balance from the sponsor. Can you share more details about this portfolio in terms of performance? If you look at your U.S. data center portfolio has been trending down over the past few years. Does the 50% mirror similar trends? Secondly, what is the NPI margin as well for? Do you see the similar NPI margin, the decompression trend that you have with your existing portfolio? How much of the 50% balance has exposure to hyperscaler and also like megawatt capacity? Anything that you can share. Lastly, does the valuation of the 50% portfolio, is the cap rate similar to your existing cap rate of your U.S. data center portfolio?
For the 50% stake, that portfolio, a large part of it, I would say about 60% of it is actually the hyperscale that you're seeing here.
Okay.
The balance of it, most of them would be as a colo providers. I think the issue that we are seeing with our current portfolio is more of the facilities that were previously occupied by the enterprise user. I think I mentioned previously before that when it comes to enterprise user, their take in terms of the location, their take in terms of how they allocate the space, and how they designed the data centers, fit-out, et cetera, may not be as efficient as what a data center operator would. That kind of makes the re-letting a little bit more difficult. But you don't have that in the 50% stake portfolio.
The margins will be better as well, and the occupancy will be arguably higher?
Okay. I think from a margin perspective, because they do have triple net leases and gross leases.
Yeah.
Ultimately, we will probably be looking at very similar cap rate, currently about 5.5%-6% cap rate.
Okay.
I think in terms of, sorry, your second question is the occupancy. Yes. So for this 50% portfolio, the occupancies are generally very strong. So we have always seen it as more than 90+% currently and going forward.
Oh, okay. So it did not really come down to the 80s, mid-80s as seen in our portfolio.
No, not yet. Yeah. I think-
Not yet, huh? Or is it you don't expect it to come down?
No, we think that it's probably quite pretty resilient. It will be more than it will be 40% or so.
Yeah, and these are actually locked in for quite long-term as well. I think maybe just for this portfolio, if you recall, in one of the quarters, we did say that we have a tenant who has vacated one of the buildings in Tempe is that. I think that one we are in the progress of backfilling it. We think that there shouldn't be any problem.
Okay. Yeah. Any idea on power capacity?
Yeah. So, for the three hyperscale data centers that we have in Northern Virginia-
Yeah.
those take between about 60-70 megawatt, and then the rest would be spread. Each asset is probably about 3-4 average. So total, those 3-4 are mainly our power shell assets.
Yeah.
But in terms of IT load, you are talking about including the Northern Virginia ones, probably about 90-100 megawatt.
Okay. Total would be, y ou are talking about the 50% that is from the sponsor, right?
Yeah. Correct.
Okay.
Power is on the entire 100% of all the buildings. It is on the building. It is not proportionate.
Yeah. Okay. Okay. I think that is all for me. Thank you.
Yeah, maybe just to add. For the MRDCT portfolio, there are two parts, the powered shell and the fitted hyperscale data center. The three fitted hyperscale data centers, they are actually located in Northern Virginia. Very tight market at the moment.
Okay.
For the few powered shell data centers, actually the WALEs are fairly long. We are looking at maybe around 7-9 years. For this particular portfolio, actually, we see it trending maybe above 95%, 100% at least about 94%.
Sorry, one more question. If you were to fund it using U.S. debt, what is the current debt that you can get in the market today?
For USD today, maybe about all-in U.S. dollar funding, maybe about 4.4%-4.6%.
Okay. Thanks.
[inaudible] Jonathan from UOB Kay Hian, you can answer the next question.
Good morning, Lily and management team. My first question relates to divestment. You mentioned you will focus on North America, and the size you indicated is quite large, SGD 500 million- SGD 600 million. Can I ask if you are looking at divesting a basket of data center in North America that will help you achieve that sizable goal? Are you looking at selling a few of them in a portfolio? Is that what you're looking at? Second question relates to your guidance of cost of debt going higher to 3.3%-3.4% for FY 2027. What's your assumption in terms of rate cut going forward to get that 3.3%-3.4%? Does that include or doesn't include the JV, that interest rate that you have mentioned? Thank you.
Okay. I think in terms of the divestment portfolio, the approach is something that is not fixed. It does not mean that I will just group everyone up, because the moment you group everyone up, it becomes pretty sizable. It may not be that easy to sell. I think because the portfolio is actually quite spread out in terms of the location, et cetera. Depending on the individual local situation, sometimes it is better for us to just sell it as an asset by asset. Or we also may look at bundling up some of the assets together as a portfolio to sell. The approach that we are taking it is not something that is fixed, that I will just package everything and go.
Given the different attributes and the different local situation, demand and supply situation in the market, we will want to take the approach that can give us the best value out.
Okay. Not cast in stone?
Yeah.
Yeah. Maybe to add on, we do have, I will not say it is cast in stone, but we do have already identified how do we want to divest all those assets. Some of them are single asset transactions, some of them are on the portfolio basis. So you will see a mixed bag. It will not be like, say, you want to sell 10 properties worth SGD 600 million or so.
Okay. Thank you for the color.
Okay. On the interest rate for FY 2026 to 2027, the guidance is 3.3%- 3.4%. Basically, we have assumed that the whole SGD 600 million IRS coming due next year will be refinanced with, let's say, a five-year USD to about 3.4%, 3.5%. As you are aware, let's cut the base rate. Now it is around 3.75%- 4% range. Various banks have various expectation or forecast for next financial year, for next year. If the floating rate come down to around 3%, we may be able to adjust that hedge ratio and accordingly price this at a lower level.
Okay.
Does that answer your question? Yes, that's-
Yeah.
Just to clarify, all our capital management positions include our JV.
Okay. You do factor in rate cuts in that forecast. Understood. Thank you.
Sorry, no. We have not factored in so-called the rate cut. We have assumed this five-year pricing or five-year interest rate swap today instead of floating rate.
Okay. That is the rate today that you get?
For five-year interest rate swap.
Okay. Thank you.
How about Vijay to the last question?
Morning, Lily and team. A couple of questions from me. Firstly, in terms of the operating cost, I think operating cost for this quarter seems to have gone up a bit because of maintenance and utilities. Are there any one-offs? Moving forward, what should we expect in terms of margins?
I think in this set of numbers for this quarter, we do have some cleaning contracts which was renewed. So that one we do see some inflationary increase in terms of the contract price. So that kind of explain it. But I think we basically, I would say, tranche out our contract. So we do not renew every one at one go, right? So the effect will be more muted that way. But I think in terms of the margin or the NPI margin, we should expect it to be somewhere similar to what we have this quarter.
Okay, got it. My second question is, in terms of potential portfolio, I mean, possibly if you add on U.S. assets and Europe assets, I think over time your Singapore exposure is going to go less and less below 40% or closer to mid 30s, et cetera. Are you comfortable with that? Because I do not see any pipeline also in Singapore.
I think we would love to be able to add on more to Singapore. While we are doing a lot of acquisitions in terms of the data center globally, Singapore remains our home ground and that will still be one of the focus. The only thing is at this point, acquisitions opportunities are actually quite limited. I think if you look at it in terms of, say, data center in Singapore, the market is very tight, so we would love to be able to add something on. But it is also very limited in the sense that the government is putting on quite a bit of control in terms of the power acquisition. Sorry, the power allocation, right?
In order for us to apply for all this power allocation, there are certain criteria that needs to be met, and some of these actually has to be it is something which an operator will be able to achieve. Like you need to have a PUE of at least 1.3x , et cetera. The opportunities for us to do the acquisition in Singapore is not easy. Of course, if you look at other industrial properties that we see in Singapore, that continues to be something that we will be keen to look at and we will continue to look at. The only issue is when you look at the Singapore industrial property, a lot of them comes with the short land tenure.
That proved to be a bit something that can be. I think that makes our decision much harder because the moment you buy, say, a 25 years underlying lease, in five years' time, you start to see the valuation of that property dropping simply because of the shortening land tenure. That is something that we are also quite careful about, right? Of course, what we can do in terms of the Singapore properties is that we continue to look out for opportunities where we can do, say, build-to-suit projects. So getting land allocations from the government together with a tenant that they like. Or we can also look at redeveloping the existing properties that we have on hand.
If someone comes along, happy for us to take up some of the space if we were to redevelop, that can actually be a potential trigger for us to go to the government and see if they are able to extend the underlying land lease. These are some of the things which we hope that we can execute, and we will continue to scan the market for such opportunities.
Got it. Just one last question, if I can. Can you give some color in terms of business park demand and high-tech demand in the Singapore market at this point of time? It still seems a bit soft, looking at the diversion in your portfolio.
Yeah, I think high-tech space and business park space are definitely still a weaker link at this point of time, and we have been seeing this for the past few quarters. Generally, I think when we look at the demand that is coming through there continues to be demand. It is not a case of totally nobody even wants to look at it. There continues to be demand, except that the demands are not for the bigger space. This tends to be the smaller area. If you take, for example, our development at Kallang Way, we started off in December with a redevelopment. We started off hoping that we are able to lease out floor by floor, which is relatively huge floor plate. But the demands are not really there.
We actually start to cut them out into smaller units, and that is where we start to see a bit more traction. I think if you track our progression so far, last quarter, we managed to improve the committed occupancy by 3 percentage points. This quarter, 1 percentage point. I would say the transactions continue to be there. We still continue to be able to cross some of these inquiries into contracts. This will be more for the smaller spaces. For business park, I think we also know that there is quite a lot of competition in the vicinity. Right now, we had three business parks. Now, we divested two. I am just left with the one in Changi Business Park.
But if you look at Changi Business Park, specifically for our building, while the business park demand may not be so good, we have been able to hold up the occupancy rate for Changi Business Park pretty well. Right now, I think you are looking at about 83%-85% occupancy. If you look at some of the buildings in the vicinity, similar buildings in the vicinity, the occupancy is definitely not there. So I think that is also the reason why we want to make sure that we are able to defend that. And I think that was also the point that I made where we decide that for a tenant, where you have a slightly bigger size unit, we are prepared to go down a bit just to defend the occupancy.
I think the rest of the renewals that possibly can be coming up for the Changi Business Park is a smaller floor unit. So that is something that we think we still can hold.
Thank you. Very clear. That is all I have.
Maybe we can have Donald to ask the last question to end this session.
Donald? Muted?
[inaudible]
Donald, are you there?
Hello, can you hear me? Yeah, can you hear me?
Yes.
Okay. Just a couple of quick clarifications. First is on the interest rate question. If U.S. rates, the swap rates come down by around 50 basis points, but you mentioned about 3%, are you able to get some savings? Would that mean that your WACD is likely to come down if U.S. rates come off by 50 basis points in FY 2027?
Yeah. For next page, I want to clarify that when Fed cut rate is on the short-term floating ratio.
Sure.
When we look at the interest rate swap replacement, we look at the long-term rates, the five-year bond rate, which is today maybe 3.5%, right? When they cut it doesn't mean that your five-year rate will be lower.
Sure.
So-
Let me put it another way. At current rates, you're expecting your interest costs, all interest costs to go up in FY 2027. By how much must rates come down for you to see your all-interest costs come down? Yeah.
Let's put it the other way around. If let's say this SGD 600 million now, I assume 3.5%, right? But if come next year, if the floating rate for U.S. dollar is 3%, we have the loans are attached. I see therefore then it's 50 basis points on that SGD 600 million.
If floating will go down by 2%-3%, you will see a neutral level. Is that what to take away from that?
We will still see some impact because the interest rate we were locking when it was quite low. So average maybe 2.3%. So you still see impact, but you have a bit of savings.
Okay, got it. Okay, that is fine.
Yeah.
Understand. The second question on the MRDCT portfolio. Any indication what is the valuation and the ticket size at this point?
About a billion, I think.
A billion, I think, for the 50% stake, is it?
Right.
Okay. Is there any underrenting in the colo leases or hyperscale leases?
Underrenting, I wouldn't say it's underrented. It's about, yeah.
Okay. So pretty much at market.
Yeah, that is correct.
Okay, that is fine. I think that is all from me. Yeah, that is all from me. Thank you.
Thank you.
Thank you. If you have any questions, please do reach out to us. Thank you.