CapitaLand China Trust

This is CLCT's 3Q Updates Briefing. I'm Siyu Yi, IR for CLCT. And with me today, we have our CEO, Jerry, CFO, Joanne, CFO Designate, Lin Tong, Head of IPM, You Hong, and Nicole from the IR team. For this briefing, we will start with a brief presentation, followed by a Q&A session. If you have a question, please use the raise hand feature and I'll direct the time to you. Is that Jerry? Please go ahead.

Hi, good morning. Welcome everybody to Capital Rands China's Trust Business Update for 3Q2025. I'm quite sure everyone has been watching this US-China President Trump and Chairman Xi coming together in South Korea. So that's actually a good way to get us started on this business update for CLCT. First, let me go to a snapshot of where we stand today in terms of our asset allocation. By percentage of GRI, our retail allocation is now at 69.9%, about 70%. That dropped from first half where it was 70.8%, about 1% drop, was because we divested this Kettlemore-Yuwa team through the CREIT securitization exercise. And as a result, of course, the other components that we ran up, 26.5% of GRIs in business parks, 3.6% in logistics parks. In terms of our distribution view, it's now 6.2%. Stock price came up a bit. That caused a compression in views. That is also reflecting some of the overall S3 view compression across the board. In terms of 3Q key highlights, I'm very happy to again share that CLCT together with our sponsor, we have listed the CLCR on Shanghai Stock Exchange on 29th September 2025. That is China's first international sponsored retail CWIC. It opened well. It opened trading at 19.6% above its IPO price of $5.718 per unit, that is CLCR. For CLCT, of course, we seeded this CREIT with our capital more imparting, and we also became a strategic investor through our 5% holding of units in CLCR. Overall, I would say that, I think I mentioned before, the demand for CREIT has been, I would say, very, very encouraging. The IPO oversubscription is 254 times for institutional, retail 535 times. We can see that allocation-wise, we have 20% with the originating or the strategic sponsor group, of which CLCT is one of them. We hold 5%. In terms of the current, at IPO, the DPU yield for CLCR is 4.4%. Currently, it's already traded. Currently, the trading yield for CLCR is between 3.8% to 3.9%. During third Q, we also refinanced and issued 150 million of perpetuals. That was also very well subscribed, 3.4 times subscription coverage. And interestingly, we also have quite a big portfolio fund manager and insurance companies allocation, about more than half of it was to institutional investors. So we successfully completed our perpetuals refinancing through this exercise. In third quarter, we also attain and maintain our five-star rating for Grasty. This is the third year where we have obtained our five-star rating. So very well done to our sustainability team there. In terms of results, for 3Q, you can see in terms of overall portfolio, our gross revenue came down by 8%, our NPI also came down by 8%. In terms of, if you consider on the same store basis, excluding our divestment or devoting, that number would be basically the gross revenue drop of 3.4%, and MPI, same sort of basis, drop of 4.4%. Now, if you compare that to first half, for our overall revenue, the drop would have, excluding UBATI, the drop would have been minus 4.7% in first half. So we are talking for the, sorry, let me take that back. Let me rephrase that. For our retail revenue, for our retail revenue, it dropped for this third quarter minus 1.8% without equating for retail revenue. If you compare the first half, on the same basis, it will drop 4.7% without equating. So you can see that actually our retail revenue, the drop has narrowed. For business parks, the revenue this quarter dropped by 9.1%. Again, due to Singapore Hangzhou Phase 2. If you compare the first half, the drop was about minus 10%. Again, a slight narrowing of drop. In terms of logistics revenue, this quarter we went up by 13%. compared to the first half, where it was increased by 2%. That was mainly due to the improved occupancy at Shanghai Fengxian. Let me add more colour in terms of, just now I talked about the retail revenue, in terms of overall revenue drop from BPA as well. If you look at our overall revenue this quarter, it dropped by about 36 million RMB, of which 21 million came from the lost revenue from the divested reporting. So that's about 58%. About 10 million was from business stocks due to the conditions that I have mentioned. So that's about 28% of that drop. And the rest, came from what we have put here in terms of lower rents and occupancy at the Mall Sinan and mid-anchor tenant repositioning at Rock Square. For the Rock Square mid-anchor repositioning, right, we have basically have had a tenant open on 1st October. So that would go away in fourth queue. It was that space would start contributing and that tenant is Decathlon at Rock Square and the new tenant, Decathlon, has saw good traffic and started contributing to Rock Square's numbers from October onwards. In terms of MPI, I mentioned minus 8.5% overall year-on-year. Again, very much due to the divested in Huaqing's MPI loss. So on the same store basis, we see minus 4.4%. And of course, there are some other factors due to the overall drop in gross revenue from other asset class, other assets like the business stocks and some of the assets like capital more. On the other hand, it's partially offset by our cost reduction efforts of about 1.3% year-on-year on same-store basis. The next slide, we take a look at some of the retail metrics. If you look at shopper traffic and tenant sales, third queue compared to first half or nine months, for the year, you would see that 3Q actually both on shopper traffic and tenant sales have done quite well comparatively speaking. 3Q year-on-year increase in shopper traffic is 4.5%, tenant sales 3Q increase is 3.2%. One of the factors is I would say is that some of the Key sectors continue to do well. We also have the effect of better golden week holidays in 2025 than 2024. So for the key trade caps, if you look at F&B, we are plus 5.1% for year-on-year for the nine-month basis. Infotech, plus 12.8%. Toys and Hobbies, again, very strong momentum, plus 56%. and jewelry and watches, 16.6%. So these key factors continue to do well, whereas maybe some of, I mentioned before, some of the weaker ones, weaker categories like fashion and beauty and health continue to have single digits drop in sales year on year. In terms of AEI, we have completed, we have seen the contribution from Capital More Shareful and some contribution from Wang Jing which I'll talk about later. But here in this slide, we just wanted to highlight one of the key growth drivers for 3Q which is Capital More Shareful's AI that added 20.8% to our shareable traffic for that mall and a 24% increase in terms of 10 sales in that quarter. Occupancy costs continue to maintain at about 17.7. That's quite stable below pre-COVID levels. In terms of China's Golden Week, we saw, as I mentioned earlier, a better Golden Week than last year. So we had 4.6% year-on-year increase in traffic, about 4% increase in total sales versus the last comparative period for Golden Week last year. If you look at retail occupancy, we have a slight bump in this quarter. Some of our show malls called Xizhimen, Rock Square, Xuefu, Snowmolar are basically fully leased and that has helped to bring up the retail portfolio occupancy. There is continual repositioning for capital mall C9, which you can see the occupancy drops slightly. We are trying to work hard to pivot that mall to a new concept where we focus more on the IP and the anime and the young, to cater to the younger generation. So what we call And we are seeing some progress there, but in the interim, there will be some bumps in occupancy. In terms of retail reversions, we see that we now have a retail regression for nine months of about minus 1.5%. And these have narrowed from first half where we reported about minus 3%. And some of the reversions, stronger reversions in C, are from again, the strong categories that I spoke about, F&B, IT, toys and gifts. Again, the weaker versions are from fashion and beauty and health. So that's basically for retail. For business parks, our overall occupancy dropped by 86.9% to 85.2%. I'll explain shortly why that's happened. The Sing Su portfolio and our, our Sing Su portfolio has been relatively stable. There was a small drop due to one of the, one tenant, you know, basically giving up the space, but we are looking to fill them. The AIT asset in Xi'an, that asset has started to basically fill the Ping An's, filled the space that was located by one of our big tenants that left one year ago. And currently now we have brought it from 74.6% to 75.4%. We are making quite good progress. And by the end of December, we are looking for the occupancy of mid-80s. So we have some tenants already lined up So they were coming progressively and we hope that by end of December we will be able to push it up to the mid 80s. AIH continue to be at the mid 80s levels. 80s levels, there was some drop but we will try to fill in those tenants as well. For Hangzhou, Phase 1 had a small increase and Phase 2 where we had previously shared that we have basically taken over some service office tenant space. That was at about 25,000 square meters. In third quarter, we had another service office space, which when we review our tenant portfolio for phase two, we found that we wanted to proactively take over that service office tenant to basically start to convert them into spaces that we can control directly. There was, of course, learning from the earlier exercise where we took over the space on the service office operator. We thought that it may be better that we take it over earlier. so that the transition, if the service office operator dropped off, would be easier. So that was what we did in 3Q. You could see that that caused a temporal reduction in occupancy from 79.7% to 70.7%, because the service office was about 39,000 square meters, and when we take it Back, you know, we directly signed leases with the sub-tenants of which about 64% of that space was leased. So that cost basically had changed from a master lease of 100% to about 60% of the space being in our books being leased. We are working hard on this and we hope to repeat the success that we have with the other service office operator that we took in. In all, we took back, from the last round we took, plus this round, we took back about, I would say, about more than 50,000 square meters of space. We have now already listed out about 67% of that space, right? So in the fourth year, I think we should be able to push that phase two occupancy closer to what we saw in June 2025 of the high 70s market. For the business card reversion, for first half it was minus 8%, so for nine months, Including the third tier is minus 8.9%. So for business fund, we continue to deploy rental incentive as a key tactic to maintain our occupancy as well as preserve asset value in quite a challenging market in some of the business fund assets. Overall, you can see that our business parts continue to, in terms of occupancy, continue to outperform the sub-market. Sin Su in Suzhou, of course, outperformed quite significantly, about 30% For the Siam portfolio, AIT and AIH, currently it's slightly below sub-market, but with the committed Committed Finance, they have signed on in October. Our AIT-AIH as a cluster would have 83.9% occupancy that would have outperformed the sub-market. As I was mentioning before, we should see even more and that should push up the whole CN cluster above 83.9% in terms of occupancy. Hangzhou at 73%, it's also outperforming the Hangzhou sub-market. And we should, as I mentioned, involve key contingency improvements in our Hangzhou overall business park occupancy. In terms of logistics, we're quite stable. Same occupancy as June 25, 96.6%. The leprosy revisions that you see there basically is due to one of our review of our strategic anchor tenant at Wuhan, which was already previously reported. I will let Joanne take the capital management part before I close off.

Okay. On our financial position for this quarter, as you can see, the total debt has actually reduced from $1.8 billion to $1.6 billion. This is also actually because of the temporal use of the proceeds from the perpetual that we showed in September. That also actually brings down our gearing to 38.8%, as you can see. But we have actually redeemed the perpetual up there, I think two days ago. If we actually include that additional perks that we have used our loans to redeem, that gearing would have been 41.3%. On the average cost of debt in this quarter, it has actually improved from 3.42% to 3.36%. I think this is actually the fruits, the label of the fruits that we have actually earlier on issued CNH bonds and also all the initiatives that we have actually rolled out that at that point in time, CNH interest was actually lower and we actually benefited and that can be seen from the cost of debt in this quarter. Our ICR is at 2.9 times. and average step to maturity is 3.4 years. In terms of the ICR sensitivity, as you can see on the right table, on a 100 basis coin interest rates movement, our ICR is still at 2.3 level, which is a healthy level. Same goes for the sensitivity on the EBITDA. A 10% decrease on the EBITDA, my ICR is still at 2.6 times. That is way above the requirement by MAS of the 1.8 times where we need to actually explain and put out some explanation to that. We also have a sensitivity in terms of the gearing. On a 1% movement of $10 to the new fee, our gearing will move about 0.27%. I think this is something that we actually put out on a pet maturity profile. As you can see, for 2025, we're actually pretty done. There's nothing that is due for refinancing for 2025. In fact, I think the team has actually proactively looked out to actually extend our loans. And then we actually worked on the 2026 Tower. $120 million, which was actually a $10 debt, has actually been refined, will be refined to a learning fee debt. I think we are working towards what we have actually communicated to the investors that by end of this year, we are actually targeting our learning fee debt as a total percentage of our total debt to be at least 50%. As of 30th September, we are actually reporting a 45%. I think By end of the year, we will definitely be more than 50% as what we have actually wanted to achieve. As a percentage of total fixed food floating, we're at 80% fixed this quarter. This level is at this level because, again, for the temporal perpetuation that we used to proceed, we actually had our floating debt. And in this percentage, you will see that this fixed percentage will come up a little bit. to actually benefit from the lower SORA that we're seeing right now in the current industry environment. And I think in terms of the debt funding mix, we're pretty well mixed. We've introduced remunerated bond. We also have done actually debt bond and also increased our onshore remunerated loans percentage. I think that's a little bit color of the debt maturity profile and capital management. I'll hand back to Jerry to actually... Okay, so thanks, Joyce.

So looking forward to the fourth queue, to the end of the year, some of the things that our stakeholders can look forward to. In terms of our AIs, for Capital Mall Guangjing, where we transform a large super-mounted area into a higher building retail space overall, we have successfully leased 100% of the AI area. achieving an ROI of 12.6%, very well done AEI and achieving a very good return of our investment and capex in this area. Currently now on 1st October, in fact, we are ahead of schedule. We were actually initially thinking that we would be only able to open the space in November, but now we have managed to basically open it in 1st October. About 14 out of 27 tenants have opened, including 7 Fresh, which also when they opened did very well. The redeeming shops were open progressively throughout October and November. Our AI area was open right before the Golden Week period, so that has really helped to increase the shopper traffic and tenant sales that Capital Mall wants in. In terms of the Golden Week performance, you can see that our shopper traffic went up at 13%. Tenant sales went up at 21%. The supermarket itself really outperformed in terms of per square foot sales versus the previous supermarket at 177 times. So very efficient use of space and very good sales. So I would say that we are looking very good in terms of this AEI. In terms of capital more share, I think last, first time we shared already about it, for our animation, comics and game street, now besides the supermarket has opened, now the game street, ACG street has now opened. This 2105 square meter NLA, where we transform it you know, previously, again, it was part of the original supermarket. We took it back and then now transformed into a thin street. It's 100% occupied next to our beautiful supermarket which opened in June. This street now has 13 brands, 9 of which are introduced to the whole Captain Moss for the first time. So, these are some of the popular 3CG brands where we are trying to basically build an area which leverage and which would basically be able to attract more IP merchandising such as tenants into the space and which would attract also a different demographic, a younger consumer demographic, a Gen Z demographic who are really into IP merchandising and the offerings that we are putting into this suite. So if you look at the first month since the suite has opened, the shopper traffic has increased by 18% year-on-year. Total rental increase that we have achieved here for this Shareful AEI is 13.1%. In terms of how we are creating value through our strategy, We have already achieved entering the CREIT market this year by listing CLCR and becoming a key stakeholder. That gives our unique holders access to the China domestic capital market. In fact, we are proud to say that we are the only SREIT or perhaps the only REIT in Asia that would be able to allow our unique holders access to the CREIT market. In terms of unlocking value, we have recited Captain Mo Yu Hua Ting. We divested Yu Hua Ting through the seaweed securitization at a premium. Basically, it was 8.8% premium to our announced floor price. And it was also a 4% premium above Yu Hua Ting's 2024 valuation. So this, I would say, is a very good outcome. In terms of NTIU, exit NTIU, it was a very competitive, very attractive 6.2% NTIU that we have exited at for basically tier 2 CP asset. This really shows how we can effectively take an asset like Inquarting, even though it's a tier 2 city asset, add value to it over time, we bought it maybe about five years ago, and then be able to recycle that asset into a series existing at a premium. at a good yield, and then bringing back money, and then being able to then find new ways to redeploy that capital. And this S3 series connection, I think in the months ahead and the next year, we will try to continue to exploit our unique advantage that I continue to see whether we have more opportunities to do such activities. In terms of extracting value, we continue to look at our AEI as an important way to drive some organic growth. So we have already announced Wang Jing and Shefu's successful completion. The next one up is Xizimeng, which we are looking forward to completion in fourth Q. Currently, the AI work is going well. The tenant is doing AI work, which is basically 89% completed. We are now looking forward to them getting approvals to open. Hopefully, by the time we get the fourth key, we'll be able to give you some good news and also some snapshot of how it's looking like. In terms of capital management, we have been very proactive at that. We told our stakeholders and union holders that we want to aim for 50% of that being renminbi denominated debt so that we basically have a better currency mix and asset liability matching in terms of our renminbi exposure. And we have basically have achieved that. We have achieved that. And by the end of December, I think we would have seen that we are making very big efforts and have successfully outperformed this 15% market. With that, maybe I'll pass back over to Xiuyi to take in questions.

Okay, thank you, Jerry, for your presentation. Now let's proceed to the Q&A segment. We have the first question from Jerry. I'll pass the time to you. Please go ahead.

Hi, good morning. Thank you. Can you hear me? Okay. Hi, Gary and Tim. I just wanted to ask a few questions. So firstly, if I move, I'll start with retail, right? I mean, your numbers, sales and traffic looks pretty okay, but your reversions are still negative. I'm just wondering whether, when should we see that turn coming? And do you have a guidance for that? Maybe that's my first one.

I think I previously shared, in terms of reversion, Quarter to quarter, we are seeing plus 3, minus 3 sort of range. This quarter was a better quarter where we had some good reversions from some of the stronger trick caps. So we sort of basically improved on the first half. But first half, I think we I mentioned before, you know, we have, you know, a mini anchor repositioned decathlon at Rock Square that basically brought down the reversion a bit. And also we were transiting from some of the higher rental easy tenants in some of our malls. Some of them have basically, you know, consolidated, right? So we have replaced them with different trade cap. So that affected, you know, the reversion in the first half. So going forward, now that we have basically worked that out, our reversions will probably look at, you know, in that type range of, I think, flat to maybe slightly negative like, you know, what we are seeing currently.

Sorry, you're still looking at flat to negative. That's the guidance still at this point.

Yes, I think at this moment, the balance is such that there are some trade caps that are doing well. So that's contributing positive reversions. But there are also other trade caps that are doing not as well, which I've mentioned before, fashion and beauty and health. And overall, while sales are as you can see sales and traffic are doing well but they are still in an environment where in terms of extending stays are being cautious right so it's also be quite difficult for some of the trade caps to ask them for rental increase yeah maybe just to add another perspective

I think our stronger moors are actually doing okay. Do register generally flat to flat positive that we wanted. But there are also moors that have been going through repositioning, composing on Isamonton. I think we still continue to see a bit of adjustment there. So that's why you see as a whole, we remain ambitious. The other perspective is that I think you probably are also aware that the, you know, say for example, when people got to spend the... capital spending tend to be more on the downside. So I think the tenants are also aware of that because they actually do give a lot of the sales promotions and all that. So while sales is actually on the healthy trend, I think their profit margins are also still having a great pressure. So I think in negotiating with the landlord on the rental, we continue to be cautious in terms of how they actually expand. I mean, things will be better next year, but I think at this moment, we still would want to be driving a bit more cautious.

Sure, no problem. I just want to, as an observation, I'm not sure whether it's the right kind of comparison, but if you compare to your peers, right? For example, people like Nick C is doing pretty okay. I'm just wondering whether it's a function of the tenants or the trade cap or just maybe the positioning in the retail sector. Just wondering your thoughts on that.

Maybe, I mean, we can't speak as a whole, but when we actually visited some of the Nixie's properties and based on the conversation that we had, they had, I would say, some of the malls were opened in the more recent times and their strategy would have been starting from a low base, get the mall filled up, and then as business continues, then rent up. I think there are certainly some effect from there. In fact, when we compare some of the malls that we are in our portfolio and similar location, our rent are actually not lower. From that point of view, there's a bit of a catch up in the rent, I feel, from those, you know, newly opened malls.

Got it, got it. Thanks for the comment. So, I mean, last one for retail, your out-cost, do you have an exact sense for me?

Yes, I think we have an out-cost. It's still about, you know, 17, high 17s to about 18.

Okay, got it. Pretty healthy. Yeah, pretty healthy. this that we saw deep in occupant reversions but also occupancy is a bit soft selected assets so I mean I know Gary you mentioned you took back some space and you managed to work on it yourself so you look at say going forward like reversions negatives which is the one that would move into a positive territory first so occupancy first or reversions occupancy So you'll be focused on occupancy going to a certain level before you start to be a bit more strict on rents.

Yes, I think clearly for the business park factor, I think everyone is almost in the same direction, us as well as other competitors. Everyone is focusing on occupancy. Just now I mentioned for our CIAN cluster, AIT and AIH, right uh you know we we uh with some of the commuter occupancy that we have or in october as a group we are we as a sian group uh it's not about 84 percent right uh we have brought it up in terms of commuter occupancy but we'll continue to bring it up uh hopefully uh to the high high 80s by end of december For Hangzhou, it's the same thing, right? Currently, maybe as a group, it's about low 70s. But by end of December, as we work through that, those service office return stays that we are working on directly, we should be able to bring it up. Hopefully, we'll be able to bring it up to the high 70s.

Okay, okay. Got it, got it, got it. Thank you. And thank you very much. That's all from me. I'll go over to the back of you.

No problem. Thank you, Derek. We have the next question from Ada. Please go ahead.

Hi, Jerry. Thanks a lot for the presentation. A couple of questions for me, a bit more in terms of the divestment proceeds from Captain Mo Yu Hua Ting. So I'm just wondering, what are your thoughts on conducting a unique buyback at this juncture versus tiring down debt?

Okay. So currently... whatever proceeds that we bring back, the likelihood that immediately, we'll probably use it to temporarily pay down debt first, because that's the fastest way to use the proceeds. This, Florian can share a little bit more about timing and all that later. But in terms of the middle-term plan, in terms of how to make use of, obviously, after you pay down debt, we have a slightly better gearing headroom I'm still looking at it together with the team. One of the options, of course, like you mentioned, is a unit buyback plan. Today, as you can see earlier in our slide, our trading is about 6 plus percent, right? Maybe give it, it was in first queue, or first queue to second queue, it was 8%. So, if you ask me, when it was first Q and second Q, 8%, there was a very strong, of course, rationale to do the unit buyback. Now, it's about 6%. It's still, I would say, maybe an opportunity, but I think now we have to weigh against maybe other opportunities that may come up. And I've mentioned before the fact that I want to look at ways to continue to exploit the SRE and CRE connection that we have now. I believe that we are in a position where we can now actually go and look in the market, specifically at retail assets. As you can tell, because we have sold the URP asset, we lost some income. If we can find a solid asset that basically has long-term value and at yields that are higher than our trading yield and also higher than the asset that we have divested, right? That becomes maybe another option for us to basically use our garing hood boom, right? We could deploy into those, to such a retail asset And then, of course, continuing in the long term to have a pipeline of good retail assets which when their value has peaked, we can then rotate them and securitize them in the CW. So that's what we are thinking through now, right? That's what we are looking at the market right now to see whether there are such opportunities. I give myself, we give ourselves about maybe six to nine months to go through the exercise, right? And we'll come back to unique holders when, you know, we have made that position. But certainly, unique buyback is still on the table if we cannot find better use of the money.

Got it. That's very clear. Thanks a lot. I guess in a kind of tangential note, given that we have potentially got a lower gearing, and still that $107 million worth of offshore CNY debt that is coming due next year, where do you see your cost of debt trending in FY26?

Joanne, you can take that.

Okay. For us, I think like I mentioned earlier on, we already actually have seen our cost of debt improving from this year to this last year. I think it's also because of the effort that we actually have achieved more running fee loans on our foot. So going forward, I think if this continues, as we mentioned, where we are actually also embarking that at least 50% of folks are willing to pay debt, we see that the average cost of debt will actually hovers around this level. So what I want to say is that actually we have already benefited from the lower cost of debt beginning of this year already.

Okay, got it. Just one last question for me, a bit more of a stupid question. But back in first half 25, we actually retained about $1.8 million S3D that was contributed by Capital Mall Yu Hua Ting in terms of distributions. So I'm assuming that all of this will kind of be sort of returned to the REIT to form the second half DPU. And also given the cut over the 29th September for CLCR, should we still expect any contributions from the asset for the second half sort of DPU?

Yeah, you're correct. In one half, we actually retained 2Q IHT contribution. At that point in time, we were actually not very clear in terms of the regulation on what is the cut-off date of the transaction. But following on the IPO of this asset in CRCR, the initial date or rather the cut-off date has actually been confirmed that it will be on 31st March. So, having said that, it means that we will not be able to actually have re-quarting contributions starting from 1st April onwards. So, in other words, the 2Q retention of re-quarting will not be released back to the union holders. and at the same time as what we have also shared in terms of operation numbers pre-queue reporting is also not inside the NPI where we actually present it.

Okay, understand. Thanks a lot. I'll come back to the queue. Thank you, Lisa. We have the next question from Hongwei. Go ahead.

Oh, hello. Thank you. This is Hongwei from OCBC. I just have three questions. So my first question is on the tenant retention issue. So I see that for retail, for example, the renewed leases is actually less than half of those. So just wondering how sticky are the tenants and are these tenants churning in and out quite rapidly? So that's my first question. And the second one is that there's certain quick categories that really boom a lot in tenant sales. so I think that also contributed to some of these tenant sales figures being supportive so is this something that's sustainable or do you think this will come off and closely related to these tenant sales question is I mean just now talk about occupancy cost so it's come down to a level where you mentioned is healthy but you know I think Derek also mentioned and asked about the negative rental reversion so just wondering is 17.7% something that is going to be where you will stabilize that or do you think you will go up or down from here? So that's my second question. And my third question is that U-Harting has been divested. So I think now GRI, you know, about 70% is coming from retail. A couple of years ago, there was a roadmap to reduce retail down to 30%. So I mean, obviously, a lot of things have changed since then. So is that a kind of a refresh target or roadmap? So that's my third question.

Okay, I think the first two questions that you can take, I can take the third question in terms of strategy, I think.

Okay, on the trade cap sales, I think... Of course, different trades behave slightly differently. In terms of F&B, we actually continue to see good traction, and I think there are interesting brands that are coming up. And so on the retention side, in fact, that also, from our experience, I think for retail malls, refreshing 50% to 50% of the area brands is quite common. And if not, I think we also would run a risk of at times, you know, our shoppers getting a bit tired of the same, you know, color. So I think that churn, we are not too worried about. Indeed, what kind of tenant that we need, what kind of tenant that goes out, it's more of a question to us so i mentioned about the fnb in terms of toys and hobbies this traditionally is not a big trade category but benefited from the likes of the progma and a few other names it did actually give us a very good sales momentum so far we see that trend is still continuing IT side, I think the first half indeed benefited quite a bit from the so-called government's incentive, the trading program. So I think there is that benefit. And Q3, we are seeing slightly papering down a bit. What we believe on the ground is that the trading program and then the incentives are still ongoing. But I think perhaps the quotas, the timing, the vouchers have given, as well as the fact that the novelty, some of the people would have already done their big shopping in the first half. Q3, the effect will not be as big, but still on a year-on-year basis, it's still an increment. Jewelry and sales will still see increase. So I think if you ask me whether the sales momentum will continue to grow, I think it's still a healthy recovery and some of the rotational trade cap shift will still continue. That's the trade cap sales retention question. On the off-cost From what we see, I think this is generally, I mean, all costs is a function of rent and sales. So from that point of view, all costs will probably stabilize at this stage and then may trend out a bit if our sales continue to grow. But I think that probably will set a good momentum when I think the tenants are actually really feeling the confidence coming back and for us to actually engage them in a positive rent cycle negotiation. But like I mentioned, that hopefully will happen sooner than later in next year.

Okay. On the question of strategy and asset allocation, Currently, we are about 70 plus percent retail. As you have noted, many things have changed versus a couple of years ago. The new economy sector, of course, have been quite in a turbulent time, relatively speaking, compared to our retail, which are very defensive asset class. On top of that, you know, we have successfully listed a new recycling vehicle, right? Securitizing vehicle through the CRIG. So in our view, you know, we want to revolve our strategy now towards this competitive and strategic advantage that we have in terms of the retail value chain, right? So I see ourselves focusing more on the retail side of the business rather than, say, growing the new economy side of the business in terms of asset allocation.

Okay, thanks a lot for answering my three questions in depth.

Okay, thank you, Hongwei. We have the next question from Youqiang Fisco ahead.

hi jerry uh just just a very quick one you mentioned you want to look at china um maybe potentially for acquisitions again can you can you give us a some color on what's happening on the ground are there distress deals and what's the kind of fabrics for retail uh in the market right now thanks okay i'll maybe introduce this shortly but i'll let you home take uh

you know that question because he looks at it from an investment point of view, but indeed, you know, I would say that we are just starting to scan the market more actively, right? I mean, we haven't bought a retail mall for some time, right? But from From our perspective, this asset has been a very defensive asset on our portfolio and particularly retail malls that are more mid-market have good traffic connections. In dance, residential catchment, those are the ones that in our portfolio have done well and want to add such such assets into our portfolio, if we can find them. I will let Yu Hong take maybe the current market conditions.

I think the market has been, I would say, still investment market relatively soft between institutions. The transition volumes, I think, have not really cut that much, especially in the retail scene. Traditionally, it was not a very big market, and then it requires a lot of operation capabilities. I mean, the market has been actually active and then giving very attractive, I would say, valuations. In the set that we have traded, it's giving us about 6% exit cap that we hope to achieve. And then for first year, I think it will be one notch lower, close to the 5%. Whereas in the capital market side, Things are a bit different. I would say when I say capital market, it's more the physical, physical, the on-block sales market. I think generally capital people with offer spread are still large. I think any buyer are still asking higher than what I've spoken about in terms of at least 1-2% or 100-200 basis points. I think this is where things are. We are still at early days, so we hope to come back to you.

So, like what Yuheng said, I think I summarized that liquidity is keen in the unblocked market, right? That's across asset class, not only retail, but retail because niche expertise tend to be blocky, chunky in terms of size, right? So, that increased the level of market dislocation that we are seeing. And because now with our, I would say, superior conditions for investing in such asset, we are backed by our sponsor and our operator who have retail expertise for 30 years in China. They have proven track record of value adding to retail assets. And we now have the ability to recycle older assets into a series, helping us to achieve liquidity when we need them. We feel pretty good about trying to find opportunities under this environment of market dislocation. And particularly, we want to focus on retail.

Thanks. Thank you, Yukiang. We have another question from Derek. Please go ahead.

Hi, good morning. Jerry, I just wanted to have a follow up on the questions, right? So, I mean, you have done the series, which was a great recycling avenue for us. But going forward, right, is that the only one that you think is most viable at this point in time? And thinking about, I say, you also looking at acquisitions, right? I mean, my own thoughts are that you're gearing at 38%. That capacity is not, say, a lot or so. So I'm just wondering whether how should we think about your capital and the size of the deals that you potentially could look at. Yeah, just these two. Thanks.

I think you are referring to whether Yu Hua Ting is the only one that could actually be injected with the seaweed, is that correct?

I think one year's time they can buy more from you, but I'm just wondering whether at this point in time, is this the only avenue that you think is open for you for now?

I'm just curious. I think this would be a key way that, you know, we want to utilize, though it's not the only way. You know, I mean, people can share that there are, you know, there are third-party avenues. But generally speaking, I think valuations for the right assets, probably you can achieve better valuations through the CRIP securitization. And of course, not everyone can basically securitize through CRIP. as you know, it's not easy to lease a CRIP and we are the only basically foreign sponsor to lease a retail CRIP on the A share. So we have the advantage, so of course we want to make use of that advantage. So that's one. Two, I think your question of you know, the balance sheet, right, of course, you know, we divested Yu Hua Ting, clearly, you know, that's all a bite size of about, you know, 1 billion remuneration of asset. It's clearly something that would be interesting and that would replace, you know, sort of the Yu Hua Ting asset size. And if we require, if we find an asset, for example, that is bigger, I don't know, say $2 billion, we may have other ways to raise money. As I said, we are continually looking at targets where we can recycle some capital. Of course, the series is one avenue. I did mention that I want to continue to utilize that channel to basically get capital when I need it. So there are, in fact, something that Duhong is actively looking at. Yung, you want to add anything else?

Yeah, in terms of divestment channels, I think we have in the past been able to divest a step to the various local institutions. So I would say that some look for income, right? Some look for alternative use. So in this market, like what Jerry alluded to, I think the liquidity is relatively thin. So on the alternative use, I think we are seeing buyers being generally more cautious, where if they are looking for income, I think, again, in this market where the big offer spread is still, you know, a bit wide, I still think 4BTV is the best option for us.

Okay, got it, got it. So, for me, if you think about, let's say, your capital sources, right, that you want to tap, so I would presume that you would look at the investments first, followed by their capacity, perhaps then equity. So, is equity something that you think you want to tap at the right opportunity?

I mean, it's not something that we can speculate I think at the end of the day, it's the quality of the asset that we are looking at, whether on a stabilized basis, the asset that we actually find can justify the use of capital. I think that's the starting point. If we don't find a good asset that meets all these criteria, then obviously we won't force it. Got it, got it.

Okay, no problem. Thanks for that. Thank you for your insights.

Thanks, Eric. You can have your hand if you really do have another question.

No, sorry.

Okay, are there other questions from the floor? Okay, since there are no questions, this concludes our session for today. Thank you all for joining and please feel free to reach out to me on my team if you have any further questions. Thank you all and have a great day.