Capitaland Integrtd Unit

Hi, good morning ladies and gentlemen. A very warm welcome to CICT's first half 2023 financial results briefing. My name is Clarice and I'm from the CICT investor relations team. It's my pleasure to be our MC for today. CICT released our first half 2023 financial results this morning and we are pleased to have our management team here to share the highlights with you. We will be starting off with a presentation by our CEO, Mr. Tony Tan, followed by a question and answer session with our management team. I will be introducing them later. Before we start, please take note that this briefing is live, recorded and will be uploaded on our website later. Without further ado, let's welcome Tony on stage for his presentation.

Good morning. It's a little bit formal. I don't know why. That's not my typical style. Thanks for coming. First thing in the morning, I think we released our result this morning. You probably have seen it, a little bit of glimpse. I will not want to delve too much on the details. I think they probably have a lot of burning questions you have, given the diverse kind of probably what you see out already released in the market against our peers. And hopefully it will give you a little bit more insight into how we look at the business, which is more important from a forward-looking perspective. So I'll just give you some very high-level update. So overall, I think we helped quite steadily first half. I think on the back of, you probably know, the reopening started last year more intensively from April onwards. So second quarter to second quarter comparison, naturally you are comparing against a high base. So the first half, you look at the first half result and the first quarter result, you see a little bit of tapering off in some of the numbers. But nevertheless, we were quite pleased that the momentum in second quarter seems to be holding quite okay. against our earlier expectation to have a deeper decline given the macro outlook. So second quarter looks pretty decent, both from the operational level and also from the macro level. It looks like things are panning out not as bad as what some of the analysts or economists are painting the picture out there. But nevertheless, we know the headwind in the second half potentially can build up. But there also seems to be some sign of a little bit of green shoot. Inflation seems to be peaking in many places. That's probably the key factor underpinning the performance of the REITs. And then for us, obviously, on the ground in Singapore and some of the market in overseas, we are also seeing a little bit of that impact coming through. So some high-level numbers. MPI, 10.1% increase year-on-year. Again, it's a moderation from first quarter. DI went up by 1.7%. So a lot of the distribution has been eaten away by interest costs, largely. And the DPU increased by 1.5%. Overall, we've seen the portfolio pretty resilient from an occupancy point of view. Across the board, both the retail and office assets, we've seen the occupancy creeping up. It's in a way a manifestation of a little bit of confidence level hopefully coming back into the marketplace against a backdrop of maybe three months ago where there seems to be a little bit more uncertainty. Tenancy is also trending well. Very pleased that we have seen both downtown and suburban mall are picking up. Downtown mall naturally helped a little bit by the increase. Incrementally, we see more tourists coming back. Going back to office seems to have normalized to a large extent and seen a little bit busy cloud nowadays downtown location. Suburban holding out pretty well against my earlier rejection that I thought when the border start reopening, we've seen a lot of probably outbound traveler, which we have seen a little bit, but seems like the sales have been tracking quite nicely. So overall, I would say the outlook for retail office, while we are cautious, but we think that there's a little bit of green shoot coming up. Hopefully that will pan out through in the second half onward. So the NPI I mentioned earlier, so DI I mentioned earlier, up by 1.7%. DPU is up by 1.5% against the last year, first half lower base. Hopefully second half will deliver a bit better numbers. We also since started to receive distribution coming from CapSpring. If you recall CapSpring, we list up quite well, but there always been a little bit of different timing gap. We begin to see distribution coming back from CapSpring. Our overseas assets are starting to contribute, albeit at a lower level than we hoped for, but I think they are starting to contribute. And obviously the CapSky that we computed last year are going full steam and it's trading very well. um overall like i alluded to earlier the portfolio number has been very encouraging from the occupancy perspective it creep up uh overall about uh from 96.2 first quarter to 96.7 you know about 0.5 point on the quarter quarter movement um the total In fact, the rental reversion, we were quite pleased that we were able to extract a little bit more reversion out from both the retail and office. And as a result, you can see quite a nice uplift between the first quarter and the first half rental reversion. And within the office and retail, quite diverse range, the retail side, office side, we've seen a low of a 3 plus percent kind of reversion, depends on your expiring rent, to a high of 20%. So that blended up into a about six point, this office is about six point something percent. Retail, we're looking at a range of around 2% to up to about 31%. So it's quite a wide, diverse range. But nevertheless, pretty healthy across the board. Shopper traffic momentum, I think, which is expected next second half, probably will slow down a little bit given the higher base last year. But still a very decent shopper traffic we are seeing to the more. Although it's already, in fact, higher than what we've seen in... probably close to almost 2019 level, not far away from 2019 level. And tenant sales, we continue to maintain, in fact, higher than pre-COVID. On the overall portfolio-wide, it's about 8.3% higher than pre-COVID. Total borrowing, we have fixed up to 70%. We have done some issuance, which I elaborated later on. And now we have a very healthy maturity profile, 4.3 years left in the debt side. Just some colours. Clark Key, you hope to complete by later part of fourth quarter, as in TOP. Progressively, as you visit, if you do go down CQ, Periodically, you're seeing some movement of tenants, some movement in terms of the hoarding. Progressively, we will remove some hoardings. Hopefully, we can start to bring in some of the tenants that we have pre-committed and start trading earlier. But gradually, we see a little bit more ramp up, probably towards the later part of this year, where the bow of the handover will happen. Raffles City I've seen also quite a nice refreshment. We have done through quite a significant reposition of Raffles City. I would say we are only at phase one of the repositioning. roughly 40% or plus each of our brand and target positioning has been achieved. And we're looking to look at remaining about 25-30% of the tenancy that we need to do a little bit of adjustments. Nonetheless, I think the refresh city, we are quite happy with it. And we've brought a lot of our investors from overseas and is local as well. to explain to them what we are doing, why we position Rafa's cities where I think most of them has been quite pleased with what they see the outcome. Overseas assets, sorry. Yeah. I think overseas, as I alluded earlier, it's a little bit of a green shoot. We have ramped up a little bit on the occupancy for Sydney. It's gone up from first quarter 83.4% to today we are looking at 88.6%. Pretty healthy take-up rate, for example, 66 Goldman. Today we are close to 96% committed. And we are working through some of the other asset plans. And we have seen some interesting phenomena which we tested in the market over there. They seem to have a bit of preference for, at least in this environment where there's some level of uncertainty. Pre-fitted up units seems to have a little bit of traction there. You know, when you get a place well decked up, very conducive environment for their staff. And if they want to make the decision quick, I think they can come in quite quickly. So we thought that decision to do some fit of space was right. But we are trying out the other building as well. In Frankfurt, a little bit creeped up in occupancy, largely from MAC. I think last quarter we were looking at 94-ish percent, today we are 95.3%. So, largely pulled up by the MAC, the airport office asset we have. All y'all know that Galileo will undergo AEI from January next year, 24th. That will be the last day we get rent. February onward, there will be no rent. But we're also very pleased to say that we are actually in quite advanced discussion with a major tenant that will take up large majority of the building. So hopefully we can give a little bit more news as we progress along. Financial-wise, I think I won't dwell too much. Maybe just a few points to note. So there are some plus and minuses, first half, second half, we're looking at. Generally, from a trading perspective, at least for retail, the second half will typically perform a little bit better than the first half because of the seasonal factor. From an operational level, first half we have seen the peak of our tariff rate, which is very high. We lock in about 30, made 30 cents. Come for second half and for 2024, it is quite a significant reduction, about 16% lower than we have locked in. So we would have a little bit of savings, hopefully, if you continue to be very vigilant and Make sure we manage the consumption carefully. There should be some savings on the utility side as well. You'll probably also know that we have resigned a new PMA, which took effect from 1st June. So there'll be a little bit of adjustment potentially towards the end of the year. We'll look at some cost realignment based on the new PMA. Hopefully, we can see some savings as well. And lastly, because we also have lock-in our interest costs. We issue a bond, 400 million in June, at 3.938%. That will take away some volatility in the short-term rate, which is very elevated. You know, today you go to the short-term market, on a floating basis, you're probably looking at 4.5% easily. Easily 4.5%, right? Depends on which tenant you're looking at. So hopefully on the second half, we start to see a little bit better cash flow coming in. We have not touched our 40 million, which we take in the back from Australia. When we did acquisition, we have not touched it there. We try not to. If we need to supplement, we will do that. But ideally, we try not to touch it. We start to see some contribution, which I mentioned earlier, from CapSpring. Hopefully, that will improve and accelerate from second half and 2024 onwards. So hopefully we can get all these mitigating factors to buffer the Galio effect. So Galio effect, Galio is about 1.5% of our contribution. So hopefully that would be enough to cut buffer then. And with all the positive reversion that we are seeing, that should translate into better numbers going forward. Okay, this one I won't touch too much. I think you all should know very well, can analyze. Maybe just to give you a little bit of flavor, I think balance sheet side, very healthy. Just now there was asked a question, some of the peers did their evaluation. I think we did an internal exercise, we did assessment in consultation with the valuer. In fact, overall as a portfolio, we've seen very stable number. Singapore very healthy a little bit downside risk from overseas asset but we see how it goes for the rest of the year but overall as a portfolio we think the number is pretty okay I think holding quite well but we have seen a little bit of uplift in our NAV as well and that's It's a result of a grant that we managed to receive from the government to offset the cost of us building the underpass at Funan. So that goes into our balance sheet and it's almost an immediate accretion on NAV by one cent. Okay, so we've been quite active, no doubt in a very volatile interest rate environment. We've been quite active on the capital management side. We did bond issue I mentioned earlier, but also we've been very active in the cash management side. So trying to minimize as much as possible the unnecessary debt carrying on our book. You know, if you look at, I mean, later you can talk to Mei Lian, she'll give you a little bit more colours. But we have different tools in place that we can tap, you know, if you need to raise money. We have a CP program in place, we have MTM program in place. We have more than enough bilateral bank relationship. In fact, we cover entire maturity for, in fact, I can jump a little bit, maturity for even 2024. So this year we are done, right? 2024, technically we are done because we have enough line. But we will look at the opportune time where we perhaps want to start looking at the potential debt issues, hopefully, and maybe potentially we'll look at some kind of early prolongation. So we are in discussion with some financial institutions and see how things can move from there. But I must say, in the environment today and the next six to 12 months where everybody is start guessing how the interest rate will look like, of course there are very diverse views in the marketplace, active capital and interest rate management I think is key. The rest are sensitivity. I mean, these are no rocket science. It's essentially the floating part. We left about 22% of our floating rate. If you measure that against any change in interest rate, that would be the impact you see here. Nothing else, I think this one I mentioned before, I think across the different sub-sector we are seeing increased occupancy and we should potentially see as we work through the remaining of the leases and we start to also go into a 2024 lease expiry, you can potentially see improvement even from the current state. Let me just jump straight. Retail, I gave you a little bit of flavor earlier. I think I don't want to say too much. The reversion number speaks for itself. I think you've seen a little bit of narrowing of gap between the downtown suburb, but nevertheless very healthy. Again, it's a very diverse range of reversion number that I mentioned to you earlier. So this is something I don't think I'll detail too much. Something to note that which also took courage, we've seen a bit of a shift Now, these are important because we track all these performance by trade cap very carefully because it affects the way you look at our asset planning going forward. Compared last quarter, this quarter, we've seen actually largely the same asset, a big jump from improvement from the beauty and health. Because first quarter, we've seen a negative number and beauty and health is our third largest trade cap. So this one do well. you have some implication on the way we look at positioning. So I think we are quite pleased that this sector has been seeing a nice uplift in the second quarter. Okay, this one I mentioned earlier, I think while we work through Singapore, 96.6% slightly below, in fact, it's slightly higher or flattish. But we are working to the remainder of leases, so you should see that coming through in the third and fourth quarter on the occupancy side. Germany, I mentioned before, MAC in fact, and the Galileo, and I mentioned before, we are working on potentially a single tenant taking large majority of space. And Australia has seen a little bit of a nice ramp up. Hopefully we can achieve even higher occupancy by year end. Overall, no, nothing much. I mean, these are our BAU. We constantly try to curate new stuff. It's important. It's also a signal to the market that there's still confidence coming in the retail sector. Some new to market brand, we managed to bring into our property, both in downtown and suburban. I think that's very encouraging. And I must thank our property management team. In fact, Chris is here. I mean, he's helping us on the retail side. His team are working very hard to make sure we differentiate ourselves from our competition. Okay, the rest I won't talk too much. I think outlook-wise, all you analysts, you know pretty much very well what we are seeing on the ground. Hopefully that manifests in a real movement. I mentioned earlier, we've seen probably potentially a little bit of a green shoot. Hopefully that's real. Insignia, for example, has been busy. Our folks are on the ground. People are coming back to the office more regularly now. The subway line and the train station are getting busy. A few assets we need to work on. Hopefully we can translate that into high occupancy. The retail side in the Sydney asset, which is the one in the Greenwood Plaza, I think that's probably going to take a little bit more time. We need some repositioning of that retail space. Location very prime, connected to the subway line. It's no different from the reference place. But I think we need to position it correctly. Currently, we're working alongside with our partner, MoVac, to look at the plan. Yeah. And in fact, there's a bit of a cross exchange and hopefully we can bring them over to Singapore to see some of the things we are doing here. Germany side, I did mention earlier that it's not as grim as what you see on the headline. It's on the ground, it's just pretty busy. We've seen some leasing momentum picking up. MAC, for example, some energy sector, some aviation sectors are starting to look at space again. in the midst of some tenants who are looking at right-sizing. But all this, I think, is a little bit healthy movement we're going forward. And hopefully with a little bit higher, in fact, very much elevated cost of capital, we potentially would see in the past always large development pipeline will slowly taper down. Because I think in the past, both in the Sydney market and in the German market, the low cost of capital has created quite a bit of speculative kind of development activity. We think going forward that activity should taper down. I think value creation, no different. We have been doing that all the time. We continue to be very agile. Look at our portfolio. Earlier, I also have a question about when you acquire, let's say 700 million and 800 million, then it became now 700. I mean, to us, we are long-term player, right? Valuation goes up and down, and sometimes it's triggered by factors that are beyond your control. Interest rate, cap rate, transaction. And different market look at valuation in a different way. But one key thing is if we position the asset right, I mean, that's the key fundamental. Driving value will come later. For us, critically, we need to make sure every of the assets will have the chance to run its full potential. And we keep pace. We keep pace to ensure that we put in the necessary capacity at the right time. not overly burdened on the portfolio in a particular year. So we try to keep pace with that. But overall, we like to keep some dry powder for other works along the way. This will ensure that CICT will be able to deliver a resilient and consistent return. And that should translate over time a higher confidence on CICT as a very stable vehicle with growth. I mean, that's ultimately our objective. Highly liquid, stable vehicle, low risk premium. I think we can achieve that. We have a tremendous advantage over our peers. I think with that, I'll stop here. Happy to take questions. And I invite my team member here who has been very instrumental in getting all this execution right. Thanks.

Thanks Tony. May I invite the management team on stage? Let me quickly introduce our panel today. Sitting in the center, we have Tony. On Tony's right, we have Ms Wong Mei Lian, our CFO. On Tony's left, we have our Head of Investment, Ms Jacqueline Lee. And to the far left, we have Mr Lee Yi Chuan, our Head of Portfolio Management. Some quick housekeeping rules before we start. For our physical audience, please raise your hands if you have any questions. Please state your name and company. And we kindly ask that you limit to two questions per turn. If you have more questions, we will also go back to you. For our online audience, please feel free to join in by dropping your questions in the chat box. Okay, we can start the ball rolling. Can we have the first question?

Hi, Tony. I'm Evan from J.P. Morgan. Congrats on the very strong rental reversions. It's accelerating. The rental reversions is based on fixed rents. Can we get a sense in terms of total rents, including variable rents? Is it as strong or slightly lower? And guidance for the second half? The second question is in regards to electricity costs. You made a comment about 16% decline. Is that half and half or a drop towards 2024? Thanks.

Each one, you want to address the rental, GTO rent?

Hi. Okay. I wasn't expecting it to start first. But yeah, I think I don't have the number offhand on actual percentage upside, but I will say that actually the GTO has been improving. I think first half has been pretty strong also. So I think the reversion in the total rent, including of sales, would be also pretty strong.

Yep. From the rent structure perspective, in the course of the last 12 to 18 months, we have gradually shifted more to a normalized level. That means those that in the past we have granted a bit more concession or a bit of restructuring of the leases, most of them we have gone back to the normal way. So the usual, closer to where the market rent is, and then with a little bit of adjustment depending on how we look at the trade, whether we want to participate a little bit upside or participate less than upside. So those are more tactical. But overall, if you look at, I think there's a slight, look at the range of the turnover rent across our portfolio is from five, I think it's like 24, five to 17. So it's still a wide range. It's a reflection of different malls are quite differentiated, yeah.

And I think Melvin has a second question on the electrical tariffs.

It's second half against first half. 2024, it's still higher. It's still higher than 2022. 2022 was 20, I think it was 20, if I recall correctly, it was 24 cents. Now we are more like the high 28, 29 cents. Same rate. Probably around there. Everything is different, the effects and the brand.

Hi, good morning. This is Tan Shen here from Goldman. First question is on Galileo. Is there any capex and also the 18 months, the second day into account rent-free? He also comment on rent of the new tenant versus outgoing tenant.

It's still under discussion. So there are some confidentiality. It's an uplift in rent, obviously. 18 months, no. That's the period where the landlord will undertake that upgrade. So that period is not lease commencement. So anticipate lease commencement by middle of 2025.

What about the CAPEX?

We are still working through the details. There will be quite a bit of capacity required because there will be the base building that we need to upgrade because that building was built more than, I think, almost 20 years ago. So some of the equipment, although it's functioning well, but it's not at that level where the new occupier demand. These days, I think they're looking at a very high-grade green building. So we are putting quite a bit of attention to that. upgrading and that to us is very defensive because you want to protect the value of the property on a forward basis. You have to do the work today and that value will come in. I think market will potentially recognize that because there's already a clear differentiation on what occupier want. So we are bringing the building up to the best standard over there.

Thanks. My second question is on second half focus. now that operating metrics are moving across most assets, are you still focusing on existing operations or more on acquisition divestment in second half?

I think we look at everything, right? That's why we have a full team here. We have investment and portfolio folks. It's not, it's not, it don't sit still. I mean, constantly we definitely need to ensure our asset perform well and there's no, there's no, sitting back and relax. I mean, it's very dynamic, especially look at, in fact, for office side, we have a lot of things to do. Office assets, sound assets, you know, look at the range of legacy of the assets, right? It's quite wide, as new as one year, two year old, and as old as probably 20 plus years. So I think we do have to pan out work and make that plan in a logical way, you know, you don't want to drag the earning excessively in any particular year. So we have to plan out the plan. So there are a lot of work for portfolio folks. I mean, it's not doing nothing. Every plan depends on the scale of the work required, right? Full monty, complete tear down, that kind of planning, it probably takes years. Even if you knock in, many should agree on what the ultimate product you want to reproduce. Along the way, there are a lot of negotiation and you got to look at the timing of how you want to call tender as well. So a lot of work is needed. To a simple repositioning aside, that would be ongoing. I mean, we have both downtown and suburban asset that we need to respond because consumer I mean, their behavior has changed. Obviously, after COVID, I think a lot of things have changed, but the consumer behavior has definitely changed and we need to take that into consideration. So asset management actively, and then of course, look at the food development side. Then investment in part and part is really the straightener, right? At a certain year, we may have to see whether the right opportunities surface and how you're going to do. fit into our whole portfolio? What comes in? Is there something you need to let go? So it's part and parcel of our portfolio reconstitution exercise that we do on an ongoing basis. So we don't keep our radar down. Although we may keep our radar up, it doesn't mean that we are going to go do something, but definitely we need to keep track of what's happening in the market.

Can we have Brandon? David?

David from Daiwa. Can you remind us again how you recognize government grant income for the Funan walkway? It seems like you're saying it improves your NAD, but it also seems like it's negative for your DPU. So can you just go through the accounting for this?

I'll pass to Milind to explain. There's no impact to DPU, yeah.

The grant is recognized under other income in the income statement. And this is actually clear with the auditor's KPMG. And that's a requirement given that the grant is in relation to FUNAN, which is actually a fair value. In terms of DPU impact, there is no DPU impact because this is actually cash

that is not generated from operations and it will not be distributed to unit holders but you'll be used to defray the cost that we've spent in the building of the underground pass just to clarify so you recognize like 34 million of other income but you have to remove that from the distribution because it's not going to be distributed yes

Yeah, because the money is spent on the construction and at the time you look at Foonan redevelopment is the whole totality, you know, the plan, including building the underground passageway, the link, and then we can seek reimbursement from the authority. But the cost will not be known until it's fully completed. Yeah.

My follow up question is with regard to Raffle City Mall. Now that you have more visibility as to the committed passing rent post-AEI, what is the magnitude of the uplift compared with when Robinson was still a tenant? I mean, how much uplift are you going to enjoy?

Earlier I did mention, but later I can pass to Yichuan who will give you a little bit more color. Earlier mentioned, I think we did a little bit about close to 40% of the repositioning exercise. A large part is in the old Robinson space where we did some movement, right? So there are moving parts. that contribute in income growth different way. But there are still areas that are not completely done yet. I can't name because it's sensitive. But generally, I think we are looking at another potential 25 to 30% change in the tenant type. So I think the full impact will probably know in the next probably another 12 to 18 months. But it's higher. And don't forget, the hotel has also been doing very well overall. The hotel benefited from the entire repositioning exercise as well. Hospitality, I mean, it's on fire now, right? So I think that's also been quite a nice contributor.

Can we have the next question?

Hey, morning Tony. Brandon from Citi. Just to follow up on the portfolio reconstitution question, when you mentioned about these legacy assets, are you talking more about just hand remixing or redevelopment? And when you talk about redevelopment, is there a certain size that you're looking at? I mean, if you look at next year, we have the expiry of the two government incentive schemes.

Maybe when we talk about the redevelopment schemes, those will take probably longer than something that we can do next year or something. Definitely, we are studying a couple of options, but if you talk about timeline rise, it will be a few years away. We are aware that some of the schemes that the government has been looking at, like the SDI as well as the CBD incentive schemes, some of them are expiring soon. But I think at the end of the day, our view is that when you take a look at what the government is trying to achieve, have they actually reached their objectives? We don't think so. So some of these things, we do expect some of these schemes probably, we look at how they probably extend or actually we look at some of the schemes. um but at the end of the day it's really looking at the scheme itself right whether the incentives that we get does it actually fit into the kind of things that we want to do for our assets right and then on the basis we will study yeah so it's not something that you know in 2024 we'll suddenly see that you know there's no redevelopment coming true yeah yeah um then the second question is about tenant sims yeah um i think if you look at first half

slowed from comparing second quarter to first quarter so going to second half if we see Chinese tourists remaining where they are do you think this could be a concern for you well

Okay, so maybe I'll start first. So for tenant sales, right, for the second half of the year, of course, hopefully we think that actually the Chinese tourists coming through with the reopening, it got off to a slow start. But I think if you look at STB's view as well as our own internal, with increased flight capacity and whatnot in the second half of the year, hopefully we see more of these Chinese tourists coming. They are still actually quite a fraction in the pre-COVID period. So I think there's quite a fair bit of room to grow. We also see F1 and also a whole series of kind of things like, you know, the concerts, right? Everybody talking about concerts nowadays, right? Those should help to drive a lot more tourism to Singapore. So I think retail-wise, retail sales-wise in the second half year should have some kind of, you know, momentum that will still carry through.

Just one last one on Galileo again, right? During the 18 months, should we be expecting some more of income support or capital gains payout?

Too early to say. Too early to say. I mean, we have some levels, but I think at this point, we are not going to comment on anything yet.

Thanks. Thanks, Brendan. Can we have the next question?

Derek. Hi, Derek. Morgan Stanley. We keep option open.

I mean, the spread is one consideration. Of course, the spread, depending on the underlying passing and where the potential And then we look at the interest rate and buy the cost of capital. I mean, it's moving, right? Obviously, it's hopefully trending in the right direction. So that's one factor we look at it from a purely from a financial point of view. Platform, not easy. Platform typically not easy. But if they are something interesting, I don't think we rule out. Like I say, we don't keep our eyes shut. We may look at it, but we may or may not go in. So we just have to see the merits of the transaction. Yeah.

Yeah. Earlier you mentioned, you know, you talked to your valuers internally, the overseas portfolio seems to be some, there could be some downshifts and valuations.

Could you just elaborate a bit more on how much downward movement there could be?

Well, yeah, well, I think if we kind of take a look across the expansion in cap rates in some of the like Australia, right, especially when some of our peers valuation is also in Australia itself, we think that probably we can expect, you know, kind of like maybe like single, mid single kind of downside in terms of valuation. But I think that, and I didn't go back to how the whole portfolio is, right? Overseas is only 7% of the overall portfolio, right? So actually, our portfolio level is not going to be very material. Yeah. I think it's something that's manageable. Of course, it's very hard to say, you know, that on a full year basis, how this number will pan out, because at the end of the day, it's also dependent on, you know, in Australia, suddenly what kind of transactions we see in the market, right? Currently, there's not a lot of it, but when some of these come true, how it actually, you know, the buyer and seller kind of price meets, right? We probably have, it would then have an impact on the valuation. So I think we wouldn't want to kind of read too much into it and how it will go in the future. year end, but definitely we do expect some of it to come off a little bit for the overseas. But again, I go back to the overall portfolio. I don't think it will materially change as the overall portfolio. How much cap rate expansion in Australia and Germany? I think right now, if we see some of, if I'm not wrong, we see around like 0.5 plus minus percent. Yeah. But I will say that even if Even when I look at our December 22 kind of assumptions, our cap rate usually is a little bit on the more conservative side of things, so there's a little bit of a buffer. So I would say that even with some of the expansion, hopefully it will not be as extreme as once they've seen our competitiveness. I believe it's for both Australia and Germany. Yes, it's for both Australia and Germany. Thank you.

Thanks, Gary. I saw Rachel put her hand just now.

Hi, good morning. I'm Rachel from DBS. Thanks for the call. A few questions from me. I think firstly, I think you're a bit cautious in terms of your outlook for office in second half of the year. I'm just wondering whether, is there any cause of concern, any vacates coming up, shadow space creeping up and expected rents in second half of the year?

Yeah. Okay. So I think for the reason why we are kind of cautiously optimistic, cautious about the second half of office, right? I think fundamentally two parts, right? One is the shadow space, broadly speaking. And also in the second half of the year, we expect a major completion in the market. So that will kind of put a little bit of a, I think that that may temper kind of a bit of the rent that we will see. Because right now, if I'm not mistaken, IOI is currently around 40 plus minus kind of percentage commitment. But I will say that in the mid term, right, in terms of the limited supply, right, At the end of the day, we do think that there's still some leaks in terms of how rental can still grow. But touching on the shadow space perspective, I think that if you look at some of the consultancy report, the shadow space actually has come down a little bit. And even though we are seeing numbers ranging from mid 300s to about 500s, only about half of it is kind of in the CBD. So I will say that, is it something that we are overly concerned? I will say no, it's just something that we thought that it may kind of limit the kind of rental growth we might see in the second half. Because on top of that, there's also a little bit of uncertainty in terms of the broader economies, right? And I think some of the tenants have also, instead of looking at relocation at this point because of high CAPEX, a lot of them are looking at renewables.

Maybe follow up, shadow space on your portfolio, has it been increasing?

Actually, shadow space in our portfolio is really quite immaterial. Right now, I think we do have one that is kind of backfilled already. We already find a replacement tenant. And in fact, some of our shadow space, when we find replacement tenants, right, we probably can get a bit of rental upside of that. So it's not too bad.

I think based on current mood, The sweet spot demand for space is smaller. So it depends on the building's configuration. You may or may not be able to cater to the needs. So in our portfolio, a couple of assets may be primed to tackle that kind of space, 5,000, 10,000 square feet area. that we can tap into. But large space occupier, I think at the moment, I think it probably would face a bit more challenge from those shadow space where then when you release the space in the market, you release by floor, right? Three, four floors in the market. So those large space occupier looking to backfill would probably take a longer time.

My next question is on tenant sales. Happy to see that the gap between your downtown and your suburban is closing. But just maybe on more forward looking, do you expect that the gap between the downtown and the suburban to really close to be similar to drive up? Or do you feel that the increase in tenant sales moving forward will be largely driven by the suburban?

If you look at trending-wise, trending-wise last year, second half, downtown fly, right? It's an urban sort of flight, I mean, trading along. So you can see that kind of year-on-year effect coming into play this year. While we think that downtown would start to see more traction from the inbound traffic coming in, that high base on last year will probably be a so-called softener vis-a-vis suburban, where it's a little bit more moderated. So I mean, purely from a year-on-year comparison, that's the way. But from a momentum perspective, I think downtown is picking up okay. Because all these events coming up, the Inbound Traveler coming in, so I think on a sequential basis should be okay.

Sorry, I just have one more question. In terms of acquisition and divestment, do you think the market is ready for you to look at acquisition and divestment?

Which market? If you look at deals out there, there are a lot of deals out there. It's whether the expectation has met. Still a bit not easy. I think the price expectation between what we observe in the market, the asking and what the market want the buyer to pay. I think it's still a bit of a gap and that largely is a function of broader economy outlook, not very certain, which is already a factor of how the entire interest rate environment should shape up, right? So all this has got to do with the cost of capital, whether availability of capital are there, and it's all intertwined. To me, that capitulation can come quite quickly, right? When that signal in the market is very strong, now foresee the capitulation very fast, yeah. That's where I think the buyers will meet. I think there's a little bit of stigma in the market.

Turning to the online audience, I'd like to pass on to Mee Ping, who is also our Head of Investor Relations to share the questions. Mee Ping. Thanks.

So I'm combining a couple of questions. So Denver and Gek Tiang, asking about Galileo. During the 18 months when the property is undergoing AEI, what will be the impact on DPU? It's the first question. And the other question we received from Denver again. Office rents expected to ease in the two-half 2023. What about the future of the office market? Any impacts from work from home?

Thanks. Mei Ling, you want to take the Galileo? DI impact?

Yeah, the DI impact from Galileo on a stabilized basis is about 10 million a year.

10 million against our, I think DI is about 700 plus million.

Yes.

Yeah, so it's quite small. Any interest rate saving will be more than enough to cover that. I mean, like a 1% move, it's $22 million. Second question is more the office market. You want to take it?

Particularly on work from home, I think it kind of largely stabilized this year, right? Around like a lot of companies are actually saying that, you know, it's going to be hybrid rather than a full remote, usually around three to four days in office. So I think that will kind of support. In fact, I would say that more and more companies are actually hoping that actually their staff come back to office more than ever. So in terms of how this actually pans out, I think it's a good support for office demand going forward. We don't expect, in fact, maybe I'll share like looking at the first half of the year, right? On a portfolio, Singapore portfolio basis, we actually see more expansion requirement and downsize requirement, both in terms of the number of tenants as well as the amount of space. So I think there's a good sign of how things will come in the second half and even going beyond the second half. Utilization rate, I think right now it's around about 70%. I think office return rate is kind of stabilized. Hopefully this will kind of pick up, but we don't think it will ever go back to the pre-pandemic times. The interesting thing also is then that because of how people are now working a little bit on the home, some of these things, when people work from home, it actually helps to support our suburban kind of retail. So in a way, what we lose in the office side, we can't help benefit our suburban malls. So I will say that by and large, I think from home, it's quite on pin here.

Thanks. Can we have the next question from the floor?

Maybe Jack can give a little bit of a color how the investment market looking at this space, the office space.

Maybe in terms of work from home and also like flight to quality, right, that we are seeing these days. So from an investment point of view, we believe that if the asset is well located and of a quality asset, those assets will still be able to hold in terms of valuation and will still be sought after. So I think, and as Yichuan mentioned, work from home is also beginning to kind of stabilize.

Thanks, Jack. I think we have the next question from Donald.

Hi, this is Donald from Bank of America. A couple of questions. First is on your Singapore office occupancy. On a queue-on-queue basis, there are some movements, notably from Asia Square, Capital Green and Capital Tower. Could you comment on the occupancy movements, please, and which tenants? Each one? You want to do that?

Um, yeah, so for AST2, we saw some movement in the sense that, uh, one of our tenants, Temspace, kind of like, uh, released back to us. So that kind of AST2 number kind of came off. Uh, similarly, I think, uh, one of the tenants in Capital Tower was also the lease kind of lapsed. So it kind of, uh, it kind of come back. That's why we see a temporary drop in terms of the occupancy numbers. I think that was the kind of concern that we may have. But I will say that we have actually quite kind of renewed across the portfolio. We have seen some pretty strong renewals. We renewed some of our key tenants in both CG, RCT, for instance. And I will say that there's actually a couple of deals that we are working on that will help to bring back the CT numbers and the ST2 numbers.

And earlier you mentioned that you're seeing more expansion requirement than downsizing. Which industries are expanding?

Roughly, we will still see a lot of those are like asset management, banking, financial services.

Okay. For your Australia 66 Goldman, on your spec suites that you're doing, what's the leasing capex that you're incurring and what's the impact on your cash rents? Sorry, at this moment, I don't have the capex number offhand. Probably I'll come back to you on that. Sure, thanks. My last question is acquisitions. Tony, do you think your cost of capital now is conducive for acquisition? And if you were to buy anything today, is it more likely in Singapore, UK or Australia or Europe or Australia?

So the cost of capital, I think I earlier alluded that there's a little bit of a buy or sell still there. I think that's still a reflection of what I feel in the marketplace. But certainly, both from the debt and equity side, it has improved compared to six months ago. Which market? We keep options open. I think ideally we still want to build our base in Singapore as much as possible. This is our home market. It doesn't mean that it has to be an outright acquisition. It can be an outright portfolio expansion, development. Those are also building your presence here by entrenching your positioning stronger and growing the exercise that would give you that competitive advantage. So I think we continue to do that. From an inorganic, that means outright, getting from third party, I think we have options. We will find the right moment. We do have pipeline from our own sponsor. We have the core option for the cap spring, which we can look to see when we should exercise, if you want to exercise it. Then we'll see what's available in the market, which I see there's a plentiful there, out there. Just the expectation, I think, still be a cap.

I think we have a couple more questions from the online audience meeting.

Hi, this is a question from Derek DBS. Can management provide some insights into the occupancy costs for the retail malls? Are we still able to have positive rent reversion given ongoing business cost pressures and also whether retailers are generally profitable? This is the first question. The other question also a retail related is from Gek Chiang, a unit holder. It's about CQ at Clark Quay. CQ and Clark Keyes, what is the capex cost and projected rate of return? Also, what is CQ's current occupancy or committed occupancy for CQ? Two questions.

Which one do you want to take?

Well, for Clark Key right now, the kind of commitment rate that we are getting is around 85% plus minus around there. We expect the commitment numbers to come up a little bit closer towards the completion of the AEI where retailers, they can see better what we are trying to achieve.

I think it pertains to your first question, the rent, occupancy costs. I think we are, in my view, we are still in a pretty healthy range. We're at 16.8% OC. In a normal time, pre-COVID, I would say we are in a very, very comfortable position. That means we see quite a fair bit of upside in terms of adjustment based on purely from an occupancy cost perspective. That means the threshold for different sub-sector retail space, there should be some room. But the second question posed I think is correct because the question is whether the profitability of the retailer will be threatened. We are still assessing. I think at the moment, the honest truth is that the retailer themselves are making some adjustment and you've seen some price elevated, which is transmitted to the CPI. I mean, all this number, all historical number, and it stays elevated, right? So my view is that I think a lot of... retailer has been passing on the cost to the consumer and consumer has been able to absorb because then you see the tenancies are all rebounding quite strongly. But where is the sweet spot? Will they be able to continue to pass on that cost? I think we are probably nearer the end than at the beginning. We probably could see a little bit of potential upside from a red junction. Depends on trade to trade, right? Tenant to tenant. But importantly, I think we need to posture correct because for the right tenant, we are prepared to take a little bit of position, which we did continuously throughout the whole entire COVID period. For the right tenant, for the right positioning to bring in, then we may want to participate a little bit more on the upside. That's where I think to us, the more important is the total rank, and that's where we want to drive the GTO component. So it's a bit of tactical strategy that is required going forward. But it's safe to say we are still trying to see what is the post-pandemic acceptable occupancy costs for the different sub-trade. It varies from sector to sector, sub-trade sector to sector. Anecdotally, we find there's a lot of profiteering along the entire supply chain. So which part of the supply chain is creaming up the most? You could begin to see evidence in the market when all the big corporate companies start to announce their results. Who are making the big bucks? You probably will know who are the ones that are creaming up the most. But at the end of the entire supply chain is the retailer and the retailer meeting the consumer. I mean, that's the end point. That part I think will take some time to figure out. But I don't think we are in the pain point. We probably see still some upside in the possibility of rent passing on. But of course, we want to be very cognizant how we want to do it. It has to be very tactical. I hope I answered that question. Can't see her, please.

Thank you. Can we have the next question from Joy? Joy from HSBC. Two questions. First, if we go back to Galileo, so post-CAPEX, can we expect a green sort of certificate for that building? And was that driven from management or was that driven from a demand perspective?

It's definitely going to be pretty green. I think it's quite green up there. I think I did allude to you to a large extent as occupied demand, but also we need to ensure beyond this AEI and even beyond, assuming we manage to sign on this tenant, right? Beyond their tenure, we need to be able to sustain the value. And the only way to do is to get your specs to where the market is. So for me, it's a little bit defensive as well to get that building up to the stage where even after five to 10 years down the road, we'll know that this building will always be on the top of demand. I think you will know that.

So yeah, we just echo the green rating for the asset for Galileo would really be up. And I think it's in line with what tenants generally in the Frankfurt market is looking at in the fight to quality and also when they are looking for their spaces.

And if you look at your portfolio, what percentage of the portfolio, office portfolio still needs a green sort of capex or defensive capex?

Well, I would say that generally, It's not specific to, say, any building in particular. Of course, there's a few buildings now currently, if you look at their Greenmark ratings, like Greenmark Gold or something, based on the new standards. And this standard will keep increasing. BCA will just keep increasing the standard of Greenmark. So we always have to keep investing in Green Capex. I would say that Green Capex will kind of settle roughly average over the next three years, about 40% of the overall Capex that we spend in the portfolio.

And then second question is on hotel. So I guess, you know, you mentioned that hotel contributes to part of the growth in RC. Are the rates above pre-COVID? And I remember you restructuring the lease. So post-restructuring, do you still get sort of above pre-COVID rental?

Yeah, we are higher now.

Can we get some sort of detail?

It's higher than pre-COVID, yeah. I can't give you the details. These are confidential. We structured that. It's actually quite in line with what we did for some of the retail trades where we participate on the turnover rent. And then there'll be step up along the way. So, And then the trash point where to bring down and what GTO percentage to charge is a function of the projection. And so we mutually agreed on where do you think the growth, how the growth trajectory will look like in 2022. That was 2020 and then where the recovery coming from. So indeed a restructuring in 2020, we have came to a position mutually that this is a growth that were acceptable. And I think they have reached that goal. So I can say overall, that's been more beneficial than it was. The last landing point of where the fixed rent is and the floating rent, the floating rent, especially the floating rent is higher than it used to be. So the better the trade, we get even more. So we are seeing that trajectory coming through now because the breadth part is way above what we projected.

Thank you, Joy. Do we have the next question? Mervin?

Yes, Mervin here. I've got a question in terms of the Australian portfolio. Seeing the pick-up occupancy, are you able to disclose what are the signing rents and incentives that you have had to provide for Australia?

For Australia, the rents are pretty much in line with market and incentives is around 35%. Averaging roughly around there. And probably just to touch on a little bit, I think just now we talked also about fitted out space, right? I think the fitted out space that we did at, say, Galileo, right? Sorry, at 66G. Too many buildings. For 66G, the fitter of space, the capex we spend actually is part of TI, the 35% plus minus kind of TI that we are giving out.

In terms of portfolio mix, given office is a negative carry based on spot borrowing costs, it looks a bit more challenged or at least more cautious. Is it time to pivot more towards retail for the next few years? Will you, I mean, there is still demand for triple nine properties, which you do have, despite the negative carry. So what's your thoughts on whether it's right time to pivot towards retail, given the tourist numbers have not fully recovered yet?

Actually, today, retail is a larger component in our portfolio. If you look at the split, it's already larger, 53%. So in terms of composition, retail is marginally ahead of the office in totality, and office is split by CBD, non-CBD, and then of course overseas. So I mean, that's give you a little bit of sensing number. Negative carry, if you're assuming you're referring to Singapore, right? Singapore is about 33%. It's not an unhealthy level. We'll see. We'll see how things will shape up from there. But at the moment, I think we are quite happy with the composition. It's not negative carry because the yield on a passing basis is probably close to 4% for sound access.

Do we have any other questions?

Hi, this is Terence from UBS. So your guidance for Singapore office is for moderating rent growth. I just want to ask how this would translate to your outlook for Singapore office rental reversions, because I see that your expiring rents are about $11.12 per square foot. But if I'm not wrong, the new buildings are calling for still a much higher asking price.

So for the office, right, I think right now this first half, we have the positive rent reversion of 9.6%. Probably it will come off a little bit come year end, but we still expect to be firmly in the positive territory. Yeah, I think the expiry count of rent show that, you know, with the gap to CBRE's market rent of around 1180 for the second quarter, right, for June, it does give us a little bit of a comfort and buffer in terms of the renegotiation and to get a positive rent reversion out of those. But I think the, it's because I think we do have some cases in the second quarter, some of the deals we are seeing very strong reversion that kind of push this up. Whether or not we can still get that kind of 20, 40% of reversion for some of these that comes from a low base, right? In terms of pure percentage wise may not come true in the second half. That's why I think the rent reversion will moderate a little bit. Yeah.

So a couple of deals we work on, hopefully we can get it on the signing page. those space are vacant for a long time so compared to the long time vacant space and the currents i think it's a nice uplift i mean we're looking at easily double strong double gg kind of uplift but they will not be reported in the reversion because you typically for too long they can period we we don't report in the reversion so that may not come true but what uh each one is alluding is that yeah we clock in quite a nice you know quite pretty strong version what we are negotiating now overall maybe it will just trend down a little bit but still probably in a pretty healthy kind of range

And for Singapore downtown retail, I think you spoke about the momentum continuing in the second half, tailwinds of the reopening. But I think you also alluded to how there could be a high base effect. Maybe some of these rents that we are seeing in the first half is coming off from a low base sign in COVID. So between the two, how do we then form our expectations of your downtown retail reversions in the second half?

So I just want to correct you. It's not the base effect arising from the rent last year. It's more the trading, the sales momentum last year strong, right? But for the same tenant, they could be trading for a couple of years. So 2023, some tenants that were signed in 2020 or at least renegotiated on a 2020 basis may be up for renewal. Some will spill in 2024. those you probably can see a little bit of uplift from there. Whether you'll be on a blended basis, still on like a 7% plus kind we're looking at, hard to say because it depends on case to case. I mentioned the range of reversion is very wide. Retail is as strong as 30% specific to that unit. It can be 3.5%. So, And then if you look at it on a weighted average, that's what we measure is on a weighted average basis, the number, we can't make a prediction now, but generally momentum wise, you can take away the fact that 2023, 2024, some of the expiry are signed during the 2020, 2021 period, a couple of them. And then some of them are even longer, pre-COVID, may or may not have been restructured, right? depend on how well they sustain through that entire COVID period. So it's going to be quite a noisy number. But what we report is just always a blended basis. But within that, you can see a wide range. Thank you.

Can we have the next question, Krishna?

Yeah, just wanted to squeeze something on your liability side. So you have about $1.5 billion of debt for maturity. Can you give some color on where are the interest costs and if you assume same thing that is, you know, the currency mix, the maturity and your hedging, then how much it will go up? That's the first question. And second question is, from demand from that and give some color on what's the typical lease period for the F&B operators and also I mean these F&B are just pure F&B operators I just want to ensure because I think I do see there is some of combing link right I mean you know a shoe bag seller can also sell coffee so I just want to ensure that this is just pure F&B and not even the combing link space also is not included in the F&B side of things. So if you can give just some comment on that side of the question.

Okay, the first question, if we assume the current interest rate environment, current interest rate level stays at, you know, prevailing. Of the 2024 debt tower, we've been looking at an increase of about 0.4 to 0.5%. overall so that will contribute to to say your overall portfolio cost of closer to the mid three levels we're currently at 3.2

So your question on F&B specific, is there something that you really want to know?

In my own observation that when I walk around the malls, there is quite a bit of churn in F&B. One goes in, one goes out. It may be the same operator having coming up with a different sort of concept. So then the cost is not on your side, the cost is on their side if they have to come up with a different concept. So just wanted to know that is it the same operator coming or is it a different operator coming?

It's a mix of both. We do have multi-labor operators who have a portfolio of different brands and different product types catered for different market segments. And if the market changes, it could be the same operator who changes concept at the end of the expiry. Because there will be some shelf life at the end. More evergreen one may take a longer time, but certain F&B concept will come a point in time where they need to refresh. Refresh also from a look and feel perspective, they need to do that refreshment. The question is whether you will fit into an entire position of them all. I mean, that's a discussion point we need to have with them. For example, we discuss it on a renewal basis and say, perhaps your portfolio would prefer this brand to come in. So we have to talk to them. It's a combination. But certainly we always want to try to bring also exciting new ones to the market. I mentioned a few names that we try it out. It's a hit and miss. Sometimes we hit it, we get it right. They have a leg to run for a while and then we populate, right, in our portfolio. And then suddenly they're all over the place and you see the sales coming out. I mean, this kind of pattern, we've seen it many, many times in different cycles. It's a part and parcel of life cycle of any kind of retailer, whether it's F&B or not F&B, which we have to manage actively. I mean, that's part of the asset management we talk about. Constant adjusting to the consumer preference, and they will change over time. Today, you go to Raffle City, there's a new donut in the market. It's always long queue. I don't know how long it lasts. You ask me, will it be another two years?

I'm just wondering if you feel that you are being a bit too overexposed to F&B?

No, I think as a percentage of the NLA, they are the largest contributor now. Around 35% of the revenue comes from F&B, occupying about less than 30% of the space. So they are overproducing from an income point of view. perspective, right? So I think that's a good thing. But from a space allocation is not excessive, less than 30%. It varies from more to more. And within the F&B is wide spectrum, right? You've got the fast food restaurant, you've got takeaway, you know, we've got the casual dining, you've got the main Western cuisine, Chinese cuisine. So it's a whole list of brands. potential mix that you can see in different assets. Some are more relevant than others. Downtown will be maybe slightly different from suburban. In suburban, even then, certain trade may be even more important than the sit-down one. So there's a bit of a curated kind of Not just F&B alone. F&B, obviously, you have to curate quite well. But other sub-sector, retail sub-sector, I think we need to curate quite carefully as well. So to your point, I don't think it's excessive at this point in time. Then, for example, Clark Key will always be quite heavy on F&B because it's just unique, right? But most of them are okay. Yeah.

I think we will continue to diversify our funding sources, not just rely on the banking sector,

Cap markets is actually a very important source of capital for us. And I think we will anticipate a good mix of MTN and bank loans going forward.

There's a bit of flight to quality, flight to safety from a lender perspective, whether it's the financial institution or the debt capital market side. So you can see quite clear, right? So we think that's quite encouraging. We also got affirmation from Moody's that they actually raised it up to stable. But we also know that it is not a job done today We have to stay static. Because when you look at the overall confidence level on why the lenders are prepared to lend to us, it's your cash flow, your ability to reposition yourself quickly, your market leadership position, your access to capital. Sometimes the irony is that you have access to capital even though you're on an elevated leverage. Because your ability to access the capital the agency that confidence then ultimately we need to have always this ready credit facility in place and it costs money to get the credit in place that's to us is also a bit of credit enhancement so we pay a little bit of commitment fee but actually carry a little bit of credit announcement. So it's important to look at the totality. So while we try to be agile, try to get different capital source and diversify over time. But there are a few key fundamental things we work on. Cash flow, make sure your insurance is there, right? You've got your base insurance. Access the market at the right time. create that desire to invest in us, then we'll be okay.

Thank you very much.

Thank you, Krishna. I think in the interest of time, we shall take one last question, probably from online.

I think this is a question from two online viewers, Eileen and Wei Meng. They're asking about whether we have any plans to reduce our aggregate leverage And then whether CICT has any target aggregate leverage ratio? Thank you.

Yes, over time. Yeah. I think we are, in retrospect, we look at, it's all about the state of where the cost of capital is. Pre-COVID, pre-change in the interest rate era where we are at this level, we are very, very comfortable. In fact, we are more than comfortable to work our asset very hard at a certain leverage level. When your cost of debt goes up this level, then you just could be very circumspect. So it's quite dynamic. Today we are looking at maybe 3.5% to 4% kind of range in term of financing cost versus in the past it was 2.5% to 3%. So it is actually a step up already. So we just got to adjust the appropriate level of gearing. But when the interest rate environment change, we just have to adjust because ultimately We are undertaking the stewardship function of capital. Make sure that our balance sheet work hard for all stakeholders, whether it's equity investor and debt investors. So we have to make sure that we don't want to have a lazy balance sheet. I mean, ultimately investors want to see us ensuring that whatever money, whether it's from the tech side or capital side, we work hard to ensure that asset perform and deliver to all the stakeholders. So we have to maneuver that with time. Given an opportunity, a right opportunity, we may want to do a little bit of a But the way to do it, I think we have to be very smart about it and very tactical. What's the best way to do it? Sometimes making sure your portfolio performs itself creates the valuation uplift. solve the problem. It could be as easy as that, right? But of course, it's not so easy. We've got to work damn hard to ensure that our asset performs on a portfolio-wide basis. Then you get a sufficient valuation uplift. Then you self-solve the valuation. Then the cash flows start coming in. The other form is inorganically. There's opportunity. You look at it. Yeah, it could be monetization. We have done that. Portfolio reconstitution. We do that. We divest some. We reinvest some. At the same time, do a little bit of equity fundraising. Or we look at joint venture partner if you can afford to do any kind of transaction on our own. So we just have to deploy the various tools or avenues available for us to look into it to reach a stage where The market is confident enough, the test site is confident enough to ensure the CRCT can function as a smooth machinery. And that's important, right? Ultimately, REIT is about managing your portfolio of asset and also managing your capital. You just have to blend these two in an efficient way.

Okay. One last question from Gulag.

I'm so sorry. Thanks for the whole presentation and Q&A. So for Galileo, will there be any more decline in valuation? Or will the valuers look ahead at your higher rentals if you manage to sign your new tenant and give you a stable valuation while you're doing the AEI before lifting it once the new tenant comes in? Cap rates notwithstanding.

need today okay well um i would say that for galileo compared to december 222 definitely um having the if assuming some of these rental does come through what you sign and everything um it should help the valuation but um i would say that we do expect the valuation still to come off a little bit because of the broader market so i can also add on that

valuation we can't predict how the valuation number will because the function of your discount rate they use the discount rate you use is a function of where the interest in market is it also as a function of where the market transaction happened also it's also a function of the underlying passing rent it's also a function of the underlying credit risk right so if we are able to get it all right then i think at least confidently we say that we should be able to protect the value right But against all these different variables, very hard to predict how the future number will look like. It can go up and down in the course of the next one, two year. It can go down, it can go up. It all depends on how the market view the underlying credit risk, what the commercial term is signed on. And then the underlying credit risk would have potential implication on your terminal yield, your cap rate. the so-called cap rate at the terminal yield level. And the discount rate will also be affected. So they're all intertwined. So at this point in time, we cannot really comment anything beyond that. What we can say is that when we undertake that CAPEX, of course, there will be a progressive kind of drawdown of payment. Purely from a cash flow VCF basis, if the value to look at a pure VCF, it would be a negative outflow in the early stage before the income come in. Purely on that. But with the passage of time when most of the capex has been incurred and paid, then what's left coming in is your net income. So you can imagine the trajectory of the potential valuation movement. You can may go down and then gradually as you are close to handover, potentially you could go up again. So I can't give a number to it, but certainly we think we can confirm and secure that tenant that we are talking. then it's definitely a good confidence booster from a value protection point of view. Solid credit. Solid credit. Higher than us.

Thank you for the questions. Okay, I think just to quickly wrap up, CSDT has reported resilience in our results, thank you for our proactive portfolio management and our prudent capital management. Thank you for joining us at this briefing today. Feel free to reach out to us if you have any further questions. Thank you and have a nice day.

Thanks a lot. Thanks for coming.