Mapletree Industrial Trust

Good morning and sorry for the delay. Welcome to MIT's 2Q and first half financial results for the financial year 19-20. It was quite an eventful quarter for us. I will let Guo Wei bring us through the results and share with us the updates during the quarter.

Hello, good morning. Welcome to this briefing for our second quarter and first half for financial year 19-20. I'll run through our usual five segments. You can see the coverage on page three and the key highlights on page five. You can see the first two points up there, distributable income for the quarter. We have delivered 12.1% better results year-on-year basis, $63.5 million for second quarter. And of course, that gave rise to a 4% increase in the DPU to 3.13 cents. And overall occupancy is 90.5% for the portfolio. I think you can look at the details later in the charts that we have given. A small dip in the Singapore portfolio occupancy of about 0.3%, so that gave rise to an aggregate figure of 90.5, partly due to the time gap for our seven Taixing drive asset from completion to commencement of lease, and partly due to the exit of one of our tenants at the Light Industrial Building at 2A Changi North last quarter. So we're seeing the effect this quarter because that exit was towards the end of the last quarter. And the portfolio average lease expiry has increased from 3.4 years to 3.6 years. mainly because of a 25-year lease that had commenced at 7 Tai Seng Drive, which is a data center we leased to Equinix. And of course, some of the more notable milestones that we have in the quarter was the acquisition of our second data center portfolio in the U.S. We have announced that just last month. So it will be the same kind of approach, a joint venture with our sponsor, Maple Tree Investments, for the transaction. So it's a 50-50 joint venture this time around, 10 powered shell facilities, or what we normally refer to as just simple core and shell kind of facilities, and three turnkey data center assets. That's in a joint venture on an 80-20 basis. with digital reality. And when we talk about turnkey, we're talking about a facility with a little bit more fit out in terms of power provisions and environment control equipment. So it's just a little more kind of complete, but we're still only looking at the real estate part of the data center facility. And of course, the seven-tising drive facility I talked about, we completed that and we have commenced the lease. With two months rent-free already accounted for, cash flow started coming in from 20th of September 2019. And the last bullet point that you see down there, capital management, essentially is equity fund raise that we have done. $400 million, that was of course to fund the acquisition of the data center portfolio in the US. And on page six, our one page report card, on the right you see the most recent quarter, 313 in terms of DPU and of course the distributor income, 63 and a half million, highest ever. Next we can go on to the financial performance On page 8, we do a comparison year-on-year basis. Second quarter, financial year 19-20 against financial year 18-19, 10.5% increase in gross revenue from $92.2 to $101.9 million. And this is, of course, on the back of new projects that we have progressively crystallized over the last 12 months. Your 30-year Ka Lang Place, which I think we have outlined earlier, is already fully committed. So we have all the leases building up. We have the data center facility at Sunview Drive, which is contributing fully already. And as you may remember, we have completed the transaction for 18 Tai Sengs. That's the acquisition from the sponsor in February this year. So this had all started to contribute to the portfolio that gave rise to higher revenue. Expenses, we have kept it very much under control on a quarter-to-quarter basis, just 1.1% increase, $21.6 to $21.9 million. So that gave rise to a higher net property income level of close to $80 million for the quarter. compared to 70.6 one year ago. Borrowing costs, of course, would have risen correspondingly upon the gradual or progressive completion of our projects. 10% increase, $10.3 million to $11.3 million. But if you look at our actual borrowing costs on a percentage basis, very much the same. And in terms of the profit for the period, it tracks the net property income line fairly closely, 13.8% increase, $56.3 million to $64 million. And of course, if you look at the declaration by the joint venture, that is our first data center portfolio that we acquired in 2017, December. It's fairly stable, around the $4 million level, about 3.95, one year back, about 3.85 this round. And that, of course, gave rise to, in aggregate, a 12.1% increase in the amount available for distribution, $56.7 million to $63.5 million this quarter. And, of course, that gives you that 4% increase in the DPU to 3.13 cents On page nine, we compare the performance on the six-month basis for the first half between financial year 19-20 and financial year 18-19. Similar kind of profile that you see, also close to 10% increase in gross revenue, 9.7% from $183.7 million to $201.4 million. So property expenses, as I've outlined earlier, very much under control. A marginal 0.3% difference, which is a little lower, actually, from $43.7 to $43.5 million. So net property income, similar kind of observation as well, 12.8% increase from $140 to $157.9 million. So similar kind of... profile that we see as well for borrowing costs as well as the amount declared by the joint venture, which is the data center portfolio. So DPU level, we are seeing a 3.7% increase, 601 to 623. Going on to the next page, we compare The quarter-to-quarter shift from first quarter to second quarter this financial year. Of course, you see a smaller increase in the gross revenue, 2.3% increase from $99.6 million to $101.9 million. Same thing, property expenses are well under control, 1% increase. Net property income, 2.7% increase. You see, of course, a more muted economy. kind of amount available for distribution, 0.4% increase, 632 to 635. So that gives you that 1% increase in the distributive income from the previous quarter, 3.1 cents, so 3.13 cents this quarter. On page 12, for the balance sheet, very stable. The average tenure of that is 4.2 years. Our aggregate leverage ratio has come down from 33.4% to 29.2%. This, of course, is mainly due to the proceeds we have received from the equity fundraise exercise end of September. That is, of course, in preparation for the acquisition of the new data center portfolio. So in the interim, we have utilized the proceeds to pay down existing debt wherever we can do meaningfully. So that has, of course, resulted in a slightly lower leverage level. And on page 13, that's a picture that you see as of the 30th of September. The average tenure of that is 4.2 years. As you can see, it's very well spread over almost the next nine-year period. For this financial year, nothing due to be refinanced, and we only have a very small amount, $100 million in financial year 2021. So I think as far as risk and exposure for funding is concerned, from our point of view, very, very small. On page 14, we outline you know, the kind of risk exposure we see for our balance sheet. The amount of debt that is already fixed, about 88%, so we think that will protect us from much of the volatility. As far as the weighted average hedge tanner is concerned, it's about the same as our debt tanner, so it's about 4.2 years as well. So as I've mentioned earlier, in the presentation, the weighted average all-in funding costs still very stable. Of course, our total borrowing cost has gone up because our portfolio had grown due to the completion of the new projects, but weighted average cost is still about 2.9%, very similar to what we have one quarter back, which was 3%. So, interest coverage is fairly strong as well, 6.6 times. And on page 15, distribution details, of course, in conjunction with the equity fundings exercise, we have done an advanced distribution. So, for this quarter, out of the 3.13 cents, 2.93 had already been distributed. So we had a balance 0.2 cents, which is just for that start period of five days for that quarter. So we will be distributing this together with the third quarter distribution because it's not meaningful for us to carry out an exercise just for a few days of distribution. On page 17, that's where we start going through the portfolio update. And on page 17, this is, of course, a picture as of now. Let's not take into consideration the acquisition effect yet. Total asset management, $4.8 billion. In terms of data center exposure, 17.8%. That has shifted up later, mainly because of currency effects. So we're still, at the present moment, In 90-10 split, 90.8% Singapore and a balance of 9.2% USA. And of course, you would have found that high-tech certainly has become the largest contributor to the portfolio. On page 18, we have a portfolio overview. As I outlined earlier, the 0.3 percentage point drop in occupancy for the Singapore portfolio, you see that being carried through to the overall portfolio from 90.8% to 90.5%. The U.S. portfolio, of course, remains very stable at 97.4%. But as far as this expiry profile is concerned on page 19, we think this is practically a business as usual profile for us, just 7.2%. due to be renewed for the balance of the financial year. And of course, the weighted average lease to expiry has increased compared to the previous quarter. Now it's 3.6 years because of the Seven Tai Seng lease commencement. And on page 20, the only meaningful change was The increase in the representation by Equinix because of the commencement of the lease, it has gone up. So now it's 4.1%. The rest, I think, fairly similar to what you see in the previous quarter. So still very, very diversified portfolio of more than 2,200 tenants. Top 10 tenants, just a little above a quarter, 26.3%. And on page 21, of course, that outlines the spread we have in the portfolio across all the different industry segments. And over time, you see higher and higher representation in the blue part, which is InfoComm. That's where we account for data center tenants as well. So you probably see this profile having larger changes in the next two quarters as we complete the transaction for the US data center acquisition. On page 22, that's the picture we have for the Singapore portfolio. Occupancy has drifted down at 0.3% as I've outlined earlier, and the rent level remains very stable at $210 per square foot per month. And the details you'll be able to see on page 23, the Light industrial building part towards the right, that's where you see the effect of the exit of Automex from our 2A Changi North facility. That of course was done in the previous quarter but you see the full quarter effect this round. So it has come down from 91.3% for this property type to 81% but as an impact to the portfolio it's not that large because it's only about 1.6% of our portfolio. The other thing I would highlight, of course, is business park buildings. It has gone above 80% from 79.3% to 81.9% for occupancy level. But as far as committed occupancy is concerned, we are already 85%. And as at end of the quarter, it is at 85%. Of course, this is an average number that we are reporting for the quarter. So we think the business park space is probably getting reasonable traction in terms of demand crystallization. And we think that is positive for us. So if you look at page 24, you see that the before-after renewal comparisons a little bit more stable, though you still see that lower kind of renewal numbers for business park buildings. That's mainly because of some of the initiatives that we have taken on to retain some of the tenants, to keep the occupancy reasonably high, and For new rents, you will also observe a fairly low number compared to our passing rent for business park buildings as well, aggregate $3.22. That's because we have secured a fairly large tenant, about 10% of the space at our strategy business park building registered for that quarter. The rent that is slightly above $3, that is the reason why you see this low aggregate number. but I think it is a considered decision that we have made to boost the occupancy. So that is probably the kind of effect we will see only this quarter or so, as what I have outlined earlier in our discussions and briefings. We think we probably would have turned the corner this quarter or next, and we will try to gradually move forward rents up now that we have gotten the occupancy more or less under control. And on page 25, our retention profile, about two-thirds of our tenants stay on with us for very long periods of time as consistent in what we have outlined earlier. That's a pie chart on the left. Retention rate is still fairly healthy this quarter, about 84.3% for the entire portfolio And going on to the next segment we talk about in the investments that we have outlined, that's on page 27. So this is a 50-50 joint venture we have with our sponsor, Mable Tree Investments, for 13 data centers. The three fully fitted hyperscale facilities, what we refer to as turnkey facilities, would be done together with digital reality. And the 10-powered shell, we acquired outright 100%. Of course, that's 50-50 between us and maybe two investments. So in aggregate, we are looking at $1.9 billion Singapore dollars total. So our part, the 50%, is about $950 million in terms of purchase consideration. So that's the reason why we have done the $400 million investment equity fund raise exercise in preparation for this portfolio acquisition. On page 28, we show the locations of the assets and attributes. This one I think we have outlined briefly as well when we made the acquisition announcement. We are very confident about the quality of the tenants we have in our portfolio. As you can see in the table at the top, more than 50% of the revenue contribution will come from some of the largest tech companies in the US. 100% occupied, of course, for all the facilities and very long will. This is very helpful, 9.1 years. And with rent escalations more than 2% per year for more than 92% of the leases. And, of course, the attractive attribute for us. 94% of the facility are on freehold land. The only one that is not on freehold land is the one at the Phoenix, about 64 years. On page 29, of course, we show the picture of how our portfolio will look like after the transaction. The chart on the left will be before assets presently. After the transaction, the portfolio will be about $5.8 billion Singapore dollars. And in terms of high-tech facilities, we will cross the 50% level, about 53%. And for data center representation, 31.5%. And out of which, U.S. will be 24.3%. So if we look at a split, it becomes a 1 is to 3 kind of ratio. Singapore, about 75%. U.S., and Canada because there's one facility in Canada in the new portfolio. Then we get the 24.3% non-Singapore and mainly US exposure. On page 30, the recent completion that I have mentioned earlier as well, 7 Thaising Drive that's leased on a 25-year basis to Equinix and fully completed. within budget and within schedule. So this will start to contribute to the portfolio fully from the next quarter onwards. And the other initiative that we have outlined in the quarter, that's on page 31, the redevelopment of column IA2. Of course, at the table you can see before, after, we're increasing the plot ratio from at least 1.5 times to now 2.5 times, giving us The largest ever redevelopment project we have, 865,000 square feet. This is a little larger than our build-a-suit project for Hewlett Packard, about 5% larger. So we can claim that it is the largest we have so far. And the pictures that you see at the bottom on the left is the before picture, a little drab, partly because of the cloudy conditions. On the right is how it will look like and of course the facility that we have already secured the build to suit the commitment, this one on the building on the left is about 25% of the entire precinct. So we have already commenced the decanment process as you know we have existing tenants in the facilities of two buildings, two factory buildings. We had 108 tenants presently or rather when we did the announcement. So right now we have about 59 other tenants who have committed to move to our other facilities within the Maple Tree Industrial Trust portfolio. So that has been very helpful and that is Very similar to our experience managing the first decampment exercise for the Hewlett Packard build-a-suit project at Telok Blangah. So that certainly has helped to mitigate any kind of the drag on occupancy levels and revenue contribution to the portfolio when tenants move out. And of course, finally, Outlook, that's on page 33, still very uncertain. The Singapore economy, I think, based on the last set of data, released only 0.1% growth, similar to the previous quarter. So we think we are still not out of woods yet. There's still a lot of challenges, not just down here, everywhere else. Our friend Johnson is also having his set of... problems down there and he will solve his problem. We have things to do down here too. But as far as rents for industrial space is concerned, you would have seen a positive uptake, positive 1.7% for multi-user space and positive 5% for business park space. That looks good, but that is only confined to this current period compared to the previous quarter but if you look further back actually there was a dip in the previous quarter so we're just going back up to near where we were even for business park space is lower than the previous previous quarter so at the end of the day it's still a little uncertain we're still seeing some up down shift in terms of rent levels so the market still remains challenging as far as industrial space is concerned But for U.S., we remain very confident about the demand. It's a very large market for us, and we continue to see, you know, good take-ups for data center and good demand for data center. And based on 451 research information, we are looking at compound growth continue to be fairly strong in terms of, you know, the supply and demand, 4.6%. and 6.5% respectively. And certainly with this strong kind of figures, we are confident that the data center space will continue to be an important and relevant segment for us. We don't think, of course, there will be any short-term kind of issues anyway. All our leases are locked in for long periods of time. And for our first portfolio, we are already engaging in initial discussions on forward renewals with some of our existing tenants. So I think that continues to be very encouraging. So as far as we are concerned, we remain focused on managing our portfolio well and will be disciplined in looking at the investment opportunities while keeping an eye on what else is happening around the world. So finally, our strategy is the same. That's what you see on page 34. We're keeping the portfolio stable and resilient. We certainly would want to make sure our balance sheet is strong and flexible. And as what we have seen, we have raised equity successfully to help us take on new initiatives and growth opportunities And that's of course coming from redevelopment developments and also acquisitions. That's what we have outlined on the right. And that should continue our trajectory over time. So I think that ends what we have in the presentation. I'll be happy to take questions.

May I request for the analyst to state your firm and your name and online participants to submit your questions via the webcast. Mervyn?

Hi, Mervyn from JP Morgan. I'm a different firm now. Yeah, maybe this go away. I mean, good set of results, but maybe we can touch on occupancies going forward and, you know, signing rents. Do you think the signing rents will continue to drift over or we kind of bottomed out thus far?

Okay, for occupancy, I think we think this is probably as low as we can get. We have all these... new initiatives or new projects that are completed. So that should start to give you that stable base for occupancy level. I think we are certainly confident of the kind of support level from the newer facilities. We are only guarding against any unforeseen kind of exit of tenants for the existing portfolio, especially for the older facilities. But if you look at our leases that are due for renewal for the balance of this financial year, 7.2%. So as long as we don't see any exodus of groups of tenants away from the portfolio, we think the occupancy will probably be very supportable at this level. We hope to be able to see the upward shift going forward. We think the segment for the multi-user space, especially the federal factory space, will probably continue to hover around the present level, say about 88%, because a lot of our tenants in these facilities are still the small medium enterprises. facing the great deal of challenges in the industry transformation and in the trade uncertainties. But business park space, now that we have crossed over to 80%, as I mentioned, we are committed at 85%, ended the quarter at 85% occupancy level. We think we have some flexibility in, you know, and latitude to shift occupancy up a little more confidently and also raise rents a little bit more than what we have outlined earlier. So we think new rent levels will probably be certainly higher than the low threes that we have seen for the business part space. For the multi-user space, I don't think we would be seeing anything that is significantly above $175, $180 per square foot. That's why it's new rents are concerned.

Thank you. Hi, Goh Wei. Yu Kang from CLSA. Previously, you guys, the digital reality deal, I remember that it was mentioned that they are trying to engage more development on their own right so and then they're selling some of their completed stabilized assets so does it mean that there's more uh returns in development business and would would you consider doing development business in u.s together with your parents because maybe there's more returns in that segment rather than on the stabilized side yeah okay i think uh i i

if I were to characterize the kind of exposure we're looking at, stable assets naturally would have slightly lower kind of use because those are really, you know, at a fairly lower risk or fairly low risk kind of profile or have a fairly low risk profile. Development projects, by the nature, by the very nature, You need to take on, say, land banking risk. You need to take on construction development risk. You need to take on leasing risk. And you need a couple of years for the facilities to be stabilized at full occupancy or near full occupancy. So the kind of returns level which the digital team had shared before as well for development projects between 9% to 12%. So that's fairly significant. But certainly you need a lot of so-called capability to be built up. You need the capacity. You need the readiness and also appetite to be able to take on those projects. development opportunities, even if they would have surfaced. So at this stage, we think we want to be a bit more careful. Certainly, it looks interesting from the return perspective, but we do not have a very established kind of presence in the U.S. or in some of the other new markets yet for us to go committing ourselves in all the development projects. at this stage yet, but it is something that we would continue to look at later on, probably in the medium term. Certainly, if we were to do another transaction in some of these markets, it would probably be an acquisition instead of a development project. We need to be able to have a good level of comfort on the landscape in these countries first. But it's certainly something that we as a group within Maple Tree will be prepared to do as you could have seen in our other product types and in our other geographies. Once we have established a presence, we get comfortable with the environment, we will probably be prepared to take on a little bit more risk. But not immediately.

Hi, morning, Derek from DBS. I'd just like to focus on your top 10 tenants, if you may, any tenant that you think needs to be renewed in the next couple of years.

The top 10 tenants on page 20, and I don't think any of them would jump up. I think... One of the larger ones, AT&T, which is in our first U.S. data center portfolio, I think will be coming due in about three or four years from now for some of the facilities, so we would have that engagement with them. For people like Sivantos, I think you could have seen in our earlier presentations for the acquisition of A.D. Tyson, that is the largest tenant we have at 18 Tai Seng facility and I think the lease is probably coming out in 3-4 years time as well but from what we can see is probably a business as usual engagement with them. Beyond that I think most of the leases I think contribute 1% or less so we think the risk is fairly minimal and by the time you know our portfolio gets to this kind of scale We have to be prepared for tenants to move in and out as what we have experienced in the past. And as long as we plan ahead, I think we should be well prepared to take on any risk. So that being said, we don't have any ones that are in the horizon in terms of, you know, renewal kind of risks.

Specifically on your first US portfolio, I'm just wondering whether, you mentioned you started initial discussions, but any sense that the tenants would like to maintain their footprint or are they looking to expand?

Okay. I think there is a mixed kind of reaction from them. Some will probably remain in terms of the kind of space that they have taken on. And there's one that is thinking of taking more and there's another one of thinking of shrinking. So it's fairly business as usual kind of discussion and most of them are talking way ahead of time so we would still want to continue that engagement and to see whether we can get a bit more visibility on the future plans and certainly if some of them could make the decision and then you know, give us a commitment. We'll be happy to lock in some of this ahead of time. The tricky part is more on cash flow management for some of these kind of transactions, renewal or new lease transactions. In the markets down there, the agencies, if they are involved, charge you the commission upfront before the lease commence. So from the case of matching the cash flow, say if your renewer is only due one, two years from now, but you get all the commitment so-called locked away now, the agents will ask for the money. And the commission fee in some of these locations are a little higher compared to what we see down here. And sometimes it's pegged to the entire lease period instead of us limiting to one month to three years, two months to six years or ten years, that kind of convention we have down here. So while some of these... part and parcel of doing business and doing transactions in these locations. But from a cash flow perspective, the moment this gets crystallized, you get that effect on your cash flow. So for some of these tenants or leases, we will probably see some of this effect later on, even if we were to be able to secure advanced kind of renewals, none.

Sorry, just two more questions on the US portfolio. I'm just wondering whether, I mean, just asking on what you can ask about development, right? Given that some of your tenants there potentially could, let's say, vacate, do you think that you could relook at redevelopment there? Like what you did in Singapore?

First, that is always a possibility, something that we can look at, I would say, as an option, as a As an approach to managing these properties, we would, as Plan A, want to retain the tenants first. We won't want to look at jumping into the development mode all the time. If the facilities are still relevant and still giving us meaningful returns, we want to be able to extract the best we can out of the assets first. And second, we would need to know whether there are other constraints, whether development constraints and downtime and the rest of the effects coming into play. same thing that we would have for the Singapore portfolio. Certainly, there are some clusters we have in Singapore that are quite well located, but there's a lot of other considerations. In Singapore, we have the land tenure issues, but U.S., less so in some of these geographies. But it's always a downtime consideration. It's always a case of us comparing, keeping as is, or redoing the entire facility or increasing the amount of leaseable space. So it is, as what I outlined earlier, an option, but I don't think we would look at that as the first thing that we immediately do the moment you have, say, a tenant moving out. We always want to try to see whether we can find a suitable replacement tenant first

Sorry, just last one. Have you renewed the onshore debt in the US really, and you reckon would there be any savings if you were to renew it?

The loan is actually not due yet, so we still have another two, three years to go. But there's nothing to stop us from looking at refinancing it, although it will be a bit difficult because it's a JV, but it's something that we are definitely looking at.

Good morning, David from Daiwa. Hello. With regard to the Kolemeyer redevelopment, the tenants that are moving to your other premises, what type of rent are they paying versus what they were paying previously?

Okay, we're giving them preferential rates. I think it's pegged less to the... original rents that were paying at Kolo Mae and we calibrate that based on the new premises that they go to so generally we give them discounts of whatever this new facilities are going to whatever those market rents are there we give a small discount so I would say typically in a range of roughly 10% level to make that transition a little, I won't say painless, but a little more less uncomfortable because they will have to talk about their own downtime, their own relocation costs and setup costs as well. So we have taken a similar approach for our earlier build-a-suit projects project for Hewlett Packard so that has worked well and of course when we offer the kind of facilities or premises to our tenants we look at a mixture of central and also less centrally located ones so that we can have a good spread and mix and we think that is certainly helpful in us keeping our occupancy for the portfolio reasonably high

And has any of those transactions been captured in your second quarter numbers?

No, I think second quarter you probably won't see much. We probably see a couple of small leases that would manifest themselves in the figures. You probably see this progressively in third and fourth quarter. As we have only announced this in July, not... easy for a lot of these tenants to react immediately. So most of them have gone through their evaluations and that is the reason why we talk about 59 out of 108 that have committed. So they have made the decision. So now is the time for execution. Some of them will take months, three to six months to prepare for the new space and arrange for the shift. So I think you'll probably see most of the effect coming in only by end of our financial year, which is fourth quarter, which is by April. By that time, most who want to shift would have shifted. Then we'll probably have some balanced tenants that are either last-minute decision-makers, you can only be small ones, or the ones that have already made plans to shift but need a lot more time to prepare for the shift Hopefully we can get everybody out by July next year for us to commence our construction works.

Okay, thanks. And a separate question. The 7 Tyson Drive data center property, can you give a ballpark of what the NPI margin is for that property? Okay.

For the sanitizing, because it's actually on a double net basis, so the equity is actually responsible for payment of as well as the property tax. So the MPI margin is probably 90% to 95%.

I think we'll take one question from the web. This is from Wi-Fi from UBS. Sutter Factories MPI margin expanded Q&Q from 77% to 83%. What drove that?

I think it's mainly a seasonal effect of us managing the costs well this quarter, but I don't think it is a kind of a level that we would want to copy and paste across for the rest of the quarters. It would probably drift back down to about 75-76% level.

Hi, Nicholas from Credit Suisse. Just had two questions. Am I right in understanding for your expectations for rent reversions, we're looking more of it becoming sort of flattish going forward rather than seeing an improvement to significantly positive rent reversions? Yeah.

Well, yes, you're right. I wouldn't characterize our rent adjustments as significantly positive reversions, because we are still seeing the uncertainty in the economic outlook and the trade issues as well, and all the rest of the geopolitical uncertainties. So I think in our earlier presentations, we have also done some look ahead. we'll probably see another one to two quarters, as I mentioned then. So this quarter, next quarter, maybe you'll see us reaching the bottom and probably be able to turn up. But at best, you'll be seeing those 1%, 2% kind of aggregate effect in terms of rent adjustments. So the market is still not very conducive for us to be able to make big rent adjustments up. and we want to be realistic about how much rent adjustments we will be able to make meaningfully on a like-for-like basis. So the big adjustments that we would have for the portfolio will be when we change the product profile from simple generic multi-user space to high-tech facilities. Yes, that's where we can get double-digit or, you know, for certain instances, close to double kind of rent numbers on a per square foot basis, but of course that would involve us putting in a lot of capital expenditure in the building improvements or upgrading. But on a life-for-life basis, probably not. If I were to again characterize that observation, probably flat is what you have mentioned.

And just one, I had a question on acquisitions going forward. How should we think about the pace of acquisitions going forward given that you've bulked up the data center portfolio quite sizably already? Would we continue to see that kind of pace going forward?

Okay, it's fairly opportunistic. As you know, the acquisition possibilities, I think they don't line up like rabbits and we just pick them off. It depends on what becomes available and and whether you know the risk return profile is something we could take on so even talking about new transactions anywhere whether in Singapore or in the other markets like for example this data center new data center portfolio that we're taking on came on only very recently, so it's fairly opportunistic. It's very difficult to program and time acquisition or transactions or investment transactions. But that being said, the ones that are more visible for us now at least will be the parents or the Maple Tree investments balancing in the two data center portfolios. The first one, of course, was the portfolio that we have acquired in 2017. So that's a balance 60%. And that, I think, is always a possibility because it's a very stable portfolio and the sponsor has the right of first refusal in place anyway. That's what we have outlined. So if it is something which the sponsor could consider and the sponsor wanted to divest that part is something that we would be able to take on fairly quickly. So that is fairly visible. For the second one, for the present one that we're going into, that could also be a pipeline we look at further down the road. So if, say, the sponsor were to decide to progressively divest. These are very natural kind of options for us to look at. And I think you see the sponsor had been doing quite a few of this in the other platforms as well.

Hi, Vijay from RHP. Just a couple of questions. I just wanted to get some sense on the industrial demand which you see in your portfolio, maybe which sectors and which segments you are seeing some expansion doing well and which sectors are not doing well because manufacturing activity seems a bit weak.

Yeah, I think manufacturing as a segment has been seeing a lot of weakness in the last year or so. I think last quarter was negative 8% or whatever based on what we see. So, Generally, it is still a challenging picture. Within the few segments, I think the ones that have exhibited growth or propensity for growth are the infotech kind of companies. We're seeing that. cybersecurity companies, all these are related to info technology kind of business. Data centers, of course, we see that as a bright spot and that's the reason why we have been able to crystallize a couple of these transactions. So for what we would consider as manufacturing type medical technology products, pharmaceutical related kind of industries, we're still seeing good demand there. Position engineering is still growing fairly well. So it's not a consistent picture across some of the other manufacturing segments like semiconductor, electronics. We're still seeing that seasonal weakness in the companies that we deal with. It's not easy to be able to spot and identify all the growth sectors. What we want to do is to make sure our facilities are well-designed, well-configured, and generic enough to be able to accommodate a broad range of activities.

Has there been any increase in late payments? And just looking at this chart, this seems like for this quarter you have traded rents for occupancy, but going forward you said that you would be trying to increase the rents as well as occupancy. Maybe what is driving this thought process or what you are seeing in the market that makes you confident of this?

Well, I think the first question you have, so far the kind of arrears that we're seeing or people paying late, it's nothing exceptional to highlight. It's actually a very kind of low percentage in terms of late payments over total revenue. It's probably below the 0.2 to 0.3 percent. So we don't see any kind of significant spikes for late payments We think that is partly reflective still of the state of health, but it's also partly due to the vigilance and the kind of single-mindedness of our people managing and controlling these kind of areas. So we need to continue to be very alert to issues. There are some tenants who of course don't pay but the percentage is very small. We don't see any say significant kind of shift compared to what we have seen in the past. And your other question on the rents and occupancy kind of trade-off in the Last year or so, we have seen our occupancy coming down. Actually, it's one and a half years. And our eyeball will be on occupancy first. Because at the end of the day, it's not meaningful for us to just have a high reported rent figure when you don't have the occupancy to show. So as you have seen in some of, not just this quarter, some of our charts are ruined. renewal rents or even new rents for some of the segments, especially for business park segments, we have rents that are meaningfully lower than passing rent, meaningfully lower than renewal rents. So we are technically, say, focusing on boosting occupancy levels. And generally, if you look at our occupancy levels, most of them are certainly now, even for business park on a committed basis, above 85%. When we hit the level of, say, 85%, we think there will probably be a bit more kind of room for us to move in terms of rent adjustments. We will be able to nudge some of the prospects and existing tenants to consider paying that little bit more. So that kind of... A shift in attention is already happening now. Now we have gotten the occupancy level that we think we wanted. Then we try to move the rents up a little more so we can be a little bit more selective in all the prospects that we deal with. At the end of the day, if you were to ask us to choose You can either have A or B, occupancy or rent. We'll choose occupancy because we're not at an occupancy level where we can comfortably cruise along. The level which we can comfortably cruise along is about 95%. We have seen that many years back, but I think it's not easy in this market. So we always look at the trade-off on a per-transaction basis. It's not a... It's not a kind of very broad kind of guideline that we have for our leasing team. So we will look at every single deal very carefully, whether they are good tenants, they are good additions to the portfolio, whether they could help us anchor more kind of related entities in the precinct, for example. So all these come into play when we deal with opportunities.

One last question from me. In terms of redevelopment for a Singapore portfolio, can you give a rough ballpark number in terms of how much more can you do, either by income or GFA?

Okay. I think I have looked at this aspect before. It's not easy to pin that down, and I would say the upper bound of what we think we can realistically do is probably about a third of our balanced feather factory kind of portfolio. As you can see, our feather factory portfolio is about 33% as of now. So we think maybe 10 percentage point out of that 30%, maybe we can do something. But that's about it. Because the others would have land tenure constraints, even if they are very well located. And the ones that I'm talking about will be all your the Bukit Merah ones, your Tiong Bahru ones, very well located, but land tenures are relatively short now. So it's not So easy for us to do anything that makes good economic sense. And as we get extensions, same thing with some of the Kallang Basin ones. The one that we have done more significant work is already completed, 38 Kallang Place, which is, of course, 100% committed. So my sense probably at 10 percentage point. Just a quick follow-up.

Can you give me the... Returns, development returns versus US. US is 9 to 12, right, you mentioned. Singapore will be low teens.

If we can find some that are in the teens, we will probably push ahead a little bit more quickly. Down here, the project returns, I think we are looking at a 7.5 to 8% on yield level. There are certain instances where we aligned, we are able to get most of the stars aligned well, like the Hewlett Packard Build a Suit project, we are getting more than 10%, but I would hesitate to say it's teens. It's just a little above 10% for that kind of initiative. So I would think that the reasonable bound for us is probably the 7.5% to about 9% kind of level for redevelopment projects.

Thank you all for joining us today. I think we can take additional questions offline. Most of you have another briefing to attend to. Thank you very much.

Okay, thank you.