Mapletree Industrial Trust

Thanks for joining us for Maple Tree Industrial Trust second quarter and first half financial year 2021 results. We have on site the management team of MIT. We have Guo Wei, our CEO, Lily, our CFO, Serene, the head of asset, and also Kim, the head of marketing. I think joining us on virtually is also Peter and also Paul. This morning we are doing a virtual teleconference, so we have both the analysts that are dialed in and investors that can access this briefing via our online webcast. Without further ado, I'll pass on the mic to Kuo Wei, who will give a short update on this quarter's results.

Yes, you seem very relieved, you know. when she gets to pass it to me. So okay, the presentation pack we released last evening as usual. We have the five segments which we normally cover. So let's start on page five on the key highlights. So the growth in the revenue we have outlined driven by the 14 data centers which we have completed for September. So there's some loss of revenue from the redevelopment project as we have already outlined last year when we started that project. We have a one-year decarbon period. So the completion of the decarbon was, I think, on the 9th of July. And with the completion of the decarbon and the project being moved to a project under development status, we have taken that. asset out of our denominator in a lot of our statistics and of course revenue becomes zero. So in aggregate from the distributable income perspective we have seen an increase 14.8% to $72.9 million for the second quarter. Of course some of this comes from the additional Contributions from our 60% state for one month, 1st September to 30th of September. And part of the increase is from our acquisitions of the other data center assets in the beginning of this year and end of last year. DPU, you can see a 1% year-on-year basis. 310 for second quarter. As you might have read in some of the details that we have outlined, we did not withhold any distributions for this quarter, but I think the weaker DPU is partly attributed to the additional rebates that we have given to our tenants, especially the small and medium-sized enterprises this quarter. despite having a slightly higher revenue contribution and of course we have a much larger unit base for this quarter after the equity fund raise exercise that we did in June. The portfolio occupancy has increased about 1.2 percentage point, 91.1% to 92.3% on a quarter to quarter basis for the second quarter. This is of course a mathematical representation. The effect is driven by, or this increase is driven by us removing column IA2 cluster from the denominator because that cluster has been, you know, seeing gradually reduced occupancy. So now with that being removed, the average naturally goes up. but we are seeing fairly stable occupancy levels across the other segments nonetheless. Of course, since the last quarter when we outlined the data centre segment as a separate property segment, we have since completed the acquisition of a 60% interest and that has indirectly increased our exposure to this very exciting property class. And we have also, in the middle of September, announced the acquisition of a data center in Virginia. So now we are going through the acquisition process and hopefully we will be able to provide a bit more details once we get a few of these transaction mechanics out of the way. So the value of that is between $200 and $270 million, so depending on finally what we arrived at commercially. On the capital management side, the leverage ratio remains fairly healthy, 38.1% aggregate leverage level, and we have, of course, a good and strong balance sheet, more than $400 million worth of committed facilities. I think moving on to page six, that in a nutshell is our report card for the trust ever since we got listed. On the right, of course, the most recent set of figures. And you can see the only $2.9 million distributable income for second quarter and the uptake in terms of DPU 310 on the right. That is of course partly because we did not withhold any of the distribution this quarter, unlike fourth quarter financial year 19-20 and first quarter financial year 20-21. If we had not withheld the amounts actually, the distribution for these two quarters would have been higher even compared to this quarter. We will share some of these details in the financial numbers in the subsequent slides. Okay, financial performance, what you see, they can see the slides, right? Yeah, okay, I see a thumbs up. So on slide eight, we have this comparison for second quarter year-on-year basis. revenue increase, I think, due to the data center projects that we have taken on. And that is the effect of the consolidation of the data center portfolio that we completed on 1st September. Net property income as a result of that had gone up about the two percentage point from about $80 million to $81.6 million. The share of joint ventures, of course, you see a kind of combination of effects because in the previous year, we do not have the second data center portfolio in the set of figures. That was the joint venture that we did for the Digital Value Trust Data Center portfolio. So as a result, you see this very large increase, more than 100% from $4.45 to $12.3 million. You bring the numbers down after taking all this into effect, amount available for distribution, 14.8% increase from $63.5 to $72.9 million. So at the DPO level, as I've outlined earlier, we see a 1% reduction, 313 to 310, on a like-for-like basis. This quarter, of course, there had not been any amounts withheld. So from the same store basis, we have given a little bit more rent rebates to our tenants in Singapore. And with a larger unit base, you see a slight decrease in the DPO. Okay? Let's move on. First half year on year basis, similar kind of profile, but of course the growth rate not as high because you account for six months and the effect is a little more muted for the one month impact of a consolidation of the 60% interest. So revenue increase half a percentage point, 201.5 to 202.5. MPI level 1.5% increase from $157.9 to $160.3 million. So you can see a slightly lower increase in the amount available for distribution, 13.2% from $126.7 to $143.4 million. The DPO level, you can see a reduction of 4.2%, mainly because of the effect of us withholding 0.32 cents for the first quarter of this financial year. So in aggregate, you're seeing the absence of that 0.32 cents in the distribution that we have declared. So the reduction is 4.2% from 6.23 to 5.97 cents for the first half. On a quarter-to-quarter basis, of course, you can see more apparently the effect of the contributions from the new so-called contributions from the 60% stake in the data center portfolio, 4.3% increase, MPI level, similar kind of profile, because of that effect, 3.8% from $78.7 to $81.6 million. But on the amount available for distribution level, you're seeing a similar increase, 3.3%, from $70.6 to $72.9 million. On the DPO level, this is of course not as meaningful a kind of comparison, you see an 8% increase mainly because we withheld 0.32 cents in the previous quarter. If we had not withheld that amount, which was incidentally equivalent to about 10% of our DP for that quarter, it would have been 3.19 and compare that with 3.10, you'll be a minus 2.8%. So that is essentially the effect of us accommodating some of these rent rebates and assistance. Moving on to our financial position, that's on slide 11. Partly because of a transaction that we did completed in a quarter, the NAV per unit has decreased shifted up 4.3%. Now we are $1.69 for 30th September. Okay, moving on. On the balance sheet side, I think there's some consolidation effect when we outline this set of numbers on the total debt. So it has moved up from $1.55 billion to $2.0 billion. And the weighted average channel of debt has shifted down from 3.9 years to 3.2 years, mainly because the debts that we have for the US portfolio onshore are relatively shorter. So mathematically, you see that figure averaging down. But the aggregate leverage ratio remains fairly healthy at 38.1%. It has, in fact, dropped 0.7 percentage point from the previous quarter. So this is our debt maturity profile. That's on slide 13. We have nothing due in financial year 2021. So we will be keeping an eye on what to do with the amounts that we need to refinance in the subsequent two financial years. You see slightly taller bars if you compare this with our previous expiry profile. because this comes from the consolidation of the US debt and this US debt actually on a slightly higher interest rate basis because we took them on about two to three years back. So we think there's some room for us to gradually average down some of the interest rates for this debt that are due. From the risk management part, we outlined some of these perimeters on slide 14. Most of our debt had been fixed. 93.8% is higher compared to the previous quarter because a lot of our U.S. debt had already been hedged. And the weighted average hedge channel is also 3.2 years, similar to our weighted average debt channel. And this is essentially an effect of the consolidation of the U.S. debt. So all-in cost still remains fairly low at 2.7%. Interest coverage ratio seven times and for the trailing 12 months, 7.3 times. And you can see the bullet point at the bottom, slightly more than half of our income stream for the coming quarter has already been hedged. So we are doing that progressively to make sure our income is stable.

Okay, moving on to the portfolio update with the completion of the acquisition of... The leader has turned lecture on and your line will remain muted until the conference leader unmutes your line.

On the left, close to 39% data centers and out of which North America, 32%, Singapore, of course, the balance, 6.5%. The high-tech buildings has come down mainly because we have carved out the data centers from the high-tech buildings property segment for more granular information on a portfolio to be given. So high-tech now is 21%. And in terms of country split, it's roughly a one-third, two-third kind of split. Singapore, about 67.8%, and the balance 32%, North America, mainly US. And on the slide, I can't see the number 17, because that cursor was on the page number. Anyway, this is the portfolio update. The numbers are usually quite static in terms of the number of assets, but this quarter we had a reduction of three properties in Singapore Portfolio because that's Kolomai II, which we have taken out from the, you know, this set of figures is a project under development, so the three buildings are almost fully demolished, so they are no longer accounted for. So Instead of 87, now we have 84 properties. So occupancy level, you would have seen the increase for the Singapore portfolio, 91.5% from 90.2%. And that one is a mathematical effect. And let me explain. Federal factories, essentially you see an increase. If you look at the details at the bottom, 85.4% to 88.1%. and that is essentially due to the Koloma A2 cluster effect. If we had removed that cluster from this set of data points, previous quarter instead of 85.4 would be 88.8 and this quarter instead of 88.1 would be 88.4. So that on a like-for-like basis for the rest of the federal factories, you would have seen a reduction in the occupancy level. So this one is a magic show, you know, when we remove Koloma A2 from the calculations. But I think the takeaway is that there's still some pressure in the multi-tenanted space. For the US portfolio, you would have seen a corresponding reduction as well. Key reason is because the data centre portfolio which we recently completed, where we took on the balance 60%, the occupancy was 97.4% then when we took over. So when we take a larger stake or we consolidate it 100%, mathematically that average comes down. Okay, let's move on. This is the lease expiry profile. You can see the split up there, Singapore portfolio because of the multi-tenanted portfolio. kind of component in our portfolio, 3.4 years weighted average. North American portfolio, 6.6. So in Navigate, you see a 4.2 year kind of weighted average figure. For the balance of this financial year, we don't think there's anything remarkable to talk about. Just 6.5% of the leases that are due for renewal. And most of our leases are due you can see the tall bar on the right, 38.2%. They are due financial year 24, 25 and beyond, you know, five years, four or five years from now. So it will be quite some time before we need to be worried about this, but we are already working on engaging some of the larger tenants on maybe a forward renewals as far as possible. So on page 19, we have our top ten tenants. As we grow our data center, part of our portfolio, you can see higher representation in this chart. We have just two colors down here, high-tech buildings and data centers. High-tech buildings represented by the yellow, orangey bars. So the number one tenant, 7.5%, HP, Buddhistwood tenant, has gradually come down from 10%. Now it's about 7.5%. as we increase the size of our portfolio. Other than Cervantos, which is at 18 pricing, the rest are data center tenants. And the second largest now is AT&T. In terms of representation, our top 10, 6.6%, mainly because of the consolidation of the interest in the 60%. So this is on slide 20, our trade sector mix. For the first time, I was reminded yesterday, we have a large representation in the telecoms segment, which, you know, essentially is where we account for our data center tenants. So at the bottom, you can see 28% Infocom, telecoms, 22%. In the previous, I think, three, four years, the bigger representation had always been in manufacturing and position engineering machinery, and of course a big part accounted for by Hewlett Packard then. So on slide 21, we have the Singapore portfolio performance figures. While our occupancy had gone up mathematically, you can see on the right, 90.2% to 91.5%, partly because of the mathematical effect of us taking out KOWA MyA2 rents have come down mainly because of the rebates that we have given and also the rent revisions, negative rent revisions for some of the leases. So from 208 in the previous quarter to 203 in the second quarter. If you look at the aggregate numbers, we are back to around the second quarter financial year 19-20 kind of rent level on an average basis. And on page 22, we have our rent revisions uh chart uh we think the the performance is relatively stable but please do not you know get too excited about you know some of these large increases like high-tech buildings you see a 301 figure for new leases that's mainly because of the retail related leases we have at 18 pricing so on a relative basis you see higher rents down there but that aside The renewals are still a fairly stable kind of level. Before, after, no change. 229, 229 for the high-tech space. Business Park buildings, you can see a slightly higher positive rent revision. We would also caution that we shouldn't read too much into this increase. The key reason is because we had a tenant that was on a five-year lease, I think, then that was on a slightly lower rent, a fairly significant amount of space relative basis. So with the renewal, we have managed to adjust the rents back up a little. So it is certainly helpful, but we don't think it is a clear indication that we are seeing a strong uptake in this case for business park rents. I think we are looking at some good level of stability. But the key thing to know is renewal rents and the new rents above our passing rents, which is represented by the purple diamond. And I think that's encouraging. So the weaker part remains federal factories. You can see that in the chart in the middle. The new rents, I think, are relatively lower, $155. compared to our renewal ransom 72 and there's still negative reversion of slightly below 2% for some of the leases that we deal with. So we continue to see more pressure at our small and medium-sized enterprises and this gets manifested in some of these grand levels that we are seeing. Similar observation for stack-up ramp-up facilities where we do have many smaller size tenants down there as well. So you can see the minus $0.05 and minus $0.07 relative to the original rents for renewal rents and the new rents coming. So we continue to experience some pressure in this space. Okay, let's move on. The tenant retention level, I think, relatively healthy. Most of our tenants stay with us long term. For this quarter, the figure is 64.8% more than four years. But the more interesting chart on the right, the retention level is 77%. It's still relatively healthy. But I think part of the reason is because unless necessarily the tenants would probably not want to take on capital expenditure, shift out of premises and especially now when they may be able to get some rent assistance or relief either from landlords or from the government. So they tend not to make big decisions on moving and some of them will just bear with remaining in the existing premises. So we won't know whether this kind of behaviour will continue but this is still a fairly healthy retention rate as far as we can see. And looking at the other parts of our portfolio as what we have outlined on slide 25, we continue to look at rebalancing the portfolio. On the left, I think, of course, is the balance 60% that was done. So that has increased our exposure for the North America, US part. And on the right, I think that's the most recent acquisition that we have announced. So this one, the pending completion around first quarter of 2021, calendar quarter. So we should be able to move our AUM closer to $7 billion and that would also increase our data centre as well as non-Singapore exposure to say about 34-35%. So this is helpful in rebalancing our portfolio for more resilient and stable kind of performance. Moving on to the next slide on page 26, the divestment of 26A Ayurvedic present. This one is still on track. We are still waiting for the paperwork to be done by HATC as far as we are concerned. It's just going through the process and we think we'll probably be able to get all these completed. towards December of this year. And the next, of course, is our redevelopment project at Kuala Lumpur. As I mentioned earlier, we have almost completed taking down the existing structures. So we are about to start on the construction of the three buildings in the new high-tech precinct. So now we are going through the tender submissions from the construction companies and we are already seeing some increase in the construction costs, mainly because of the COVID-19 pandemic. Additional so-called safe distancing measures, additional PPE required and additional kind of constraints on working on site in construction sites so all these we anticipate to have you know impact on the construction cost and we are now doing our final evaluation but certainly that would have material impact on you know the final project kind of value. We think it is still meaningful for us to continue because despite this cost increase, it is still a meaningful redevelopment project that allows us to increase our port ratio by another one time. leasing demand I think continues to be encouraging, especially for some of the high-tech users in this space. So we will probably commence the works in this quarter once we get the construction kind of bits evaluated and finally decide on the approach and a scheme to go for. So finally, I think we talked about the outlook. In Singapore, I think it's still challenging as well. We have outlined economic kind of decline, 7% for the quarter. Of course, you compare that with the previous quarter, it is less negative. It is still something to be concerned about. Business sentiments actually had improved a little for the fourth quarter, so hopefully the environment continues to normalize a little and that certainly will be helpful for our portfolio. For our Singapore portfolio, we of course continue to see the pressure being faced by our smaller tenants and a lot of their businesses are affected and the rent relief that we have given so far first quarter and second quarter in aggregate $7.1 million. We have earlier estimated that we need roughly $20 million and that's one of the reasons why we have done the withholding of the distributions in the previous two quarters So we think the amount that we require should be in the same level of $20 million that we have anticipated earlier. So we think there's no need to withhold more, but certainly we would have more of this kind of relief being crystallized in third quarter, maybe some spilling over to fourth quarter this financial year, because some of these reliefs are still pending confirmation from the government agencies. And arrears, as I said, 30th September, I think still not alarming. We're talking about 1.4% of previous 12 months arrears. cost revenue certainly is higher than what we have been seeing, you know, traditionally. But as a, you know, in view of the pandemic situation and the condition of our market, this is still a very, fairly low level. And we think it is a manageable level for us. Many of our tenants, I think, you know, working with us fairly closely on their payments and There are some that have asked for rent deferment or restructuring, but not that many. It's still a fairly manageable number, less than 100 tenants have asked for some of this rent deferment or restructuring. So as a result of that, we think the situation is more or less under control. So we think there's no need for us to continue withholding income for this quarter. So I think moving on to the US or North American portfolio, it is a very resilient property segment. So there continues to be very strong demand for data center space and partly driven by this pandemic as well. There's an increase in demand for you know, off-site working, then the digital connectivity becomes more important. There's a lot more e-commerce usage as well. So that has been a very good driver, you know, for data center kind of needs. So we think this remains resilient. So in summary, that's our, I think, final chart. We... certainly strive to keep the portfolio diversified and we want to keep it resilient as well and we have very good financial flexibility and we certainly continue to look at the growth through acquisitions and developments like what we have always been doing. So I think that sums up what we have for the second quarter. I'll be happy to take questions.

Thank you, Kuo Wei. We will now move into the Q&A session. And those on the call can state their firm and name before proceeding with their questions. Participants via the webcast can submit their questions online. Is there a question from an analyst who started the ball rolling?

Hi, Melissa. It's Mervyn here.

Hi, Mervyn.

Yeah, maybe I think Kuo Wei touched on some of the rental trends, but maybe some color on your expectations going forward. I presume it's going to be rather challenging still, but any green shoots you want to highlight and potential stabilization in terms of timing?

You're talking about the outlook for the rent in the coming quarters. So, yeah, I think it's not easy to read but the figures that we are seeing in a high-tech space and a business park space are certainly a bit more encouraging. These two property segments will probably be the first that would see that, you know, a reversal in terms of the negative rent pressures. My read is that we will get to some level of stability probably middle of 2021, so around May, June time, because it's still difficult for us to say we're completely out of the woods, even for some of the stronger assets. A lot of tenants are still cautious and may see certain segments that are up industry segments that are seeing a return of demand return of kind of business activities a lot of them are still taking a wait and see approach so in terms of rent levels we'll probably be seeing a flat kind of profile if we are hoping to see any meaningful positive reversions, it can only be second half calendar year 2021 and beyond. That is mainly for the stronger segments like your high-tech space and BP. BP, maybe we can see some spillover effect from the commercial space in some of the commercial office users. looking for slightly more attractive price alternatives. So that might spur some demand. But our worry remains on the feather factories and stack-up ramp-up facility, which are all multi-tenanted kind of facilities. So we think the negative revisions on the rent is going to continue on at least till say the second half of 2021 maybe by say september october next year which is about a year from now we'll probably see that leveling off so that that weakness is going to continue on for some time especially when we have a lot of small medium-sized enterprises in this space and some of these companies are being supported by a lot of these government measures, and that cannot go on indefinitely. So if the business environment doesn't improve meaningfully by next year, some of these companies may really consider downsizing significantly or going out of business. So that would have an impact on our rent and occupancy levels for the multi-tenanted space.

Thanks very much.

Hi, morning, Kuo Wei. This is Derek from DBS. Can you hear me?

Hi, Derek.

Hi, Kuo Wei. Just a few questions for me. Just follow up what Muslim had asked. I'm looking at your occupancies, right? I'm just curious whether, you know, do you think that your SMEs are supported by liquidity provided by the government in the first half of the year? Just curious whether should we expect some form of weakness moving to the second half?

Yeah, that is a worry. As I think you have mentioned earlier, The government support is actually quite important and is critical for the survival of some of these companies. So the rent rebates and release had been helpful, but more directly from the real estate kind of landlord perspective. But the support on the job support scheme in government offsetting some of the wage costs and also the moratoriums from the financial institutions and the banks had been helpful and that had helped the companies especially the smaller ones in managing the liquidity and cash flow. So as you might have seen in couple of these speeches and government kind of statements this kind of assistance cannot go on forever for all industries so we see that support probably being kind of weaned off towards end of this year and some of the tenants may find that they will not be able to continue meaningfully without this kind of support in place. So we think there's a risk of us seeing lower occupancies and lower rent levels, especially for the further factory space.

Okay, so does it mean that your net rebate guidance of $20 million is likely to be utilized, given that you only use about $7 million first half?

Yes, the thing is the $20 million, of course, we made some gauge earlier on around the same time when the government had the 42 budget or supplementary budget. And when we leave, you know, as a fairly well-defined framework now, out of our... 87 properties. Of course, 87 because we included the three column IA2 assets. Now we have 84 plus three, 87. Out of our 87 properties, we have only received the notifications on the relief details and quantum for 37 of them. five are not eligible, either single-tenant or MNCs. So we have a balance of 45 multi-tenanted properties that are assessed by IRAS for property tax on a global basis. So the kind of relief details are still pending the confirmation from IRAS. But we are very certain based on the indications that we have received for the 37 buildings that you know are already processed most of the smaller size companies will get some form of relief and we think we'll probably utilize most of that 20 million that is you know anticipated and if you look at the the amount that we have set aside 6.6 from fourth quarter, $7.1 million in the first quarter, $13.7. And of course, in the first two quarters of this financial year, we already used $7.1. So we think the balance, $6 million or so, will probably be utilized and some of the effect would be manifested in slightly lower kind of revenue collected for either third quarter or fourth quarter. So that kind of balancing kind of outcome will probably be seen in third or fourth quarter. So at the end of the day, we are looking at a fairly even kind of distribution profile for the rest of the financial year without us needing to set aside more

income okay sounds good sorry last question for me i've noticed that you mentioned earlier in the call that your interest cost is expected to drop a little bit i know and also notice that your hash ratio is quite high i'm just curious whether are you looking to go towards more floating in when the hedges come due uh well in in short yes i think when the uh

That deal in the next year or two, we'll probably look at refinancing certainly them and try to nudge the interest rate down a little. As you know, the interest rate environment is fairly conducive. But I think we want to be able to do it in a prudent manner because some of these debt and some of the interest rate hedges are already in place. If we unwind them now, it's just a case of us crystallizing the differential and the loss. So we will look at the expiration in the next one, two years, and then of course try to take advantage of the current low interest rate environment to adjust the interest rate down. And that of course would have an impact on our profile, whether it's a more fixed or more folding. But I think in all likelihood, we'll probably still have a reasonably high level of fixed debt because of the nature of our portfolio. But there's a good likelihood of us moderating that ratio down a little.

Okay. Sounds really good. All right. Thank you very much.

Hey, hi. Hi. Can I just ask a couple of questions? Just on the column R year 2, can you give us a bit more details on how much construction costs you see rising and what's the impact on your initially guided year-on-cost?

I see a finger sign pointed at me. So we are putting a big question mark down there. So we, of course, are running a tender now and it is probably better for me not to outline that range because I don't want some of these contractors who are bidding for the job to anticipate and manage the negotiations. But it is not a small increase. If it is a $3-5 million increase, I think I will tell you upfront, it is not small because the contractors across the board faced with this additional kind of measures they have to bear and some of these costs are very real. So we were trying our best to find ways to structure the construction contract and then manage the impact. But as what I have outlined earlier, We think this is still a meaningful project for us to take on. The additional GFA that we are creating is very significant, especially when we are not needing to pay for the additional GFA that we are able to utilize. So the value creation is very significant. So we think the project is able to accommodate the construction cost increase. So our focus now is just to try to mitigate and then manage the quantum of the increase. But certainly once we have those contracts locked away, we will outline the revised set of figures. But right now, as I said, since we are in very close negotiations and discussions with some of the bidders, I think I'd rather not posture any kind of range yet.

Okay. Does it actually, I mean, with all this COVID and rising construction costs, right, does it kind of change your decision on a couple of the AERs that I think you were previously guiding for, like the one at Kati Bukit?

Of course, we would have to take this into consideration. The Khaki Phuket one is a fairly significant redevelopment if you want to embark on it, about double the size of the Koramai A2 one. So it is not something that we would, that we have planned to anyway, to start immediately. we want to look at the leasing momentum and the level of demand and where the demand is coming from for, you know, the new space that we are creating now. So practically, even with or without the COVID backdrop, that project will come on earlier, maybe two years from now, when we are near completion of Columbia II or when we have a greater clarity on you know, the level of commitment. And also we have to keep our eye on the impact of the portfolio when we take down operating clusters, you know, that's contributing income effectively. Kola Mahi, or rather the Kaki Bukit cluster is larger, quite a lot larger than the Kola Mahi II cluster. So the revenue impact is significant and you have to keep an eye on the development headroom as well. Now that our portfolio size is a little larger, we are a little less constrained along that front, but it's something that we have to keep an eye on so that we don't use up the available headroom. So we would certainly be more careful and we'll be a bit more conservative in our you know, assessment, especially on the construction cost and timeline impact, for sure, you know, this will be the new norm. Unless the world, you know, convincingly shakes the disease off. But I think we might, you know, have a good chance of seeing that. You look at it practically, we only start the detailed planning and execution probably two years from now. So if two years from now, you and I are still talking about COVID, it must be really a dire situation. Then, of course, if the economics still works, if we can still find certain segments of the industries that would want, you know, well-specced facilities in those areas, few select occasions, economically it may still be meaningful for us to push ahead with the project, but we will be more sensitive to the time frame and the cost in an overall assessment, say, two years from now.

Okay. All right. Thanks, Ngoc Hoi. That's all from me. Thanks. Maybe we'll just take a question.

Sorry. Hi, Mel. This is Donald from POA. Question on the deferment. You mentioned that there were 100 tenants so far. What's the trend like for the deferment, say, for the first quarter versus second quarter out of the 100? Was there an increase or has it started to come off?

The number is about the same. in terms of the number of tenants asking for deferment, I think the first quarter we talked about 105, and this quarter was 94. Okay, so this is in total or per quarter? At any one time. So we have slightly fewer that have asked for a kind of deferment, but I think That kind of number difference is probably not so significant. So for ease of reference, about 100 tenants at any one time that have asked for some form of deferment.

Okay. And this is as a percentage of revenue so far. Any guidance on it?

Don was about 6.9% of monthly NPI for the Singapore portfolio.

6.9% of monthly NPI. Okay. And how many of these is hiding under the COVID bill as opposed to unofficial?

We will not say that they are hiding. They are just some of them availing themselves to this about one-third.

Yeah, it's equivalent to about just 290 of monthly rent or about 1.1% of NPI.

1.1% of NPI. Okay, one very quick pull-up. 290,000. Very quick pull-up on rebates question earlier. I sort of missed it. How much was released this quarter? In total for the half, is it 13.7 million? Or what was the number?

Okay, in total for the first two quarters, we have released $7.1 million.

Okay. And you're providing for $20 million.

Yeah, we're looking at around $20 million. So we think there will be more than $7 million, certainly more than that in third quarter and fourth quarter financial year. As I outlined earlier, some of the notices that were already processed by IRAS for the 37 buildings and some of these have of course MNCs and larger companies who are not eligible for the additional relief and that's why the kind of crystallization of relief is a little lower in the second quarter. But third quarter, we anticipate that most of the multi-tenanted buildings will be processed and assessed by IRAS and most will get crystallized this quarter. So we think this is a quarter or rather the third quarter will probably be the quarter where we would release some of the amounts with help to balance off the impact of rent relief that we would need to give. So we will calibrate that and see but generally we would expect everything to get even now for the financial year. Most will be in third quarter. There will probably be some spillover or residual kind of rebates going into fourth quarter of the financial year, but that should be all.

Okay, so it's assuming that you've released the entire $20 million. Yeah, that's correct. The remaining $13 million will be spread in the next two quarters in your fiscal year.

Yeah, that is how we see it. And of course, we would use the amount that we have retained earlier to go and try to offset the effect over the third quarter and the fourth quarter, depending on finally how much gets confirmed by IRAS within that quarter. Okay, I understand. Thank you so much.

Hi, it's David Long from DiWIM.

Yeah, sorry. Yeah, yeah, please go ahead. Okay. David, you can go ahead.

Thank you. Thanks. The iOraja Crescent divestment, is it necessary to distribute the $19 million in profits over three years? Shouldn't you just reinvest everything into the Virginia data centers?

There is something that we can do, but at the end of the day, we would look at the effect on the portfolio and where we get additional funding from. Certainly, a bigger part of the proceeds was reminded. Of course, this one was $125 million. A bigger part of the proceeds would be recycled. this $19 million is essentially just the profits that we are distributing. So there's no kind of standard guide on this, but I think our original intent then was to, of course, distribute the profits, especially when this is a fairly meaningful quantum to the unit holders.

Okay, got it. And the Virginia Data Center, Can you provide some guidance in terms of the yield that you're going to acquire?

Not at this stage because the vendor is extremely careful about this confidential information and will want to lock away all the commercial and financial perimeters first. before we outline anything, this unfortunately is the nature of some of these type of transactions. So in terms of, I think, profile, quite similar to what you would normally expect for data centers with this quality of tenants and lease in place. But please do bear with us. We, of course, would very much like to review a little more about that counterparty is a little sensitive about the information being released way ahead of time. So we will probably be able to provide a little bit more details in the subsequent engagements or conversations.

Okay, great. Yes, thank you. Got it.

Hi, it's Wi-Fi from UBS. Can I ask two questions? Yep. Just to follow up on your comments on rental outlook, for flatter factories, you mentioned negative reversion likely until September next year. May I know what is the pace you're expecting? I think previously you guided around 2% to 3% negative reversion. Has that changed?

The 2% to 3%, I think, when we look at the overall... kind of portfolio on a lease by lease basis, I think probably minus 5% is the kind of range or around the minus 5% level is what we anticipate.

For flatter factories, right?

Yeah, for flatter factories.

Okay. Secondly, on your Ayer Raja divestment, are you able to share what drove Equinix to exercise their option? And also, do you have any other buildings with such option?

Okay, the second question is very easy to answer, no. So that is the only asset that we have with this kind of option. So we certainly try not to embed these kind of options in because we want our portfolio to give us that stability. We do not want the portfolio size to shrink and expand erratically over time, especially when this kind of structure is in the form of an option which may not be something that we have control over in terms of the timeline and exercise kind of flexibility. So from what we understand, Equinix had a kind of balanced approach in their own portfolio management. We want to have ownership in some of the key nodes or key hubs and it's also prepared to lease space in other premises. So we do have Equinix As a tenant, even in Singapore, at Seven Taising, we did that upgrading project for the entire building for Equinix. It's also in our facility in the US at 180 Pitch 3. So it has a kind of a hybrid model. It need not own more and it is prepared to lease even in some of the key data center locations as well. So for this case, because it is one of the, say, key connection points for Equinix, there was a reason at that time when we had this project being initiated, it wanted the option to purchase to be built in. It's a non-negotiable point then. you know, when he was looking for the developers that he could work with. So it's the same condition it has, you know, put across to all the bidders for this project then. So it was a deal-breaker condition then and we have considered long and hard, you know, and at that time, of course, we were still trying to build up our capability and track record in this space, and we thought, okay, fine, this is something that we could take on. We have worked out all the financial impact and then economics is still, of course, financially meaningful for us at that time when we did the transaction. So that was one of the considerations this clinic had then, and that was our commercial gauge At that time, of course, we are very careful in this kind of options. We certainly would resist giving any of these options as far as possible.

Thanks. Sorry, just one last one. On data centers, have you seen any cap rate compression since you last bought your first US portfolio a few months back?

Since that first one, certainly, I think... That one, when we bought it, it was just a shape below 7%, about 6.9%. And I think now if you are looking at equivalent kind of assets, you'll probably be looking 6.5%, 6%. And for hyperscale facilities, probably even lower. And as you might have seen in the transactions being done now, a lot of investors are still... you know, putting in a lot of money in this space. So for some of the key markets like U.S., I think if you're talking about pure call and shell, you'll probably be trending below 6% already in terms of cap rate, even for simpler kind of assets or portfolio. If you're talking about a very established portfolio cannons or very strong cannons and in some of these key locations, you may even be pushing at a 5% level in terms of cap rates. Thank you very much.

Hi, Gorin. This is Khanshan here. Hi, Khanshan. Can you share a bit more about where is new leasing demand in Singapore coming from?

new leasing demand, I think I will be hard pressed to really identify certain bright spots within the market. I think maybe the description is which one is less weak. So I have Kim with me. She's facing these kind of questions on a daily basis. and then I'll let her give you a bit more color from a perspective in the engagement of the prospects from the different industry sectors.

Hello, good morning. This is Kim. Which one is actually less bigger? Because the new demand of or we don't really see, we see it's still a little bit more like a musical chess. Then the industry that is still doing okay is still the biomedical companies, the precision engineering, and the semiconductor industries. So those that is supporting the hospitality and the retail, like the wholesale trade, those are hard-pressed. These are some colors I can give you. How are we going to attract more people? Seriously, we really have to try to find that niche for our property. I hope that answers your question.

If I can follow up, if it's more of a musical chair, how low are you willing to lower rents in order to attract relocation demand?

I think that is the... The area that we actually don't want to play in, we don't want to be going on a price war. So what we are trying to find is those customers or companies that find our place suitable maybe because of the location. Not so much of the specs, but sometimes it's really the location and then the usage pertaining to their trip. So we are trying to carve out this niche instead of going to the price war.

Okay, got it. Thank you. And my second question is on data center. Can you share how is the acquisition landscape like both in US and outside? And should we be expecting more acquisition in this area in the near term?

If you're talking about acquisitions, I think we would of course look at the potential acquisition of the balance 50% from the sponsor for the portfolio that we acquired from digital. That one of course very much depends on the sponsor's timeframe, but it's something that we could work on. Other than that, we are still looking for opportunities in the key market. Nothing that we are able to really crystallize at this moment nothing that is you know near kind of mature level where we are able to you know transform into a workable deal a lot of these are you know RFPs being done in the market so we are continuing to look nothing yet. In Singapore, it's even more difficult as some of you might have seen that the moratorium being put in place by the government agency, so it's very difficult to get new data center development being approved. So while the demand continues to be very strong in Singapore, the likelihood of us being able to crystallize another beautiful suit in the very near term is quite low because you can't even get the agencies to give the go-ahead. So I think the market may only open up in 2021, probably from mid-2021 and beyond, not immediately.

I can just follow up on what you mentioned about overseas data center assets, right? Is it due to a lack of asset up for sale or is it due to disagreement on price that deals are not coming through?

I think the deals are still surfacing once in a while. I won't characterize it as a lack of opportunities. I think in terms of availability, may not be as many as what we see in the last two or three years, but there are still transactions being done and opportunities being surfaced every now and then. But I think the bigger challenge for us is actually price or the very sharp cap rates So we find that some of these transactions will be a bit difficult for us to do and for the deals that are done in the market now may not be something that we will be able to price competitively.

Thank you all for your questions this morning. I think there are some questions that are online as well. Maybe I'll just read out one before we end the session. From Fraser Smith, how much of the $7.1 million rental relief was booked in 2Q versus 1Q?

1Q was $2.5 million. So the balance, of course, about $4.6, $4.7 million in the second quarter.

I think we can end the session, and if there are any follow-up questions, please send that to myself and Mui Lien. For the webcast questions, we'll try to get back to you. We'll drop you an email and contact you. All right, thank you, everyone. Stay safe.

Yeah, thank you very much for joining us.

Thank you.

Thank you. Bye-bye. Okay, thank you. Bye-bye.