Mapletree Industrial Trust

Hi, very good morning to everyone. Thanks for taking the time to join us for Maple Tree Industrial Trust's first half financial year 21-22 results call. We have Mr. Tam Kuo Wei, our CEO of the manager, and Ms. Le Lily, CFO, joining the call this morning. I am Melissa and I will be your moderator today. Before we begin, may I request for analysts who have joined us via Webex to use the raise hand button for the Q&A session. Without further ado, I'll pass over to Guo Wei to give an update for the quarter.

Good morning everybody. We have uploaded the deck as usual last evening. I'll run through the few segments. First on the highlights, that's on flight number 5. Essentially, we have the growth driven by the contributions from the portfolio acquisitions of data centers in North America. So if you look at the year-on-year comparison, distributable income is now $88.4 million. It has gone up 21.3%. And of course, DPU, you can see a similar kind of upward adjustment, close to 12%, 3.47 cents. And of course, included in this DPU is the distribution of gain of 0.07 cents from our divestment of 26AI Raja Crescent, which is the data center we did as a build-to-suit project for Equinix. So that was completed on 25th of June in terms of transaction completion. So we will be distributing the gain over eight quarters, and of course this quarter being the first quarter where you see us registering that contribution. And the occupancy level for the portfolio remains very stable, 93.7%. If you look at some of the shift in the occupancy number on an aggregate basis, that's because of our... consolidation of the recently acquired data center portfolio and that portfolio occupancy is at 87.8%, so mathematically you see a downward shift in the occupancy number when aggregated, but it's a very stable number. The portfolio will, of course, because of the longer will for, or weighted average list of expiry for the new portfolio, you see an increase from 3.7 years to 4.3 years. And of course, the effect on our portfolio, so-called, The shift is because of a transaction done or completed, 1.32 billion US dollars, 29 facilities, that was completed on 22nd of July this year. And of course on a capital management front, we have a very robust balance sheet and as of now more than a billion dollars worth of committed facilities available, so we are in a very strong position to withstand any kind of near-term stress even on the financing front. And going on to the next slide, that's on slide 6, is our report card for the past 11 years. Some of you might have noted we are 11 years old already. We had our anniversary just six days ago. So on the right you can see the most recent quarters data points, highest ever distributable income and of course we have a new so-called level for the DPU compared to the rest of the quarters. So this is us continuing that upward track in terms of distribution and gains we provide to our stakeholders. I'll go in a little bit more specifically into the financial performance as the next section, starting from slide number eight. Revenue has gone up 50.5%. From $103.4 million last year, last financial year, to this financial year, $155.6 million. This, of course, has two effects. The consolidation of the balance stake that we acquired last year and also the contributions from the new portfolio and recent acquisition of the data center in Virginia. So all these helps to provide a fairly significant increase in the revenue line. And of course with the consolidation you can see a corresponding increase in operating expenses from $21.7 to $35.2 million. And net property income tracks that upward shift as well, 47.4% increase from $81.6 million to $120.3 million. So I think the borrowing cost has also been adjusted up accordingly from $12 million to $17.4 million. So If you bring the figures down to the amount available for distribution, that's where we have reported the 21.3% increase from $72.9 million second quarter last financial year to the $88.4 million that we are reporting for this financial year. On a DPU basis, 11.9% increase. from 3.1 cents to 3.47 cents. Looking a little at the year-to-date or the first half of the financial year's performance, that's on slide number 9. Of course the increase a little more muted because we only had some of the contributions from the recent acquisition only in the second quarter. So revenue side we are seeing a 40% increase. Property, net property income also about 40.4% increase. For the first half year $160.3 million to $225 million. And on the amount available for distribution, roughly 19.3%, a little lower than what we have, of course, registered for the second quarter, but it's still a very meaningful increase for us, $143.4 million to $171.1 million. So in aggregate, you are looking at the DPU increase of 14.2%. from 5.97 cents to 6.82 cents for the first half of the year. I think on a quarter-to-quarter basis, you see a similar trend. Of course, that increase is essentially from the new portfolio that we have acquired and we do not have the consolidation effect registered because it's already been in the financial numbers for the financial year. So a smaller increase of 21.5% for revenue, 14.6% for profits attributable and for the distribution, 6.9% increase and a DPO basis Of course, a more gradual 3.6% quarter-to-quarter basis from 3.35 to 3.47 cents. And going on to the next slide, slide 11. The net assets remain very stable. I think from a quarter-to-quarter basis, you see that the small leader uptick 1.7% from $1.75 as at the previous quarter end, 30th June, to $1.78 as at 30th September for these quarters. And on the balance sheet, that's on slide number 12. The debt of course has shifted up because of our acquisition. We have taken debt to fund the acquisition and it increased to about $2.9 billion. Weighted average channel has shifted up from 2.8 years in the previous quarter to 2.9 years in the quarter that ended 30th of September. You might have noticed the aggregate leverage ratio shifting up from 31% to 39.6%. Of course, the 31% was a figure which had incorporated the proceeds or cash that we have taken in from equity fundraising exercise in June. in preparation for completion of the transaction and we had not deployed the cash yet and that is the reason why on a reporting basis we see a lower leverage level but I think upon completion of the transaction on 22nd of July us taking on the debt and deploying the cash, you see the leverage level moving back to where we roughly were prior to the transaction. So we are now at 39.6%. And of course, if you look at the debt maturity profile on slide number 13, very well spread. And the weighted average annual, 2.9 years. A little lower than our weighted average lease expiry because our weighted lease expiry is a little longer due to the longer leases that we have in place for the data center portfolio. And if you look at the amount that is due for refinancing for the financial year, this current financial year, $425 million is very well within the capacity that I mentioned earlier, more than a billion dollars. So it's very well spread and we don't see any near-term challenge even on the financing side. And of course, if you look a little bit more closely at our other perimeters, that's on slide 14, as of 30th of September, our fixed amount of debt is lower at roughly 58% compared to about 96% previously. The key reason is because we have only recently drawn down the floating rate loans for financing the acquisition, we progressively take on the fixed rates, then you see that the percentage fix shifting up a little in the next couple of months. And with that all in, funding costs or our interest, more and more I think relevant the interest cost is lower, partly because this is made up of more floating rates So it's at 2.4% compared to 2.7% in the previous quarter. But as I said earlier, when we take on more fixed kind of elements in the borrowings, we expect the all-in cost to shift up a little, possibly closer to where we were in the previous quarter, assuming that the interest rate environment doesn't change too much. But as of now, the interest coverage ratio is very healthy at 6.7 times. And looking at the other forms of measurements, you know, trailing 12 months or even adjusting for the perpetual securities, we are roughly at 6 times for the quarter that just ended. Now, going into the next segment where we talk about The portfolio, this is of course a refresh of what we have on slide 16. Now we are at 8.5 billion Singapore dollars. And the Singapore and North America split is roughly 50-50 now. Singapore, of course, having a very slight majority, 50.6%. And data centers represent more than half of our portfolio, close to 53%. And in aggregate, we have about 24 million square feet of space. We continue to have a very large number of cannons and very diversified kind of portfolio profile. And if you look a little bit more closely at the occupancy rates on site number 17, You can see in the chart below, data centers has shifted down in the aggregate figure because of the lower occupancy rate that we have for the recently acquired North American or U.S. data center portfolio. So this is a mathematical effect. The rest of our segments are relatively stable, but we have observed some downward pressure for our business park buildings, about one percentage point from 83.6% to 82.6%. So in aggregate, you see the 0.6% reduction in the reported portfolio occupancy level on the right side of the chart. And if you look at the lease expiration profile, that's on slide number 18, very well spread and is essentially business as usual for us for the rest of our financial year, only 5.9% of the lease is due. And in aggregate, our weighted average lease to expiry, 4.3 years. The Singapore portfolio, we are seeing roughly 2.8 years, which is very close to our debt maturity kind of figure as well. North American portfolio is relatively higher and it has been helped by the recent acquisition, so now we're at six and a half years. And if you look at the tenant base that we have, that's on slide number 19, in aggregate, top 10, just below 30% contributions to the gross mental income. Number one is still on the left and the contribution has of course shifted down over time to just 6.2% and if you look at number two to number ten, all are data centres partly reflecting the shift in the portfolio profile and are still quite well spread among many of the key players in this space. And on slide 20, that's our tenant diversification chart. some of you might have noticed this is probably the first time we have a change in a position. We used to have the orange sector always starting from 12 o'clock. So now we have the blue part, the Infocomm part, which starts at 12 o'clock, representing the largest segment in our portfolio. That is, of course, because of a consolidation of to the data center portfolio and also recent acquisition. So now you see them stretching position. But that said, it is still a very diversified kind of tenant type across many, many different segments. Now going a little more into the Singapore portfolio, that's on slide 21. We see a fairly stable renter level, 213, no change from the previous quarter. The data, of course, you can see on the right side of the chart, on site 21. Occupancy, I think we're seeing an uptick. That, I think, is very helpful in us maintaining that stability. And if we look a little bit more closely, at the renter revisions figures on slide 22, while we see the stability in most segments in terms of before, after the renewal rents, we continue to see more pressure for the business park buildings. If you look a little bit more closely, before, after, we're talking about a $0.23 reduction for the business park rents from $3.96 to $3.73. But of course, that is still a little higher than our passing rent. So we are able to defend our rents a little. But for new leases coming in, we have taken that on at $3.40. So the market continues to be very competitive in the space we're in. And we would... prioritize occupancy and adjust our rent levels if necessary to improve the occupancy levels for our business park buildings. For the rest, I think we are seeing a good level of stability. For high-tech buildings, I think the new rents are a little lower because it depends on the category and type of tenants and buildings we're getting in for that quarter. As some of you may know, we have a wide range of high-tech assets and leases can range from from about low 2s to high 3s or even just a shade above $4. So it's a very wide range. And anyway, for this quarter, only four new leases registered. So high-tech buildings, we continue to see a very decent level of support. So going to the tenant retention chart on page 23, On the right, you can see the most recent quarters figures, 80% in aggregate. So it's a very healthy level that we continue to see, of course, partly because of the posture that we have taken in the engagement with the tenants, trying to keep them in the portfolio as far as possible. And I think moving on to the next segment, which is our investment update, On page 25, I think the key update is the completion for this particular quarter, 22nd of July, so they have started contributing meaningfully, as you can see in the financial numbers. And on page 26, our redevelopment project. The project, of course, is continuing to be on track for the few milestones that we're looking at, second half of 2022 and first half of 2023 for the first two blocks and the last block. But, of course, there's some kind of shift in the actual completion time within this window period for the completion of the projects, but I think it's still well within the overall plan that we have in place. And we are looking forward to, say, handing over the first block next year to our built-to-suit anchor tenant. And in the meantime, we are engaging prospects that may need a large kind of space or have large space requirements for this precinct. So hopefully we are able to outlined any pre-commitment ahead of completion. And I think finally going on to the outlook and strategy on page 28. For the Singapore economy I think in summary I think it's still positive. Businesses are still positive and cautiously positive about the outlook, though there is a recent kind of bit of uncertainty due to the extension of the stabilisation period, but hopefully we can get out of this uncertainty very soon with direction and guidance from the leaders. The arrears as I've indicated in the second bullet point for our portfolio remains very stable, about 1% of the last 12 months of gross revenue. So we do not see any additional stress. But that said, of course, there will still be some smaller tenants within our portfolio that have not recovered from the challenges of the pandemic yet. So we will continue to engage some of these tenants that are in the rear to see how we can manage the financial impact and the challenge that they are facing. As far as rent relief and rebates are concerned, we don't foresee much to be given. For the second quarter of this financial year, we have given out just below $150,000. This is, of course, a very small amount compared to what we have given out in the previous financial year. Some of you might have remembered, we gave up $12.7 million in terms of rent reliefs and rebates in financial year 2021. So right now, the amount that we're giving out is still a very manageable sum. We do expect more to be given out in the next one or two quarters, and part of this, of course, is in line with the government guidelines for landlords to give that two-week reprieve for retail-related tenants, which we have some. So there will be some more, but I don't think the magnitude will be in any way near what we have given out in the last financial year. And I think going on to North America, the data center portfolio We continue to see a lot of projects being in the pipeline and the pre-leasing had been fairly encouraging as well. The numbers that we have reported, 60% pre-lease and demand in the primary markets I think continues to be quite strong. So while there are some near-term rental pressures, we don't see any big immediate issues for us because most of our leases are already locked in a long time anyway. So we think that the data center market continues to be fairly healthy as far as we are concerned. And of course, I think finally, going on to our strategy, it remains the same, keeping our portfolio stable and resilient. And as you can see in our shift in our portfolio profile, as we increase our scale and coverage, the diversification certainly is very helpful. And from the financial flexibility side, our coverage ratio is strong. We have... the sufficient accommodated facilities available so we don't see any near or medium term challenge at all from the financial side. And of course On the growth, completion of the recent acquisition of course have been helpful. We continue to look out for more opportunities and not just in US. We are looking at other geographies as well as I have mentioned earlier. And of course our development is still on track for completion within the timeframe that we have outlined. And hopefully we can see the revenue contributions coming in probably late next year and early the year after next. So I think that ends the overview and the presentation. I can take questions.

Thank you, Goh Wei. Just some housekeeping matters before we begin. We will first take questions from analysts who have logged in via the Webex, and you have to raise your hands to put yourself in queue. And followed by that, we will take in questions from analysts who have dialed in. Webex listeners or website listeners are also welcome to submit their questions via the online platform as well. I can take the first question. Can we have a direct from DBS, please?

You are asking about the margins for the portfolio. I think a short answer, yes.

Because the operating costs that we have continue to see the inflation effects creeping in. So when we do our contract renewals for most of our services, we anticipate upward shift in the operating cost despite us looking at efficiency improvements and you know, using technology to contain the cost. So on a contract to contract basis, I think 5 to 10% kind of increase is anticipated. But the bigger worry is what you have also mentioned, utilities. We have two elements in the utility costs. First one is the discount level which we can get from the power retailers or the power companies. So that discount rate had been shifting down and we expect that to continue to shift down into the next calendar year 2022. So that would materially say reduce the kind of headroom we have. And the other element is the discount of tariff rate because our energy contracts are essentially based on the discount level to the tariff and the tariff moves up and down with whatever the Singapore power outlines on a quarterly basis and we have also seen that shifting up because of oil or fuel price increases and the power crunch experience as well. So we anticipate the the energy costs or rather utility costs and for our case mainly from electricity to continue to move up and the upward shift based on our gauge so far might be in the ballpark of about $200,000 more per month basis. If you're looking at an annual kind of impact, probably a $2 million kind of impact, depending on finally where we land with the tariff rates and the kind of level of discounts that we can get.

Okay, thank you. So it's quite manageable. Okay, so my next question is, appears to be quite manageable if your cost increases, if that's the case.

Well, I think it is something that we think we can stomach. You look at this quantum of increase relative to our operating cost, but the thing is the margins would still be under stress. If you look at our revenue level or even rent levels, we continue to see negative revisions in many of the segments and the likelihood of us hitting a kind of a support level in the next three, six months, not likely. I think you'll probably be by middle of 2022 before we have that visibility. So you see the top line coming under a bit of pressure and your operating expenses for certain, we are seeing that upward shift. So the margins will probably see that challenge going forward.

Thank you, Derek.

Thank you.

Just a gentle reminder to keep it to two questions per analyst. We have Mervyn. Mervin, would you like to ask your question?

Thanks, Melissa, and good morning to everybody. Just following on to Kuo Wei's comments about maybe bottoming out only in mid-2022, I noticed that excluding data centers, the MPI for all segments is actually down Q and Q. So should we be expecting this to continue to drift lower on the back of continuing negative retrograde versions? and maybe even occupancy pressures within the business park properly.

Okay. I could not get that part of the question that clearly. Okay. Partly because of our hardware issue, we're using a, what do you call it, Polycon on this, and they want to reduce the echo. So they have to reduce the volume. So you're saying the data center rate... No, I'm sorry. I'll just repeat myself.

It's okay. Yeah, please. Yeah, I just noticed excluding the data centers, the API for all segments were actually down Q on Q. So we expect this to continue on the back of continued negative rental reversions and maybe occupancy pressures for the business parks in particular?

Yes, I think a short answer to your question is yes, we expect that pressure to continue to be there. So what had been helpful is the uptake in the occupancy levels so that we are able to mitigate some of these effects. of the rental rate challenges and also the expense increase on our net property income. So yes, I think we are looking at the net property income level having a risk of downshifting a little.

Maybe you can touch on the data centre portfolio. I don't know whether there were any leases renewed over the quarter. What was the rental reversions and any guidance in terms of the FY23 leases? Are we expecting flat, positive or negative rental reversions? Thanks.

Okay. As of now, we don't have any leases that were renewed. So the... The gauge that we have for the next financial year is that the likelihood of tenants renewing is fairly good. But I think it's a bit early now for us to look at the rent levels. But hopefully we are able to push for a little bit of growth in some of the key leases that we're renewing.

Thanks very much. Hopefully, with some cost savings, you can get new telecom system for next result season.

Thank you, Mervyn. Can we have Joy to ask the next question, please?

Thank you, Melissa. Just two questions for me. First of all, just on Singapore, did you look at the land lease or rather the vaccine project that LendEase won, were you part of the RFP process? And more broadly, are you seeing a pickup in sort of still-to-suit requirement or convert-to-suit requirement? Is this something that you can explore with your existing Singapore portfolio?

I think the first one, I think we have not looked at it for the portfolio. And the second question, sorry, I couldn't hear you that clearly.

It's really just on the RFP for built-to-suites. Are you seeing sort of more opportunities in that area?

I think they are maybe one or two possibilities that we are looking at. And I won't characterize this as, you know, that the industry is seeing a lot more demand in this place. But I think on and off, there are a few kind of possibilities and some of these are not exactly a hundred percent or that can be strictly pigeonholed into a kind of possibilities because some of the requests for space comes from users who are open to build to suit or open and they are also open to relocate into existing facilities that can be customized. So there's a couple of these kind of possibilities around. One of them we're looking at comes from the finance industry, backroom kind of operations. Another one is an automotive industry. And of course, we continue to engage data center users as well for their needs. and we are suddenly open to conversions of any of our two remaining blocks at the redevelopment of the Column IA2 clusters into a data center. We have already made provisions in the design, sometime back. At the end of the day, it's very much driven by the support and approval from the government agencies as well, if we get interest from end users. So these possibilities are being reviewed and considered. So I would say that there are space users out there looking out for this kind of product offerings, but I won't characterize this as say the market coming out with a lot of demand. There's some demand that we are pursuing.

Thanks. If I can just follow up on the DC, would you be affected by the moratorium? Yeah, absolutely.

We are not bulletproof. So that moratorium applies across the board. So we keep regular engagements with the agencies and the I hope that we can get some guidance as well. So we basically are engaging at all fronts on the user side and also on the regulator side. And hopefully we can tie all these up and then be able to crystallize a transaction by certainly a lot harder than maybe three, five years ago.

Okay, thank you. And my second question on US, for the lease coming up due, is there any capex required?

Well, as of now, I don't think we have any anticipated. Essentially, for many of the leases that are on call and shell basis, we don't think we would require a lot of expenditures to be committed. And if necessary, it will probably be some form of tenant improvement kind of commitment that will build into the lease for recovery.

Thank you. Thank you, Joy. We have a question from caller users. So I'll open it up to analysts who have dialed in. Please state your name and firm lease.

Hi, can I ask a question? This is Brandon from Citi. Please go ahead. Hi, Brandon. Yeah, hi. Can you just give us some clarity on the empty space, not empty space, the vacant space at the Atlanta DC in the U.S.? I think it was 63.5%, right? So what's the update from there? That's my first question. And second one is, do you have a targeted EUM allocation for U.S. DC over the next one or two years?

The occupancy level as we have reported earlier is roughly the 63 to 65 percent level. So we are still of course working on listing out the balance space. Right now we are actually doing a more detailed analysis on the market and we are close to the appointment of external leasing firms as well to help us reach out to the market and our intent is to go for quick wins first. In other words, lease out the commercial part of the space first while we look at the longer term conversion of part of a space for data centre usage and I think I could have outlined earlier in our earlier engagements we are looking at maybe in the next year or so to be able to lease out at least a big part of the commercial space available. We are looking maybe about 50,000 square feet of space. and hopefully the commercial market would have recovered by next year. As you know, many of the corporate users are still in a flux now and a lot of them have not firmed up their approach and policies, whether they really go fully back to work, whether they have hybrid kind of work arrangements. So there is going to be a bit of uncertainty in the near term, but I think we are hopeful that the market will gradually improve by next year. And in terms of composition, I think we will not want to do the allocation by country. It's extremely difficult to calibrate the portfolio along that front. So our intent, of course, is to look at a profile of between half to two-thirds data centers. And as of now, we have already crossed the halfway mark. which is a 50% mark for data center representation. So we would certainly continue to look at possibilities globally, including the U.S., and the likelihood of us being able to facilitate crystallized transactions in the U.S. on a relative basis is a little higher because of the size and the depth of the market essentially and also our presence there had been helpful. But so while I do not want to set a limit, I will say that all things being equal, we will want to have the representation in the other markets essentially for more balanced and more diversified kind of portfolio. So I don't think I want to say we'll cap it as the current level now. Okay, thanks so much, Gouy.

Thanks so much.

Hi, this is Donald. Hi, Donald. Hi, Gouy. Two questions for me also. First is on data centers. For your first renewal next year, what sort of rent reversion expectations will you be looking at, given that the general US market is pretty soft when it comes to releasing spread? And also, are you imputing some vacancy allowance, some churn rates as you renew next year?

Yeah, I think you're absolutely right. There's some near-term weakness in some of the markets and our aim in many of these renewals or extensions is to try to keep to the current trajectory so we can push for a 2-3% increase from the last rents or the expiring rents, I think that is a kind of a target that they are moving towards. The rent incentives and all the commission effect will be considered and generally we are looking at probably 5-6% kind of impact on the revenue from the lease renew.

So you are expecting effective 5% to 6% down or 5% to 6% of the 2% to 3% increase?

Okay, the 5% to 6% is the effect on the rents, the revenue that we are expecting to get. So I think on a straight line basis, there might be a risk of rent revisions being a little negative.

I understand. Thank you so much. The second is on the business part. For the quarter, your occupancy is down, but rent reversion trends on a sequential basis looks like it's easing when it comes to the negative reversion. What's driving these trends, and when do you think the business parks for your portfolio will bottom?

It's not easy to crystal ball. I think The business park uses say to some extent are similar to in terms of space kind of usage close to commercial tenants to some extent, especially those that are not using the facilities for, say, high-tech manufacturing. So we do have some tenants who had shifted their operating model from a work-from-premise kind of arrangement to hybrid arrangements where they have staff who can work from home to be working from home or working on a kind of hybrid basis in the premises and at home. So that has resulted in a downward shift in the occupancy and of course the demand that we see in general. We think this kind of say adjustment will continue to be there at least until the end of 2022 because many of the tenants and the corporates are responding maybe to this new norm and now the pandemic kind of situation is not entirely resolved. We are not out of the woods yet. So there's still quite a bit of uncertainty. And if you're looking at when we expect that situation to, say, be a bit more stabilized and us looking at the bottoming of the portfolio, I think the earliest that we would venture is probably the mid of 2022. But that I think is looking at a fairly optimistic kind of outcome. the economy being open sooner than later and as not needing to have all these constraints and restrictions in place so optimistically by middle of 2022 which is around say june july time you find that the bottom support then you you can see that the outlook improving. But I think with this uncertainty, there is certainly a risk of that support only coming in maybe by third quarter of the calendar year.

Which tenants did not retain? Which industry?

segment which this tenant is in which represents the larger part of this shift is in the chemicals industry. What it did was it downsized its space requirements roughly half in the renewal. So that has of course created a downward drag. Long and short is that the many of our tenants and corporates would remain operating. And I think they continue to be confident of at least a medium-term outlook. But it's the business model that probably has shifted for some of these tenant types. And so for this particular tenant, for work that... cannot be done at home because it's dealing with chemicals. They, of course, retain the space and operations, but for certain backroom support that need not have that physical presence in the premise, so they have gone on through the hybrid work arrangements. So that resulted in the reduction in space required. Got it. Thank you.

Thank you, Donald. I'm cautious that we are approaching the hour mark for this call. I'm going to take one more last question from WebEx. I think that's from Vijay. And Vijay, would you like to ask your question?

Hi. Just a quick question. I think there's a market talk on digital reality. What are your thoughts on your future projects? pipeline from US markets and is there any other market other than Singapore and the US you are exploring in terms of opportunities at this point of time?

Thank you. Well, of course we have heard in the market that it might be coming up soon. We don't have a lot more details about that and certainly We look everywhere for opportunities and for increasing our coverage and reach of the platform. intent as I think I could have outlined earlier is to be able to have a more balanced portfolio beyond our two geographies other than Singapore and North America. We look at the other markets in Europe and the other key markets in Asia. We would continue to look for the right type of additions that we could bring into our portfolio.

Yes, that is correct.

I think in terms of the mandate, we have only outlined data centres beyond Singapore. Of course, we regularly review other possibilities or other property types and segments that could help us improve our property portfolio profile. But in the meantime, I think we will be allocating our attention and resources in the data center space first.

Thank you Vijay. I'm just going to take one last question from Derek from Morgan Stanley.

Are you able to ask your question, Derek? Sorry? Hi, are you able to hear me?

Yes, we are able to hear you.

Okay, thanks for that. I just want to ask on the U.S. data center occupancies for the new acquisition, the current 88%, where do you see that number heading towards, especially after middle of next year, and how will this translate to overall U.S. EC occupancy?

Okay, I think we, of course, looking at the larger vacancy, so-called property, and for our case, for this particular portfolio, it's a 250 Williams Atlanta, and we outlined the intent to reach out to the key leasing brokers and our aim is to lease out the commercial space first because it's probably a lower barrier and easier execution. So I outlined another 50,000 to 100,000 square feet of space that we hope to be able to lease out. So practically, if we were to intensify our engagements, you'd be looking at probably the middle of 2022 and beyond before you see the contributions being crystallized. So hopefully we are able to nudge our occupancy level on an aggregate basis by another 1 to 2 percentage point.

That's 1 to 2 percent for USDC. Yes, that is correct. Okay, and just on the MPI, notice that the USDC MPI also dropped to 77, 79 percent. I think it's probably because of the acquisition. Do you see that MPI margin also improving after middle of mixed up?

Well, we don't expect big fluctuations in the MPI margin going forth because I think most of our assets are on the triple net basis and we cover most of the expenses from our tenants anyway.

Okay, so we just maintain it at 79%. Yeah. Okay, got it. Thanks, Lohi.

Thank you, Derek. I'm going to take just two last questions from our webcast platform. We have a question from Wee Bing. Is there an impact to the cost due to the increase of electricity prices, especially for the data center portfolio?

Okay, we don't see that having any impact. say, direct impact because most of our leases, as I outlined on TripleNet basis, so the utility cost is fully recovered from the tenants. I think, broadly speaking, no direct impact. But of course, for the landlord's part, which is our part, we have a couple of facilities that are on multi-tenanted basis where we, of course, take care of the common areas and general area utilities. So indirectly, we would see some small increase in our expenses, but we don't expect that to be large because most of the energy consumption for the data center operations and the data halls will be borne directly by the tenants.

I think the final question is from Helen Wong. For the Singapore High Tech and Business Park new leases, what kind of tenants do you see?

Are they new to Singapore? Well, we don't have a lot of really new kind of industry types coming in. I think the key demand still comes from precision engineering, ICT companies, though I think the other segments like semiconductor had been fairly robust as well. I think in the recent... year there had been an uptick in the semiconductor kind of activities and as a consequence of that demand for space. So far we have not seen other forms or other so-called new industry segments that are new to the country or new to the economy.

Thank you. Thanks for joining us today. I think we have passed the hour mark. Now it's 10.35. I'm sorry we have not been able to answer all your questions. We will get back to you via email or if you know how to reach us via phone. Thank you and have a good day. Stay safe.

Bye.