Mapletree Industrial Trust

Good morning, everybody. Thanks for joining us for MIT's 4Q Financial Year 31-32 Financial Results. We are having the virtual analyst call right now, and this is also a live webcast where investors can log in to listen and submit their questions online. If I can invite Guo Wei to give a quick update of the results. We will take questions later.

Yeah, thank you. Morning, everybody. Good that you can join us, even if it's virtually. Actually, I was half expecting a video session. I can't get to see them. And they were offering to show me. OK. We have the presentation tag, which was uploaded last evening. I think we're sharing this on this platform as well. I think we can go on to the first relevant page on our highlights. Essentially what you see us delivering a fairly credible set of results from the distributable income perspective 18.8%, just a little above $350 million Singapore dollars. Of course, DPU is a little more exciting, 10% year-on-year increase to 13.8 cents. And the distributable income for the fourth quarter, you can see a more significant increase, about 28% for the distributable income $90 million. This mainly due to, of course, the full effect of the US data center portfolio which we acquired. And on a DPO basis, 3.49 cents, same as what we have done in the previous quarter, 5.8% increase year-on-year basis. Certainly on the full year basis, we don't have the full financial years worth of contributions from the acquisition because it was done only in the earlier part of the financial year, but it has been very material in terms of the contributions. Of course, the next part we talk about our portfolio status. The valuation increase, of course, driven by the acquisition, about 29%. But now we are at 8.7 billion Singapore dollars. The valuation gain in aggregate, we are talking about 87 million dollars. Of course, a big part driven by the increases we see in the US data center portfolio. I think driven quite materially by capitalization rate compressions. in quite a few of the locations we have. And of course you would have seen, if you look at the details that we have outlined, the valuation losses for the Singapore portfolio, especially the shorter land tenure ones, those are, I think, quite structural in nature as we go forward. As the tenure gets shorter, as we raise towards the expiration of the leases when we return sites to the government, the valuations gradually moved down. So it's certainly helpful to have the cushioning effect from the US data center portfolio. Now on an operating basis, I think we are happy to note that we have found a good level of support and in fact we have managed to move the occupancy up. by 0.4 percentage point. So we are now at 94% for the entire portfolio. And I think as some of you would have read in our announcement, the divestment of our 19 Changi South Street 1 property was completed just after the end of a financial year. But I think we reported it down here for completeness. So $30 million in the pocket. And on the capital management front, we had our first distribution reinvestment plan for this series. The take-up was fairly healthy, 42.5%. That, I think if you recall in our announcement, the issue of the units was at a 1% discount to the weighted average unit price prior to us closing the books. And the take-up was very... nice because we have good support from our sponsor which took up, Mayberry Investments which took up is a proportionate state. And of course the balance sheet remains strong. We have sufficient committed facilities. I think the only key thing to look out for is interest rate movements. Okay, maybe the correct way to put it is how much you will move up. I can tell you for sure it's moving up. At least for the next year or so. Quite unlikely for it to move down for whatever reason. So it's just how much more that upward shift will be depending on the posture taken by the Fed. Okay, now going on to the next slide, I think this is our usual reporting chart. On the right, the most recent set of figures which I've outlined earlier, 3.49 cents and $90.3 million. So we certainly hope to continue building on this upward growth trajectory. Certainly there's a lot of headwinds we will discuss. Going on to the next slide, we have included this to provide a broad overview of our take on what we are doing to be a good corporate citizen. And certainly the push is to build a climate resilient portfolio. I don't know whether we have copyrighted this part. Okay. We have set the long-term targets. You might have seen the financial year 29-30 number. That I think was taken from the base of financial year 1920, a 10-year target. Why 1920? Because that was before COVID. The kind of consumption patterns and operating figures we have for the COVID years, a little less representative of what a normal situation is, and it's very difficult to take reference from there. So anyway, we just look back. financial year, 19-20, plus 10 years. So we are looking at these three key targets, which we have outlined at the top. Building, electricity intensity, we would reduce it by 15%, greenhouse gas by 17%, and we are working at generating solar energy of 10,000 kilowatt peak. So this is a nice round number. I think at one time I was discussing with our team, and they were with me over this single digit kind of adjustment. So anyway, I rounded it up 10,000. So it's a nice number to work towards. So as of what we have done so far, we have, of course, completed two set of installations at our Serangoon North cluster and Kolek and Sofa corporate headquarters cluster also in Serangoon. So that gave us 849 kilowatt peak. You can see at the bottom right, nice pictures on a sunny day especially for these two clusters. So we are looking at progressively installing more. We have actually just awarded a contract for some of our clusters for this current financial year. So we will be working, you know, and working very hard in delivering that 10,000 kilowatt peak. And hopefully a little sooner instead of, you know, waiting till the last minute. At the end of the 10 years, like you're all studying for an exam like that, the last day before the exam, try to, you know, get as much done as possible. So we're working hard on that. We are motivated as well because this is financially meaningful. It helps us mitigate the impact on the high energy costs that we anticipate over the next couple of years. Now on the other element, Greenmark or the green building certifications, of course in Singapore it's Greenmark, we have a couple of facilities that were recertified and we have obtained Greenmark Gold for Synergy, our business park building. So we are working on the next cluster, which is the Serangoon North cluster. So these are some of the initiatives that we are taking on, and we certainly want to get a few more badges to demonstrate the compliance of of our buildings in meeting all these green kind of expectations. Okay, so going forward I think on the financial results, we do not have any kind of exceptional elements to highlight. Essentially that big increase you see on the revenue property income mainly due to the US data center portfolio effect. The valuation effect, of course, you can see in the net fair value gain. For the Singapore portfolio, of course, it's already muted. Rather, Singapore plus our wholly owned data center portfolio are fairly muted, $7.2 million. We have a joint venture with our parent and of course that one has also a stake in three hyperscale facilities in the US, so all data centers. So we have provided a bit more details on that part of our portfolio. So the fair value gain is relatively significant. even on our share, about $79, almost $80 million recorded. So I think moving on, we talked a little about the effect on the full financial year. The amount available for distribution, as what I've outlined earlier, 18.8% increase from just under Now we are about S$351 million. So that gives rise to that 10% increase in DPU year-on-year basis from 1255 to 1380. And of course, please, I would encourage you not to extrapolate using this 10% kind of annual growth any growth rate is not something that we can replicate all the time. It is just fortunate that we are able to get a reasonably large portfolio at a good window. And this kind of growth rate is probably difficult for platforms that are of a certain scale already. If we are maybe five times, eight times smaller. Yeah, maybe there's some avenue for that, but 10% kind of annual growth is certainly not something that can be replicated easily. Okay, going forward, I think we talked about our financial position. The equity fundraise exercise that we did certainly has been helpful. So on the Year-on-year basis, you can see our increase 12%. One year ago, it was 166 NAV per unit. Now we are 186. Very small marginal shift on a quarter-to-quarter basis, 3.3%. Okay, moving on. For the portfolio valuation, as I've outlined earlier, $8.7 billion driven by the new portfolio. So that is a very material increase from the $6.76 billion the last financial year. The valuation gain of the data center portfolio, as we have outlined in the second bullet point, in aggregate $87 million. So that has helped us partly to improve our NAV per unit as well. On the balance sheet side, you might have seen a very slight reduction in the total debt, $2.97 billion to $2.90 billion, because we repaid some of our loans with cash available. And with the recent take-up of borrowings that have a slightly longer tenure, so we have managed to increase the tenure on that weighted average basis 3.5 years to 3.8 years. from a quarter ago. So because of the valuation improvement and also us taking on a little bit less of the debt, aggregate leverage ratio is at a fairly comfortable level of 38.4%. So I think it just means that we have a reasonably robust platform and balance sheet. So the debt maturity profile is what we have outlined on this page 15. That's how we arrived at that 3.8 years. Very well spread, though we do have a little more four years later, financial year 26, 27, but as we work on our refinancing over time, I think we will continue to spread the exposure fairly evenly over the years. So in terms of the coverage ratio, if you look at the bottom three lines down there, still very healthy level. Whichever measure you look at, whether it's trailing 12 months or with adjustment for our perpetuals, so about 5.7 to 6.4 times. Our weighted average oil funding cost has gone up marginally, and we're seeing the interest costs creeping up already from 2.3% to 2.4% this quarter. Tenure, of course, has increased a little, and I think, of course, now we're moving from bottom to the top. The percentage fixed is a little lower at 70.5% instead of 80%. We do have some hedges that have fallen off, so we would be mindful of the situation and look for opportunities with the right windows for us to maybe get more certainty on the rates as far as possible. Portfolio update, this one I think is a refresh picture, and I think our chefs crafting this pie reminded me that we have switched the position. Now US is at a 12 o'clock site. Now we have data center that is 54%, decidedly more than half of our portfolio. the asset under management 8.8 billion is a little higher than the valuation of our portfolio mainly because of the right of use effect because this one is partly accounting. You look at our bullet point number one, the right of use assets for our leasehold assets were aggregated inside this number but the figure is established at $42.5 million, so it's in our books. Okay, we can move on. The portfolio overview, we have in aggregate 143 assets. I think the big increase is of course on the portfolio transaction. occupancy level as I've outlined has moved up and that's contributed mainly by the Singapore portfolio. If you look at the North American portfolio, it's very stable at 93.3%. And you can look at the occupancy levels, there's some so-called small movements across the different property segments data centers being very stable, high-tech buildings are also at the same level. We have some small upshift in the business park building and the federal factories, but some very little downshift for the stack-up ramp-up facilities. So from where we can see, these are just the usual, you know, rather the business-as-usual kind of tenancy movements. So nothing really significant to highlight here. And on the expiration of the leases, if you look at the chart for this financial year, which we have just started, 14.2% less due is nothing exceptional. Some of you have noted we have our AT&T leases that are expiring, but that is only in financial year. So it's in the next bar, under the 21.5% bar. And out of the three assets that we have with AT&T, the larger one at San Diego, I think some of you might know, that one has original expiration date of December 2023. And we have been notified by AT&T that it wanted to do a one-year extension. So it will be December 2024. So then I think we are pushing it another year forward. What we are doing now is tidying up the documentation for this extension. For the other two properties, this San Diego one is roughly 2.6% of our property. you know, revenue contribution. The other two smaller assets, I think we don't have any indications from AT&T on an extension or renewals yet. From the looks of it, it probably will not be doing renewals or extensions on this. But the expirations of this are also a little later, end September, and then I think the other one is November 2023. So the subsequent financial year. So okay, this is where we are. Top 10 tenants. I can see all blue except one orange. So all data center tenants except for Hewlett Packard, which is of course manufacturing regional headquarters. So the AT&T part I talked about, the 5.4% in aggregate, 2.6 for San Diego, 1.9 for the Tennessee one and 0.9 for the Milwaukee set. So now I think we have some clarity on a big part, about half of the AT&T kind of lease with us. We will see it continuing on with us until end of 2024, so another two years and eight months. So for this tenant diversification, nothing really material to outline. It remains very diversified, okay. And for the Singapore portfolio performance, you can see on chart 23, very stable rent levels, but we continue to work hard to nudge occupancies up, make hay while the sun shines, while the market supply-demand situation is still a little to landlords' advantage before the big supply of stock come on stream. We will try to lock in as many leases as we can. So on the rent revisions, you can see some ups and downs. The high-tech buildings, I think we managed to nudge the rents up. I think this is at our Kalang Place asset. The 190 figure for new rents for the high-tech buildings is a little low. That's because that's one of our, according to how our friends describe it, this one is a half-baked high-tech building because We have the Topayo cluster where we have a mix of a new build plus asset enhancement part of the cluster. So this is from the asset enhancement part. But for statistics purpose, we have aggregated this in this high-tech buildings segment because it's a continuous cluster. So anyway, this is for... that kind of building where we had a newly signed, of course, still relatively competitive for that asset type and quality. For business park buildings, I think we have seen some small dip. Essentially, that's us trying to be more competitive in the market to keep our tenants and also join new tenants as you could have seen. Our business park space in terms of occupancy level is still relatively lower compared to the rest of our property types. So we are working a little harder and trading off rates for occupancy. But I think in aggregate some of you might have calculated or noted we have positive rent revision for the entire portfolio. I think for this quarter is 1.1%, positive 1.1%. Last quarter was positive 1. So this is what we call two consecutive quarters of positive revisions. So I think the light at the end of a tunnel is getting a little brighter. But this, of course, is not a very decisive positive rent revision, but it gives us a a bit of encouragement that the support is there. Tenant retention profile, nothing very significant to highlight. I think it's fairly healthy at 84%. Investment update, our redevelopment at Kolomaya II on track. First block, I think we're looking at completion by end of the calendar year. The other block 2 also by end of calendar year slightly behind the first block because I think the first block we already have the committed anchor tenant so we are prioritizing the completion and handover for that first block and I think the anchor tenant has already commenced fitting out works in the facility so things are progressing well As far as the leasing discussion is concerned, it is ongoing. We have a couple of, say, fairly large interests that we are pursuing, but at this stage we don't have any commitment that is assigned yet, so we are working very hard on that. Of course, the next thing, the divestment, which was, as I mentioned, completed on 21st of April. So we received the $30 million already and I think this one we would keep because the gain is relatively minor relative to the valuation of purchase price so we will keep the funds for working capital or take down on that. Outlook and strategy, I think on the outlook still very uncertain but I think there's a optimism that Singapore's economy might move up a little depending on the next refresh of the economic growth. I suspect we'll probably push closer to 4% if our gradual or now more than gradual opening of the economy works according to plan. But I think the bigger issue that we are facing now as an economy and as a platform is rising costs, especially energy and for us, of course, electricity costs and supply chain disruptions, which is causing a bit of issue on inflation for us. It's an operating part that we need to watch out for, operating costs we need to watch out for. The other thing, of course, is interest rate effect, as I've alluded earlier. For sure, it's on the way up. It's just how fast it is. So we think another 75 to 100 basis points, quite easy for us to see within the next 12 months or so. So in terms of the arrears, I think just to close up, I think this is a little lower already compared to the last 12 months. So this is also a positive indication of that optimism and also less kind of stress that we see in the portfolio of our tenants. So US, I think, continues to be strong, especially in the data center space. Rental rates in segment is relatively stable. challenge for us is always getting the right deals in this market and kind of appropriate capitalization rate because it's still a very competitive market. But we are very positive about this space. Okay.

Thank you, Kuo Wei. I think we will now take questions. If I can encourage you to raise your hands and limit your questions to two per analyst. I think the first one is Mervin. Mervin, please. Mervin, would you like to ask your question?

Yeah, good morning. Good morning. Can you hear me?

Yep, I love that you're clear.

Good morning, Chloe and Tim. Thanks for the presentation. My first question is just in regards to electricity costs. Maybe we can just run through the sensitivities, any hedges that you have in place and when they drop off And I think there's a bit of concerns about electricity for data centers. Maybe you can touch on that.

Yeah, I can do that. Now, our data center leases in Singapore and also in the U.S., mainly triple net basis Singapore. Of course, we don't take care of electricity for the data center tenants, so they would shoulder it entirely. In the US, it's about 90% that are on triple net basis. So the impact is very muted as far as we can see. And the increase in utility rates in the US is not as high as what we are seeing in Singapore. Because I think down there they had, in the markets that we're in, a little more diversified energy sources. and they are under a little less pressure. But anyway, looking at the forecast we have, we don't think there will be any material impact on the data centre part. But our Singapore operating portfolio is where we would need to be a lot more watchful as Almost all our leases are multi-tenanted basis and we take gross rent so we take on the exposure. Our electricity cost as a proportion of our operating cost was below 5% depending on how you look at it. This is of course relative to financial year 21-22 figures, so actual numbers now that the financial year is closed. So 4 plus percent. We anticipate that to go up two to three times depending on finally where we land with this utility rates. The reason why we say that is because our current so-called hedge or semi-hedge would fall off by 30th of May. So from 1st June we need to take on the new rates. Now we're still, I think, partly protected. We have a combination of fixed and discount off tariff kind of schemes, but mainly discount off tariff because it's only one or two tenants where we have arrangements on fixed. So discount off tariff for us is roughly in the 20% to 30% range. discount level, because over time we have made adjustments. So we are already seeing that cost increase creeping up as you know, the discount on tariffs is off the Singapore Power's tariff rate. So that has been going up on a quarterly basis. So we will just, our cost will just float up though the discount is still there. But that aside, a more meaningful discussion to look at what we can secure beyond 30th of May because I think it's another month or so before we need to contend with the bigger exposures and as you would have read in many of the press coverage or media coverage, many large energy users cannot get contracts from the energy retailers because it's a capacity issue and also the rates are going crazy. So our current high tension rates, after the discounts, we are looking at the mid-teens in terms of cents per kilowatt hour. So about the 15 cents And if you look at the government's rates, now they're offering to help the businesses with the temporary kind of energy contract scheme. It fluctuates 40 cents, 45 cents, or 50 cents. So there is a real risk if we were to go to the market that the light for light basis the cost can go up two to three times depending on finally what we went up with. Of course we are trying to work with energy retailers bulking out our or aggregating as much as our demand as possible to try to negotiate for a better price. So the energy retailers have not been able to really commit firm prices for the next two quarters and the visibility they have is probably end of the calendar year and beyond. If you're talking about longer term fixed rates, the situation now certainly is not helpful with the Putin dancing around with Zelensky and the situation I think is still very volatile. So that's the reason why we have look at the possibility of energy or utility costs going up two to three times for our case.

So net net two or three times, what would be the sensitivity to your FY22 DPU?

Yeah, okay. DPU is difficult for us to pin down, but I think maybe we can talk about the maybe net property income effect, maybe 2-3% kind of effect. Minus.

My second question is, I think, in regards to your U.S. data centers, I think there was a lot of statistics. Apologies, I didn't catch them all. I think you mentioned that half of AT&T will stay to 2024. Can I presume the rest will drop off in the next two years or so?

Well, right now we don't have any visibility, but I think taking an educated guess, the other two properties, I think, are quite unlikely for AT&T to take long-term extensions. Maybe if, you know, for the purpose of their own operational kind of management, shorter-term extensions could be possible. I think our plan A now is to look for alternatives instead of, you know, waiting until the last minute for it to tell us whether it's continuing or not continuing. But the certainty, of course, is for the larger one. So at least we have some clarity down there. That aside, the San Diego location, as you might have read, is actually very popular for life sciences companies. The demand actually is a lot stronger than data centers. So we are looking at

higher the highest and best use in the medium time beyond so this is another angle that we will explore now that we have close to three years of lead time so worst case based on discussions or indications of or your understanding of the customer needs maybe two or three percent of gri could be lost from the u.s data centers the next two or three years yeah

I think in terms of kind of expiration of lease, yes, two plus percent. Certainly, we have that kind of lead time. We will be working on finding replacement tenants or alternative kind of strategies for these assets.

Cool. Okay, I have my two questions. I'll let other people ask their questions. Thanks. Okay.

Thank you, Marvin. I think, Derek, you're next. Would you like to ask your question, please?

Hi. Thanks, Melissa. Hi, Koi. Derek from DBS here. I'll ask my two questions. My first one is on... The sign card going into bankruptcy chapter 11, I'm just wondering whether you would give us more comfort on your other tenants. I think we've been getting queries whether we have a look through on whether is there any further risk that your other US data center tenants could also face similar kind of stress. I'm just wondering whether your team has taken a look through your portfolio.

Okay, a short answer is yes, we have taken a look. And so far, all are current. The operations for most of these assets are in line with what we anticipated in terms of activities and usage. So no other indications yet. The SunGuard one, I think you might have read in some of the coverage. Its business is a little mixed. has I think out of the 55 assets, 24 that are dealer centres, 31 that are all those recovery calls, rather backroom support. So that kind of business is affected quite materially by the COVID situation, especially when people are not working in office and they can't work from home to a limited extent and need not have this kind of secondary backup. So that part I think is affected quite a bit. Of course it has overextended itself, balance sheet is not strong, and its UK operations is suffering. So there are certain elements down there which is not very directly related to the data center demand and operations. But the things to, I think, consider is sometimes very difficult to gauge in advance of time, you know, the health of the tenants unless, you know, they are very regular in giving us the feedback because that is not the primary kind of engagement. You know, we're not going to be able to talk to the tenants every month or every quarter and tell them, give me a business feedback. But our asset and property guys will make a gauge on activities and then have a sense of whether, you know, the space is well used, whether they still have decent business activities. So far, I think the rest of our assets, we don't have any worry yet. The other thing, of course, we were reminded by our board, keep an eye on the credit default swaps for some of these assets. entities. So that is another element that would point us to possible stress. So that's another thing they are tracking on. But so far, no arrears. Everybody's paying on time, including SunGuard until March, of course. Now we are in April.

Okay, sounds good. So my next question, if I can just ask back to AT&T, right? So the San Diego data center, they probably extend for one year. So is it your read that they will likely vacate after? And is this property a carrier hotel?

No, it's for their enterprise use primarily. And there's some call center element for the AT&T operations. So I think what they are doing now or what they have done is to shift the call center elements personnel or the people to Orange County, I think it's another 100 or so miles away, further up north. So in terms of the activities and operations, I think it is still supporting the state or that part, that geography for US, but probably a consolidation of business. So the data center part for the enterprise systems still in place and I think they needed quite a bit more time to work out their plans and even if they needed or wanted to relocate, it's not going to be something that they can effect immediately. I think that's the reason why they're looking out for the extension until December 2024. And our read is that it might not continue on now that you know a part of the business operations have been relocated, the call center part. So it's economically not so meaningful unless say over the next year or two they suddenly find that there's a shift in the strategy or requirements and they pull more of their enterprise systems back here maybe because it has always that option of renewing or further extension. That one I think will continue to have that engagement and discussion. But our comfort for this particular site is that the demand from the life sciences space is extremely strong. And we do have these investors knocking on our doors wanting to look at the site and see whether they could do something. So That is another possibility for us to look at in the medium term for the higher and better use of the space.

Okay. Sounds good. Life science is sexy for now. All right. Thank you.

It is very sexy, actually. But if I were to characterize this, just as competitive, if not more competitive in the data center market space.

Okay. Okay. Better outcomes, I hope. All right. Thank you. Yep.

Thank you, Derek. Can we have Brandon to ask a question, please?

Yeah, hi. Morning, Kuo Wei.

Can you hear me?

Yes. Yeah, hi. My first question will be with regards to that retained distributions of $6.6 million, right? Can you share with us what are your plans for that? Has it been held back this quarter because of SunGard, because of AT&T, or is it just your general concerns about the Singapore market?

Okay, that's $6.6 million, of course, as many of you may remember at that time when we held back, it was in anticipation of the rent rebates that we might need to provide to our tenants because of COVID-19. So we had given rent rebates and the total amount withheld was $13.7 million, $6.6 million plus $7.1 million. So we have released the $7.1 million in the previous financial year already. So last year, or the financial year that just ended, there's still a little bit of noise in the COVID situation. We're not too sure whether we're totally out of it or not. So that was retained. And I think we were, of course, mulling over when we should really release to the unit holders. Of course, one consideration is whether we release in financial year 21, 22, which is already passed. But I think the contributions we have from the new data center portfolio has been fairly material. So there is no compelling need for us to just flush everything out for the purpose of cleaning up our storeroom. But that's it. We certainly won't want to hold on to this indefinitely. I think a good time for us to release that is financial year 2022-2023, which is now. And especially when we anticipate the rising cost pressures from mainly utilities and of course other inflation effects, as I outlined earlier, two to three times increase in utilities. and also interest rate increase kind of drag on the DPO. That one is for sure coming. It's just how fast the adjustments get done. So we think that $6.6 million would be very helpful in us mitigating all these pressures so that this year we will continue to be able to have a fairly stable kind of delivery.

My second question will be with regard to William Street. Can you share about the latest update on leasing and occupancy and was there a reval downgrade in the latest exercise?

I think short answer, we have not leased out more space yet. It's still around 65% and the Downtown Atlanta market is of course decent but is not booming. One of the kind of uncertainty now is of course the work habits or work arrangements for the corporates especially in the commercial space because of the COVID-19 situation while is the environment is getting back to a bit more of a normal state in the U.S., many of the employees are still preferring to work from home after getting used to, you know, the yoga sessions at home before they start work in the morning, nice coffee in the afternoon. So anyway, so a lot of the corporates in the commercial space have not taken on large increases in or even talk about commitment of commercial office based leasing. So that part is a little uncertain but we think the market will probably find its own level and gradually return to some steady state this year 2022 or 2023. While we have not been able to secure any large prospects, we continue to engage the market and we are working on small scale asset improvement to improve the attractiveness of the building. And we think we should be able to find the right match and hopefully nudge the occupancy up this year or so. And in terms of valuation, I don't think there's any impact. There's a very slight improvement for the valuation for this asset.

All right. Hey, thanks much, Corey. That's it for me. Thank you.

Thanks. Can we have Derek Heng, please?

Hi. Good morning, everyone. So, a few questions. Good morning. So, the first thing I would like to ask is on the other trust expense lines. I think in your FS you mentioned there is some provision for tenant compensation. Can you elaborate a little bit on this one? Second is on these, just now there were quite a number of numbers moving around for electricity exposure. Can you just give us a dollar value in terms of utility cost that you are paying in FY22, which is your share of payment? So do let us just quantify this a little bit more accurately.

Okay, I think invariably we would have this kind of, you know, very specific questions. Now maybe to answer your electricity question first, our current cost financial year 21-22 is around the $6 million level, Singapore, and we anticipate probably a $10-12 million kind of increase. So that finally depends on the tariff rates and also the track rates and then the wholesale market rates, you know, what we can secure in the next few quarters. So, of course, in a worst-case scenario, if the rates remain elevated, And you see the $0.40, $0.45 per kilowatt hour kind of situation will probably be $10, $12, plus another $5, $6 million, that kind of situation, two, three times. I hope that is, I think, more specific in terms of a cost already. And yeah. So anyway, that one I think is a very big moving part. I think if we were to have this conversation two or three years ago, I will probably be able to give you to maybe the nearest million. Now I think it's a magnitude of two times or three times that kind of possibility because it's really a very volatile market and it's very difficult to get that. even from the energy retailers. So that one I think we'll keep a close eye on. The provision that we have outlined as what you have mentioned for the tenant works, it is a rectification works on some of the installations for a tenant that in our discussion with the tenants we have commented to. So we have to provide for that at our data center asset.

And North America or?

Yeah, North America. It's data center. It's basically a, what do you call that, infrastructure installation rectification works. So that part, I think, because we have an ongoing engagement and discussion, we have some rough figure. So we have made some broad provisions first in our books. So the books have not really started yet. Right now, we're getting the contractors in place and construction so-called books in place. So over the next couple of months, we should have a more certain number because now they're calling contracts.

Thank you, Derek. Can we have Nicholas, please? Nicholas Tay?

Thanks, Melissa. Hey, Kwame. Hey, hello. Just to clarify on the AT&T one, so basically the San Diego asset will renew until end of 2024. The Milwaukee and Tennessee ones, you're expecting those two not to renew? Just wanted to make sure I get that right.

Yes. That is a great read, but we do not know finally what's going to be happening to the Milwaukee and the Tennessee ones because they have not extended. and the expiration is about a year and seven, eight months from now for the first one, September and November 2023. So they did not say, for sure I'm not saying, but I think logically if it had the longer term plans, we would have the initial discussion now. So we need to plan for the possibility that it's not going to renew or extend. So that is our gauge now when we are looking at replacement tenant possibilities so that we are a little better prepared next financial year.

Okay. And then I guess my second question is just for these data center assets, I guess even if we lump in the SunGuard one for example, from what you were saying on the San Diego asset, you're looking to perhaps convert it more to life science rather than a data center. Is it the case that some of these data center assets are so specifically built for the previous tenant that it's quite hard to bring another DC tenant in and you'd have to convert it? And in which case, are the rents pretty much comparable because it's kind of shell and core or you'd expect lower rents?

Okay, for most of this, Yeah, for most of these facilities, because our involvement in the lease is on a call-and-shop basis, so the kind of rent shift is not going to be much. And conversions I don't think is a big issue because most of the, say, new prospects are would not need very significant upgrades to the facilities. So if you're talking about light for light data center use, I don't think there will be a lot of capital expenditure that we anticipate. But of course, it will be a different case, say, if you were to switch your life sciences for the San Diego facility. We might be able to retain the structure, but that will probably involve cutting out of everything else just to suit, because it's an entirely different industry. But you were talking about light for light data center use, I think we can retain the structure and building, and especially when our lease or our exposure is only on the corn shelf.

Okay, got it.

Thanks a lot. Thank you. Thanks, Nicholas. I think I'll read one question from the web. What is the expected month that Kowloon IA will start contribution to MIT? With the data center moratorium lifted, are there plans to add more data centers to the portfolio?

Yeah, I have this indication in sign language from one of our . OK, just kidding. The contribution from Kole Maie to probably be six months after the DOP. So we are looking at next financial year, not the current financial year. So if you are looking at modeling any contributions, you have to take it to financial year 23-24. So you'll probably be talking about the beginning of 23-24 financial year, you see some contributions

I think the other question is on the data center moratorium.

It gives us a bit more clarity, but it doesn't, of course, tell us exactly how receptive the agencies will be in final proposals. As you would have seen in the guide, they have 60 megawatts. in terms of what they are looking at for the next one and a half years, and they are looking at this, what they call CFA, call for application, only in September, based on the timeline. 2Q. 2Q. Okay, 2Q. So, we... will of course certainly be on the lookout for opportunities, but we don't have any certainty on that. And if you look at the moratorium kind of lifting, the kind of conditions they have outlined when they lifted the moratorium, it is skewed towards the operators. In other words, for landlords or builders or developers or REITs like us, we don't have a strong leverage. They are looking at new business activities or data center activities that any participant can bring into Singapore. The POE, the power usage effectiveness 1.3 times, which is mainly in the domain of what the operators can have influence over, less so for landlords or builders or developers. So it's very much driven by end users and the operators of these facilities. We certainly will be very interested to participate. Singapore is a very tight market and still seeing strong demand. So when the CFA opportunity is open, we would certainly want to be able to be a part of it and see whether we can be competitive. We'd like to do more, I think, in short, in Singapore.

We have David to ask your question. Maybe we'll take the last three questions.

Good morning, Kuo Wei. Again, back to the Hi. Back to the electricity cost. Of the $6 million that you mentioned for this recent financial year utility expenses, is that mainly concentrated in the Singapore data center portfolio, or are there other assets that the $6 million was allocated to? And then I still don't understand why you cannot pass it on. If it's going to increase $10 million to $12 million, why can't you pass it through to the tenant? And why are you, seems like you're absorbing all of this?

Okay, the cost is entirely for our multi-center facilities, non-data centers, because the data center parts, you know, are taken care of by the tenant. So that's what we characterize as land not cost our own electricity costs for our common area, for our air conditioning systems, So, the effect on the tenant... Sorry? So, it's our own cost.

So, the multi-tenanted properties.

Yes, multi-tenanted properties. So, that does not include the tenant's own consumption or own cost. In the past, you might remember, we do aggregate the tenant's requirements, but that is mainly for us bargaining with the energy retailers on a better rate, but I think the tenants would, of course, pay whatever they need to pay. We don't subsidize them. So the delta that we're seeing now is essentially on the rate increase from what we have been paying in the past to what the, say, whether it's a track price or whether it's a SP tariff rates will be if we are able to switch to the SP tariffs, but there are certain constraints in some of our clusters which we will need to get from the energy retailing market, which I think are still seeing fairly elevated rates in the $0.35 to $0.40 per kilowatt-hour basis. So I think that is our uncertainty. I think your question, whether we can pass it through to the tenants, that is on our landlord's side. we probably won't be able to pass directly that way. But one way we are thinking of is, of course, increasing our service charge indirectly to, you know, pass on some of these higher operating costs. But it is not easy to execute, you know, whenever you try to pass on some of this operating costs through the service charge to the tenants, but it is something that we are exploring now, and our take is if we were to do that, we will probably be looking at a couple of segments or property segments that have the bigger impact, like the air-conditioned buildings, the high-tech facilities where energy or electricity consumption is a little higher. So another avenue is us adjusting our air con charges, because we charge our tenants an air con for air conditioning usage for some of our buildings. So we can look at adjusting the rates up to offset the energy cost increase.

OK, got it. Yeah, that's all for me. Thanks. OK.

Thank you. I think just to clarify on the question earlier on the column . We have just checked the income. It can be expected to come in maybe from the start of the calendar year. So we're looking at probably January, February timeframe.

Yeah, 2023.

So I think if we can take one question each from Derek and Tan Chuen, we can close off the session.

Derek Chang. Thank you. I just want to ask a question on interest rate sensitivity, right? Because given that you're not on 71% fixed, what would be the DPU impact if interest rates go up by 25 dips? And I guess where do you see your all-in going towards by the end of this financial year and the next one, assuming you refi at current rates?

Okay, Lily is going to look at the crystal ball and give you a read.

As I always say, if I know, I won't be here already. As would a lot of us too. Okay, in terms of the sensitivity, so if you look at every, say, 15 bps increase in the interest rate cost, you are probably looking at impact on our DPU by about 0.13 cents for this financial year. So I think in terms of the all-in, if you just use that as a gauge, then I have no idea where my interest cost will be by the end of the year, so it very much depends on where the rate hikes are going, how many hikes are there, and how front-loaded the adjustment will be. Currently we are at about 2.4, so you definitely expect that to increase by about, I don't know, it's a question mark. You know, every time I do a forecast, By the time we called for discussion, the rates went up further.

Assuming you refinance at current levels, where would the all-in go up to?

Refinance at current level. I think if you talk about the refinancing, the refinancing part actually is, if you compare what we have locked in previously for the refinance, the loans that are due for refinancing, that was actually done somewhere earlier back in the 2018, where the rates are still, which is similar level to now. So I don't think you expect to see a significant increase on that basis.

Okay, got it. And just now, the sensitivity, that's 50, every 50 fits, right?

5-0? 5-0, yes.

Okay, got it. All right, thanks.

Okay, thanks.

Okay. Hi. Hi, Nachin.

Hi, good morning. Looking into FY23, there is quite a bit of cost pressure around both interest rate and utilities. I'm just thinking, how likely are we going to see acquisition to offset this for this year?

Even more difficult to read. The crystal ball is very cloudy. Market is still very competitive in the space that we are interested in, so not so easy to crystallize transactions. Of course, the larger one, which is more feasible, is a balanced 50% stake in the data center portfolio, which we have with our pattern. That one, my sense is probably not likely this year, 2022. sponsor is very busy with tons of other things, really. So, and it's also providing fairly decent property income, you know, as an investment. So, my sense, if it were to come, it would probably be next year. But, of course, we have fairly regular dialogues with the parents. Anytime, I think, they are open to us taking on we'd be very happy to do so. But I think one thing to note is that with our unit price at this level, the acquisition will not be terribly exciting. So this is a kind of trade-off that we need to be very mindful of, and especially in view of the rising interest rate environment. So whether this is the right window for us to push for that. That aside, I think we continue to look for investment opportunities as what you have pointed out rightly. If we are able to crystallize any interesting transaction, that would help us drive the DPO because the cost pressures are I think very real and everybody is experiencing it now.

Can I also just do a quick follow-up? Given the current unit price and better gearing, can we expect DRP to drop off or are you likely to continue that going forward as well?

I think as far as you have read in our current announcement, we are continuing with this quarter. Our original plan was to at least cover the development period for our Color MyA2 project so that will last till early part of 2023. So essentially we're trying to match the proceeds to the construction so-called cost progress payment needs. So there will probably be a little more than what we need so that will help us moderate the leverage level, but I think the primary focus is to match the funding needs. And at 38.4%, while it's a healthy level, we won't characterize this as a low leverage level. I think you might remember sometime back the previous two rounds when we did the distribution reinvestment plan, we had that turn off when we were below 30%. So, of course, that is a fairly low, objectively speaking, a fairly low level. So, if we are using the distributionary investment plan as a tool to adjust our leverage, 38 is probably not a level which will turn it off yet, but I think for the time being, we will re-look at this after we complete the construction of COVID-19 and we see where we are and whether we have more needs.

Okay, thank you.

Thank you everyone for staying with us for so long. If there are any other questions, please contact Mule and myself offline. Thank you and have a good day.

Thank you.

Bye.

Bye-bye.