Mapletree Industrial Trust

Hi, good morning. Thanks for joining us this morning for MIT's 2Q and first half financial year 2022-2023 financial results. We had uploaded our announcements together with presentation deck last evening. And this morning, we have management seated in the office to do a virtual presentation of the results. We have Guo Wei, our CEO, Lily, our CFO, Serene, our head of asset management, Peter, the head of investment, and Kim, the head of marketing. Myself, Melissa, and William from the IR team. So without further ado, I'll pass on the mic to Guo Wei, who will give a short intro to the financial results.

Yimin, I've been... Oops, sorry. Can you all hear me? Probably I've been spouting nonsense and got cut off by the police woman. So anyway, I said I was standing up. The rest are sitting down. Yeah, thanks for joining us. I'll run through the five usual segments that we present at our results release. First, I will go through the key highlights. That's the first segment. And who's controlling the... Okay. Now, if you look at the slide number five, you can see the operating performance continues to be fairly robust, you know, despite margins being squeezed by inflation effects and also higher utility costs. And the distributable income actually had been fairly stable $89 million on a year-on-year basis for that quarter, 0.7% increase. But DPU, you can see that effect coming down. This is, of course, partly due to the dilution effect from the series of distribution reinvestment plan we have in place. And I think going forward, we continue to see more pressure coming from borrowing costs, so-called increases. Now, looking at the second set of bullet points, if we look at our portfolio performance, especially for the Singapore portfolio, has been very encouraging. Our occupancy level on an aggregate basis has gone up 0.3% to 95.6%, which is if I could say highest ever we have recorded for the Singapore portfolio ever since we listed the platform. So the market I think continues to be helpful in the occupancy front and even on the rates as you would have seen in the details we have outlined we have seen an increase in average rental rate as well, 213 to 215. So rent revisions are also positive across most of our property types. In fact, the effective aggregate increase is positive 2.6%, which is the fourth consecutive quarter of increase. So that is also another welcomed sign. That said, we have seen a small dip in the occupancy level for the North American portfolio because we have an asset fairly small, 0.4% of the portfolio revenue as of last year on a relative basis at Leonia. We have a tenant that's moving out, so now we are, of course, in the process of engaging interested parties to take up the space. On the capital management front, the third set of bullet points, we are happy to report that the hedge borrowings, we have managed to shift that up a little, 74.2%, almost two percentage points from 72.3% in the previous quarter, and the weighted average, four years. So that gives us a bit of a protection, but not full protection against the onslaught of the interest rate, the upward adjustments. And the DRP continues to be a good source of funding for us, especially when we still have our ongoing development project at Colomaya II. So last quarter, $40.2 million received. a very good take-up rate of 42.9%. Of course, as you know, that is contributed mainly by the participation of Maple Tree Investments as our sponsor. It's about 25% of that 42.9%. And the last bullet point as a kind of a measure against the increasing so-called pressures we anticipate in the next couple of quarters from costs, so-called increases, and also borrowing costs upshift. We will plan for the release of the $6.6 million that we had withheld earlier over the next three quarters, so that will help cushion some of the negative impact that we anticipate. So I think that rounds up the key highlights. But if you look at the chart that we have outlined on slide six, the DPU profile as well, you can see we have outlined a dip to 3.36 cents for the current quarter. And we, of course, will work hard in keeping our occupancy levels healthy and then try to retain our tenants as far as possible while keeping a close eye on our margins and costs going forward. So I think that is a quick snapshot of what we have. The rest I think are fairly standard kind of components of what we normally update. We don't have anything really exceptional to highlight. I think there will probably be some burning questions some of you might have, so we can take them.

Thank you, Goh Wei. Just some housekeeping rules. We request for our analysts to keep your questions to two for each round. So of course, if there are no more questions, you're very welcome to ask some more. If you can raise your hands via the WebEx platform, You can also contact us or via the live webcast. So we will take questions on the various platforms. Can we have the first question, please? Derek from DBS, please go ahead.

Hi, morning. Thanks, Melissa. Good morning. I'll just ask one question. Essentially, it's on your refinancing, right? So could you give us more colour? I noted there's some expiry next year and looking where base rates are in the US, it appears that things could spike up quite significantly. So maybe, could you just share where you expect interest rates to land and this $350 million, how should we think about your interest rates?

Okay, the colour we have is orange. I'm just trying to put a fast one on you. Lily will shed some light on that, but I assure you it's still orange.

I'm wearing green today, hoping to get some positive vibes. But anyway, let's address the refinancing for this current financial year. If you look at the presentation slide on 13, we do have about $315 million of debts that is maturing in January. The good thing about this refinancing is in terms of the benchmark rate, we have already done the hedges for it. We have extended. If you recall last quarter, I did mention that we have no repricing with respect to the interest rate swap because we have already extended the interest rate swap that's expiring in January. So that part is kind of locked up, right? We are currently negotiating with the banks with respect of the loan renewal itself. I think because it's still in negotiation, I'm afraid I can't say too much in terms of the pricing, etc. But I think we are hopeful and we are trying our best to keep the incremental cost as low as possible. We don't think it's going to be very significant looking at what we have locked in ahead of time. I think for all intents and purposes, the risk that we are really facing here is the rate hikes that the US Fed has been putting on, and that basically impacts the benchmark rates. I think in terms of the margin, the risk is not as high as compared to where the market interest rate would go. So I think for this refinancing that is coming due in January, because we have already done our extension of interest rate swap, that risk is very much mitigated. The next year you will find that we have about $175 million of MTN's paper that is falling off and this typically you are looking at them somewhere maturing in middle of the financial year and end of the financial year. So I think that still gives us some breathing space but nonetheless the team will continue to look at how we can address the refinancing this year.

Lily, just to summarize what you mentioned, we should expect that the increase in interest rates for this particular tranche should be much lesser than the base rates that we see increasing. Is that the right assumption? Because you already hedged it. Yes.

Sounds excellent.

I see a long queue. That's all from me.

Thank you. David, can you please go ahead with your question? David from Daiwa.

Yeah, good morning, everyone. I have a question on the accounting treatment of your hedges because you're seeing a pretty significant gain this financial year. And how should I interpret this? Is this just accounting? It actually increases your NAV. So is there any way you could monetize this? to offset the rising interest rates? Or should these hedges just unwind on maturity and we should not even look at your gains on those derivatives?

For the derivatives, under the accounting standard, we are expected to do a mark-to-market. Of course, the RRS that was taken on a few years back definitely is in the money now if you look at the interest rate environment, and that is also the reason why the derivatives value has actually increased. Whether do we want to monetize it? We can, but then the question is the moment you monetize, you lose your protection going forward. So I think that is That is why I think typically corporates don't really actively look at unwinding their hedges. I think the hedges are there for a reason, for your protection. So the question then is do you just want to remove that protection just to monetize it? I think the other point I would like to highlight is also that such mark-to-market has no DPU impact. I think you will get the benefits when you do your realization and you are right, you basically then unwind at point of maturity. Does that answer your question?

Yeah, that's pretty clear. Thank you. That's all from me.

Thanks, David. Mervyn?

Hi, guys. Yeah, this is a question in terms of the non-renewal in the US. Just trying to understand the reason for tenant moving out. And also, you see other non-renewal risks outside AT&T over the next 12, 18 months. Thanks.

Okay. For this tenant, I think the activity level has been fairly low in the premise. So it's not a key location for its operations, so it decided to move out. And anyway, it's not a very large asset. As to other renewal, so-called discussions, I think the more prominent one still remains the group of 3A TNT assets. We don't have any other very large one in the coming, say, 12 months or so.

Do you have any of these smaller ones that could come out?

Smaller ones, I think we have a large, what we call hyperscale user at the Northern Virginia asset, but on a relative basis is a smaller part of our portfolio that is having the lease up for renewal beginning of 2023. So that one, I think, is in the joint venture vehicle we have with MIP3 investments and also with digital. So digital is... fronting that engagement with the tenant now. So we do not know at the present moment on the renewal kind of intention, but we are hopeful and hopefully by November or December we will get some clarity on that.

Okay, thanks. I'll turn to the back of the queue.

Tan Chien, you have a question?

Hi, morning. Just a question on the debt currency profile. The proportion of US borrowing seems significantly higher as compared to your asset base. So is this a deliberate policy and with refinancing, will you look to bring that down?

I think typically when it comes to the debt currency profile, The reason for the higher percentage in terms of US dollars is more because we are also trying to ensure that there is a natural hedge with respect to the capital value. And of course, plus the fact that for the US dollars borrowings that are taken onshore in the US itself, we actually are able to enjoy the tax deductibility when it comes to us having to pay the tax, etc. So there is certain benefits in us having a higher percentage of the U.S. borrowings. But having said that, I think in terms of the impact, the U.S. borrowings, we have a large part of our how should I put it? Sorry, yeah. Our hedge ratio is about 74%, right? And that also means that the U.S. borrowings is quite largely hedged. So I think we only have about 25% or above of the US debt that is unhatched and therefore facing the risk in terms of the higher interest rates. So I guess you can say yes, that composition is deliberate because we were looking at the natural hedge as well as taking advantage of the onshore tax deductibility of the interest expense.

Okay, so with the refinancing this and next year, we shouldn't expect this ratio to change, right?

I don't think so.

Fairly unlikely, unless you are able to get a lot more, say, exposure or kind of projects in non-US geographies, and you see that ratio adjusting. Because if you look at the nature of our projects, so-called the fundraising exercises, it's almost entirely in Singapore dollars for equity. So whatever equity that we raise would normally be used to pay down existing Singapore debts, that's a lot more direct and so-called less cumbersome to execute. I don't think we're going to try to be... inventive and take the Singapore dollar equity funds, convert it into US dollars and pay down our US dollars debt for the time being because we still have a fairly decent level of tax shield by having a slightly elevated which is a level of 60% when we first started of debt for the US portfolio. So as with most kind of instruments, there's no one instrument that is going to be suitable for all seasons. So that kind of profile, the profile that we have, had been helpful, very helpful over the last five years. But of course the trade-off is that you see more exposure, more direct exposure to U.S. rate hike cycles. So that's what we are seeing now. That said, it's certainly helpful that we have a big part that has already hatched away. Then the small balance of about a quarter would be still having to experience the current volatilities.

Okay, got it. Thank you.

Thank you Tan Sian. Brendan, do you have a question? Brendan from Siti. Okay, maybe Nicholas can ask your question first. Nicholas from CreditSys.

Can I just ask on some of the leasing progress? Just want to understand on the AT&T, although it's still early, you know, any kind of like the backfilling or inquiries that you're getting on the spaces and also the leasing up for column IAA2?

For the AT&T facilities, as of now, we don't have any additional updates that we can share. So we are still checking with the market and getting the brokers on board. It's about a year from now when the leases expire. So we would certainly update the community when we get some so-called interest reports. from prospects. So at the present moment, nothing yet. For the Kolomae II redevelopment, we are discussing with a prospect for two floors in the middle block, block 163. So we, of course, have not sealed up the lease document yet, so we are Optimistic, but still working at it. At the same time, I think we are reaching out to a couple of interested entities, but not as close as this tenant who is taking up two floors. That two floors is roughly 27% of the NLA of that building. So if you split it up, you add another 8-10% to the occupancy level, so you would have crossed 30%. You include the first block of 24.4%.

Okay, just one quick follow-up. In terms of the timing for the anchor tenants lease, when does that start?

Okay, effectively for us, after the rent-free, it will be end March or early April 2023. So for ease of, I think, modelling, 1st of April 2023 would be, I think, a good date to pin the start date. after the expiration of the rent-free period.

I understand. Thank you.

Thank you, Nicholas. I think Brandon has been trying to ask a question. Brandon, are you able to speak?

Yeah, can you hear me?

Yes, we can hear you.

Yeah, thanks. Fantastic. Just two questions. The first one is with regards to the $6.6 million that you are returning. How should we be reading it? I mean, Because they're going to distribute it over three quarters. Why not four quarters, one of five quarters? Is it because you think that the next three quarters is going to be quite bad? Or you're trying to engineer a DPU growth for the full year? Yeah, that's my first one. The second question would be, can you explain the year-on-year for an MPI margin across several of your segments this quarter, especially on the USDC as well as the high-tech space XDC? Yeah, thanks.

Okay, the mathematics behind this is extremely complex. It's like us, you know, designing for a trip to Mars. But anyway, that was, of course, said in jest. It's not a precise kind of exact science that we have. We think the... Release of the $6.6 million is timely, partly, of course, because of the increasing pressures that we anticipate in the next couple of quarters. But I think, more specifically, should we do it two quarters or three quarters, there's no exact science to it. Our sense is that if you split it up over too many quarters, it will be inconsequential and it will be too dilute in terms of the effect. And we also do not want a concentrated kind of a release in one quarter, which I think may not be helpful over at least the next couple of quarters because we see that continued pressure from at least inflation and then borrowing costs that will continue to feature for some time. So of course the debate is two quarters, three quarters, at the end of the day we decided to spread it out a little more to three quarters that would at least, you know, help us pike through the next couple of months of greater uncertainty. And if you divide 6.6 by 3, 2.2 is a reasonably helpful quantum that we think would at least give some material help in terms of the profiling?

I have the questions on MPI margins. I think for Singapore and the US, the reasons are quite different. For the Singapore portfolio, I think, as you all know, utilities expenses have hit across the board, especially for the air-conditioned buildings, including high-tech And we see this hitting the margins directly. For the U.S., if you notice, queue on queue, actually the MPI is the same. For the U.S., the treatment is a bit different because for whatever expenses we incur for the property, there is a claim back. So you'll see that gross revenue may be higher in some quarters if there are works that are to be claimed from the tenant. So I think for the North America data centers, the effect is largely different. mathematical and not so much because of any increase in property operating expenses.

All right. Got it. Thanks so much.

Thanks. Okay. Thanks, Brendan. I think we have from OCBC. Would you like to ask your question, please?

Sure. Thank you. So I have two questions. So the first one is I think there's still a right of first refusal on the data center portfolio that is held. at the sponsor level. So just wanted to get a sense of what's your thoughts on acquiring this given the current funding environment. Then the second question is on data centers. Has Maple Tree Industries done some kind of valuation on the data centers on an alternative use basis, say if they no longer are used as data centers? Yeah, that's all. Thanks.

Okay. The first one I think on the right, to acquire, it remains there and we are, of course, keen at the end of the day is whether the parent maple tree investments is ready to divest and award price. So I think for this asset type, the prices continue to remain fairly tight or rather capitalization rates remain fairly tight. So unless you get a very huge friendship discount that is so-called out of line with the market, my sense is that, say, if you take an arm's length kind of value for the portfolio, it will not be easy for us to execute a transaction to do an acquisition. So we would, of course, keep an eye on our cost of capital, both on equity and debt policy, whether there's a window for us to engage our parent a little more so-called on this possibility. My sense is that at least for the next six to nine months, fairly low likelihood for us to explore this in view of the market situation. But it's something that we will continue to monitor and with the right conditions and when the market window opens, we would pursue that with our sponsor. Now on the evaluation of the data centers or alternative use, as of now, for most of the facilities, the highest and best use generally would be for the data center operations. Say for some of the locations where we have the assets that are in say business park type of precincts, that would be the next alternative use, the so-called next alternative better use. So the valuations will probably not differ too much from what we have because most of our assets in this kind of locations are leased on a triple net basis and mainly a power shell or just call and shell basis. So the general kind of rent levels and valuation would not differ too much from, you know, what we're getting for the data centers, of course. For the fitted hyperscale facilities, that's very different. The assets are purpose-built and the fade-out element is a lot higher. But for this group of assets we have, the leases are very long and the tenants, I think, are relatively a lot more sticky. compared to the other groups of tenants. So that part, I think, the risk, of course, is there after the expiration of the very long research, but it will be something that we will need to review many years down the line. And, of course, on a positive note, there are certain so-called upgrades that we see Like, for example, the San Diego asset where AT&T is presently at, it did a one-year extension, I think we have outlined earlier, to December 2024. So that part of San Diego is actually a very vibrant life sciences hub. So that represents an upgrade in the so-called use for that kind of premises So it is another angle that we are exploring in terms of conversion. See if we are not leasing out the space to a data center operator at expiration of the lease.

Thank you. That's very detailed.

Thank you. I think I'll ask a question from the chat. Derek from Morgan Stanley. The all-in-debt cost of 2.9%, what would this be after refinancing the $351 million in loans due? That's the first question. The second question, the Colom Ayer 2 redevelopment is completing in the second half of 2022, first half of 2023. Is management worried about leasing progress so far as it's just been committed by the anchor tenant? Any further updates?

On the all-in debt, the 2.9 is what is reflective of what we see in the current quarter. As for the refinancing, I think just now I said that we are trying to make sure that the incremental is not as high. And with us locking in the hedges ahead of time, we actually managed to lock in at a a rate that is comparatively attractive compared to what we are looking at now. So I think even if it does increase for the refinancing, we are hopeful that the increment will be less than 50 bits. I think that's something that we are trying to do and we hope to achieve. But as I said, unfortunately I can't give you guys too much details on that because we're still negotiating. Hopefully we have some good news later on. So as to how it will change the 2.9%, I think if you recognize that the $350 million is only about 12% of my total debt, I think the impact may not be that significant as well, if I'm talking about the incremental. Okay, I hope that answers your question.

Okay, the next question on the leasing of Kolo Maie, we are absolutely confident of the ability and reach of our leasing folks and they are working very hard and they have been assuring me that they would be able to convert many of the prospects they are talking to. So if you look at the track record of their delivery, we remain very positive. So there will always be some challenges in the market especially when the environment is so volatile. But we have a good product. We have a brand new facility. We have specifications that are relevant to the industries that we are targeting. So we are positive. So you may take a bit of time in terms of leasing up, in terms of getting the tenants in place. And as I've outlined earlier, the block in the middle, Block 163, we are very close to signing about slightly more than a quarter of the space to a good brand name tenant. So the momentum is there. We will continue to work on that. But practically, I think if the question is on the contributions, when we see the revenue streams coming, I think... you'll be towards the end of 2023 that we'll see the kind of revenue streams being recognized because by the time, say, we complete the development by middle of 2023, even if you can get a tenant to commit, then you have a feed-out and a rent-free period, so invariably most of the contributions will probably be back-ended towards the end of 2023 and early 2024.

But for the block that we have already committed, we expect that to come in from beginning of next financial year, so that's 1st April, right?

Yes, 1st April. I think that 24.4% is confirmed. That part, I think, gives us that base load as far as revenue is concerned. But the rest, I think, while we work hard at getting commitments in place. But practically, as I mentioned, with the so-called commencement times being staggered and you have all the fit-out and rent-free arrangements, so the real cash flow will probably be towards the end of 2023.

Thank you. Can we have Vijay's question, please?

Thank you. Good morning, Gubi. I have two questions. The first question is on the service charges. I mean, there were some discussions about increasing service charges in the past to mitigate these inflationary pressures. I mean, is there something, is there still something on discussion and if such a thing would be implemented, would it be across all the leases of annual portfolios? My second question is related to Forex impact. With regards to the strengthening of the USD index, How did this impact your DPU for this quarter or for the past nine months? And if you strip off the USD impact, what would it be? Or is it fully mitigated by the interest payment in US dollars also? That would be my question.

Okay. On the service charge part, I think we have articulated our intent to increase our service charge. We are happy to share with you. We have done that 1st July 2022. So for our air-conditioned facilities, essentially the business park buildings and the high-tech buildings, that increased roughly 10%, you know, because we are making adjustments to the second decimal point on the service charge cost. So 10% increase. And I wouldn't say it's very well received by the tenants. We get some complaints here and there, but they grudgingly... accepted the increase. So that has helped us offset some of the margin pressures from utility cost increases. Just to share our current read on the cost upshifts, you might remember we have shared before our utility cost increase we anticipated roughly $10 to $12 million for the year and it is fairly in line based on what we are seeing so far on the actual costs so-called taken in. So probably you fall quite well within the $10 to $12 million anticipated so that utility costs rather offset from the service charge increase will be helpful. Our gauge in terms of the impact from this service charge adjustment is probably one plus or so million dollars. It's not going to be very significant but it's helpful in mitigating the effect and it's also a signalling and a shared kind of pain that we have in place with our community. We have not raised the service charge rate for our non-air-conditioned buildings, in other words, the multi-user federal factories, because these are not large so-called consumers of utilities. The buildings are not air-conditioned. The equipment that is so-called powered by electricity would be mainly the lifts, for this premises so that the impact is not as material and we have weighed the pros and cons of pushing ahead that additional kind of so-called revenue, I won't say revenue, additional so-called contributions on the service charge you can get from this bunch of folks will not be that much and is extremely painful process dealing with the thousands of small leaders, SMEs on this front. So we have decided not to, you know, have a blanket across the board service charge so-called adjustments. Now on the exchange or the Forex so-called impact, I think Lily can shed some color on that. we have a big part of our borderings that are already hedged, so we don't expect any so-called big movements down there from the Forex impact. On the distributions, we also have the hedges in place for the cash flows that we are receiving, but with different levels of kind of hedges that have been laid on over time. So I think Lily can share some so-called details on this.

Okay. As Kuo Wei says, we typically look at the U.S. income stream coming in from the U.S. and we take into consideration the net after looking at the interest rate that is in U.S. dollars as well. So the exposure we're looking at is really net of all this. We basically hedge the net income stream by looking at FX forwards. So we do that on looking ahead four quarters. So every quarter we will actually add a little bit of FX hedge or FX forwards for the quarters coming in the next four quarters. So basically I think the key idea here is we do average our exchange rate that will be applied on the distribution. So if you imagine this quarter's distribution is probably made up of a few forwards that has been locked in four, three, two, one quarters ago. And of course we have about, we left at about maybe 20% that is on a spot basis. So I think typically that is how we manage the FX exposure. So I think the key thing we have to remember that when we do all these FX hedges is to ensure certainty in terms of the distribution, not so much of we are trying to benefit from, we're trying to profit from it. Okay, I hope that answers your question.

Yeah, got it. Thank you. If I just may just clarify on the first part, just to clarify that the service charge has been implemented across all tenants, not just for new leases, and this is the margins which we can expect moving forward after increasing the service charge in coming quarters. Is my understanding right?

Yeah, the service charge increase has been applied to all air-conditioned buildings, so the high-tech facilities and the business park buildings, but not to the non-air-conditioned buildings, the federal factories, stack-up ramp-up facilities, We don't have that increase in place.

Okay, thank you.

Okay, I think we are running out of time. I'm going to take questions from those who have not had a chance to ask on the WebEx. That would be Xavier, Michael, and Amanda. Xavier, could you ask a question, please?

Hi, thank you. Thank you, Bowie. I just want to check your views because Microsoft just one of a slowdown of spending. I want to know whether you foresee weaker demand as well as longer lease-up periods for your U.S. data centers. And by extension, should we also expect a slowdown? Does this slowdown in cloud spending to affect Singapore data center demand as well?

Okay, I think the tech companies are really looking at their growth plans. That said, they're still growing probably at a slower clip They will be making adjustments on their needs in some markets for sure. You can read about them downsizing certain parts of their workforce. But I think the medium-term outlook and demand continues to be very encouraging. And for the lease-up of the space we have in our portfolio in the US, certainly that would have some impact. And on the level of interest, we would of course continue to monitor the market very closely and try to find the right match for our space. The Singapore data centre space, I think I would characterize this as still a landlord's market because the vacancy is extremely low. Whatever power that is available, you know, already would have taken. So despite, you know, the shrinkage in some quarters for some of the tech companies, I believe, you know, if you are able to offer new space, additional or rather adequate power allocation for any facility you'll be able to find a taker very quickly because Singapore is in a situation where your supply is really or new supply is really non-existent partly because of policy decisions taken three years back as you know there's a moratorium in place so it is partly an artificial kind of constraint from the supply side. So if you have any space available or power available, that will be taken up very quickly. But that is also a challenge we face from a developer's perspective. It is not so easy to get hold of new allocation, new approvals for such facilities. So while we are very positive about The kind of demand that we are seeing here, we might not be able to exploit the opportunities very effectively as a REIT, as a developer, as a property company compared to, say, data center operators or users.

Got it. Thanks for the detailed response. So if I were to summarize, I guess the near-term challenge, there'll be near-term challenges for U.S. data centers, but the medium to long-term outlook is still good. And as for Singapore, I guess as you mentioned, it's still a landlord market. The question is just whether you will be able to take advantage of it.

Yeah, that is right. As you know, there's a CFA, a call for application by the agencies for the data centers that's closing I think next month. Quite difficult for us to be competitive in this space. You know, it will be an operator kind of game instead of a property company or developer game.

Thank you so much.

Thank you, Xavier. Michael, do you have a question for us? Michael from UBS. We'll take the question from Amanda first, please. Amanda Seah.

Hi, thanks for taking my question. I just have two quick questions, one on rent and one on leasing demand. For the rental, are you seeing any pressures on asking rent for your new leases? I see that your new leases for business park are set up at 3-7 park buildings in the second quarter, so lower new signing rents. That's my first question.

Okay, this so-called additional sense and read of the market, probably I ask Kim to give you. She's been dealing with all these prospects, you know, on a very intensive basis.

Right. For the flatted factories, right, we are actually very tactical in our approach because now our occupancy for the flatted factories has gone up. So some of the leases, the new leases, we were actually trying to get some very good tenants in terms of the profile. So that's why we have made some adjustments. But where there is smaller spaces, we actually push up the rent. So on average, it does seem that it has lower, yeah. But it helps us in the longer term. So for the stack-up ramp-up, it was due to largely a few big tenants. that we were trying to replace. So we tried to get them to come in earlier. So that will help us to reduce the downtime. So it's more of a tactical kind of move. But on the whole, we are actually pushing the rentals.

So essentially... Sorry?

Go ahead.

We just want to say Kim is getting more selective. Partly because I think the so-called situation is a little more helpful now. The supply and demand situation is more helpful for landlords, but we are fully cognizant of the fact that there will be a lot of stock that will be completing end of this year, early next year. So it's always at a a state where we are looking at the tension, whether we should nudge the occupancy up a little, whether we get better quality tenants to improve the profile of the precincts that we are managing and also taking a more defensive position in view of the new stock that is coming to the market that will be competing with us. So this is striking that kind of balance which Kim is working hard at and exhibited in some of the figures that you see in our update.

I see. Okay. Thanks. Then on leasing demand, what is your read on the demand on the ground currently? Are you seeing any slowdown, say, from any particular tenant sector, even in manufacturing data, or maybe any tenant sector that's coming in strongly?

I don't think we have so-called registered any material so-called shift in the level of demand, whether upwards or downwards. I think the COVID, the so-called the issues are firmly behind us now. You know, everybody is walking around maskless except for a few people very careful people. So our tenants, I think, and prospects are generally, I would say, I would describe as positive. So I don't think there's any drop-off in demand. It continues to be encouraging, though, of course, you might have read in the recent reports, there are certain segments that they're seeing some so-called reduction in say industrial production or capacity, semi-con industries being so-called under a bit of stress. But generally we don't see any big negative issues across the different segments.

Thank you.

Thanks Amanda. I think I'll just check if Michael would still like to ask his question if not Michael? Okay, I think we might have lost Michael. Well, thank you, everybody, for joining us for this rather long call this morning. We hope we have answered most, if not all, of your questions.

There's one I managed to see, DRP, right? DRP? I saw it flashed up on the screen for three seconds and it went off.

Oh, okay, okay. So Derek's question has caught the goalie's eye. everything would catch my eye, blinking. He would like to answer this question. Kuo Wei mentioned the merits of continuing the DRP, but wouldn't this be an expensive source of funding, cost given trading yields, maybe more so than borrowings? We also saw the dilutive impact of the DRP this quarter.

So it's not an easy kind of calibration to do. I agree absolutely it is. costly relative to, say, our position a year back. At that time, our unit price or equity cost is a lot more attractive from a fundraising perspective. But it is still, at the current level, at a premium over NAV. So if you look at it very theoretically, it is still beneficial to raise equity at a premium to NAV, but of course on a relative basis, a little less interesting. From our perspective, we still have funding needs for our development project, and I think just as a quick reference, we have about a third more to go in terms of payments. not precise numbers. So that would require so-called us to get capital, whether debts or equity. So if we see continued support from our unit holders and also from our sponsor, we think it's helpful for us to continue for a little while longer to have the capital in place to cater to the funding needs for our development project until we finish up most of it. Certainly we can take that and our leverage ratio is still at a fairly healthy level but it is not at a very low kind of a level where we have extremely large headroom. We are still at the 37.8% level. So I won't describe this as an extremely safe kind of leverage level. Extremely safe is below 30%. We have reached then, you know, that level some years back and also partly because of our application of the DRP then as well. over the quarters, and when we got to that very, very safe level, we turned that off. So we are certainly not near there, and with the current leverage level, it's good to keep a little bit of headroom and have some dry powder in place, but we are cognizant of the fact that it is, on a relative basis, less attractive means compared to a year back and also the dilution effect to the portfolio. So we are recalibrating that and we look at that in a quarter or two to see whether we want to continue with the DRP program or not. But I think as of now, as we have outlined in the current quarter's We're continuing with this quarter first because we still have current needs.

All right. Thank you, everybody. Thank you for your time. Please reach out to us if you have further questions. Thank you. Bye.

Thank you, everybody.