Mapletree Industrial Trust

Good morning, everybody. Thank you for joining us for MIT's second quarter financial results for financial year 2023-2024. My name is Melissa from Investor Relations. We have the management team of MIT with us this morning. Mo Wei, our CEO, Lily, our CFO, Peter, our head of investment, Serene, the head of asset management, and Kim, the head of marketing. We have uploaded results presentation last evening, which we'll be using for this discussion. Without further ado, I'll pass it on to Kuo Wu. We'll just go through the key highlights and we'll proceed on to Q&A. Kuo Wu, please.

Okay, good morning. I hope you can hear me because we don't get any feedback. Hopefully, this is not so little key. Okay, I got the thumbs up. We'll run through the key highlights. It's actually a fairly straightforward motor for us and questions after that. If you look at the first bullet point, essentially, from the distribution point of view, able to deliver more, 3.5% more year-on-year basis for the quarter to $94 million. PTO perspective, you can see a 1.2% increase, 3.32 cents. The key reason is because of the enlarged unit owner base. We did previous year a series of our equity distribution investment plan. We had one equity fund raise exercise that we did June this year for our Japanese asset acquisition. So that increased our unit base 2.7 to 2.8 billion units, 4.8% increase. So essentially we have more unit holders share slightly larger distribution. So that resulted in the near-term shift in DTO. On the operating front, if you look at our second bullet points, we have registered very, I would say, low-plus kind of results. Rent revisions, we're happy to say, positive across all the property segments. In fact, if we aggregate property, rather the rental revisions, we're looking at 20%. That's very encouraging from the revenue side. Of course, that is reflected in the higher rental rates as well. If you look at the Singapore portfolio and the US portfolio, both are getting higher rates. 2019 for Singapore and The portfolio average lease to expiration has also increased from 3.9 years to 4.2 years because of our recently completed transaction. As you can see, the third bullet point finally completed just before the end of the quarter, the 8th of September. So we would expect contributions to start or to be meaningful from the quarter onwards and on the capital management front I think it's relatively stable 80% of our holdings are still attached annual 3.7 years our leverage ratio see as a fairly healthy 7.9% level so I think that sums up what we have for the quarter. Maybe I can take questions.

Thank you, Bowie. May I request for analysts to click the raise hand icon on Webex? In the interest of time, we will limit to two questions first, and then we'll come back if there's more time. Okay, sorry. The first question would be Derek from DBS.

Hi, good morning. Melissa, can you hear me? Yes, I can. Hi, morning, Kuo Wei. Just two quick questions. First one is, could you give us an update on the AT&T leases that is expiring this year? Then my second question will be on the interest rates, right? Maybe could Lily give us a sense of where will you expect interest rates to land by the end of this financial year? Yeah, just two quick questions. Thanks.

Oh, yeah. having to answer the very difficult question because it's crystal poor gazing. All is a bit hazy and cloudy. So now on the leasing of the AT&T facilities, we are still engaging the market. So as you would have seen in our highlights and report, we don't have any leases materialized yet. So for the Tennessee asset, which is the second largest. One, I think, stay closer to us reaching some form of movement. We're working very hard on that. And hopefully by fourth quarter, the financial year, we'll be able to share whatever we are able to

I think you're a bit muffled. You say you're floating in and out.

The reason why I'm floating in and out is because I'm floating like a butterfly. You know, you remember our friend Muhammad Ali. But I won't sting you, don't worry. I'm walking back, pacing back. Anyway, so I'll stay put at the IM. So essentially for that, the particular Tennessee asset is closer to us reaching some form of agreement and it is a long process but that's why I'm saying hopefully by fourth quarter we'll be able to share the specifics the other and the lease for the tenancy asset will be expiring so we still have a bit of rent income in Thailand One thing to note that even if we are able to procure a lease, generally for leases, it's fairly long to allocate rent-free or tenant incentives. Okay, thank you.

How about the interest rates? Hello?

Hi, can you hear me?

Yeah, I can hear you.

The system doesn't want me to speak. Okay, so as I was saying, the interest cost for this quarter is reported at 3.2%. It is definitely lower than last quarter simply because of the addition of the jet yen borrowings. So that mathematically kind of bring it down. So if you look at the rest of the year, we don't think that the interest cost will change very significantly. So we probably can look at it to around between the 3.2 to the 3.5 range. Of course, that depends on where the interest rate goes and what the Fed decides to do. I guess to hide or not to hide, that is the question, right? So I think for next, but I would say for this financial year, we don't have a lot of hedges that will be expiring. So they are actually quite small percentage and the effect of which is not expected to be that significant. So I think that's not so much an issue. For the next financial year, we do have some close to about 200 million of hedges that will be falling off. So those, I think, if we were to do a replacement again, the impact shouldn't be too significant. But I think the bigger risk that we have here is really the replacement of the hedges that is reported at the joint venture level. So at the joint venture level, for this financial year, we have about $120 million Hedges will be up for renewal. So we have actually done some forward, some hedges ahead of time, forward start basis. So I think all in, the impact will be quite limited. So I think for this financial year, the impact may not be that significant. Come next financial year, we would expect to see the full effect of such replacement. So we should be expecting the interest cost to go up. And if you can recall, the joint venture was actually acquired back in, I think, 2020. So the interest rate, general interest rate level at that point of time is relatively low. We are looking at around the 1% level. Today, if we were to go out and hedge, I think the two, three years rate would be hovering around 4.5%. So we can expect quite a bit of the impact arising from this replacement. I hope that answers your question.

Yeah, give me good colour on that. Alright, thank you very much. That's all from me.

I think we have a request to repeat the last part of the AT&T explanation because I think I was muted accidentally.

Muted accidentally?

Last part, maybe last part.

Anyway, that's A. kind of three assets. The second largest, which I mentioned earlier, Tennessee was above 20%. Gauging the prospect very closely, hopefully by fourth quarter we will be able to share specifics on whatever we are able to close up. That is existing lease of AT&T expiring end of November. So we would have still a little bit of rental income in the meantime. But in fact, rent-free for any new tenant would be to be taken in. So from the cash flow perspective, even if we are able to get lease in place, that we have a a year or so of zero cash flow. So that is a practical consideration from our perspective.

Okay, can we have the next question from Mervin?

Yeah, thanks for the opportunity. Congrats on the strong rental divergence. Maybe you can touch on divestment gains. How much do you have left? Indicati, because some of us are surprised that you have divestment gains from 2017. And in terms of managing GPU, would you also increase the proportion of management fees paid in units going forward to temper any impact from higher buying costs? And my second question is related to slide 13. For FY25, about 544 million. million. How much of that is US dollar versus Sing dollar? And do you have a borrowing cost guidance for FY25? Thanks.

Yeah, okay. Now, first, let me share with you, we have no kitty, not sign it. So the reason why we have done this distribution this way was essentially a sequencing acceleration and essentially whenever we have a level, we will certainly try to distribute. Now we look at the capital distribution in water that we will also apply to mixed water. Coming from the two areas, the first $4.2 million from the 65 tech park present addressment that time, we were still waiting for clarity of the tax treatment. Only recently did we get clarity. And with us having that certainty, we proceeded with the distribution of the divestment gains. Of course, one consideration a couple of years back was we have done the bit of a distribution while setting aside a bit of the stone X treatment. But the amount becomes very small and may not be as meaningful as you have seen. Soon after that, we have the 36AI Raja Klezum investment done for the centre that we built for Equinix. So that is relatively material. We could see that with eight quarters, the distribution of close to $16 million. So decided not to co-mingle these various ops. This was put aside till we have that clarity. Same consideration for the O-Yang compensation as what we have written down there. It was from compensation from the government or taking a small sliver of land for the MRT works. So not a lot of money. So it's not that significant also relative to the earlier set of distribution gains from 26A. So now that we have completed distribution of the more material from 26A, Ayo Raja Trezor, the DPU, I think she's probably in a need for some level of support. We have that available. It's time for us to continue that distribution. But it's not a lot. If you look at the effect, it's only two quarters, this quarter and the next quarter. Subsequent quarters don't have anything programmed or scheduled. So the question on the $545 million.

I think in terms of the currency, part of the 544 is actually the jet yen loan that we have taken on on a short-term basis. So currently at this point for the jet yen, as you all know, we have done long-term bonds covering about 160 million. The balance is actually to be done through bank loan. We are now in the process of The documentation should be completing this quarter or this coming quarter. And currently, for us to do the completion, we have actually drawn on short-term loan. So the buck of your 544 is actually on a short-term loan basis. I hope that answers your question. The rest of it are actually... The rest of it are actually... I'm really wrong. On this one... The rest of the power is actually a mix of SING dollars and US dollars. But if you are trying to figure out how much of these are hedged, I would say a large part of them are hedged. It's just that when we manage the hedges, it is managed on a portfolio basis. So as I said earlier, in terms of the hedge expiry, we have about 160,000 150 to 160 million of hedges that is due. And so the impact is not so significant.

What's the absolute dollar amount for US dollar bonds out of the 545?

Absolute dollar. Wow, you're so detailed. I think we'll take it offline.

Sure. So just back to my first question to go away. You don't have any things in the kitty, but are there any other properties that you've invested before that you're still waiting for tax treatment clarity and also the proportion of fees paid in units? Will you be lifting it to temper the impact of higher borrowing costs?

Yeah, I forgot to answer your question about fees and units. Right now, we don't have any plans yet. So If you look at our past approaches on this, essentially either by use transactions, essentially acquisitions where we have fees in units, arrangements or issue units or through the distribution reinvestment plan Well, right now we don't have any video plans to reactivate that. On your question on whether there's any residual elements, yes. If you look at the divestments that we have done, all the meaningful ones, the 6A Ayuraja Crescent I mentioned earlier where we have done distributions of the gains for 8 quarters, there's the tax treatment part still unknown. So if we get the clarity, the tax treatment, actually our engagement with the tax authorities, they will probably be able to distribute it out. I think amount won't be large. It's just a small residual part of an uncertain tax treatment. Other than that, we don't have any significant divestments that would result in us having gains, whether ending tax clarity or not. If we look at our tool, we've only four divestments done. For two other divestments, the 1920 South and also the Southfield facility in Michigan, the gains are relatively small. It's actually very marginal. So we don't think we'll be able to have any kind of gains distribution there. Going forward, look at what else we can divest. Any of the assets that are probably less relevant in our longer term strategy, we can divest and if we are able to crystallize any divestments, then we can look at the possible distributions. Now we are still at an early stage. As I have shared in some of our conversations as well, gauging the market and trying to get some sense of interest assets. There's some level of interest, not that interesting yet. Maybe we'll be able to look at one or two kind of possibilities. But I think it will be large, something that we'll continue to manage in terms of the portfolio

Thank you.

Thanks very much. I think when it rains, even a small umbrella makes a big difference.

We have Tan Xuan. Ask the next question, please.

Hi, morning. My first question is on reversion, right? 8.8% for second quarter. Can you share what is it for first half? And for full year, are you still guiding for low single digits?

Okay, we will work out the mathematical effect of the first half. I don't think it's as high. Actually, your third quarter number is actually a relatively challenging number. Going forward, I think the market can grow by not being as exuberant. I think a no single digit will probably be what we can look out for in the next couple of quarters.

I think we may not provide a six-month rental revision number, but the portfolio rental revision for 1Q was 5.3%.

So, I mean, it's hardly a mathematical thing. You can just take a simple average and then be quite close once you can live that, you know, staring at every single instant regression. So, essentially, we are quite, I would say, happy with the outcome for this quarter, but I don't think it's a level that we are able to really replicate future quarter. So, no single digit on me kind of level, about 5% level is probably a ball with a stick. level.

Okay. Got it. And second question is on Rampart at Kowloon Way. Seems a bit slow. What would be the main pushback from prospective tenants?

Okay. Essentially, there are not that many large users out there that are ready to commit. Of course, for a long way precinct. A lot of space that we need to lease. We're talking about close to 400,000 square feet. So our aim is to get very large space users, but the kind of demand is relatively low. Most of the prospects that we're dealing with And they're cutting across many, many industry sectors. Most of the prospects we're dealing with are looking at the smaller space needs, a few thousand square feet or even a larger one, 10 or so thousand square feet. So it's taking us a bit more time to build up the occupancy. So especially now that the economic outlook is becoming a little less certain, capital costs is I think getting to be a bit more, a bit higher for any businesses looking to commit to any lease, commit to any expenditures. So the companies are becoming a little more careful and therefore I think it's a little more difficult for us to secure commitments. Our team is certainly working hard, engaging the market, talking to the prospects. Our sense is that in the coming months, there will probably be a gradual accumulation of more smaller users than a couple of very large ones that can help us improve our occupancy levels. In short, it is a bit slower than what we have anticipated, but we're working hard at it.

Okay, thank you. Thank you, Tan Shen. Brandon, would you like to ask your question?

Yeah, hi. Koei, can you hear me?

I can hear you.

Yeah, hi. My first question would be, you wanted to follow up on the divestments in Singapore, right? Can you give us more clarity on that and how far would you go in terms of the divestment or even discount, right? I open this as a 10% discount just to get your gearing down. Yeah, just my question. Second one is, can you update on the walkie space for the send the interface for AT&T?

Sorry, Brendan, I think you were breaking up. We didn't hear the end of your first question and the second question.

Oh, can you hear me now? Yes. Basically, I just want to ask how the updates on the Singapore divestment exercise and how far would you go in terms of the discount or premium? Like, for instance, are you willing to sell, say, 10% discount just to get this going? I just want to hear your thoughts on that. That's my first one.

Okay. I think the second one, we more or less get the gist of what you were So the divestment exercise is actually a portfolio rebalancing exercise. It only has this positive impact if you are able to divest meaningfully on positive impact on the average. As you have seen in our current reported average level, 37.9%. to a very healthy level. So there is no compelling reason for us to invest just for the purpose of managing our level. So I think just maybe about 10 minutes back, we talked about engaging the market on Singapore assets. We do get some offers coming in, but some are interesting, but not all are interesting enough. So the assets that I think we have looked at are essentially some of our federal factories and then our business park buildings to see whether there's some level of interest. So there was some initial interest. terms of pricing, probably not at a level which we think is meaningful for us to invest for the sake of investing. So as to your question, we want to push for the divestment with some discounts being given. At this stage, I think it's probably not necessary for us to do that. All of these assets, as you have seen in our off-putting, still giving us very good currency levels and very strong yields. So if it is a case of selling at a discount, even at higher yields than it will take on, it is probably not a move that will take in the meantime. So it would be selective. divestment process and we don't get probably divesting at valuation or prices that gives us a bit of premium that would allow us to strengthen our balance sheet as well. It's a relatively selective approach that we are taking at the moment. And for the other question, the other two assets, the San Diego one, the largest facility we have, as we have shared, the lease has extended to December 2024. So exploring all options, whether it's a divestment, whether it's a redevelopment, so we do not have anything material as of now. So we will be continuing to look at all these options. Milwaukee asset, the smallest of 1.9%. This has expired last month, September 3. So it is vacant now. We are engaging the market on a few prospects that might be interested. So do not have something the posts will be crystallized, all the energy assets where we are already in discussions on the needs. So this will take a bit of time. So I think we have these six to nine months of downtime for some clarity, but we will work out of that.

Okay. Thanks a lot, Koei. That's it. Thanks.

Maybe before we take the next question from Derek Chang, I'd like to ask a question from Jonathan Lim on the web. Had the Japan data centers started contributing at the start of Q2 instead of actual end of Q2, would DPU still have declined this quarter despite the enlarged share count?

You see our friends down in scratching their head. It is a very relevant question. My sense is that you might still get a bit of . The contribution won't be large enough to offset. Some of you would have seen Other than, you know, the operating portfolio, some of the assets we still trying to lease up and some vacancies are building up. But the bigger impact actually comes from this cost increase. Look at the water. percent increase, not small. The first half, 20 percent. So that will continue to have one redistributable income. So a bad test, I think, is next quarter's announcement where we have one full quarter of contributions from the Osaka facility. I think one thing we would like to share our other line as well, which is that the Osaka Data Center, a phased completion kind of, on a phased completion schedule, the completion of the acquisition transaction on 28th of September, you only have 70% of cash flow, because it's 70% done and written out. We have the balance, 30%, finished up progressively from this year, from early part of next year. So we still have a small little wrap-up. OK. Our mathematician down here said they punch numbers into their giant spreadsheets. They say maybe marginal. kind of DPU growth if we would have affected all these as if we had the asset at the start of the quarter. I think the fact of the matter is we only got it three days before the end of the quarter. So the positive effect will fail in the third quarter of the financial year. But our worry at the end of the day is the inverse cost impact that may offset whatever gains we get from this.

Thank you, Bobby. Derek, a question for us.

Hi, morning. Can you hear me?

Yes, we can.

I just want to follow up on Lily's earlier comments on the interest rate outlook. I'm not sure if I heard correctly, but are you cutting for 3.2% for this FY and then next FY is when it moves up to 3.5%? Okay.

Currently, it's about 3.2%. I think for the next few For the rest of the financial year, we probably do still expect interest rates to be creeping up. So I think on the average for this year, we will probably be looking at a range of about between 3 to 3.5. That should be the range for this financial year. But next financial year, when you see the full flag of your ZEE, replacement of some of the hedges, with some of the expiry hedges that comes through, we would expect the interest cost to increase a bit.

I see. So probably closer towards the 4% end-all.

I think that one really depends on what happens in next quarter. Like I said, the big question of this quarter and of the year is to hide or not to hide.

Okay. Understood. Next one would I understand. It's difficult. I think it's on Milwaukee. It expired in September, but is that reflected in the U.S. D.C. occupancy? Because I noticed that crept up actually in this quarter. Okay.

The reason why we have that increase in occupancy is because we have finally started a lease for our asset in Leonia. 67,000 square feet as you know. We have read it out earlier. The nation had given a tenant left over a year back. So, they managed to get a permanent tenant. And finally, you know, all these paperwork done. Started at least, I think, what September is it? September. So that has resulted in that small little bump up in occupancy level. Anyway, it's not mentioned, it's not a Davis Entertainment. So trying to find the right category or categorization for this tenant, they provide adult health daycare service.

Right. So is the Milwaukee vacancy reflected already?

No, I think that has not been reflected because the lease expires 30th September. So you'll see the effect in the next month.

So what will the occupancy be if we include that?

I think that the Milwaukee vacancy

We'll have to come back to you on that.

Okay, Shafiq, no problem. And this is lastly on divestments. The Singapore divestments, is there a dollar value that you can share for the assets that they have put on market? And I guess on the inquiries, you mentioned you've had a few inquiries so far. Just wondering what the profile is like, are they an occupier's fund or even a fellow?

Okay, I think this is not something secret. When we went up, we had a very broad spectrum of potential buyers. So we have put in a few business card buildings as possibilities. If you look at the aggregate valuation, it's only more than $5,000 million. We have put in a couple of our other factories. All of them. So we are talking about another $500 million. So we look at this as possibilities. So in an ideal world, when the market is very tight, I'd say if they are able to crystallize, maybe a brilliant. But that one is what we are putting out as items on our menu. Each one is with the venture buyers. But I think realistically, in case of whether you get for a couple of them, one or two of them, maybe a hard portfolio. So the sense we get from applications is that there's some interest, but as I shared, some of them are looking for some level of discounts and support. So it might not be as interesting or meaningful for us. So this is a, I would say, continuous process and engagement that we have going forward. I think this is the time we shared earlier. As our garden grows, we need to do some pruning. So this is the regular market, regular adjustments that we'll be doing. So we'll go through this process periodically and see if the market is a little more conducive for transactions. The outlook is that maybe it will crystallize some of these data further down the road.

Right, but for now, Bob, $500 to $1 billion available for sale.

Yeah, I mean, that's the kind of items we have on the menu. But it is not like a target. size or scale that we're looking at. Because at the end of the day, the engagements with potential buyers, either a case of us telling them, look at our annual report, whatever is down there is available for sale. And it becomes too broad in terms of the kind of engagement. So we decided to narrow down the narrative in terms of what we are possibly looking at. So that's how we arrived at that. I said, okay, this is a smaller subset, which might be possible to solicit feedback. It doesn't certainly mean that, oh, yes, if there's some level of interest, we are prepared to do 500. It's essentially... I mentioned earlier outlining what might be new.

I guess more imminently, do you think it could do maybe $50 million over the next two quarters? Is that realistic?

What was the question? I think it can do $50 million.

$100 million, is it realistic? Maybe.

50-100, that is, I would say, a possible kind of level. Because at the end of the day, in a market like this, it's a bit more, of course, challenging. And you need to find the right match in terms of whether they are able to fire and at five levels which we think we will be able to divest. I think that level 1,500 might be a realistic reference level for us to look at or finally being able to match demand and supply part. It's something to look at.

Thanks, Derek.

Thanks so much, Kowei.

Thank you. We are going to take the last two questions so that we can try to target to close at the end of the hour. Su Chai, would you like to ask your questions, please?

Hi, thanks, Kowei. Su Chai from Macquarie. Just two questions. First of all, just to follow up on Xuan's question, particularly on the Colama Eye Asset itself, can you give us an idea? Right now, let's just say you're going to go out to lease to a tenant what sort of rents you're going to get, what sort of tenant profile that you're hoping to get into right now. And then maybe some ideas to like what is going to be in the next 12 months. Understand that market may be soft, but really what is the target? And then ultimately some guidance on this particular asset over the next 12 months. Second thing is that I think last quarter you did talk about acquisition. So I just want to ask, You know, right now, is this still going to be there? And then acquisition pipeline, is this still like, you know, some profile? Is it going to be sponsored by the party? And then is this really going to be something you look at? Or is this going to be selling assets right now? Because your balance sheet is actually okay. Yeah, thanks.

Well, I think the rent levels that we're targeting still around the $4 per square foot per month for the columnar asset. We think our product, good, has very high specifications and is at the right location. So while we recognize that the leasing progress is a little slower, we have fairly meaningful kind of engagements with the market. So it's across a very broad spectrum from instrumentation companies, biotech companies, position engineering companies across the board. This is a very broad industry segment, so we do not have any particular sector that is very prominent. So our facility is flexible enough to accommodate many of industry users who certainly hard in building up the occupancy. Looking ahead 12 months, we hope to get to a level of say 75%. That is a meaningful level. That is the term target for us. On the acquisition front, Suddenly, there are news popping up now and then. But if you look across the board, spread over a lot of capital, I would say non-existent in any markets. So unless it's a very compelling objection, it's difficult for us to crystallize any news now meaningfully. So we will continue to look I think a realistic outcome is that any acquisitions will probably be done in the part next year or beyond. Because near-term, likely for the market, we adjust also for your physical market assets that are at the right kind of rising level for us to deliver a profit level of the only few occasions it will give you that decent spread, it will be bad. That's the reason why we seized the opportunity this year for that transaction. But opportunities like this, few and far in between. I think we'll be very selective and careful way we look at the acquisition opportunities so as you all have observed as well the time for us to look at maybe adjusting the portfolio a little investment would be something that we look at a bit more that's why we started this engagement process but our balance sheet is still relatively strong so be selective well We adjust our portfolio.

Thanks, Luthak.

Thanks a lot. Thanks, Kwame. Thank you.

Krishna, would you like to do the honors of asking the last two questions?

Thank you very much for taking my question. Just housekeeping ones. First is on the operating expense. What happened? I think Q1Q, it was increased by about 15%. If you can give some color on that. And then some general industry question. First is, you know, I hear a lot of the headlines about, you know, large companies coming to set up bases here, be it in electronics, automobiles, electric vehicles, or, you know, life sciences. Just wondering if, you know, the supply chain participants of these large companies, I mean, are you seeing demand for that? I'm just trying to get some color based on your earlier comment that you see you potentially likely see more of the smaller tenants coming into your facilities later part of the year. So if you can give some color on that. And then the last question is that you have this divestment thing, where will you acquire if you were to, will you be more interested in further increasing your footprint in Japan?

I'll answer the simpler question first. Yes, certainly in the near term, Japan looks interesting and more meaningful to us. It also helps us improve our portfolio diversification. So in the near term, yeah, that's where we look at it more closely. Now, I'm going backwards in terms of the question answering. So the second question, next question is on the industries. Yes, we have seen certain large through kind of companies setting up shop here. Fortunately, some of these kind of needs and demands have not been a good match for the products that we're offering. For example, your bees and all those, those are very... Direct allocation of ground-up build. you are breaking apart on the second question okay so actually large industrial users like for example some of the EV producers good matches or whatever products that we have especially now where we are trying to reach high spec, so the pockets of kind of demand continues to be a bit smaller. And one observation that we have is that new corporates coming in, including Chinese corporates, I would say a meaningful representation on our prospect list. you use generally a smaller unit, not complete production plant kind of demand that we are seeing. Though that, of course, in the other so-called Singapore. It's not a good match for that way. The next question is on the operating cost or margin.

In Singapore, the effect is a slight increase in terms of our utility. Really because there's a slight increase in tariff rates from SP services. Also, with the commencement of Kalang Way, that has increased as well. If we look at expenses for the US, I think it might be better to look at MPI margins. So if you're referring to a QOQ increase, you'll note that actually MPI margin had dropped. For the US, in particular, because some expenses are charged to the tenant at a later date, we look more closely at the NPI margins, and I think that was due to rent-free period for some leases and lower pass-through income. So this is a huge impact on higher expenses. And in the US, we rent-free effect plus pass-through income, lower pass-through income.

Right, okay. So you are showing positive reversions, but then your rent-frees have also sort of gone up, right? So face rent, effective rent kind of relatively flattish.

I think the rent-free refers to the North American portfolio, which tends to be lumpy because there are just not that many leases that can be signed in a particular quarter. So I think that you cannot really see in the portfolio.

Okay. Finally, if I just want to squeeze in just Japan acquisition, is it like, do you really like kind of like these assets or is it more for the JPY, cheap JPY debt?

First and foremost, we are a real estate platform. So we need to like real estate attributes first. The JPY thing is icing on the cake.

Okay. Because I think you raised more JPY debt than the asset value for that Osaka asset, if I remember correctly. So I was just wondering that.

Let me just clarify, we did not raise more JPY debt. We raised exactly the same amount that is required for the acquisition. So I'm basically 100% capital hedge for the JPY debt.

Okay.

Of course, the obvious reason being that this is just a way of doing the capital to minimize any such fluctuations in terms of the capital. Of course, the other consideration is amongst all my currency, definitely, JET Yen is the lowest. Is it like we will borrow more in JET Yen to fund my investments in other countries, not like people's debt-based investments?

Okay. Thank you very much for your answers. Thank you.

Thank you. We are at 10.29. Thank you for spending the hour with us. If you have any more questions or if it was not clear because of audio, we apologize. Please reach out to me if you have any more qualifications. Okay. Thank you. Have a good day. Thank you. Have a good day.