Mapletree Industrial Trust

Hi, a very good morning. My name is Melissa. Thanks for joining us for MIT's fourth quarter and full financial year results briefing. We have the management team of MIT on site for this virtual briefing. We have Kowei, our CEO, Yuli, our CFO, Peter, head of investment, Serene, head of asset, Sarah, our US asset manager, and also Kim, who leads the marketing team. The results presentation slides were issued last evening by SGXNet and available on MIT's website. We will use it for this morning's briefing. Without further ado, may I invite Kuo Wei to provide a short update on MIT's performance. Kuo Wei, please. Thank you.

Can you hear us? I assume you can. If not, you can speak half an hour. Without your hearing anything, you'll be just spending another 30 minutes without any productive things done. So anyway, our fourth quarter and full financial results I hope you can see we have projected it. We can go on to the highlights and talk about what we have delivered. I think all in all, we have relatively resilient performance and the revenue contributions from the new projects have been quite meaningful. If you look at the net property income improvements, 0.6% year-on-year to $521 million. And the amount that we are able to deliver to unit holders has increased 2.7% to $378.3 million. But on a DPO basis, if you look at the full year performance, we have a 1% dip compared to the previous year actual results So we are delivering 13.43%. Of course, if you look at this in relation to the higher distribution available, this is driven mainly by the slightly larger unit base that we have. You could remember we issued $200 million of equity in the third quarter last year for our Osaka Data Center acquisition. So that has resulted in this small little drag. All in all, we are still looking at a fairly resilient financial performance. If we look at the second set of bullet points on the operational performance, we have reported positive reversions across all property segments. The aggregate average, we are looking at positive 6.6%. So if you look at the rental revisions over the last 10 quarters has been positive as what we have outlined in some of our conversations. For the last two and a half years, we have turned the corner as far as revisions are concerned. But if you look at the kind of trend, the previous quarter 7.2, this quarter 6.6, And three quarters back, it was 8.8%. So it is, I think, a case of us reaching a kind of point of diminishing returns. Would we get or would we be able to have rental revisions, positive rental revisions, next few quarters? We'll probably have. But my sense is that we'll probably trend towards a 4%, 5% level. I think quite difficult to look at you know, us going for high, even high single-digit figures, because as you might have seen, with 10 quarters of consecutive positive rent revisions, by the time we hit another two quarters, we will be catching the front end of this so-called period of positive rent revisions. So the kind of upward adjustments had already been effected about three years back. So that kind of additional upshift from the rental rate perspective would be a bit more, I would say, muted. Now, going on to the rent levels, we are registering higher rent levels that have been fairly encouraging, $2.02 for the Singapore portfolio and $2.51 for the North American portfolio. For the North American portfolio, you might have seen in some of our detail numbers, we see a small upshift, and if you look at our AT&T representation, essentially when AT&T did the extension of one year for our San Diego asset. We had a small little bump in terms of rental rate. So from rental rate perspective, we see a higher so-called numerical representation. But that one I would say is temporary. The portfolio valuation is relatively stable. If you look at that from a face value perspective, $8.8 billion. And compared to last year, 0.9% increase. But if you look a little bit more deeply, compared to book value, we had some write-downs. If you look at our other announcements on the valuations for this year, Portfolio valuation seen a small uptake mainly because of the addition of our Osaka data center that we took on third quarter last year. So that had, you know, marked the downshift in like-for-like valuation adjustments. Later we can run through some of the details. But certainly, From the perspective of the portfolio management, we continue to look at rebalancing it, improving the profile. For the Osaka Data Center, as some of you may know, it's a phase completion kind of arrangement because it's not a fully completed or fully fitted asset. We have phases 2, 3, 4 to be done. We have recently completed a phase 2 feed-out workflow. And of course, we are receiving the corresponding revenue contribution. So as of now, 80% done. We have another 10 plus 10 for phases three and four in this year that we would expect completion. Now, divestment is another key initiative that we would look at a bit more closely. And some of you may know we have reached out to the market uh to to you know get a sense of interest for a broad range of assets in our portfolio the singapore assets the value factory assets business park buildings and some of our u.s data centers the demand has not been that strong it's fairly loop on some level of interest but not uh at this level where we can or or the kind of um the the interest level not at a stage where we are able to cross the line and go into a firm kind of transaction. So we will continue to look at this divestment initiative this year. We think the market should be more conducive. While the interest rate cut start date has been shifting back and forth, probably more back based on the current set of articulations. But we think it's a case of when, not a case of, you know, whether. And we think the market will probably respond favorably to that towards the later part of the year. And there might be windows available for us to look at divesting some of our assets. But, of course, we have successfully completed one, the Tangling Hot, feather factory cluster, $50.6 million. That was completed just before the end of the financial year on 27th of March. I think some of you all have asked, I think, on the gains that we will be distributing. I think relative to what our original cost plus our... capitalized costs, we have gains of roughly 13 million Singapore dollars. So our intention is to distribute this 13 million dollars equally over the four quarters in this financial year. So of course you won't see this in the fourth quarter set of results. The next quarter we will have this as a line item for the distribution of gains. Now on the Capital management part will continue to strengthen the balance sheet and we look at opportunistic issuances of bonds or getting our borrowings hedged at an attractive favorable rate whenever we can. So we have recently issued $50 million Singapore dollars three years at 3.75%. So that will give us a bit more certainty and also allow us to lock in, I would say, a reasonable rate in the meantime. Hedge borderings, we have reported just a shift below 85%, so we have a fairly good level of protection. Average tenure for the hedge, 3.7 years, which matches our bordering tenure relatively closely. So we have a bit of a kind of a good match along this front. Leverage ratio we think is still relatively healthy, 38.7%, gives us a bit of headroom to take on projects and to look at the possible acquisitions to help us further diversify and strengthen the portfolio. So I think that rounds up the key highlights, maybe I'll go to the valuation part to give a bit of colour. So this is on slide number 12. The figure which I've outlined earlier, you can see aggregate 8802 for the entire portfolio. So there are, of course, essentially some write downs across the portfolio. In the Singapore portfolio, mainly due to the shortening land tenure clusters, because this is a case of a mathematical representation once your assets go to a stage of below, say, 15 or 16 years of balanced land tenure balance. Cap rates, generally the same, except for, compared to last year, except for the Singapore data centres, Because of the very high demand for this space, we have seen a roughly 50% cap rate compression for the Singapore data centers. And of course, mind you, this is the year where we have switched valuers. So while we see that as an indication of the width of the market, because when you shift girlfriends, you cannot do a life-for-life competition. You say, last time you did this to me, or last year you did this to me, this year you did another thing. But I think the cap rates being, I think, likely the same for the rest of the sectors is an indication of the stability in the Singapore market. Whereas for the US data center market, we're seeing cap rate expansions generally across the board, except for some one or two assets where we see side compression because of the relative strength of certain sub-markets. Now, for the U.S. assets, I think if you look at the cap rate reference, most of them will be clustering around the 5.75%, 6%, 6%. 5 level. The broad range, you know, at the extreme end, at the low end, 5%. At the high end, I think it's 8.25%. So this is, of course, the tighter cap rate assets are driven by the location and the kind of attractive kind of attributes. Like 180P3 at Atlanta is exhibiting the 5% cap rate because it's 100% occupied, long leases and high demand area. The 8% cap rate is represented by Arlington asset because the tenant left in March 2023. So from a cash flow perspective, there is nothing apparent yet in terms of releasing kind of a prospect. So some of this was taken into effect But if you look across the board, the range of cap rate expansion, we would see them clustering around plus 25 to plus 75 basis points. And that represents roughly 64% of all the assets we have. So I think that will give you a sense. I think if you're looking at modeling that kind of effect, you can look at that range or you can pin whether a 50 basis point, you know, for getting a rough gauge. So do we see this cap rate continue to expand next year? Of course, it's not easy to stare into the crystal ball and forecast, but we think we are near or at the bottom because the cap rates are quite sensitive to your funding costs and interest rate environment and the market should, I would say, turn the corner along this front and hopefully your cap rates would at least be stable. And if not, if the market really continues to be exuberant, especially for the data center assets, we might see some improvements. But I think the stability should be maintained henceforth.

Okay? Yes. I think we will move into Q&A. If I can request for the analyst to state your name and firm and limit your questions to two per round. I think the first one on the line is Mervyn.

Mervyn, please. Good morning, everybody. First question in terms of parental reversion guidance for the coming year. Any thoughts on that and how you're seeing demand? Second question I have is in terms of the distribution for JVs, it's very strong, I think up to 33% year-on-year. What's happening there, given that I presume you're facing high interest costs and there's been a drop in occupancy from the US portfolio? Is there a higher payout ratio, capital return, or what's happening there? Thanks.

Yeah, okay. I think the rent revisions kind of... outlook. I have touched a little earlier. We think we'll still be able to nudge rent up certain segments of our market, especially the more generic spaces. We are getting still decent rent levels. I have talked about roughly 5% positive rent revisions, and we should be able to maintain that for another two or three quarters, then we'll see SS. I also outlined earlier, by that time we would have reached a three-year cycle and we would be at the start of the current set of rent up shift cycle. Then that, what do you call that, increase might be more muted. Now on the rent levels, we think the business park space would still be under a bit more pressure because the sub-market vacancies on a relative basis are still high in the international business park and Chinese business park space. While we have fairly respectable occupancy level, you know, above 80%, but the kind of challenge in this kind of market and the competition for prospects is tough, is stiff. That said, you might have seen, you know, us getting high new rates. If you look at the chart we have on page 23, 431 for business park buildings. So it's encouraging, but it may not tell you the entire story. I think just as a... so-called a bit of a background. We had a couple of small tenants, or I won't describe them as small tenants, but tenants who took up small amount of space. 1,000 square feet for a coffee joint, $5 per square foot. Two small tenants, slightly more than 2,000 square feet, 440 or 450 level. So in the mid $4 level. So that has helped us you know, pull up that weighted average figure. But generally, there's still a lot of competition in that space. Now, of course, if you look a bit more closely at the other sector, the high-tech buildings, this aggregate kind of representation may not tell the full story because the new rents that we are able to get not representative of what we see at, say, our Kallang Wei high-tech buildings, we think we'll still be able to do $4 plus minus for that space. But the kind of tenants that we can get, I would say not very large tenants. We'll be looking at those 10,000 plus minus square feet kind of tenants for the time being, unlike those... you know, 70,000 square feet tenants. That is very difficult to come by in the market.

Distribution and JV.

Distribution and JV. If you're talking about the comparison, what you might have seen or might not have seen noted is that there's a dip at the beginning of the year from the amount that we have withheld for the tenant that we did not name that ran into a REAS issue and that had undergone a Chapter 11 proceedings. So because of the amount withheld, we had a slightly lower uh amount of of distributions on the jv but i i think we noted that that had been since resolved we have received the areas and of course the amount with help had been released so that has resulted more directly from this particular tenant uh the additional contribution of about two million us dollars that were recorded in that line distribution from JV. So that has been helpful. So maybe since we are on this topic, we can close up a loop on this outcome of the proceedings. As you could have read in some of our earlier materials, all eight of the leases were taken over, but we had some modifications to two of the leases. One, we had a downward rent adjustment. The other one, there's a right of termination given with six months notice. So we are now seeing the effect of the termination right being exercised. So we'll see that effect, not now, that the right had been exercised. We are looking at the expiration on the 8th of September 2024 this year. So that is at this East Texas circle, and the impact to the portfolio is roughly 0.3%. So that is anticipated, but I think that slightly later exercise of the right gave us a bit of a reprieve and we continue to get the revenue contribution in the meantime. So I think that should close up that part on this tenant. Alright, thank you.

We have Yijian. Yijian, would you like to ask your questions please?

Sure, thank you for the presentation. It's Yijian from OCBC Credit Research. So my two questions is the first one is about US data centres. So you mentioned that the REIT may be looking to divest U.S. data centers. Is there any similar characteristics of these U.S. assets that is planned for divestments? Like, what's the reasons? And then the second one is, if you can clarify more on the accounting of the Osaka data center, because the stake is not, the interest is not 100% yet, but then there is another 20% that remains to be paid. So in terms of the consolidated data, that property income, how is it actually recognized? That's all from me. Thank you.

Yeah, okay. Now, for the US data centers, I think certainly from the perspective of a portfolio manager, we'll try to divest ones that are less relevant to us, whether financially or operationally or from the attributes perspective. So Assets that are not likely to give us reasonable revenue contributions, whether due to occupancy issues, due to attributes issues, we will look at divesting. An ideal situation is that assets that are a little less interesting to us might appeal to buyers who value, some of the other attributes. The ones that we have mentioned earlier, like for example, our San Diego asset. Of course, now we have the extension of a year from AT&T. We get a bit of a premium rent, but that lease will expire 31st December 2024. Will we be able to get a replacement tenant in the data center space? We're not too sure now. We are reaching out to the market. But I think we have outlined before that the asset is adjacent to a vibrant biotech or life science market in San Diego. It's one of the few largest life sciences market in the US. So that might appeal to a different group of developers or space users. So we will be looking for matches like this. uh there are some assets that we have uh lower occupancies or that are vacant similar kind of consideration like for example our arlington assets say if you are not able to lease meaningfully or at the right pricing but if you have a end user that can repurpose the facility at the right price it will be something to look at that is one perspective the other perspective is that for some of the assets that are, I would say, fully valued, that we have fully exploited all the kind of opportunities available in moving up occupancies, moving up rents, and is relatively stable, and we can get a good offer from the market is something that we would consider. Because at the end of the day, if we can get, or if we can divest the asset at cap rates that are meaningfully tighter than what our valuation says, than what we think we'll be able to work on in the years to come, because these are fully valued, fully so-called worked assets, then we could crystallize some of the gains channel the capital or recycle the capital into other, maybe a more interesting opportunity. So these are some of the options that we're looking at. And there's another so-called subset, which is the kind of interest that we have received from the market or even end users or the existing tenants who expressed an interest of exploring the possibilities of buying over the premise that they are occupying. So these are possibilities that we'll be looking at. And as a professional portfolio manager, while we'd like our assets, we don't form emotional attachment to them. We look at the economic outcome and see whether it makes sense for the platform for us to keep, hold, redo or divest. So I think that should provide a bit more colour on how we approach the possibilities in our US portfolio. Now on the Osaka Data Centre Mathematical Gymnastics allow the Jim Ness to answer the question.

Hi, morning. Okay, for the Japan acquisition basically as you know we have only paid up to 80% of the agreed purchase cost in view for the feed-out works that are still outstanding so that's another two phases to go. In terms of accounting we would have reported in the P&L, the relevant income with respect to the 80%. So I think the agreement that's been set up during the acquisition is that as the feed-out works are completed, we will pay the proportionate portion of the purchase consideration, and at the same time, we will also receive the relevant income stream from it. So...

Sorry, go ahead. Sorry, go ahead. Oh, because you only allowed me two questions, I thought I can squeeze one slight one as a follow-up to this data center, this Osaka data center. Yeah, okay. So the remaining 20%, how much is that, roughly?

About 20%. So I think that's about 10 billion yen.

Okay.

Okay, thanks.

Sorry, I interrupted you at book value.

Sorry again?

I interrupted you when you were about to say something about book value.

Oh, I see. So we're saying that on the balance sheet, the book value we would have also accounted for, that means we would not have accounted for 100% of the valuation as well. So we have adjusted out the fact that there is a balance, JPY 10 plus billion that needs to be paid out.

Thank you. Derek, would you like to ask your question, please?

Hi, good morning. Can you hear me?

Yes, we can.

Good morning. Two questions for me. Good morning. My first one is back to your thoughts around valuations, right? And you're saying that you want to sell USDCs. Given that your new valuers or your girlfriends give you higher cat rates, do you think you can sell at book or at above purchase price? I'm just curious.

Now, okay. We would say take confidence or we have confidence that the Valuers are able to or are pricing the figures at what they think the market is transacting at. So of course, many of you know valuation is an art. We think those are fairly representative numbers. That said, we are not fixated on needing to divest or wanting to divest at the prices above valuations, though that had been our so-called feature in the last five divestments. We always deliver a little bit of profit, whether big or small. Some large enough for us to distribute. Of course, those are more opportunistic investments. And of course, we will entertain the opportunities that came then. For assets, we think we will be able to realize meaningful gains. But now our approach... has taken a slightly different posture. We will be looking at the recycling capital. We'll be looking at whether some of these assets are meaningful to us in the longer term. So if the value continues to decline, not because of cap rate expansion, but because that market demand will be weaker for that particular sub-market or the attributes are not as relevant in the space we're operating in, and we anticipate a constraint valuation figures in the years to come. Yeah, I think it's something we look at. So maybe a short answer to that is, would we divest below valuations? We will consider. Of course, that won't be our first position when we go out to the market, knowing that for some of the assets, we have fairly sizable downshift in valuations. I think as some of you read through the details, some of you might have noticed the largest downshift is our 250 Williams asset, 302 down by 83.6 million US dollars or minus 28%. So that one Other than the cap rate expansion of one percentage point, the bigger issue is that about half of the building is commercial office space and the demand for commercial office usage is extremely low in US and several developed economies because most of the people working from home or most of the staff from these large organizations are working from home. Will that trend change? It may moderate a little in terms of work from home allocation, but will we get back to the good old days where everybody in the office quite unlikely because I believe some of you might be sitting in your kitchen, your bedroom, or your study while we are participating in this. So that will become a new phenomenon. Because of that reason and because it's all stuck in the US market, for this financial year, we have seen that fairly significant downshift in values for assets that have the large office component for this case. But as I said, long and short, would we consider selling below current valuation? Yes, we will look at, you know, the medium to long-term prospects and if it's a meaningful direction for us to take for some of the assets, we will do that.

Got it, got it. More defensive strategy. Okay, so my second question is on interest rates, right? So I think Lily kept interest rate really low, below her guidance of 3.5. So I'm assuming there are some hedges that's yet to roll off. So I'm just wondering, could you give us a refresh guidance for interest rates for this financial year?

I believe my previous guidance was it should remain below 3.5%. But at any rate, if you look at going forward, we have about 220 million of interest rate swaps that will be expiring in the coming financial year, of which most of them are actually SING dollars, about 70% are SING dollars. And the expiry tends to be towards the end of the financial year. I think the U.S. dollar is about $67 million, and that's expiring somewhere in mid-2024. But having said that, I think as you recognize the hedge rate, there will be a difference from the current hedge rate vis-a-vis the replacement rate. So that is likely to have some impact. But because of the quantum, I don't think the impact will be too much. So I hope that we still can try to keep the interest rate as low as we can. But nonetheless, as I said, I don't really think that we are going to shoot beyond the 3.5.

Okay, good. That sounds fantastic. All right, thank you.

Thanks, Eric. We have Dale.

Thanks, Melissa. Hi, this is Dale from DBS. Kuo Wei, thanks for the presentation. Just two questions from me. I think the first one with regards to what you mentioned about divestments, just wondering if there's any quantum that you have targeted or at least based on the non-core assets that you've targeted for divestments, what is the quantum looking like?

Well, we don't have a very, very specific number. But I think anything between $200 to $500 million Singapore dollars would be a good band to shoot for. Some of our assets we have are relatively chunky. If you look at our business park buildings in Singapore, for example, aggregate slightly more than $500 million Singapore dollars. Last year, we tried to see whether there's interest when we package everything together. not successful in getting a strong interest in that space. So we have to see if we can do one down there, maybe another one asset in the US, maybe in aggregate we might hit a lower end. So this is a kind of a period where we don't have that clarity yet because we have not re-engaged the market. But we are also... not working on our business contingent on being able to divest because we are not under pressure to lower our leverage or strengthen our balance sheet at all costs. So we'll still be a bit more opportunistic, but we would engage the market a bit more closely. But the 200 or so million might be that lower bound that could be meaningful to us that would provide a reasonable kind of set of capital that we could deploy elsewhere.

Okay, got it. My second question is on your high-tech part at Kalang Wei. I understand that occupancy is gradually creeping up, your rental rates are holding firm, but just wanted to understand versus your earlier projections, your IRR calculations, how is that trending versus what you had earlier projected for this redevelopment?

Of course, for an income platform and for REIT, we use IRR as a reference, it is not a threshold. that you know is a second thing. Now with the slower leasing up the IRR because of the recency effect you know on the IRR computation would result in a bit of a drag but as of now I think we should still be able to clear our intended IRR and The steady state occupancy levels that we're pushing for remains the same. We're talking about 90-95% level. And our current rent levels are holding. So we will reach there. And from the accretion perspective, we think we'll be able to deliver as promised. But as what you have observed very accurately, there will be a drag on IRR. because of this over-leasing up. Some of you may remember, you know, whenever I am pressed to come up with a timeframe, I always say six to nine months, right? Because three months is too short. One year, some of you may not accept. It is a realistic kind of time period where we might be able to do something meaningful Like for our Kuala Lumpur Way asset, yes, we are, of course, getting our leasing folks to work extremely hard, but we are also adjusting our commission structure and incentive structure as well. Hopefully that will draw more tenants, more prospects, and some of our external agents to work a little harder, you know, to move up the occupancy. So... I think there were invariably several questions on where we reached the steady state. I think I would moderate down our earlier kind of trajectory. Realistically, looking at these kind of small incremental tenets that we are able to commit, we'll probably be looking at 65, 70% occupancy level by end of financial year, which is 31st March 2025. So that, I think, is a more realistic and meaningful trajectory for us to shoot for. But I say this, of course, I think our leasing folks are working hard and they are certainly trying very hard to exceed this kind of a trajectory so that we can have some pleasant surprise at the end of the financial year or towards the end of the financial year. And the big driver at the end of the day would be large users, very large users, because the incremental ones, yeah, we push a little harder, we can get there. But we need those 50,000, 100,000 square feet kind of tenants. You need one or two big ones that would provide a meaningful kind of improvement the figures so these kind of animals that they are present in the rainforest but not easy to find right so we have to find a little harder okay okay got it got it okay yeah that's all from me thank you thanks dale uh we have brandon brandon would you like to ask the next question hey uh morning uh can you hear me

Hi, I just want to answer on the US occupancy rate at 86.2%. It's really rather low. Do you think this is the bottoming kind of a stage or you think that there could be more pressure for FY25?

Well, I would not want to promise you that this is the bottom, but we think this is near the bottom because The effect that you see is driven by us accounting for the exits of the two AT&T assets at Brentwood, Tennessee, and Milwaukee. So it's fully accounted for for this quarter, 86%. But in many of our conversations, I think we talk about us being close, very close and very, very close to getting a replacement tenant for Brentwood. And we are indeed very close. The promise I get from Sarah is that, yes, you'll be on the platter very soon. Okay, the long and short is we have received a goal, you know, a goal ahead from the tenants, So hopefully we're just at the very last stretch, the very last yard for the 100-yard dash to get the paperwork across. So yeah, we just need to get that done. And this attendant somehow has very traditional practices. And one of the tricky part is they need to collect autographs from all the relevant signatories. So hopefully that is the final bit. So with that in place, our occupancy should go back up beyond 90%, about 91%. So that will give us a bit of a reprieve. But, of course, the challenges continue to be ahead of us because we do have some expiries coming up, the larger one being the San Diego asset from AT&T. So we'll be keeping a close watch on that. But we are happy that we are able to close up this Brentwood lease soon, then at least we have a bit more room.

Okay, my second question would be on your NPR margins, right? So if you look at this quarter, I do know that it's relatively low, like sub 74%, and we saw quite a bit of declines in most of the asset class. Is this what we should be looking at in terms of modeling for FY25? Or you think it's a bit of one-off because of the low occupancy?

Yeah, talking about an aggregate basis for the whole portfolio, right?

Yeah, I mean, aggregate is 33.7. But if you even look through the different segments, except for like business park and high tech, right, a lot of the other spaces kind of came down. and especially the U.S. data center side. So I just want to know, from a modeling standpoint, is this a normalized number? Or you think that there are some one-offs or sort of occupancy-related items in there?

Well, you are absolutely right. There's one element of the occupancy kind of effect. For the U.S. data centers, As I mentioned earlier with the AT&T leases being so-called expired, we don't get revenue, but we have expenses like property taxes. So that one for the large assets is relatively big and it has resulted in the drag in the MPI. So would we be able to see an upshift in MPI margin this financial year? We don't think so. Because until we are able to get the revenue contributions coming in, the cash coming in, we won't be able to kind of reverse that effect. So for modeling purposes, I think you'll be prudent to continue adopting a similar kind of profile until we have the Relating clarity. For the Singapore based assets, I think of course that downshift is a little less. I will say pronounce. We see an improvement this financial year. Unfortunately I'm not able to. Uh, say with certainty now. The few big moving parts, property taxes not coming down, utility charges, while there are some quarters that had been expecting or anticipating maybe downward adjustments, we think at best it's going to be stable, maybe moving up with them because we have on an aggregate basis larger utilization, especially when we have slightly higher occupancies for our Calangwe assets. our landlord part would see larger consumption, all things being equal. And the other effect, which might not be apparent, is that Kowloon Way being a fairly significant asset in our portfolio in Singapore, we had the temporary occupation permit set in March 2023. For one year or so after completion the property would be what we call under the defects liability period where the maintenance cost is taken on by the contractor or the providers for the services and equipment so you don't see that represented in cost but from this year onwards you know as all these kind of provisions fall off, we will need to account for the maintenance cost of this asset. So, in all likelihood, we would expect the MPI margin to be at this level or shift down a little because of this effect.

Okay. Thanks so much, Kouei. That's it for me. Thank you.

Thanks, Brendan. Joy, would you like to ask a question? I am mindful of the time, so I think we have online Joy, Tan Xun, and Terence to round out the session. Joy, please.

Thanks, Linda. Morning, Goh and team. Just two questions from me. First, going back to US, on the Brentwood asset, is there any capex required to sign this lease and also just on this portfolio broadly. Do you foresee sort of capex for occupancy improvement in 20... Okay.

We have, of course, our friend, Sarah, who is head of assets for data centers in the U.S. She's sitting right in front, putting up her hand, and the one to address the question very intuitively.

Hi there. So there are no tenant improvement capital expenses associated with the lease. There are several landlord capital items that would need to be done to the building as a shell. We're anticipating approximately $5 to $6 million in completion of those within the first 12 months of the lease.

Sure. Thank you. And if you can just comment on the overall capex expectation for 2025. OK.

I think in aggregate, we are looking at roughly $20 million US. And a lot of this relates to roof water pooling replacement works And these are essential for our buildings to continue to operate optimally.

And this is for the U.S. portfolio only or inclusive of the Singapore?

Yes, U.S. portfolio only. For Singapore, we don't anticipate much, only a few million dollars here and there. And because we have been improving our... buildings over the years incrementally, you know, as you might have followed. The lift upgrading, toilet upgrading, chiller upgrading works have all been done progressively over the years. I think the only other large project that we're taking on is the solar panel installation. And this is our third phase. We've completed two phases and we should be completing that this financial year. And that will give us now in aggregate slightly more than 10,000 kWh of solar energy.

Thank you. And then my second question just on the divestment, if you look at the bid-ask spread, Singapore versus US, what sort of bid-ask spread are you seeing and what sort of bias are you looking at in the market?

Well, I think you might still see maybe 50 bps delta between what we can get from the market. And hopefully this gap closes and we'll be able to find a good point where transactions can occur. The buyers, I think, very, very Now, Singapore assets, we have shared earlier, a lot of these are investors, as in financial investors, not end users. For one of our assets, the single user building, 26 Woodlands Loop, we are engaging the market as well. So the type of buyer for that asset I would say you see more end-user type of buyers. For the US, I think it's also a fairly broad range. As I've alluded earlier, there are a couple of smaller ones. There are smaller assets that we have that we have some indication of interest from existing tenants. So these are end-user sitting tenants requirements. Whereas for the rest, it's a bit more difficult to read. It could be data center operators. It could be developers. So a fairly broad range. But as far as we are concerned, as long as they can pay, we are not allergic to any investor type or buyer type.

Thank you for the comment. Thanks, Joy. Tan Hsien, would you like to go next?

Hi, good morning. Can I ask about the divestment? If I'm not wrong, the guidance last quarter was $100 million to $200 million and now it's $200 million to $500 million. Can you share a bit more about what has changed?

Yeah, we have decided to push a little harder. At the end of the day, these are just figures in a band of simulations that we are looking at. And some of this, of course, we need to have some basis. It's built up from the various candidates within our portfolio that we have shortlisted. We look at reasonable probability, low probability, higher probability. You come up to a kind of band we're looking at. And I think to be more direct about it, we think the possibility of us getting fantastic acquisition deals this year is not high. Because the market is still in a set of flux unless you get, you know... into a deal where you are in the right place at the right time and you are the right counterparty. So the market is still in a set of flux and the way for us to get dry powder, the way for us to move a little ahead of the curve for rebalancing a portfolio, I think we need to look at a bit more divestment So while I won't describe the range 100, 200 as a target, it is some kind of reference level we look at. So there's a slightly higher kind of bound, and as you might have noticed, it's a bigger spread. I won't say 200 and 250. That means we have already one or two assets in mind. But I set a bigger bound so that we would encourage the new teams you know, our chaps that are studying this, our chaps that are engaging the market to keep their minds open to see whether they can stretch the envelope a little. So it's something that we look at. So my point across is try not to read too much into this kind of level. It's not us saying we must do 200 come hell or high water So it is kind of a reference range that we are looking at. And some of you may remember earlier part of 2023, we were asked, of course, about the divestment portfolio size. That time when we engaged the market, it was even higher, 500 or more. So because that was how we have packaged some of the assets we have in Singapore when we engaged the market. So we will need to go through that discovery process but they will serve as a guide for us, and we will be getting the teams to work harder on crystallizing the values of our assets.

We've got it. And the second question is on the mid-single-digit reversion, right? Does that include U.S.?

No, it doesn't. That one is for Singapore. I think if you look at the rent revision requirements, aggregate data that we talked about earlier, all are for the Singapore portfolio. For the US, we do not have much renewals anyway. So I think for some of the cases, typical renewal upshift is that 2-3% like what we have embedded in the original leases. So I think that will probably be a reference level we take from that.

Okay, thank you.

Thanks. Terence, would you do the honors of the last question, please?

Thanks, Melissa. I just wanted to just clarify a trans question. I guess for U.S. data centers, like let's say for Brentwood, what kind of reversions are you getting and what kind of incentives do you have to offer to sign the leases?

okay for that one because the deal is not done first yet and second is this tenant is very shy we will not be able to outline you know the exact parameters but I think just to share a little more the starting rent for this tenant will be a little lower than the last rent paid by AT&T. But if you look at it on an effective rent basis, you know, for the whole AT&T list period, and the effective rent for this tenant for its entire list period, it will be a little higher. So we are looking at slightly better economics in the long term. This one we have 12 months of rent-free given. So that is, I would say, the more material part of the package that we have in place. And we don't have any additional tenant incentives embedded in this transaction.

One more question on the JV interest rate in the US. Could you share what is the JV interest currently and when is the debt due for refinancing?

For this extremely difficult question, I will have Lee answer.

This is a very difficult question. Okay, I think for the JV, as you all know, the JV was acquired during a period where interest rate is very favorable. So naturally, you expect that there will be quite a picked up if we were to do a refinancing. We actually have a first tranche of the JV loans that has already expired, I think in early January. So I think for the next two years in January, we would have another $300 million that will be due for expiry as well. So as for the replacement rate, I really have no idea. It depends on what Jerome Powell decides what he wants to do, to cut or no cut, how many cuts and when he wants to cut. I hope that helps.

So next two years, $300 million per annum or just $300 million two years down the road?

Next year is $300 million.

Okay, thanks.

All right, thank you so much. Thanks for joining us today. I think we are ending a bit. We have overrun it slightly. But you know where to look for us if you have any further questions on the results.

Yeah, M Tower Level 35.

Yeah. We all sit on 35. All right. Thank you very much.

Okay. Thank you.

Have a good day. Bye-bye.