Mapletree Industrial Trust

Thanks for joining us this morning for MIT fourth quarter and full year financial 2024-2025 results briefing. MIT has released its results on 30th April after market break. We have the management team to present the key highlights of the results. Ms. Le Lee Lee, CEO. Khoo Ging Fong, CFO. Ms. Tan, Head of Investment. Ms. Serene Tam, Head of Asset Management. Ms. Jim Shotking, Head of Marketing. Now, I'll pass to Millie to present the key highlights of the results.

Good morning, everyone, and happy cooling-off day. So, no politics talks today. Okay, anyway, we can probably take a break from all the after the past few days' talks on politics, right? So, let's focus a bit on the results. For this quarter, we're going to a year-on-year improvement in terms of the DPU growth, 1%, reporting at 13.57 cents. The key contributors to the improvement in DPU growth is really on the back of the new contributions from the Osaka Data Center. We see the full-year effect this year, and we also have acquisition which we have completed towards the end of September. As for specific details on the financial, I think we will have Kim Phong to run through that. On the operational front, we are reporting a positive rental revision across all the sectors. I think weighted average about 8.1%. If you look in terms of the range, we are achieving rental revisions of between 1.4% to 12%. I think the higher of the range of 12% is actually the revision that has been recorded for our flatted factories. So there is the resilience of the flatted factories as well. As we have said, I think in the past quarters before, the rental revision is largely due to the fact that these are leases, renewal of leases, which were signed like three years ago during the COVID period. So naturally, we as we near the renewal cycle for these leases. On the valuation front, overall we see an increase in valuation by about 2.7%. AUM totalling about 9 billion. The highest increase is due to the Japan acquisition as you can see on the slide. In terms of the Singapore portfolio and US portfolio, it's actually quite flattish. However, you will note that we do register slight revaluation loss, but that's mainly because we have some capitalized costs involved. If we look at the cap rate, it remains largely unchanged. We don't really see a significant change in terms of the cap rate. So if I can move on, to the maybe portfolio occupancy. The portfolio occupancy slips a bit from 92.1% to 91.6%. Very marginal dip but it's still a dip nevertheless. If you look at the individual portfolio, Singapore portfolio is about flat. I think there is slight I think just to be specific, I think if you notice the light industrial building is actually at the lower occupancy of about 51%. I think that's mainly due to a vacant building. But I think I also like to highlight that this light industrial building segment forms only 0.7% of our overall portfolio. I think one thing which all is quite concerned on the commuter occupancy at Kallang Way, the high-tech park at Kallang Way. So I think we are pleased to inform that the commuter occupancy as of now for this property is 60.1%. So if you remember the last quarter, we reported a 57%. So that's about an uptick of about 3%. So we should be seeing the full year effects of these committed leases coming through soon. North American portfolio occupancy is reported at 88.2%. If you compare to last quarter, there is a decline from last quarter's 90.3%, largely due to the exit of a tenant in Philadelphia. I think that's something that we have already flagged out in last quarter. I think for the North American portfolio, we continue to work on these spaces. Even for like 250 William, if you remember, 250 William is actually a building which is about 50% data center space and 50% office space. So the data center space is already, I would say, fully taken up. But the team continues to work on the office space. And hopefully with some of these new spaces taken up, we will be able to inch our occupancy for $250 million. In terms of lease expiries, we have about 14.3% of the leases that are expiring in this financial year, or in FY25-26. Mostly from, I would say, the flat-out factory segment as well as the USDC segment. For the USDC segment, it's about relatively long, 6.3 years. I think if you look at what is due for renewal in FY25-26, about 3.6%. I think we have also informed during last quarter that about 1.7% has actually confirmed to be non-renewable. I hope and I think that should be it for the remaining of the financial year. I guess the remaining 1.8%, this is something that the team have already started work and we are relatively hopeful that the renewal should be there. At any rate, I guess the tenant renewal and backfilling of space is actually part and parcel of our business. It's something that the team will always continue to have to work on. We can move to the next slide on some of the measures that we take on. to tackle some of these tenant renewables and backfillings of space. Generally, three prongs, re-letting, re-positioning, and re-balance. As a background, in US, about 60% to 70% of our data center are located in the primary data center market. Again, as I said earlier, the will for the US leases are relatively long at about 6.3. The recent non-renewables that we have seen so far I would say many of them will largely due to tenants' company policies where they review the corporate real estate space requirements. So I think if you look at it, quite a number of them were actually from the enterprise user, for example, the likes of AT&T. For some of the things that we try to do, like we will try to engage them ahead of the renewals, I think this is This is shown as what we have done for property at Richmond, where they have actually renewed two years in advance. Of course, we also do try to backfill the spaces. I think this can be backfilling it with new data center operators, or it can also be non-data center operator as what is evident in what we have done with Brentwood two months back. I think one thing to note about Brentwood, the good thing is your rent-free period should be coming off soon, around June this year. So we should be expecting some cash flow contribution coming out from there. Anyway, coming back to what we do as part of our assets management, repositioning is something that we will always consider. This can take the form of doing a redevelopment or even releasing the properties out as a separate project.

use.

Rebalancing is something that we have always been looking at in the past 1-2 years. So I'm quite happy to announce that we have actually divested the data centre in Georgia. I think for this particular data centre, the lease expiry is supposed to come out in August in 2025. So this basically helps us to negate part of the effect when it comes to our lease And of course, given that we have a diversified portfolio in terms of geography, it does help a bit in trying to negate some of these non-renewables. I think then maybe going for the next segment, I'll have Ging Fong to take us through the financials and the capital management side.

Good morning, everyone. I'll quickly run through the financial performance of MIT as well as the capital management position. Year on year, Our net property income increased to $531 million, largely due to higher contributions from our Japan properties, as well as new leases and renewals across various Singapore property clusters. These were partially offset by loss of income from the divestment of Tangling Halt, which were completed in March last year. No renewal of leases in North American portfolio and higher property maintenance and marketing costs. Our borrowing cost is lower at $105.1 million. mainly due to repayment of loans proceeds from Darling Hall divestment and lower interest on the unhatched floating rate loans. These were partially offset by higher borrowing costs taken on loans for the Japan portfolio. The distribution from joint venture is lower, mainly due to higher borrowing costs from repricing of mature interest rate swaps. Accordingly, our distribution per unit increased by 1% to 13.57%. Quarter on quarter, our net property income increased to $131 million, mainly due to non-renewal leases, lower rental rates, and higher property maintenance costs from the North American portfolio, which were then partially offset by new leases and renewals across various Singapore property clusters and the full contribution from the Tokyo acquisition. The distribution from joint venture is lower due to higher borrowing costs from repricing of matured interest rate swaps. Accordingly, our distribution per unit decreased by 1.5% to 3.36 cents this quarter. Our balance sheet remains strong, with gearing at 40.1% and interest coverage ratio of 4.3 times. This financial year, we retained about $30 million of cash through DRP. But given the pickup depends on MIT unit price, and in the current volatile market environment, we are suspending DRP from this quarter onwards. Our debt maturity profile remains well staggered with average debt duration of 3.2 years. On interest rate management, about 78% of our debt is hedged into fixed rate with average hedge duration of 3.4 years. The average borrowing cost for the quarter decreased slightly to 3%, largely due to lower floating rate on unhatched loans. However, we continue to see impact of higher interest from repricing of our interest rate swaps maturing in the coming financial year. For FY25-26, we have about 600 million of IRS coming in. We expect to be replaced at higher interest rate. The impact of this is about 10 to 11 million. And given that these are all onshore in the US, net of tax year may be about 7 to 8 million. And one-third of these will give the negative impact to CPU in FY25-26.

We can go on to the outlook. Well, I guess outlook, everybody knows where or don't know where it's going. So one word to describe is uncertain. Every morning I wake up wondering what Donald Trump has done or said as I was sleeping. I think in view of such uncertainty, we have also seen a lot of the economies adjusting their growth rate, their economic growth rate, Singapore included. We do continue to see the risk of higher operating costs as well as the elevated borrowing costs. This will continue to exert pressure. It's something that we will need to just ride through and deal with. Operationally, we will focus on improving our occupancy for both the Singapore and US portfolio. I think hopefully if we can bring out some, we can fill up some new spaces that will be able to inch out and provide us with some additional cash flow. In the face of the trade tariffs and the political tension, I think we are going to be a bit more defensive in terms of our leasing strategy. we do need to try to be a bit more nimble and flexible when it comes to the leasing terms. I guess our efforts on rebalancing the portfolio through divestments will continue. This will actually help to strengthen our financial flexibility and provide us with more headroom where we can make some meaningful acquisition that can provide us with sustainable growth. So I would say we do have our challenges ahead of us, but our portfolio is diversified and we do have relatively strong balance sheets. So we do hope that this can see us through this on certain time.

With this, we can take questions. Now we will take questions from analysts. We request each analyst to take three questions. We have a question from CP Morgan to take his first question.

Good morning, Lily and Tim. Congrats on the strong rental reversions and the very low borrowing costs. Can we touch on a few properties that we saw a decline in property values? In particular, Neil Armstrong Boulevard, McKinnon Parkway, Hills and Dales Road, Governor's Hill Drive and Hathaway Parkway as well as South Bowen Road. Can we just get an update in terms of, are there future vacancies for these properties? Not necessarily for FY 26 but 27, because if we look at the big drops in or drop in valuations for in March 24, it kind of correlated to the vacancies that you touched on previously. And also, second question I have is, any updates in terms of the properties at Rancho Cordova? I note that it seems that JL is trying to sell one of the properties there, and the occupancy of one of the properties actually seems to have dropped to 42.5 from a much higher level.

Thanks. Just to answer the first question on valuation, um of course there's a list of properties that was being highlighted you know generally for us we do see um the us valuations are predominantly pretty much cash flow focused you know so when there is you know upcoming renewals or upcoming vacancy or when the property is vacant the valuation will actually fluctuate quite a bit and the other side is true as well once we manage to secure any increase in um occupancy or slightly higher rental rates or more committed cash flow, the valuation will actually tip up immediately as well. So as you rightly pointed out, I think the last one I heard was Arlington at Bowen Road. So that was the one that the tenant have actually moved down and then we have actually wrote down the valuation because the property is currently vacant. So I hope that kind of summarizes why the valuation changes. Then the second question on the Rancho Cordova tool, I think it's sharp of you to find that JRL is marketing the property. It is currently occupied, but we actually thought that it is not one of our core properties, which is why we are actually running a process to sell. And in order to do that, we will actually have to get a third-party broker to help us to market the property to have a via outreach to potential buyers or investors. So that's one of the properties that we are trying to sell.

So the five properties that I mentioned between 10% to 12% decline in property values, is that upcoming vacancies or lower rents? What's driving the drop in valuations?

Yeah, well, I think it's probably a mixture of both. I think it's because...

Some of the adjustments for valuation may also come from the assumptions used by the valuers.

Yes, for market rents.

Market rents, how they gauge. I think, I don't know, I mean, to be frank, we do have a change in valuers for the portfolio. So that could jolly well also contribute a bit to how the assumptions may differ between valuers to valuers. So it may not necessarily just purely because this is coming up specifically. but it's a combination of quite a few.

For this particular property, is it a drop in valuation, mainly change in discount rate used by the new valuer, or is it actual cash flows that's impacted and reduced?

So there are some, and there are quite a number that is due to the adjustment in terms of the market value.

So there is some risk of lower cash flows to some of these properties, not necessarily this year, but in the outer years.

I think it's still quite early to say at this point. I think these are basically, you're talking about it being due in the next few financial years. So things may change. As we have highlighted, things are very fluid at this point. So the renewals, we typically will start talking to them as early as So at this point, we won't really know.

Then five questions for me.

Do you want to make inquiries available in one of the slides that we have?

Yeah. Just in terms of the... Sorry.

So I think because just now when you're running through the list of properties, just to be clear, some of them are... are due to vacancy like the one in Arlington, but quite a few are mainly due to the just changes in market rent. So it's not because the leasing is weak or in future as well. It's just a valuers view.

Yeah, I know the valuers may be more conservative than actuality, which may not be the reality, but just try to understand because the vacancy is kind of correlated to drop in valuations the year before. So we actually had six to nine months precursor to guidance.

But I think we shouldn't assume that all leases when expired will not be reviewed. I think, as I have highlighted for this financial year, 1.7% is confirmed non-renewable. We don't think that this number will deviate very significantly for the rest of the year. So the balance of the 1.8%, I think, a small portion has already been addressed with the divestment of Northwood. The balance of it is something that we are working on and I would say we are quite hopeful.

And how should we be thinking about distribution of prior divestment gains? We saw the one at Northwood Sparkway, which I presume is a gain. How should we think about it?

I think in the first place, if you talk about divestment gain, you know that we have already, for this fourth quarter, this is the last quarter of our distribution for tumbling hogs. We have so far not kept any divestment gains, if you want to put it that way. So for this Georgia data center, the gain is actually very small. So I think, you know, based on what we have always been doing, it's not likely that we'll be distributing it.

Okay, good luck with the backfilling. Thank you.

Can we have Derek from DBS to answer the next question?

Hi, morning. Can you hear me?

Yes.

Yeah, hi. Good morning, Lily and Tim. Just... two questions for me. Firstly, I think Lily, you mentioned about your rent reversionary outlook for this year. You'll guide us for mid-single digit. I'm just wondering whether what's driving this more conservative number, just being conservative, or are you actually seeing that compressing of the leasing spread going forward? Maybe your answer for this first.

I think it is more from the fact that these are the past leases that we have been seeing where we record double-digit type of rental revision, these are mostly leases which we have taken on during the COVID period. So I think you understand that during the COVID period, a lot of the businesses were facing pressure. So we have actually in our negotiation being a little bit more flexible. So I think this will start off from a low base. So we have been continuously seeing very good, very strong rental revision coming through for the past, I would say, about three financial years. So generally, if you look at our Singapore leases, this tends to be on the three to five years type of lease tenure. So I think that is where we think that while looking at the situation, while we think that the rental revision will still continue, will still be positive, we may not be seeing as much growth as what we used to be, simply because These leases which were on a low base would have more or less be running out of recycle.

I see. Okay. But generally still positive for this year. It's a good confidence you'll get that. Yeah. Okay. Got it. So my second question is on your asset recycling. I noticed that you have been selectively selling assets. I'm just wondering... Given that the US is quite diversified and you've got many properties that's maybe sub 10 million, are you actively looking to sell more prior to the lease coming up for renewal? Do you have a guidance on that quantum for us?

We are definitely looking at streamlining the portfolio. I think that is something that we have articulated a few quarters before. that I think you also understand that our North American portfolio actually acquired largely through three large portfolio acquisitions. With portfolio acquisitions, there are nice properties, there are properties that may not be as nice, there are properties that were relevant, may not be as relevant right now. So we are actually taking a good hard look at this list of properties to see what we think may not be as relevant. Of course, some of them would include those that is nearing expiry, which we think that maybe the renewal potential may not be as high. And of course, this will also include those vacant buildings. So I think we remained open as to the options that we have with these properties. But I think suffice to say that the divestment of some of the some of the properties in the US portfolio is definitely ongoing.

Okay. How about Singapore? Is Singapore something you're looking at also?

I think Singapore is the same. You would also appreciate that the Singapore portfolio has generally been there since our IPO time. I think we also, earlier on, back in about 2023, we actually pushed out a big $1 billion divestment program which didn't work out that well. So we have kind of take a good hard look at the Singapore portfolio and trying to see what is something that is not as relevant. So I think at the end of the day, what we are hoping to do is for those that is not giving us as much growth or for those which we think we may not be able to extract a lot more value out from it, this will be the potential for candidates for us to divest. And once we divest, basically the proceeds, we can use them for redeployment into new investments. I think that, I hope, can actually bring our portfolio to deliver sustainable return for our unique goods.

Okay. Got it. That's all for me. I see a long list of questions. That's all for me. Thank you.

Thank you.

Yep.

Do we have Rachel from Macquarie? Next question. Rachel, if you are speaking, we cannot hear you.

Rachel, we can't hear you, Rachel.

Hi, can you hear me?

Hello?

We can hear you, Rachel.

Oh, hi. Okay, that's good. Thank you. Sorry, I think there's something wrong with my headphone. Okay, maybe just the first question on the average cost of debt. The $600 million that you have guided on the U.S. debt, does that include your JV level? And what's the current average cost of debt for your JV level?

Hi, Rachel. Yeah, so our average cost of debt for this quarter, when we mentioned, is 3%. This excludes our JV level. But the $600 million of IRS coming due in the coming FY, that includes basically total IRS, including the JV level, our share. So when I mentioned the per annum impact, $10-11 million, part of this will actually hit the lower distribution from JV.

Got it. Would you be able to share what's the average cost of debt for your JD level?

Currently, it's around three points.

I don't think it's very far out from what we are reporting, maybe slightly higher.

Okay, got it. Yeah, thanks. And then maybe just on the Brentwood lease that you were saying that the rent-free period is coming off. Roughly, what's the percentage of GRI from that asset?

It's on our top 10. There, 1.4%. This is the last one that you see, our number 10.

Thanks. Maybe just one last question for me. In terms of, I think you have guided some divestments and you're looking at some divestments, but given how uncertain the environment is now, do you see a slowdown in pace in terms of divestments and hence FY2026 may not reach the kind of divestment that you're hoping for?

We have not exactly seen a significant slowdown.

But I think we think that we should still be able to deliver some divestment. I think probably, hopefully, say in the range of $500 to $600.

Okay. And these are mainly the US portfolio or the Singapore portfolio?

It should be a mix. I think we don't specifically say I must divest Singapore only or I must divest US only. So I think we will have to manage it as it goes. As you appreciate, I think divestment is not something that we say we want to get it. So we can't really dictate how it will take place. It's a lot of negotiation and process that needs to be run.

All right. Thank you so much. gives up my three questions. Thanks. Derek from Morgan Stanley to ask the next question.

Great. We can't hear you. Where's his name?

I just wanted to ask a couple of follow-up questions. First one would be on the guidance for non-renewals. Lily, you mentioned 1.7% confirm not renewing this financial year and the balance of Balanced 1.8%. Is there 1.7% telepark in Singapore?

Sorry?

On non-reals? Yeah.

Sorry, I was a bit cut off. It's a name not familiar to me at this point. It's not really my portfolio. You are referring to STT, is it?

Yeah. Yeah.

um stt as you see on the chart should be reflected in the small little blue line that you see the base so i think for stt currently they um contributed about 1.8 to our gross revenue okay so i think with the I think I probably explained this before, but for STT, the rental actually has two portions to rate. One is the base rent. The other one is the rental which they paid on the fit-out that was done. So what happened is that fit-out leases will actually drop off this coming financial year. So we do expect the impact to be around 50% of this. But I think the SDG has also been, has extended their leases with us for another 10 years. And there's also a little bit of additional space that's taken up. So I think all in, I think the impact might be a bit, but I think we should still be looking at about 50% of the 1.8, slightly lesser than 50%.

Understood. So that 1.7% and 1.8%, those numbers that you mentioned really stem from the US portfolio.

So for the US one, what I was saying is for FY25-26, about 3.6% of the gross revenue is due for renewal, of which the 1.7%, I think we have already said that there are confirmed non-renewals. The remaining of the 1.8%, part of which, of course, Northwood Forms it. So we have already divest. So I think Northwood contribution is about 0.1. So you're talking about the remaining of 1.7 of renewables which we are currently working on and we think that it should be okay.

Got it. Thanks for that. Sorry, I didn't catch the first part of the presentation. And just on, you mentioned cost pressures, higher borrowing costs, higher operating costs. To counteract such effects, would you be open to, I guess, increasing fees in units?

I think at this point, there's no intention to. So what we will try to do is to adopt as we will try to increase our efficiency and try to improve the margin, trying to reduce the impact on the higher cost. And as for the interest and our borrowing cost, I think that's something that we have always been looking at it, trying to see whether there's any way we can reduce the impact.

I think in terms of managing the interest cost, we continue to be nimble. So, you know, for example, last quarter when I speak to you guys, the five-year rate was around 4.3%. Currently, maybe 3.5%, 3.6%. So, we continue to monitor this. So, for the upcoming IRS deal of, let's say, $600 million, when we monitor, let's say, recently when the interest rate went down to around 3.2%, 3.3%, we try to catch a bit. So, we will not do the replacement at one go, $600 million. We can do a bit of forward start, can do some of the extension early, say. So we will continue to monitor so that will help to reduce the impact for our DPU.

Okay, and what will be the all-in interest outlook for this FY?

So the MIT interest rate for the coming FY may be around 3 to 3.1%. Okay, got it. Thank you.

We have Joy from CSBC to ask the next question.

Hi, can you hear me? Hi. Joy, we can hear you. Okay, great. Thanks. Hey, Lily and team. So, first of all, can we just get an update on the US power study? And I think in your slides, you mentioned about redevelopment. Are we referring to redevelopment in US or Singapore? Thank you.

Redevelopment can be both in Singapore or US, but I think it's very much looking at whether do we have the right composition of it. By that, I mean there's a lot of factors that goes into in terms of redevelopment. We probably need to have some level of commitment before we are prepared to do something similar to what we have done in the past for our Kalang Way, where we have at least a certain proportion that is taken up before we will consider doing a redevelopment. Because I think we also have to appreciate that for redevelopment or any projects that is along the line of redevelopment may have certain impacts on our GPU. So I think that's something that we need to balance as well. So in short, whether is it in Singapore or US, we are open to both. I think you also asked for the power study. I'm glad that you bring this up. There's something that I forgot to talk about just now. But I think for the power study, we are actually in the finalization for the power study for San Jose. At this stage, based on what we understand, I think the facility in itself, we are able to get accessible power, say, around 3 to 7 megawatts. I think currently, you are talking about maybe 2 to 3 megawatts. Currently, it's about 2 to 3 megawatts. We should be able to get Based on the existing infrastructure, power grid, we should be able to get up to 3 to 7 megawatts. If we want to go further up, I think 20 megawatts is possible within the next maybe 3 to 4 years. So I think at this point, we are evaluating the options that we can work with. And at the same time, we are also doing our marketing in terms of the releasing and I think as with A lot of the other properties were also opened through a divestment for this.

Just to follow up on San Jose, I guess if you were to start a redevelopment, would you do on a spec or you will need to secure a tenant before you start development work?

I think I will let Peter take this.

So essentially, like what Lily mentioned earlier, when we undertake redevelopment, it actually creates a lot of downtime and uncertainty as well for us as a portfolio, as a REIT. So if you look at our earlier redevelopment and the development that we did, most of them are actually built to suit. So this is probably something similar that we will do for US. And our primary aim is really to have income producing assets. So speculative development, especially if it's a big one, it's not something that we will want to do. But specifically for San Jose, as what Lily mentioned, we do see some upside in the power. We have done our power study, we can increase to seven megawatt without much work, but to increase to 12 or up to 20 megawatt, we have to pay some money. We are also exploring potential sale as one of our repositioning or rebalancing strategy.

So just to clarify, basically up to 7 MW, there is no payment required or no capex required, right?

No payment required. Of course, in terms of internal capex, we will still have to pay. But at least there's no additional payment that we need to do to the power authority.

This is based on this existing power grid.

Yes.

Okay.

Cool. That's very clear. And then my second question is in terms of a tenant, I don't know if you've done sort of an assessment in terms of exposure to sort of export-related activities and also in your view, what percentage of the tenants are a little bit on the more vulnerable side?

This is more on the Singapore portfolio. To be frank, it is quite difficult for us to put a number to the tenant's exposure. I think partly you understand that our tenant base is 2,000 over. So for me to try to gather information from 2,000 over tenants, it's not easy. And for quite a number of them, it will be like pulling teeth out of a tiger's mouth because these are actually deemed quite confidential from their perspective. But I think what I can say is we have spoken to some of the tenants. Some of the larger tenants, they actually don't see a significant change in terms of their business order and production, especially for those that are exporting to the U.S., I think a lot of the tenants are actually taking a wait-and-see position. Nobody really knows what will develop from the trade tariff. As I said, every morning we wake up wondering what has happened, what has transpired, what has Donald Trump said or not said, done and not done. So I think it is very, very fluid at this point. So quite a number of the tenants will also like, you know, I also don't know what to expect. So they have, some of them have, a number of them has actually been saying, you know, I'll just wait and see before we move. The larger tenants actually may not be that impacted, especially those where they have already been preparing to diversify their support chain. So I think The US-China tension is something that is not new to everyone. It has been ongoing for the past years and also arising from COVID. I think everybody learned a bit of a lesson from there. So the bigger tenants have actually, the larger corporates have actually been looking to diversify their own support chain and their supply chain. So I think when the trade tariff comes out, then for them it's Well, it does impact us, but we have that flexibility to be able to reshuffle our distribution in terms of the materials, in terms of the products. So basically what they do is they try to reshuffle and minimize the impact in terms of the cost. And interestingly, we do see some inquiries for additional space from some of the existing tenants. Basically, this will be tenants who are actually exploring that maybe if the trade tariff turns out to be what it is, they may be looking at moving some of their operations to Singapore. I think at the end of the day, at this point, Singapore is one of those countries with the lowest tariff rates. We also see that some of the export-oriented tenants you know, for those that is in the, say, semi-com industry, etc., they are actually producing more for the Asian market and not so much for exporting into the US. I think what could be possibly will impact, well, for that matter, I think will impact everyone is actually the second and third order effects. I think with the tariff going on, we would expect production costs to increase. So I think that is something that we will have to keep a lookout for.

Cool, that's very clear. Thank you, Lily.

Sorry, I'm bitter again. So I just want to address Melvin's earlier question on the valuation. So after I kind of look at our valuation numbers, those few properties that you highlighted, essentially those leases, except I think the last one you mentioned at Bowen Road, actually the valuation actually increased slightly. So I probably got that mistaken. But for the rest of the properties that you mentioned, the valuation dropped, not due to the leases, but it's mainly due to the changes in cap rates and valuables assumed market rents. And so it's a house building. And most of those leases are not going to expire in the next two to three years. So just to close out that loop.

Can we have Brandon from Citi to ask the next question?

Hey, morning. Can you hear me?

We can hear you.

Yeah. Hey, great. Just want to talk a bit on your reversion outlook, right? Just confirming that you are lowering down from high single digit to low to mid?

Single mid.

Single mid.

Yeah, so we still expect a positive rental revision coming through, but it will not be at as high pace as a double digit.

Okay, and are you open to sharing with us the split by the different industrial segment as well as on the US side, what's the expectation there? Because I realize that your gross signing rents have been coming down despite the very strong market over there.

For the Singapore, in terms of segment, you have a range of 1.4% to 12%, right? So the 12% is actually contributed by the Fletcher Factories. So we see a higher, and if you look at the historical trending of it, Flutter Factory is the one that has been giving us quite strong rental revisions for the past few years. The one that made the rental revision may be on the lower end tends to be those that is in the business park and the high-tech side. I think that is also reflective of the situation in high-tech and the business park because of the supply that's coming on stream. So for the US side, I think in terms of rental revision, it is positive, but I don't think we are expecting a double-digit rental revision. I think if you look at some of the data that's been put out by other players, some of their double-digit is largely because they are also doing the operations side of it. So For us, our data center is really more on a core and shell basis.

I hope that explains.

Yeah, so basically for US, you're still expecting low to mid single digit positive as well going forward.

Is it correct? I think we can't really just have a general reversion target like this because for our US portfolio, quite a lot are actually lock-in leases. And for our better ones in Northern Virginia, where it's actually one of the world's hottest markets, those are actually on very long lock-in leases with extension terms that have already on pre-agreed terms as well. So I think this is one of the main reasons why you do not see a very high reversion but at least we are comforted that those assets are pretty much resilient and will be renewed in that case. So for you then, for some of our other assets that, you know, which we do not have sufficient power to cater to the new development in the industry, we will then have to undertake power study and then with that, we may have to sell some of them. So which is why we kind of hesitant to give a very targeted reversion

But I think you also appreciate that US is actually a much bigger land compared to Singapore. So I think there is some varying factor in terms of the market. Yes, that's right.

Sure, sure. And just to follow on from the US data center portfolio, right, you know, out of this 3.1 US billion of portfolio that you have, can you sort of give us a rough sense like how much of this you do look at actively selling them? How much of it does have the potential for upgradable power and how much you think it's really sort of much more resilient than the rest? Yeah, because as you already mentioned, there's a fair mix of a lot of things. So good to get your sense on where we should look at the viability of this portfolio in a short and medium term.

Maybe I would say that if you look at this, this is a tenants mix. Out of that, we have about 20%. These are the treated hyperscale data center services. These are the ones that we thought are very resilient. And of course, we have 60%, which is PowerShell data centers. I would say that out of this whole bunch, probably 60% to 70% are pretty resilient. And if you look at our geographical split, 60% to 70% are also in Tier 1 markets. So for the balance, 20% to 30% are more for domestic city users and so on. Those are the ones that we see are probably less resilient than the Tier 1 markets. But having said that, you know, they serve its own use as well. So if you're talking about how, you know, the strength of our portfolio in US, you know, probably the 7%.

Sorry, I kind of missed that Peter. Sorry, I think you were cut off or something.

Don't worry. If you look at it from our view, or if you look at the pie chart on the right side, the donut chart on the right side, the hyperscale and the colo providers are probably what the current market is driving at, whereby there's AI and more retail type of users. So the weaker part of our portfolio is mainly the enterprise and end user and the other section.

Got it, got it. Okay, okay. This is very helpful. And just one last question to add it, right? Yep. Sorry?

Hello? We need to also... Yeah, sorry, sorry. Can you hear us, Brandon?

Yeah, yeah, yeah. Okay, okay.

All right. Maybe I can, if I may also add, if you look at our North America data center portfolio lease expiry, at least more than 50, I would say more than 50% of our leases are actually due in FY30-31 and beyond. So I think what you're looking at in terms of the more recent expiries a small percentage of the total portfolio.

Can you also share a bit on your MPI margins for this portfolio? Because we have seen that coming down below 70% again this quarter. In the past, I think it was always about 70 plus percent. So is 68, 69% the kind of normalized number that we should be looking at?

Not really. I think if you look at the MPI margin, historically we have always been around the 73%, 74% level. I think this quarter it is a bit lower, but you also understand that typically this is the last quarter of the year. There is quite a number of works, the cyclical works that actually happens in that quarter rather than other quarters. I think if you look at the historical trend of our margin, the last quarter tends to be a bit on the lower side. But if you look at it on a full year basis, on the average, I believe the margin are somewhat relatively consistent.

Okay. Hey, thanks much, Lily and Peter. Yeah, thanks. It's very helpful. Thank you. That's it for me.

Bill from UBS to ask the next question.

Yeah, thanks, thanks. Hi, Lily and team. Thanks for the presentation. I just have two questions, actually. I think the first one is, you know, going back to the expiries in the US, that 1.7%. I mean, based on currently, you know, what you guys are working towards, should we be expecting, you know, more conversions or you're just looking to spend a bit of capex and release it? And, you know, what kind of capex should we be expecting for the portfolio?

You mean for the 1.7%?

Yeah, yeah.

We are open to all. So basically, we keep the options open. So we are working both on releasing for data center basis. Of course, the preference would be if I can lease out as a data center, that would be my top. If not, then other users is something that is not closed option as well, right? And besides the leasing, of course, as we said, some of them it possibly may have potential for divestment.

Okay. But given that they have already confirmed that they're not going to renew, are there any advanced negotiations with potential releasing or what should we be expecting for the part of it?

I would say that it's not a case of where you get zero inquiries. There have been viewings, there have been some talks It's really just then trying to see if we can crystallize the talks into confirmed leases or not. But these are things that are still quite fluid and we are working on it. So I think for the 1.7%, we also included the San Jose. And that is something that we have done a power study on. So we do hope that that can actually create some interest in the facilities as well.

Okay, got it. Okay, and my next question is on the borrowing cost. I think, Geng Fong, just now you mentioned that there'll be a $10 to $11 million impact. I'm assuming this entire $10 to $11 million is the total impact to mint, right, in terms of the higher borrowing cost?

Yes, the per annum impact for the replacement hedges would be around 10 to 11 million, but this is per annum.

Okay.

600 million of IRS coming due, I mean, it will come in progressively, this FY.

Okay, got it. But just wanted to hear your thoughts behind this. This 10 to 11 million is based on today's rates, or have you guys actually assumed or baked in further interest rate cuts?

So, I think the market has priced in, let's say, about, let's say, potentially three rate cuts, right? But these rate cuts will affect the short-term rates floating on our unhedged portion. So, from that front, we will continue to see some interest savings from our unhedged loans. But when we talk about replacement of the IRS, we will usually use the five-year rate So we have used a current five-year rate, maybe 3.5%, 3.6%.

Okay. So meaning to say if the five-year rates do actually come down, there could be some slight savings from that.

Yes.

Okay. Got it. That's all from me. Thank you.

We have Tan Sian from Goldman to ask the next question. Can I just check that 1.7% non-renewal other than San Jose, which other assets was included in this?

I think San Jose will take the block of it. And I think previously we have so highlighted that there is a tenant in 250 Williams, which has asked to reduce the office space. The data center space was extended for a longer lease period.

Okay, got it. Second question is on USD exposure and also debt, right? In terms of income hedging, how long is it for? And also given the difference and sting in US borrowing costs, any thoughts about shifting the USD debt to SING?

So maybe in terms of the FX front, in terms of managing our FX, we have two parts, right? One is the capital investment, then is the income hedge. On our capital hedge, we try to borrow the local currency, borrow natural hedge. So for USD, currently maybe about 55% to 58% assets is hedged in US dollar borrowings. In terms of the income hedge, for the next 12 months, we have hedged about 57% of our USD income into SING dollar. On borrowing costs, The thing with USD is that if we borrow onshore, we have the tax shield, you see. So, all in all, we are still slightly better off borrowing USD onshore currently. I mean, other than providing us that capital hedge, we also, I mean, net-net, we are still about the same in terms of all-in interest costs.

Okay, got it. And then, yeah, sorry.

Sorry, Tan Shren. I mean, If today we take SING dollar borrowings, right, and you swap to USD, it doesn't really make sense because maybe we need to pay about 150 to 170 BIPs cost. So net-net, we are still better off borrowing onshore USD.

Okay, I understand. Last question on the divestment of 5 to 600 million. That's the total amount that you're looking at, right? Not what you're looking to achieve for FY26. Is that fair?

I think the 500 to 600 target is probably the lower bound of what we... The process is something that is not really detected at my whims and fantasies.

It takes a lot of work for us to run the process and Even after you get the process, you need to go into your due diligence, you need to do your negotiation, etc. But I think we should be able to, I guess to a 5 to 6 million type of number, it should be something that is achievable for us.

Is it achievable in the next financial year?

Yes.

Okay, got it. Thank you.

Because if I can do more, if the numbers are correct, if the price is correct, if we can do more and help us to push ahead with our streamlining of portfolio, I think that will be something that is good. I think at the end of the day, what we want is to really build a resilient portfolio that can bring sustainable growth to the unique holder. So whether be it my divestment proceeds is being redeployed into vector usage better properties that give us growth, that can provide us growth in the long run, or even just us streamlining the portfolio and resolving some of the leasing pressure, I think that's something that would be quite good for the portfolio.

Okay. Thank you. Thanks. Yes. Thank you.

Jonathan from UOB asks,

Morning, and thank you for taking my question. Our first question relates to tariff, and you correctly pointed out that reciprocal tariff in Singapore is a lot lower than regional countries, potentially. So, for the four asset classes that you have in Singapore, high-tech, business park, flatted factory, and stack-up ramp-up, which segment will be positively affected? Which segment will be negatively affected by reciprocal tariff. A second question relates to the very attractive rent for new leases for high-tech. High-tech at $337. Business Park new leases at $3.9. They look much higher than the existing leases. Could you give us some colour on how those attractive rents were achieved and can we infer or read that positively for the trend going forward for these two segments. Thank you.

Your first question on which segment will be more exposed, I think that is a very difficult question because really nobody knows what will happen. We are not able to decipher what is the at the end of the day, what will happen in terms of the trade tariff is something that is still a huge question mark. I would say generally, if you want to look across, if you are looking at your second order, third order effect, globally, for that matter, globally, prices will go up. Things are going to increase simply because of the trade tariff. So this is what we meant by the second order. So, and kind of effect would affect most of the industries. And I would say, if you look at it, class across board the assets class. But I think we have seen quite some resilience in terms of defective factories during the trying times. I think if you look at the COVID period, while we say that defective factories have a lot of SMEs that may be affected, we also recognize that defective factories are actually one of the lowest cost space that you can find in Singapore. So when times are uncertain, people don't know what to expect or people are trying to safe cost, the lower cost space tends to be something that people will want to look at. So from that perspective, I think deflector factories are relatively resilient. Of course, it doesn't mean that deflector factory tenants will not be affected at all. There would be tenants who will be affected, but it's just that because it's low cost, we might be able to find some replacement tenant in times to come. So I think with that, we are also a bit... We also keep an eye in terms of the arrears that we have been looking at. I think our arrears numbers throughout the Singapore portfolio tends to be relatively healthy. Generally, you're talking about a 0.1% type. Even during times of COVID, our arrears numbers, I think you'll only be looking at 1%, 1.2%. which is still relatively healthy. So I think the resilience of the portfolio is there. There's no denying that the trade tariff will have impact, but how much that impact is still a question. As I said earlier on, we have also seen quite interesting things in the sense that we have inquiries for space from our existing tenants because they are looking to move their operations into Singapore because of the trade tariff. So that is actually somewhat a positive point for us. But it's always a case of which effect is higher than the other. So I think that is something that remains to be seen at this point. I hope that answers your question.

High-tech and business park, there will be less manufacturing. So would that be more resilient? And then stack-up ramp-up will have more, you know, logistic, trade-related activities. Would that maybe be weaker?

I think the short answer is probably, we don't think so. Yeah, we don't think so.

Okay, thank you. And on the new leases, sorry?

Oh, in terms of the new leases for the HIPEX, I think a large part of it is attributed to our Kalang Way. I think that one, if you recall, our Kalang Way property is actually one which is of relatively, I would say, very good quality. So the kind of rental rates that we have been able to command of it actually shows evidence of it.

Okay. And could you give us the latest occupancy for Galang Way? How much has improved in the last quarter?

Committal occupancy is 60.1%. Last quarter was 57%. So we have an uptick of about 3%. Okay.

Thank you. Thank you very much. Thank you.

everyone for joining us. We are mindful that we have exceeded the hour. If there are any more questions, reach out to the IR team. Thank you.