CapitaLand Investment Limited

Good morning, ladies and gentlemen. Welcome to Capital Land Integrated Commercial Trust or CICT's FY 2023 results briefing. We are hosting this event live from our office at Capital Tower. Since this is a new year, we have also decided to try something new So instead of a formal presentation, we will be having sort of a question and answer with the management team of CICT. Please feel free to give us feedback, how you find the session, and we will be glad to improve. So the sequence of the discussion will also may not follow the flow of the presentation that's uploaded on SGXNet, but largely the contents are there. So before we kick off the session, I'm pleased to introduce the panel, starting from our CEO, Mr. Tony Tan. And on Tony's left is Ms. Jacqueline Lee, our Head of Investment. And on Jacqueline's left is Mr. Lee Yi Chuan, our Head of Portfolio Management. And on Tony's right is Ms. Wong Mei Lian, our Chief Financial Officer. And I'm Mei Peng, the Head of Investor Relations. So to start off, we are also pleased to invite Tony to give us some of the context and performance of CICG's financial results. Tony, please.

Thank you, Mei Peng. And good morning, everyone. And good morning, those online. I think most of you will agree, 2023 has not been an easy year. You'll agree, 2023 has not been an easy year. It's also not the year that we had expected at the end of 2022, with the China reopening, And hence, there's a lot of heightened expectation of a full recovery in 2023. Obviously, what you've witnessed is a series of things that went the other direction. We have a series of very aggressive central bank rate hikes started from the first quarter. And hence, to a large extent, I think it has affected a lot of market volatility and economic uncertainty. So that's a little bit of a backdrop. To put it in context, FY23, we were actually positioned quite well with some of the portfolio reconstitution that we have done in 2021. And hence, you see the full effect coming in in 2023. So the financial result is to a large extent reflection of the completion of the acquisition that we did in 2022. And hence, in 2023, you see that delta in numbers But having said that, I think operationally, we'll be also very laser focused on, given things were moving quite rapidly during the year, focus on a few things. First is revenue. We need to protect our revenue. And one way to do that is to really, really go all out quite early in our lease expiry to ensure we lock in our renter as quickly as possible. And this is exactly what we did. Secure the rent, the tenant we want, and hence you see across the portfolio, we have a very high level of retention and a good, nice reversion as well. Secondly is cost management. Extremely important to ensure we manage the cost carefully. And we were fortunate that in 2023 versus 2022, one of the highest costs was naturally the utility costs. And we managed to get a lower rate in the second half. So you see a second half improvement in basically the margin from a reduced OPEX. At the same time, we also restructured our property management agreement to get stronger alignment between the REIT as asset owner and the property manager. So what that entails is the typical arrangement with a property manager is that the REIT actually carries some costs. So in the revised property management agreement, we have structured such that certain element of a cost, specifically the manpower cost relating to leasing, is taken away. And we compensate the property manager on a transaction basis. So they close the deal, you get paid commission. So in a way, there's a bit of more closer alignment in terms of where the revenue generation and cost incurrence. So in the long run, I think we should see the benefit even clearer. So we have been cautiously trying to focus these two. And as you see, throughout the year, naturally, obviously, we had a benefit in the first half of 2023. A lower base in 2022, we've seen a big ramp up and gradually taper down in second half. And as a result, all this active work, you see our operating metrics has been very stable. portfolio occupancy has gone up 97.3% just last year, beginning of the year. Valuation has gone up as a result of very strong operational improvement. Rental rate has achieved higher than what we expected. We also started to look at cost minimization in the REIT perspective by looking at where relevant, certain building, the cost, required restructure and hence certain costs would be passed on to the basically occupier. So we adjusted service charts during the year as well. So all this accumulated into a very healthy kind of operational number. So this is a little bit of backdrop on the financial number. In the short term, this is what I've been doing in the 2023. But in the mid to longer term, in fact, during the year, we have started to think about where the new revenue stream is going to come through. With the completion of Clark Key in November this year, and it should be fully ramped up hopefully by second quarter, then we have started to think about where is the new source of income stream. And hence, we announced that we are going to do an upgrade on IMM to reposition IMM stronger as a key regional outlet more, not just in Singapore, but hopefully around the region as well. So that story hopefully could carry through as we start to do the work along the way. And as of now, we are very pleased that even we have even started the work at IAMM, we have already secured 70% of the pre-commitment in our AEI space. So that's a series of work that we are planning ahead. In the very longer term, we also, and this is also in the back of everyone's mind, including some of you that we were talking earlier about what we're going to do with Galileo. We started to embark on a, I would say, fairly defensive to ring fence the asset so that we can protect the value for a longer period of time. If you recall, Galileo was built for own use. Historically, it's owned by a bank built for themselves. Subsequently, it was divested to a different owner and eventually CICT bought over. So that building is constructed not for a general multi-office letting environment. So we want to do that correction so that in eventuality, whichever prospective tenant that we prospect out, we can survive the next five to 10 years without to worry about a single tenant exposure because the building is built for own use. So that is something that we are working on. And naturally, a few things that will come along the way as we completed the Australian acquisition, we knew that there are certain gaps we need to fill, and we started to plan in the necessary upgrade in the field by assets, and hopefully you get some traction. Again, that will bring additional revenue source. So if you look at the long runway, we have crossed the 23, quite successfully. We entered in 2004, a few work to be done. And hopefully once that clarity along the way in 2004, you probably can see even 25, 26, where will be the potential new revenue stream will start coming in, right? So those are critically important for us to manage. So that's a little bit of backdrop. The other thing that was highest, so this is all at the asset level. At the financing level, We also very later focus on making sure we manage the interest expense. I think later a million, we level it a little bit more. So one of the key priorities, very active cash management. Active cash management, active, so I tell a lot of our folks, It's not like two years ago. Today, money is very expensive. It's no longer cheap to hold money. So we need to make sure that we get the cash in as quickly as possible and minimize any unnecessary kind of loan on your balance sheet. That effectively will bring down your average cost of debt. So you can see our average cost of debt has creeped up a little bit at this point, despite the heavy load that we are carrying. So I think that's, in a way, a manifestation of... very active cash management, active deployment of cash efficiently. At the same time, looking at different instruments that we are able to tap to get the different source of financing. So hopefully we will eventually continue to do that in 2024 and hopefully we can deliver surprises for you guys. Yeah. Yeah.

Okay, we just have a couple of slides that we definitely for unitholders out there who will be interested to learn, which is that our distribution for the second half 2023, it's 5.45 cents. So this will actually be paid out in March. So please look out for the details. So now maybe we move on to the next section on the valuation. So I think, Tony, would you like to share a bit about some of the thoughts about what we have actually achieved for valuation?