CapitaLand Investment Limited

Good morning. Welcome to CICT's briefing. I'm Alison from the investor relations team. I hope you had a good start to the morning. We had a very busy one. We released two announcements this morning. Our first half results and the proposed acquisition of the 55% interest in Capital Spring. Our CEO, Chun Xiang, is here. He will be covering them in his presentation later. We will actually also have the Q&A session. We'll be happy to hear your thoughts and address any questions that you may have. Without further ado, I'd like to invite Chun Xiang on to the stage. Chun Xiang, please.

Good morning, everyone. Thank you for joining us today. We have quite a bit to cover today, so without further ado, we'll start. Maybe I'll just run through the presentations for both the results and the transaction, and then we'll just take some Q&A at the end. Okay. So we will try to, I think most people will be more interested in a transaction. So we will try to focus on some of the key highlights for the results first. Just go through the few slides before we talk about the transaction proper. I'm sure you guys have some burning questions on the transaction itself. So we will want to jump straight into that as soon as possible. Okay. So today, we announced the results. CICT delivered a fairly good set of performance for the first half of 2025. Gross revenue came in about $787.6 million. This is a slight decline of 0.5% year-on-year due to the absence of income from 21 Collier Key, which was, as you know, divested in November 2024. However, on a like-for-like basis, excluding 21 Collier Key, Gross revenue grew 1.4%, and similarly for MPI, it was down 0.4% year-on-year, but up 1.7% on a light-for-light basis. And these numbers really reflect the underlying strength and stability of our portfolio. Distributable income rose 12.4% year-on-year to a record $411.9 million for the first half. Unit holders will be pleased to also know that our first half DPU increased 3.5% to a new high of 5.62 cents despite an enlarged unit base as a result of the EFR that we did late last year. This was underpinned by the full six-month contribution from Ion Orchard, better performance of our existing portfolio as well as lower interest expenses. Our proactive capital management continues to put CICT in a favorable position. Aggregate leverage improved to 37.9%, down 0.6 percentage points from end 2024, giving us greater financial flexibility. At the same time, our average cost of debt has declined to 3.4% from 3.6% six months ago, supported by the easing interest rate environment, as well as our proactive refinancing efforts. These metrics underscore the robustness of our balance sheet and the resilience of our diversified portfolio. Operationally, our portfolio remains robust. Overall occupancy stood at 96.3%, with whale holding steady at 3.2 years. Tenant retention rates remain high, with retail and office showing improvement compared to the first quarter. This also reflects the tenant confidence in our properties. Rent reversion for the office portfolio was 4.8%, for the retail portfolio, 7.7%, with suburban malls achieving 8.8% and downtown malls 6.9%. As we guided earlier, we expect rental reversions to moderate to a more sustainable pace in the coming quarters. Tenant sales per square foot increased 17.9%, but this was largely due to the inclusion of ION in the numbers, excluding ION. Tenant sales per square foot was about flat, but shopper traffic increased by about 3.4%, indicating that conversion opportunities are intact. In May, we completed the divestment of service residence component of Capital Spring. which actually allow us to do the transaction that we are announcing today as well. So we'll talk a bit about that later. So CICP's 45% stake was valued at $126 million. We divested it at an exit yield of approximately 3.6%. Proceeds were used to reduce debt and support working capital, demonstrating our disciplined capital recycling and focus on financial flexibility. And our AEIs, which is our other value-add strategy, at Galileo and IMM building are progressing well. Galileo has reached 97.7% committed occupancy. We target handover to the anchor tenant from late third quarter. Income contribution will ramp up meaningfully from 2026. At IMM, the AEI space for Phase 3 has been handed over. with post-AEI occupancy at about 98.6%. With over 100 outlet stores, IMM continues to strengthen its position as a regional outlet destination. We have two AEIs in the pipeline, commencing in the fourth quarter. At Lot 1, we will be adding an additional 15,000 square feet of NLA at Basement 2, leveraging URA's surplus car park conversion scheme. The space will focus on daily essentials and convenience-driven retail. We will also enhance the connectivity to the mall with a new sheltered bridge extension that links directly to the residential area across the road. The mall will remain fully operational throughout the AEI and we target to complete this in the first quarter of 2027. In the previous quarter, we also shared that we have some AEI works planned at Tampines Mall. Here are some of the details. In line with LTA's pedestrianization plans, we will be rejuvenating the main entrance at Tampines Mall and refreshing the tenant mix and increase product offerings through the improved configuration. The works will be carried out while the mall remains fully operational and we target to complete this AEI in the third quarter next year. So that concludes the key highlights of our first half results, and I'm happy to take some questions on this later. But before that, I think we would like to proceed to share about our other announcement released this morning, which is the proposed acquisition of our remaining 55% interest in Capital Springs. Okay, so having walked through our first half results, which reflects the resilience and quality of our portfolio, we want to now look at this particular transaction that we announced this morning. I'm sure a lot of you have many questions. We'll try to address most of the important points in the presentation, but if you have any further questions, we can take them later. As a background, currently we own 45%, as most of you are well aware, of Capital Spring, the commercial component, excluding the service resident. The proposed acquisition is to acquire the remaining 55% interest from our partners, Capital Land Development, which owns 45%, and Mitsubishi Estate, which owns the remaining 10%. The agreed property value on 100% basis is $1.9 billion. which is the average of two valuations done by Knight Frank and Savills, which is both appointed by the manager and the trustee respectively. We understand that the cap rates assumed by the two appraisers in these latest valuations are compressed by 5 to 10 basis points compared to that of the valuation assumptions in December 2024. That is, from 3.75% back then to now 3.65% and 3.7% respectively. Based on the agreed property value of $1.9 billion, the entry yield is approximately 4.2% based on the first half 2025 MPI. As CICT is acquiring units in Glory Office Trust for the remaining 55% interest, the total acquisition outlay is about $482 million. Capital Spring is a 51-storey integrated development comprising of premium grade A office tower, ancillary retail, as well as a service residence component, which we divested in May 2025, as pointed out earlier. I think most of you are familiar with this building. It's not a new building in our portfolio. We already previously owned 25%. We have provided regular operational updates on the building, so it should be something that is not unfamiliar to all of you and to us as well, which is why we like the asset and we are proposing to do the acquisition. We like the property as it has consistently performed well, maintaining almost full occupancy as at 30th June 2025, underpinned by quality tenants from diverse trade sectors. The proposed acquisition aligns with our strategic goal to deepen our presence in Singapore, our core market. With this move, our Singapore exposure will increase from 94% to 95%, reinforcing our commitment to deliver long-term value and resilience to our unit holders. Apart from being a high-performing asset, Capital Spring has received several recognition for its architectural excellence and commitment to sustainability and inclusive design. They further affirm the quality of the property. This slide shows our ownership structure before and after the acquisition. It's quite straightforward. We won't spend too much time on this. Next. So, why are we buying the remaining 55% interest in Capital Spring? I think the investment merit and the transaction rationale is quite clear, but we will articulate them more clearly in this slide. We do believe in the asset. As an owner, we have seen the performance. We were able to track the potential and the performance of the underlying asset over the last, call it four to five years since it was completed. This acquisition aligns with our commitment for long-term value creation. Capital Spring is a prime example of a development-led growth, transforming from a multi-storey car park, if you guys recall, that used to be the Golden Shoe Car Park, into a vibrant commercial hub in the heart of the CBD. It offers entry yield in the low 4% and potential upside, especially given the limited pipeline of new Grade A office supply in the core CBD. Beyond financials, Capital Spring enhances the quality and resilience of our portfolio, being a premium Grade A property. Importantly, this acquisition is accretive to DPU, 1.1% on a pro forma first half 2025 basis. and reinforces our position as the proxy for high-quality Singapore commercial real estate. Let us go through the detail in the subsequent slides. So Capital Spring is more than just a building. It is a reflection of our value creation strategy via redevelopment and portfolio reconstitution. We started this journey in 2017 with our JV partners to redevelop the site and completed it in November 2021. As part of our portfolio reconstitution, we divested the service residence component and an exit yield of 3.6% this year. And now we are acquiring the remaining 55%. Capital Spring is a thoughtfully designed space that brings together work, live, play in one integrated development. Since its completion in 2021, Capital Springs stands among the best premium grade A office assets in Singapore CBD. The property has three elements that reflect our commitment to creating spaces that go beyond functionality, offering a holistic experience that attracts and retains tenants. One of the key reasons we are confident in Capital Springs' long-term value is the limited pipeline of new grade A office supply in the core CBD. As you can see from the table on the right, There is no material new supply in 2025 and limited developments coming on stream in the subsequent years. This supply-demand dynamic supports renter stability and potential upside for well-located high-quality assets such as Capital Spring. You'll be further supported by flight-to-quality demand as occupiers prioritise premium office space for relocations. Capital Springs average rents for expiring office leases remain healthy with a well-spread lease expiry profile, giving us flexibility to capture renter growth over time. In the last two years, Capital Spring has signed leases with positive rental reversions in the range of 5% to 7%. Specifically for the first half of 2025, up to now, the positive rent reversions achieved was approximately about 7% for Capital Spring. And tenant retention for the building is above 90%. Capital Springs occupancy has been strong since its completion, anchored by leading financial institutions and financial services. It is underpinned by diverse business trade sectors, supporting stable cash flows and enhances portfolio resilience. One of the strengths of Capital Springs is its tenant profile. Post-acquisition, J.P. Morgan joins our top 10 tenants alongside other well-established names. In terms of portfolio trade mix, we remain diversified across trade sectors, with banking, insurance and financial services increasing to about 18.9% from 17.6%. With this acquisition, we are strengthening our ownership and further reinforcing CICT's leading position in Singapore's office market. From this map, you can see all our office properties located from Tanjong Pagar MRT to Rappers Place and City Hall MRT stations. They give us scale, visibility and relevance in the market. Being diddly entrenched in the CBD allows us to better serve our tenants, respond to market shifts and continue to deliver long-term value to our unit holders. Post-acquisition, our exposure to office will increase from around 38% to 40% of our total portfolio value. Our Singapore exposure will grow to 95%, as mentioned earlier. This reinforces our strategy of being Singapore focused with high quality assets in prime locations. As such, the acquisition of Capital Spring will further reinforce CICD's position as a proxy for high quality Singapore commercial real estate. In terms of the financial effects, so let's look at the impact following our acquisitions. The acquisition is expected to deliver DPU accretion of 1.1% on a pro-forma basis for the first half 2025. This assumes the acquisition was completed in 1st January 2025 and CICT had operated 100% of the commercial component up to 30th June 2025. I think pretty respectable accretion numbers, considering that this transaction, based on the billion-dollar total value, it's about, call it, 3% to 4% of our total assets under management. So to deliver a 1% accretion is a pretty respectable number. The funding will be supported by a private placement with proceeds to cover the estimated purchase consideration and vendor loans as well as transaction-related expenses. Any remaining proceeds will be used to pare down debt. So we are balancing growth with financial prudence. Our aggregate leverage remains consistently below 40%. Post-acquisition, leverage is expected to be at about 38.3%. which is lower than our gearing level at 31st March 2025. So this is a quick table of expenses relating to the total acquisition outlay. So subject to completion adjustments, the purchase consideration takes into account, amongst other things, 55% of the agreed property value and net liabilities. For CLD's 45% interest, CICT will receive will pay a 1% acquisition fee in units, given that it is an interested party transaction. Post acquisition, there's no change in the number of properties, portfolio NLA, and will as this, because our current 45% interest in CCT, in the capital spring, has already included these numbers in our current portfolio. So there's no additional increase in terms of number of properties as well as NLA. However, the property value will increase to $27 billion, while portfolio committed occupancy will be up slightly at 96.4% instead of 96.3% as of June 2025 on a pro forma basis. Okay, so I hope I've given you some good insights on the transaction and why we are entering into the transaction today. If you have any questions, we are happy to take them in the Q&A segment very fast. Mervyn is not here today, but Darren is just as fast as we realize. Okay.

Can we invite the management team onto the stage for the Q&A, please? Before we start the Q&A, I would like to introduce the management team. On Chun Xiang's right, we have Mei Lin, our CFO. And on Chun Xiang's left, we have Jack Bin, head of investment. And on her left, we have Yi Chan, head of portfolio management. So some housekeeping rules before we start. If you have any questions, please raise your hand and wait for the mic to come to you. Try to keep to two questions at a time, and we'll come back to you if you have more. For those online, if you have any questions, please put them in the chat box. With that out of the way, we'd like to open the floor to questions. Okay, I see perhaps Terrence, please.