CapitaLand Ascendas REIT (A17U) Earnings Call Transcript & Summary

Good evening, everybody. I am Kit Peng, Head of Capital Markets and Investor Relations. On behalf of the management team, a warm welcome to Ascendas Reit's First Half FY 2020 Results Briefing. Despite a very uncertain market condition, Ascendas Reit continued to achieve a steady set of results. In the first half of FY 2020, we achieved a distributable income of $263 million, a decrease of 3.7% year-on-year. DPU is $0.0727. The investment properties stand at $12.75 billion. Operationally, the portfolio occupancy held steady at 91.5%. For leases that came due for renewal due to property risk, achieved a positive rental reversion of 5.4%. Gearing is healthy at 36.1%. We continue to maintain a high level of natural hedge for our overseas investments. We will now elaborate on the above-mentioned highlights. First half FY 2020 versus FY 2019 year-on-year comparison, gross revenue increased 14.6% due mainly to contribution from the 28 business park properties in U.S. and 2 business park properties in Singapore that were acquired in December 2019. This was partially offset by the rent rebates to our tenants due to the COVID-19 pandemic as well as lower occupancies of certain properties. NPI increased by a similar quantum to gross revenue partially offset by rent rebates. Total amount available for distribution rose 3.7% to $263 million. Contributions from new acquisitions were offset by expiry of rent [indiscernible] of a rollover adjustment in the first half of 2019 to tax ruling by IRAS on the nontax deductibility of certain finance costs in prior years. However, due to the decline of [indiscernible] to $0.0727 due to the excess of the one-off distribution of rollover adjustments in [indiscernible] as well as the large number of units in issue following the December rights issue to fund the U.S. and Singapore business park properties and to lower the aggregate leverage. Excluding the one-off distribution of rollover adjustment in first half of 2019, DPU would have declined by about 8% year-on-year. When we compare first half FY 2020 versus [indiscernible] second half FY 2019, gross revenue at $521 million is 11% higher, driven by mainly contribution from the U.S. and Singapore business park properties in December but offset by lower occupancies at certain properties. NPI is an increase of 7.7% to $388 million. This increase is in tandem with the increase in gross revenue if we were to strip out the rent rebates to Singapore tenants and liquidated damages for Australia and Singapore as well as lower occupancies. Distribution income increased by a lower 5% to $263.2 million because some rental guarantees fell off in U.K. and Australia as well as higher interest expense due to a higher loan quantum to finance the acquisitions. DPU declined 3% to $0.0727 due to the enlarged number of units in issue. We adopt a semiannual distribution frequency. We will be paying a distribution of $0.0727 for the 6-month period of 1st January through 30th June 2020. The payment date is on 27th of August. Moving on to investments. In the first half, we acquired a 25% stake in Galaxis, a prime business park property located in the one-north area for $102.9 million. The property was acquired at an attractive 6.1% net property income yield. Key attributes include its direct access to the one-north MRT station, long lease tenure of 52 years and a strong tenant base. Four Asset Enhancement Initiatives were completed for a total cost of $23 million to upgrade building specifications and improve amenities to add vibrancy to the properties. In the first half, we continue to streamline our portfolio with the divestment of Wisma Gulab, 202 Kallang Bahru and 25 Changi South. Together, they generated proceeds of $125 million. The properties were divested at above their respective book values. And the buyers of these properties are end users who are in the household product business as well as self-storage. Galen is one of the AEI that was completed during the period. Occupancy has improved to about 66% as at June due to a new takeup by a biomed tech company. So our plan here is to create a biomed ecosystem. Another AEI that was completed is in Sydney. The occupancy is low at about 55%, but it will be 100% occupied from 1st of August due to a new takeup by a contract logistics company. After -- very soon after first half closed, we acquired a new logistics property to be developed in Sydney, Australia for $21 million and at an attractive NPI yield of 5.8%. The development will take about 1 year to complete. Given its prime location, good building specifications and low vacancy rate of about 3% in the vicinity, we are confident to lease it up. Currently, we have 10 logistics properties in Sydney. And all of them are fully occupied. Gearing is healthy at 36.1%. Following the rights issue in December, we successfully raised $1.31 billion. Ascendas Reit's liquidity position remains robust. Currently, operating cash flow is stable. And we have in our reserves $561 million, comprising of $361 million in cash and another $200 million in committed facilities. Average debt maturity improved to 3.6 years based on a total debt of about $5 billion. And to minimize any refinancing risks, not more than 20% of the debt or $1 billion will be due for refinancing in any single year. Funding indicators are summarized in this table. The financial metrics are at very healthy levels, far exceeding the required minimum level set by the bank loan covenant. A3 credit rating is maintained, providing us with financial flexibility and good access to capital. We continue to put in place a high level of natural hedge for all our overseas investors -- investments to minimize the effects of adverse exchange rate fluctuations. So in Australia, we have a total investment of AUD 1.7 billion. About 77% of the assets is funded by Aussie dollar-denominated debt. So in U.K., it's 100%. In U.S., it is 100% as well. So on the right, on the extreme right, you will see portfolio occupancy holding steady at 91.5%. So on the left, extreme left, Singapore, occupancy is lower at 87.9% Q-on-Q. For Australia, U.K. and U.S., occupancies remain fairly stable at 92% to 98%. So let's take a closer look at Singapore's occupancy. Occupancy declined to 87.9%. There were some movements of tenants, especially in 31 Joo Koon Circle, a light industrial property tenant. So a tenant here consolidated its operations into another property within our portfolio. Currently, we are working on some prospects for the space. Sources of new demand. We have some bright spots here. So in the first half of 2020, we saw new demand from the logistics companies accounting for about 23% of the gross rental income. Also, engineering companies, some of them provide engineering solutions for a wide variety of industries, such as defense and energy industries. The IT sector, you see here, 14% in our range, is also a new takeup by some game developer company. And lifestyle as well, 10.3%, there are companies setting up central kitchens for the production of dumplings, buns, braised food and even Japanese food. Rent reversions. On a portfolio basis, the average rental reversion was a positive 4.3% for 2Q. That is the April to June period. In Singapore, we achieved a 4% positive rental reversion. And we were able to renew leases at higher rents for all the clusters and set high specifications. In the high-spec space, a decline of 30.6% was registered. And this is due to a renewal of a showroom space on the street level in a property in the western part of Singapore. As the tenant is in the retail industry, the rents were renewed at a lower rate. If we were to exclude this outlier, the high-spec segment, the rental reversion would have been a positive 2.6% and Singapore's portfolio reversion would be higher at almost 13%. If you were to -- if I can refer you to the business and science park segment, you see a 16.3% increase. So there are a handful of leases in the Changi business park property area that underpin this number. Under the integrated development, amenities and retail segment, you see a 19.8%. Here, it is really underpinned by Aperia, which continues to achieve rental rates of $5 per square foot per month and above. In Australia, a positive rental reversion of 16.6% was achieved. There were 2 small leases renewed in Brisbane. And rents were mark-to-market since the previously comment 3, [ 3.5 ] years ago. In the U.S., a positive rental reversion of 16.2% was achieved. These were for leases in Raleigh and Portland. So for the financial year 2020, we expect a low single-digit positive rental reversion. To defend our tenant base, we will have to be competitive with our rates. WALE is at 3.9 years. At the portfolio level, about 8.2% of gross rental income is due for renewal for the rest of the year. In Singapore, 11.3% of Singapore's gross rental income is due for renewal for the rest of the year. As for single lease buildings, which is in the darker shade of the first bar, 6 are due for renewal here, 2 are likely to renew and the remaining 4 are in the process of negotiation. Australia. 2.1% of the gross rental income is due for renewal. One -- there is one in Brisbane and the tenant is not renewing. And we are marketing the space actively. In U.K., 1% is coming due for renewal. And this comprise of a very few handful of leases. And they are mostly located in the West Midlands area, which is an attractive site for distribution. So far, most are likely to renew. In the U.S., 1.7% of the gross rental income is due for renewal. Again, only a small handful of leases located in Raleigh and Portland is coming up. Ongoing projects. So in total, we are working on $431 million worth of projects. These projects are under development or redevelopment and undergoing AEI. This quarter, we will kickstart 3 new AEI projects in Singapore and Australia. So these are in the bottom half of this table here. 21 Changi South Avenue 2 is a logistics property in Singapore. A new substation will be constructed to upgrade the power supply and air-con systems and a new service lift will also be installed. This will enable us to cast our net wider and reach out to tenants in the semicon, pharma industry. In Australia, 2 adjacent suburban offices located at 100 and 108 Wickham Street in Brisbane will be enhanced with new collaborative spaces, upgraded office lobbies and a fresh central courtyard with green landscaping and seating. So the cost is about SGD 10 million. At Coward Street in Sydney, a suburban office property, we will be spending $1.5 million to put up end-of-trip facilities, outdoor sitting, relandscaping of the garden beds and refurbishment of common areas. COVID-19 updates. As we have updated during the first Q business update about 3 months ago, Ascendas Reit has provided assistance to selected tenants across the geographies, such as in the form of rental rebates and changes in payment schedule. To date, the financial amount of the assistance do not have a material impact on our revenue. In Singapore, in line with the Singapore government's guidelines, A-REIT has provided rent rebates through its tenants amounting to approximately $20 million year-to-date. The actual amount to be disbursed will depend on the tenants' eligibility assessment by the authorities. This amount is in addition to the Singapore government's property tax rebates and cash grants, which we will fully pass through to eligible tenants. In Australia, we have suspended rent collection from our F&B and retail tenants located at our 3 suburban offices from April 2020 until the reopening. One lease for a leisure hospitality tenant has been restructured and the tenant was provided with rent rebates. Rent waiver and deferment were offered to 2 small SME tenants. The overall impact to A-REIT in Australia is less than $0.6 million. U.K. The rental payment frequency for some tenants has been changed from quarterly to monthly in advance. And some rents have been deferred to the later part of the year to provide some cash flow relief to tenants. In the U.S., we have provided rent rebate of about USD 10,000 to a small café operator in Portland, which business was affected after employees in the vicinity decided to work from home. Moving forward, we need to temper our expectations on new takeup because of the more cautious approach by the potential tenants. The COVID-19 situation remains fluid. The economic outlook will be challenging for some time to come. And this could impact the performance of the group. We will work closely with our tenants through these very difficult times. The Manager will also keep a close eye on the changing situation so that we will be able to respond accordingly to protect unitholders' interest. Ascendas Reit's well-diversified portfolio and tenant base should help us to mitigate the challenges ahead. This brings us to the end of first half fiscal year 2020 results presentation. Thank you.

Thank you, Kit Peng. Before we begin the Q&A session, I would like to introduce our panelists today. First, we have Mr. William Tay, Chief Executive Officer of the Manager; next, Ms. Yeow Kit Peng, Head of Capital Markets and Investor Relations; and Ms. Koo Lee Sze, Chief Financial Officer. [Operator Instructions] Operator, we are now ready to start the Q&A session.

[Operator Instructions]

Maybe before we go into Q&A, just let me take a few moments to just go through the summary of the message that we have here. I think most of you will be very keen to know what is the out-of-pocket rental rebate that we have given. We have, actually in our AGM reply, that is about $20 million expected. So for first half, we have actually released about $9.6 million of rental rebates for our Singapore SME tenants. So this is in line with the [ $42 million ] budget provision. And we have taken the position to release the rental rebates in June despite the lease has not come out from Inland Revenue. So we are still waiting for the qualifying lease. But we have actually disbursed the rental rebates, about $9.6 million right now, to our SME tenants. So it's still a moving number because looking at the lease that we have, maybe slightly outdated because the numbers in our database may not be the latest, which Inland Revenue will have. So there will be adjustments in the second half to correspond with the lease that is provided by the government. The second part is that you may also be interested to know that property tax rebate, we have passed on this property tax rebate to our tenants. That is about $10 million to now -- right up to now. And this has been passed on to our tenants right now. So all in all, year-to-date, it's about $20 million. We do expect this to change in the second half. And also to point out, we also have currently make provision or rather taken in about 3 -- about $3-over million -- $3.2 million of rent deferment that's agreed with our tenants. This is backed by the security deposits that we have with them. And as you know, in the [ $42 million ] budget, they can defer up to 4 months or 5 months, depending on which industry they are. And they can defer this and repay from November from this year for the next 9 months. And we have actually worked out with some of our tenants in terms of this deferment. The tenants that came in through the notice of relief is still very handful. Only about 11 of them have filed a notice. But we don't wait for notice to work with our tenants. So long as they need help, we will actually work with them. And there's a small other impact that comes in through things like your waiver of car park. Whether it's a movement of [ day of possession ], more rent-free in order to allow them for free toll, because of the Circuit Breaker, this works out to be another $2 million to $3 million. So all in all, this is the out-of-pocket rental rebate and assistance that we have provided for our tenants. One thing also to note that overseas continues to be small impact. Australia, we have again about $600,000. We have given rental rebates to a hospitality and leisure company, as we mentioned in first Q. Two other tenants have been qualified under the SME, the rental support code of conduct by the government. These are professional service and travel-related companies. U.K. continued to be no impact right now, except for some adjustment of payments from quarterly to monthly. And U.S. continues to be a small -- $10,000 that has been given. So by and large, this is the rental assistance scheme for the few countries that we are in. So we also want to assure investors that the occupancy continues to be healthy at 91.5% right now and against December 2019 of 90.9%. And we have actually achieved positive rental reversion, first half, 5.4%. So we also have adjusted our forecast for the full year. In last quarter, we mentioned that it's likely to be flattish. Now given that the half year has gone by and we have locked in about 5.4% in the first half, we are looking towards low single digit for the rest -- for the full year. Our gearing is very healthy at 36%. Loan covenants are well within threshold. And we have sufficient to meet the current financial and operating requirements. And you probably will be curious whether we have held back any dividend. No, we have not. We don't see a need right now. And we'll release the dividend as about 100%. So this is, by and large, the key points that I wanted to address. And we can take your questions right now.

Our first question is from Derek Tan at DBS.

Okay. Just two quick questions for me. I noticed that your Singapore margins was a little bit lower [indiscernible] on a year-on-year basis. Do you mind if you could share some color on that? I mean there may be some shocks due to the rent rebates. But if going forward, how should we look at margins? That's the first question.

On the portfolio basis -- Derek, thanks. On a portfolio basis, I think it's mainly due to the low occupancy coming from some of the buildings.

Okay. So this is looking at -- yes, for Singapore? Singapore, it's due to occupancy.

Yes, Singapore.

Okay. My next question will be on your rental reversion, I think you give us a bright spot. So you're raising your guidance on rental reversions. But I'm just curious about the fact that I know the economy is still fairly fragile. What's giving you this confidence? Is it because of what you have delivered? Or is it because what you're seeing on the ground, there's small inquiries on the ground?

Yes. Derek, I think in the first quarter, I mentioned when we made the business update, it was very positive coming from discussions that we have with tenants, right? So we have a full year where we locked in for some of the leases for the first quarter and as well as discussion that we have with the tenants for second quarter and third quarter. So you will see now that even second quarter, despite COVID -- because these discussions started 6 months, 9 months ago. And tenants do realize that they are actually below the market. Take, for example, business park, you can actually see this double digit mainly coming from business parks. And our tenants are prepared to increase the rental pay for this renewal. And as well as in U.S. -- and you know from us that day 1, we acquired this asset, it was under-rented. Despite COVID, I think it does makes sense that we continue to negotiate for mark-to-market rental, given that some of these activities are also critical for them. And during this period, there are also some changes. Inside these numbers is a mix of long leases, 3, 5 years as well as short leases like 1 year. There could also be renewal that comes in at 3 months. So when it's a short-term lease, obviously we'll ask for higher rental. And this also ties back to their business plan as they wait and see. Take, for example, logistics, if they've got a new contract to stockpile some of these essential goods. And these essential goods that's supporting the COVID right now may not be a long-term requirement. So they will come in at the short-term renewal. And that is when we are able to ask for better rates for some of the leases. So that is how the numbers have stacked up in the rental reversion.

Okay. And my last question is on acquisitions. Given there's a bit more confidence on the rent reversionary cycle, are you going to be a bit more active on that front? And how does the business park of the sponsor looks to you in terms of time line?

We continue to have a lot of very high interest for the assets of the sponsor. And the conversation, to be honest, conversation continues. We are doing what we can to unlock these assets in Singapore, mainly coming from the sponsor and as well as overseas. In fact, overseas, I would say that while we are still going through Circuit Breaker, some of the economy has actually sort of opened up during that time line. So deals are coming back. They came back as early as April, May. So we are looking at opportunities out there in overseas market. So we'll be very keen to acquire good quality assets that meets the needs for these interests, Derek.

We have a question from Joy from HSBC. Her question is how are your AEI and construction were affected? Shall we expect any delay in completion? Her second question is could you share your strategy on acquisition this year? And the third question is are you seeing change in demand pattern recently? Which sector is outperforming and underperforming?

Thanks, Joy. On AEI and construction, to be honest, the news about contractors being able to go back to work is not exactly what we are experiencing because the number of workers that were released is also quite small. So you've probably seen in our slide that has the updated TOP. So by and large, the large-scale construction, for example, Grab, UBIX and iQuest, we are looking towards a 6-month delay. So they have been pushed back by 6 months. In Melbourne, there's a small change. It's only about a month or 2, but it actually crossed the quarter, so from second quarter to third quarter. We are also watching this carefully. You probably have seen in the news today, Melbourne also spiked in terms of cases. So these are the impact to us in terms of the larger-scale development. The AEI are less impacted. It requires less workers on site. So by and large are still on track. There is one AEI that we actually completed, except that the inspectors couldn't go on site during Circuit Breaker to do the inspection. And we have to wait for the TOP, which crossed to second quarter -- third quarter right now, okay? The acquisition I mentioned just now, the sectors or the asset classes that we may be keen on continue to be what we have been acquiring in the past, the assets that supports the driver of the economy. So for example, in U.K., we'll still be keen to do logistics acquisition. As previously guided, we will not be shy from business park in the Europe market, U.K. market. Primary reason that these actually are asset classes that we think is supporting the driver of the economy. U.S. continue to have interest in tech sector -- in the tech cities. Whether they are supporting the life science, the technology or any of these research near the campuses of the universities, these are asset classes that we are keen on. We continue to monitor and track opportunities in data centers overseas as well as in Singapore, the sponsor's asset I mentioned earlier. If you are asking for change in demand pattern, I would say the demand right now in terms of our new takeup comes mainly from logistics. In terms of space because there are huge takeup, for example, for all the stockpiling, we do have one that comes in to support NTUC and they take up quite a lot of space. On the non-logistics side, we do see demand coming from the biomedical and the health care industry. We have actually locked in some, I think Kit Peng has mentioned some of the new takeup, the new tenants that comes in the biomedical companies, whether the test kit or vaccine research. These sectors that we continue to watch continue to be the same industry that we have mentioned in the past, the retail industry, companies supporting aviation, hospitality, oil and gas. So these are the sectors that we continue to watch carefully. So I hope I have answered your question, Joy.

Our next question is from Donald at Bank of America.

This is Donald. A lot of my questions have been asked, so I'll just be brief on this. And the first question is maybe on reversions. Could you give some color on the breakdown this quarter? Given some of the segment at business park have been pretty strong, Australia as well, who is -- what kind of industries and leases are driving this kind of strong reversion? That's the first question.

Okay. Trying not to disclose the specific names of the companies, but in Changi Business Park, there is a renewal by a bank, an international bank at more than 20% higher rental rate for a 3-year lease.

Why would be this so, Kit Peng? Is it because it was initially under-rented...

My bank won't be so aggressive.

Was it because it was initially under-rented? Or is it because banks are taking up satellite space now because of the whole COVID situation? Or what's the thinking there?

Well, this is a renewal. So it is the same amount of space that they are already occupying. And it is quite a large space. So because it is a large space, so initially when they came into the property, the rents were quite competitive. So now it's mark-to-market. And the market rents in the area is actually holding up very well.

Okay. So it's more -- a little bit of under-rented?

Yes.

It is under-rented. So for this lease, it's not even any of those shorter-term leases that actually compensating us with high rent. They continue to sign longer -- I mean the regular 3-year term. So we are actually quite happy that this particular tenant has given us more than 20%. As well as if you look at other sectors, the larger one is probably IDAR. IDAR continue to also perform well for its location. And again, there's also exception right there. The tenant happened to be a foreign company who continues to like that place. And they signed for about close to 20% as well increase. So the attention, you probably also want to note is high-specs, where it's actually a negative 30%. I think Kit Peng also has mentioned in her presentation that it's actually due to one lease that we have to give very good discount to retain the customer for occupancy.

So the business parks and integrated reversions was due to one lease each? Because I just want to check, if I strip these things out, what is the real reflection of rental reversion? Because certainly they can be 16%, 19%...

No, just one lease. I think as mentioned, it's one lease. For some business parks, we have, I think, more than 50 leases renewed. And it ranges between 20%, 25%. I've got teens, 27%, so it's really a variety of leases. So it's not very strong. But I guess coming from a question from the bank, Kit Peng wants to draw attention that it came from a bank. So I hope...

I doubt though. So the readthrough -- but the readthrough is a positive readthrough. Is that safe to say on the direction of the reversion?

Yes.

Okay. My second question is...

[indiscernible] are mainly positive, very few -- in fact, no, I don't see a negative here.

Yes. So the reason why I highlighted the bank is because in terms of the space, right, it's quite a large one.

And second question is on the -- your rent deployments. I appreciate that you -- and also the rebates, you have settled at a $20 million rebate expectation. Deferment is marginal. Based on your discussions on the ground, can we take it as -- this, whatever that they've been discussed in the first half and provided, should roughly be in line also going to second half, assuming no second wave, no second lockdown?

Okay. If there's no second wave, I think the rental rebates may change a little. As I mentioned, yes, it's likely to be more upfront, I would say. Because the requirement under the quality of budget is less than $100 million. Historical data that we have on the customer, it ranges. Some customers that we have data is maybe 21/8 turnover, 21/7 turnover. So they -- so long as it's less than $100 million, we took the position to release the rental rebate to them first. So this has -- or their $100 million in 21/8, 21/7, they could be on the decline. And when it comes down to 21/9, their later tax filing could be a qualified SME, which is not in our database. So looking at a trend, I think there could be more that may be qualified. I don't think it's a huge number to start off with. So in terms of SME, I think they are fairly clear that less than 20% are SME. So we have taken the position to release whatever rental rebates to those that we know in our database.

So $20 million is, on your part, is pretty prudent already, taking care of potential...

I suspect this is probably taking care of a big majority. So we think for the least amount, there could be others that may fall into this category of qualifying SME.

Understood. Last, very quickly, any conversations already on Science Park? Or is this still too early?

Science Park is probably still in discussion. Just I know exactly what you're asking.

No. I guess my question is how close -- are we closer now compared to, say, 6 months ago? Are we still at the same spot?

I think we are still probably still in discussion. With COVID, I think more likely to be delayed.

We have a question from Vijay, RHB. The question is can you give clarity on the rent rebates that has been recognized in first half 2020? Is the full $20 million being imputed? And also, you mentioned that SGD 10 million of property tax rebates has been disbursed. So will this be added back in second half once government releases it?

This is Lee Sze. I'll answer this question. The rental rebate, as mentioned by William earlier, of about $9.6 million has all been taken in, into the first half results. And for the property tax rebate, as this is just a pass-through, so there's no impact to our profit loss count.

Yes. So Vijay, does that answer your question?

There's a question from Wilson, Morgan Stanley. Given the strong leasing for logistics and business parks, what is your outlook for occupancy?

Thanks, Wilson. I've got a problem with the word strong. I don't think we are seeing strong leasing coming out for this asset class. I think this is opportunistic, where companies are responding to the COVID and taking up spaces. We do note that renewal is stronger compared to pre-COVID. Primary reason is because I think customers are not moving or relocating in order to save CapEx expenditure. I will say that the logistics demand, again I go back to what is driving the logistic demand in Singapore. The logistic demand in Singapore is driven from contract manufacturing. Currently, the bright spot that comes in for logistics are all short-term stockpile. They take up -- they almost need a space immediately to stockpile sanitizers, your rice and all these things. And they are taking, whether it's 3 months, 6 months, 9 months, 12 months, 18 months kind of leases. So for such circumstances that has presented, we think that when COVID is over, there will be a rationalization again towards whether they require those space for -- to stockpile all these essential goods. So I will go back to contract manufacturing. I think that is probably a longer-term impact to us. If we can continue to attract manufacturers here and the manufacturers continue to be able to produce, I think there will be demand for logistics warehouse space because the 3PLs will be able to get the contract from the manufacturers. But we are not certain whether this will continue to be as it is pre-COVID or will there be fall-off from any of these manufacturers. I'll give you an example. The 31 Joo Koon, the company, the tenant that is there, actually consolidated. While they are still with us, they actually consolidated into another space. They gave up one building. In terms of active marketing, we are happy to say that we continue to have interest right there for those -- for that building. We have RFP being favorably evaluated by a prospect. So we hope to be able to backfill some of these expiry of leases. If you ask me about my outlook for occupancy, demand -- new takeup is likely to be weaker, given the current situation. And if that continues to have an impact, it means that occupancy is likely to trend down. Okay. Wilson, I hope I answered your question.

Our next question is from Tan Xuan at CLSA.

I just have one question on deferment of that $3.9 million. Is that all the requests that you're getting or just those that has been accepted? And are they all coming from that 20% SMEs?

Okay. About $3.2 million is mainly SMEs. We have also assisted some of these deferment to some companies who probably in the borderline. They are large enough, but they really need help. So these are some of deferment. I mentioned, for example, they could be supporting the aviation, not a small company, but some help will be -- have been given to them. Yes.

Would you expect deferment to increase in the second half?

I'm not surprised because we still have a lot of cases being discussed with tenants. And if -- we do expect that assuming the -- we can't agree to any of this deferment, there's always an option for them to go to the assessor. So we have been clearing whatever we can, knowing that they actually have a route to go to assessor. I think what we wanted to do is to make sure that they are able to survive. And what we can do is to help them right now. But fortunately, the amount of request is not huge. There's a lot of tenants asking. But as you see, what we have done previously from first quarter to second quarter, I think you've heard me, first quarter, really not much of this kind of requests and we are still evaluating. Second quarter now is about $3.2 million. We don't think this to be a huge amount because this -- I mean it's a huge amount going forward because I think all these rental relief has been helping them. So customers do see the entire package that the government as well landlord is helping.