CapitaLand Ascendas REIT (A17U) Earnings Call Transcript & Summary

Good evening, everyone. Welcome to Ascendas Reit FY 2020 Results Presentation. Before we begin, our CEO, William, would like to give an intro -- no? Okay. So sorry about that. So welcome to Ascendas Reit FY 2020 Results Presentation. Despite the challenging environment in 2020, I am pleased that Ascendas Reit delivered a resilient DPU of $0.14688. Ascendas Reit achieved a distributable income of $538.4 million, DPU of $0.14688. Total assets as at 31st December increased to $15.1 billion. That is an 8.6% increase from the year before. Operationally, portfolio occupancy held steady at 91.7%, and we achieved a positive rental reversion of 3.8% for leases that were renewed during the year. Gearing is healthy at 32.8%. Overall, our property valuation is stable and slightly positive. When we compare the full year FY 2020 performance to the full year of 2019, gross revenue increased 13.6% driven mainly by full year contributions from the U.S. and Singapore business parts that were acquired in December 2019 as well as contributions from new acquisitions completed in the second half of 2020, that is the 2 San Francisco offices and a suburban office in Melbourne. The additional contributions mentioned above helped to cushion the effects of COVID-19, whereby we assisted tenants with $17.8 million of rental rebates and also lower occupancies at some existing properties. NPI increased in tandem with the increase in revenue. DI increased by a lower 6.7% to $538.4 million due to a lower rental support in some of our overseas properties. All in and with the additional units issued in December 2020 in anticipation of upcoming acquisitions, DPU declined 6.1% to $0.14688. Second half versus first half performance. Gross revenue at $528 million is 1.3% higher driven mainly by maiden contribution from the 2 San Francisco properties and 1 Melbourne suburban property but partially offset by lower occupancy at some properties. DI increased 4.6%, underpinned mainly by lower interest costs. During the year, we locked in attractive rates for some U.S.-dollar and Australian-dollar loans. We also refinanced $300 million of perpetual securities at a lower rate of 3%. Another reason for the higher DI is because in the first half, Galaxis contributed only 3 months, and in the second half, the full 6 months. So DPU increased 2% to $0.07418. When we compare second half of 2020 versus second half of 2019, the growth in the gross revenue NPI and DI is largely due to the acquisitions of the 28 business parks in U.S. and 2 business parks in Singapore, which were acquired in December 2019, and partially offset by lower occupancy at certain properties, rental rebates. So DPU is flat at $0.07418. As you can see from the results, the impact of COVID-19 on Ascendas Reit has been minimal. We continue to distribute fully the taxable income available for distribution to unitholders. We adopt a semiannual distribution frequency. So for the period of 1st July through 18th November 2020, a distribution of 5.7% has already been made in December due to the equity fundraising exercise. Therefore, for the remaining period, 19th December to 31st December, another $0.01678 will be made. Book closure date is 10 February, and you will be receiving the dividends on the 9th of March. Investment highlights on acquisitions. In 2020, we seized the opportunity to acquire $1.4 billion worth of properties. We scale up our overseas investments, bringing the share of overseas investments to about 34% of total investment properties, which stands at $13.7 billion. The most significant increase was in the U.S. from about $1.3 billion in 2019 to $2.1 billion in 2020. The additional $0.8 billion of new investments continues to be located in tech-driven cities in U.S. The 2 properties in San Francisco are well-located. They are new and their leased to high-quality tenants for an average of 9 years. This is followed closely by investments into Australia, which increased by about $0.6 billion. The new acquisitions here comprised of suburban office and logistics properties, but mainly in the Macquarie Park Sydney location, which is an attractive alternative for companies looking to decentralize, cut costs and reduce travel time for staff. The NPI yields for these acquisitions ranged 5.6% to 6.2% in Australia and 4.9% in U.S. On asset enhancement, we completed 7 projects totaling $34.2 million. In the final quarter of the financial year, we completed Aperia, a mixed-use development located in the Kallang area. The tower, lobby, common corridors have been enhanced. There's also a new playground to create more vibrancy and attract families with young children with this amenity. Divestments. We continued to streamline our portfolio with the divestment of 3 properties in Singapore. Together, they generated proceeds of $125 million. Moving on to capital management. Ascendas Reit ended the financial year with a very sound capital profile. Gearing is healthy at 33%, following the private placement and preferential offering in November, December, which successfully raised about $1.2 billion. So there is plenty of debt headroom. And this works out to be $2 billion, $3 billion before gearing reaches 40% to 45%. Meanwhile, there is sufficient operating cash flow and $278 million in cash to meet current financial and operational obligations. Debt maturity profile is an average of 3.7 years. And to minimize any refinancing risks, not more than 20% of our total debt of $4.8 billion will be due for refinancing in any 1 year. So this works out to be about $950 million a year. The financial metrics are at very healthy levels, far exceeding the required minimum standard set by bank loan covenant. Interest costs are lower at 2.7% versus 2.9% in the previous financial year. As mentioned earlier, we locked in attractive rates for some USD and AUD loans. We also refinanced some bonds, and perpetual securities had very good pricing. A3 Moody's rating is maintained, providing us with financial flexibility and strong access to capital. We continue to put in place a high level of natural hedge for all our overseas investment to minimize the effects of adverse exchange rate fluctuations. So in Australia, we have a total investment of about AUD 1.9 billion. So about 70% of the assets is funded by AUD-denominated debt. So in U.K., it's 100% hedged. And in the U.S., it is 60%. Valuation. Overall, it is still stable to slightly positive. Same-store portfolio is stable at $12.83 billion. Head rates compressed further in Australia for both the logistics and suburban office properties. Portfolio occupancy, also generally stable, above portfolio level as well as country level. This is shown on the right side of the chart. In Singapore, there was some movement of tenants, mainly due to the nonrenewal of a lease at 11 Changi North. So the occupancy here is about 88.4%. In U.S., the occupancy is up to 92.9%, and this is partly due to the newly acquired San Francisco properties. So on the same-store basis, occupancy is stable at 91.9%. Australia occupancy here remains high at 97.4%. Similarly, in the U.K., 97.5%. Sources of new demand in 4Q. In the fourth quarter, we saw some demand from the biomedical-related tenants. This is highlighted in the right-hand pie chart, the area shaded in pink, followed by energy and chemicals industry that is in the dark blue. So a new tenant in the solar industry took up quite a sizable space in a high-specs property in the 4Q. And then we also saw some demand from food manufacturers. So that is in the red shaded area, and they are located typically in the light industrial properties. This slide shows the new demand for the full year FY 2020. So in 2020, some government agency took up space in our business park properties, so this is captured in the pie chart on the right, the area shaded in pink, where you see the 22.7%. The lease commitment is for 5 to 15 years, providing Ascendas Reit with a stable income stream. The other key sector is logistics, which is in purple color. Rental reversion. Overall, the portfolio achieved an average rental reversion of 3.8% for the full year, and this is in line with our guidance throughout the financial year. As you can see in the first column, boxed up in orange, in Singapore, we were able to renew leases at higher rents for all the clusters, except the high-specs and logistics segment. In the U.S., a 16.6% rental -- positive rental reversion was achieved. In Australia, 14%. We have also provided the rental reversion numbers for 4Q, and this is in the rate box on the further right. In Singapore, all the clusters had negative rental reversions, except for integrated development amenities, retail cluster. In the U.S., a positive rental reversion of 18.8% was achieved for leases in Portland. Going -- looking ahead for FY 2021, we are expecting rental reversions to be in the low single-digit range. Portfolio rail has increased to 4.1 years from 3.9 years at half time. On a portfolio level, 16.3% of rental income will be due for renewal in FY 2021. In Singapore, 20.9% of rental income is still for renewal. This includes 3 single-lease buildings. They are in the process of negotiation. So far, the indication is that the 2 larger ones are likely to renew. U.S., 7% will be coming due for renewal. They're mostly in the Portland and San Diego location. Australia, 5.7% coming due and they are mostly logistics properties in terms of NLA. In the U.K., about 5.5% and they're mostly located in the West Midlands area. Ongoing projects. About $328 million worth of projects are undergoing development and redevelopment for asset repositioning and enhancements to improve the returns of the existing portfolio. This includes the development of a build to suit for Grab in the one-north location as well as the redevelopment of UBIX, a high-specs property, and iQuest@IBP, a business park property. Due to COVID-19, some of our projects have been delayed by about 6 months. In the fourth quarter, we embarked on a new AEI at Changi Logistics Centre to upgrade the power transformer, warehouse base, toilets and lift. Please, next slide. Ascendas Reit portfolio is large and diversified. Total investment properties now stands at $13.7 billion. So geographically, the split is Singapore, 66%; U.S., 15%; Australia, 13%; and the U.K., 6%. By asset class, business parks, suburban office properties account for almost half of our investment property; industrial, 27%; and logistics, 24%. We have more than 1,450 tenants operating in more than 20 industries. And finally, we have a portfolio comprising business parks, logistics, high-specs segments across selected strong markets. In fact, our diversified portfolio has provided us a very stable performance during this FY 2020 COVID period. Although there remains some uncertainty worldwide due to the COVID-19 resurgence, we are much better prepared and we'll continue to develop and strengthen our business moving into 2021. So this brings us to the end of FY 2020 results presentation. Thank you very much.

Thank you, Kit Peng. Before we proceed, I would like to introduce our panelists today. First, we have the management team members from the manager of Ascendas Reit, Mr. William Tay, CEO; Ms. Koo Lee Sze, CFO; Ms. Yeow Kit Peng, Head of Capital Markets and Investor Relations; Mr. Lawden Tan, Head of Investments and Business Development; and Ms. Serena Teo, Head of Portfolio Management. We also have with us the Managing Directors from CapitaLand International. First, we have Mr. Dang Phan, Managing Director, CapitaLand USA; Mr. Paul Toussaint, Managing Director, CapitaLand Australia; and finally, Ms. Michelle Lee, Managing Director, Europe and Investment and Portfolio Management. I would like to invite William to say a few words before we open for Q&A.

Thanks, Wylyn. Good evening to all. You have heard Kit Peng give a presentation of our performance for 2020. Just let me give a quick summary to that. As we have seen, in 2020, our operational metrics has remained very stable. Occupancy is at 91.7%, and we have achieved positive rental reversion of 3.8% as per guidance of a low single digit. We did experience some minimal impact from COVID-19. It has given us a dent to our Singapore portfolio, primarily coming from rent relief about $17.8 million as well as rent deferment about $4 million, which is requested by tenants that we have worked out in terms of restructuring their leases. The DPU decline is also affected by occupancy in some of the properties. In 3Q, we have make known that there is a building, CINTECH II, which has a nonrenewal. So occupancy has dropped from 100% to 0% in Science Park. In 4Q, a logistic property in Changi North has also experienced a nonrenewal. The customers in the logistics operator has -- some of that has moved to our logistics facility in other location. In fact, due to COVID, our logistics, as you can see from the slides, our logistics portfolio occupancy has the largest improvement. We are about close to 94% occupancy for logistics. CINTECH II, while it's reported as nonrenewal in 3Q, we have found a tenant to take up the whole building. It will be -- it is actually occupied right now by a government agency. So the other decline by -- on DPU also because of divestment. Early in the year, we have divested 3 assets and one-off asset, Wisma Gulab. It was 100% occupied, and now we have divested that, which is a -- had a declined NPI. Overall, I think we have experienced minimal impact from COVID in overseas market. As you have seen, occupancy has remained strong. Rental relief is minimal and also deferment that we have restructured some of the leases in U.K., and all this has come in as a minimal impact. Overall, our standing right now, if you look at A-REIT, as Kit Peng has mentioned, we are large. If you looked at the asset class exposure that we have, we are about close to 75% in business park and logistics. So our business park includes urban office as well as tech offices in the U.S. So we are -- we believe that we are prepared and resilient and this COVID has actually tested our resilience, and we think that we have achieved a good performance in 2020, and we are well-prepared to continue this performance in 2021. Thanks, Wylyn.

Thank you, William. We will now start our Q&A session. [Operator Instructions] Ray, over to you, please.

[Operator Instructions] Our first question is from Matthew Song at JPMorgan.

It's Mervin here. Maybe you can start off with rental reversions on the logistics portfolio in Singapore. It's -- the decrease has moderated from the third Q. I'm just trying to understand what's driving the minus 7% given commentary from some consultants that -- or some of your peers that logistic rents are stable and not largely increasing? And then my second question in terms of guidance for rental reversions is low single digits. Can you give us some color in terms of breakdown for Singapore, U.S., Australia and U.K. for this coming year?

Thanks, Mervin. For logistics, as I mentioned, in terms of rental reversion, it actually depends on the leases that come due in each of the quarter. And then we have experienced some, if you like, rental that was much higher in preceding leases and they come due for renewal. And especially in logistics right now, while we see an increase in demand, the rental has also been a little bit more -- there's pressure in terms of rental because there's supply in the market. And during this time, I think most people will be -- most tenants and landlords has -- tenants have options, and landlord, we want to be able to give competitive rent to encourage a relocation. So we have to be mindful of this as we pitch our leases to these tenants, which is why in 4Q, you see a drop in the rental reversion. Your question about low single digit across -- in 2021 across different markets. I would say all the markets will probably experience the same single-digit range across Singapore, U.S., Australia and U.K.

We have a few questions relating to rent reversions from the webcast. So I'll ask them on behalf of the participants. This question is from Donald, Bank of America. Singapore rent reversions were mostly negative in the 4Q, but you are expecting low single-digit rent reversion in 2021. Why so? Is it mostly driven by positive reversions expected outside Singapore?

Thanks, Donald. As I mentioned just now, I think across the different markets, we are likely to see flattish to low single digit in each of the market. The negative rental reversion in 4Q, especially, if you like, across third Q as well, different customers, different industries has different experience in terms of amount of rental that they can pay. Going back to Mervin's question about logistics, for example, we do have freight forwarder in 4Q. They are experiencing difficulty in their business. While they take our logistics warehouse, we have to be very mindful of how much they can pay, and we did experience a negative reversion from some of these logistic players. In fact, in other clusters, the tenants that came in from negative reversions comes from a variety of industries. We do have, for example, IT companies, communication companies, equipment companies who we have experienced negative reversion. For the positive ones, we also included technology, biomed as well as network companies that have given us positive. So if you look at in the electronics industry, it's a range of positive to negative depending on where the market is and their prior leases that they have with us. Going forward, I think this uncertainty continues. So we do not expect huge rental reversions. But looking at the leases that comes due next year, and the discussions that we have right now, we always have some reversion renewal done. Some are likely to renew as well. And of course, we will expect some not to renew. Based on the leases that we have right now and the discussion to date, we believe that we still can turn in a low single-digit reversion.

Another question relating to rent reversions from Wai-Fai, UBS. 2020 rent reversions were strong in the U.S. and Australia. Is that sustainable in 2021? Should we continue to expect double-digit rent reversion?

Yes. These 2 markets has exceptional growth in 2020. We do experience right now, while leasing has been -- generally in this market, leasing volume has come down, you expect higher incentive to retain them. So overall, we believe that the rent reversion will come down to flat to single-digit instead of double-digit that we experienced in 2020.

Another question from Derrick Heng from Macquarie. Negative rent reversions in Singapore, looking for high-specs and DC, is it largely from high-specs or DC NOI?

There are no renewals due for DC. So they are mainly the high-spec tenants. In high-specs, we do see some challenges from communications equipment. So these are the tenants that is affected, likely to be from COVID. This industry is probably the one that is probably worst hit.

Okay. Ray, we'll take the question from the con call.

Our next question is from Donald Chua at Bank of America.

William, sorry to be asking on the webcast and on the con call. Can you hear me?

Yes, yes, yes.

Okay. So a couple of questions. One is on your data center acquisition in Europe. What's taking so long in the confirmation of the acquisition? That's the first question. Second is, I guess, well, every time, I will be asking. Science Park development, any progress this year? Is it going to be this year? And also relating to this is, I think the Singapore government has come out to say that they want to encourage sustainable data center expansion plan. Will the Science Park redevelopment include a data center format for the future? That's the second question. And third is on waivers. How much rent assistance will you be expecting for 2021 as compared to last year?

Thanks, Donald. For DC, we mentioned it's a portfolio across a few countries in Europe. It takes time to do our due di and to negotiate with a vendor. We hope to close soon. I wonder why it gave you the impression there's a delay. I think we are still on track, and we hope to be able to announce that acquisition soon. So this pipeline is still on the table. And there's -- we are going through all the necessary work as a product manager to make sure that we are acquiring well, making sure that the title and all the due diligence is done properly. We are making sure as well through the asset audits that we are buying in terms of preparing for any future CapEx plans. You mentioned about sustainable DC. I think this is not just in Singapore. Across in other jurisdictions like Europe, I think sustainability is also a key driver behind going towards a green data center. So we hope that with this acquisition, we are also well positioned to be able to have a foothold in the data center and it's definitely in our interest to make sure our data center is green over time, okay? With regards to your question about Science Park redevelopment, it is still in the works. We definitely hope that we will be able to make announcements soon. We are still working with the government authorities with regards to our development plans. We definitely make this known in the right time. On your question on whether that will include data center in Science Park. I'll say no. Data center is quite specific in regards to the location that they should be in because the good location will attract customers easily. We actually do have a data center operator in Science Park, but in fact, they have moved out, and we have replaced their building with somebody else, a government agency. In terms of rent assistance in 2021, I think we -- for 2020, we believe the bulk of the assistance has been given out. There could be some that comes in via the COVID 4 bill, which essentially has the right to PT. Some of these assistance that we are working with the tenants with regards to their request for PT or reduce in rental, and this is very small, a handful. In fact, less than 5. So it depends on whether -- how we have negotiated and whether the tenants can accept some of these restructured leases. I think we are probably about 17.8 -- $17.2 million in Singapore is probably what we will see as close to final, I would say, close to final. Probably small amount, maybe $1 million, $2 million that comes in for 2021.

Okay. There's a question on the webcast from Joy, HSBC. Could you give a bit more color on the leasing environment in Singapore? What other tenants you're seeing nonrenewing? With the incoming companies in the tech and pharmaceutical industries, are there increasing demand for build to suits? Are you seeing increase in development costs? And would that affect return of any of the ongoing AEI? And another question on U.K. logistics. Have you seen increase in demand? Noticed that there was -- there are 3 assets that have yet to be leased. Any update on that?

Thanks, Joy, for your question. You have many questions there. Maybe just to start off with the leasing environment that you asked for in Singapore nonrenewals. The market continue to be a bit challenging right now. Tenants, I mentioned, tenants have options and landlords are very eager to close them. There's also huge supply coming onstream in the next 3 years. While we do see that the -- I would say that demand coming up from new -- that's to A-REIT, especially probably new to Singapore has increased, less of a local demand. So we do see some of these customers that comes into Singapore tapping on the Singapore's ability to -- ability with a source of talent pool as well as the transparent market. And I suppose Singapore's demonstration of the way they have handled COVID has also gave confidence to some of these foreign investors. So I do not know whether I mentioned this before, I probably have, as we have also hosted overseas visitors coming into Singapore in the last few months. We got to make sure that we apply the permits for them to come in and they go through the quarantine and then the checks before they can visit our sites. So there are increased demand coming from -- in some of these overseas industries in the likes of technology, in the likes of machine makers as well as biomed. Whether they are build to suit, we do not see an increase in build to suit. We previously mentioned, we have some pipelines for build to suit, so they were pre-COVID. And with COVID, I think some of these industries require almost immediate available space for fit-out. So they ranges between multi-tenanted buildings. If the new needs large spaces, we were definitely booked on CTS. As I mentioned, we've mentioned previously where we can convert to suit for some of these tenants who need large space of entire building. We're also mindful that because of COVID, construction cost, as you have asked for as well, development cost time lines are affected. In our discussion with contractors, in our experience with our existing projects, we do some -- experience some small increase because their contract there is caught with a new requirement. For example, it's ranged between 2% to 3%. But if you were to do a brand-new contract to be tendered out today, we suspect it will not just be 2%, 3%, probably in the mid-teens kind of increase. For the U.K. front, as you have rightly pointed out, that from our acquisition, there were 3 vacancies but these 3 vacancies are very small vacancies. When we acquired them, we had renter guarantee. Because of the size, as you have seen right now, it still continue to be vacant. But we do see some increased leasing volume, increase in leasing volume in U.K. Comparing 4Q to 3Q, what we understand that the leasing volume has increased about 10% for the logistics sector. The retail -- online retail sales has probably hit about 30% -- expected to hit about 30% in 2020. I think this will continue to be a trend for U.K. For those who have impacted by Brexit -- for some of the tenants or industries that's impacted by Brexit, what we understand from these tenants is it's a matter of inconvenience that they have experienced instead of a severe disruption to their supply chain. So I think they're still positive over in the U.K.

Ray, may I check if there are any questions from the conference call participants?

Yes, we have. Shall we open the questions?

Yes, please.

Okay. Our next question is from Brandon out of Citi.

Just couple of questions for me on the U.S. front. Can you update us whether -- how Stripe is doing with their lease? I understand that they are still going ahead with the Oyster Point movement, so is that still ongoing? And have you secured any new tenants for the space? That's my first question. And the second question is with regards to recent leasing negotiations with your tenants in the U.S. Are they -- have they been giving you interest in that you're going to give them more space? Or are they asking for more rent cuts because of all of the work-from-home impact? Yes, those two.

Thanks, Brandon. For acquisition of the 2 San Francisco building, Stripe has a 7-years lease with us. While they have announced the move to Oyster Point, even before we were looking at this acquisition opportunity, they still are current in their rental obligation. The last that we met them, they expressed that they are experiencing probably about 10% to 20% of workers going back to office to work. They are going ahead with their relocation to the new facility. In fact, we understand they are putting in -- they're reviewing their needs, and we know that Stripe is actually, in terms of quality of tenant, they are very good quality. In fact, we hope that, as they expand, they may then look at retaining some of this space that they have in our building. We are not looking at subleasing. The subleasing is by Stripe. We understand there are probably some viewings, but nothing concrete has come out in terms of subleasing that space, okay? The other question about the leasing in U.S., yes, different markets do experience different -- give us even different experience. Some markets like Portland, probably we do see a lower leasing volume. We do expect, as you rightly pointed out, we do expect higher incentive to retain them. They are probably also looking at shorter leases to be able to be flexible in their lease commitment. This is mainly in Portland. In San Diego, it's fairly stable, and we do see increase in demand from the technology sector. Raleigh as well is fairly stable due to limited supply, okay? I hope I've given you some color. Maybe I can ask Dang to give you a little bit more color on the leasing market in the U.S. Dang, are you on the line?

Yes, I am. Thank you very much, William. I'm happy to add some more color. I, of course, generally very much agree with William's overall assessment. I think in particular, we have a cyclical slowdown in 2020 and early 2021 on leasing, but we do expect the volume to pick up in the second half and we're already seeing early indications of tenants coming back into the market to look at space on a preliminary basis. And in particular, we think that San Diego and Raleigh will be quite stable to strong in the medium term, San Diego driven by a very diverse tenant base driven by Apple coming to San Diego and taking 1 million square feet. And then you also have the 5G, wireless, defense and gaming industry being very strong there. So I think in the medium term, the outlook is good. Life science is also a very meaningful and growing sector in San Diego. And so the overall outlook for -- in San Diego, I think, is quite good. Raleigh is one of those markets in the Southeast, which is business-friendly, lower cost, more space. And it's also driven by tech and a nascent growth in life science. So it's a very stable corporate market. It is cyclically slow at this time. But in the medium term, we think the situation there will be very good as well.

Thanks, Dang.

Ray, do we have more questions, please?

Our next question is from Dale at DBS.

William, Dale here. Just 2 questions from me. I just want to add on to Joy's question with regards to the increase in the construction costs. How has this affected the construction of Grab HQ? And is there any chance of Grab HQ getting completed earlier than this second quarter, as you mentioned? Next question is just now, Kit Peng mentioned that there are 2 single tenants in Singapore that are ready to renew. Are you able to share how's the discussion right now? Are we expecting a bit of a positive? And if so, what kind of sectors are they from?

Okay. Maybe I'll take your first question. And the SLB tenant, maybe I'll ask Serena to take. For construction costs, I mentioned because Grab is a rare locked-in contract, we don't see a huge impact to the construction costs. But time line has been delayed to second Q. We are still looking at second Q right now. In fact, if you ask whether it will come in earlier, we hope so. But the chance of it coming earlier is very remote. In fact, we do risk it slipping to maybe even 3Q. So that is for Grab. But we believe that the -- it will be completed this year. Construction cost is still not a big problem because of -- it's a lock-in contract, okay? On the second question with regards to the lease renewal, Ms. Serena, you can take that question.

Yes. Dale, this is Serena. Thanks for the question. I think earlier, Kit Peng mentioned that in the Singapore portfolio for 2021, about 20-plus percent of leases will come due for renewal, among which during her presentation, she did mention that there were 3 SLBs that will come due for renewal this year. She also gave an update that we are close to signing 2 of them, which is correct. It is still on track. The 2 that we feel quite likely to renew with us are in 2 of our logistics properties, both in logistics. So we think that the chances of them renewing with us is good because their business fundamentals still remain strong at this point. In the third property, the reason why we left silent on that is also because it's mainly not because of the tenants' business, but more because we have plans for that property. So we might see a nonrenewal for that property in order for us to work out our plans for -- work our alternate plans for that property. So hopefully, that gives you a direct answer to the question that you are asking.

Ray, do we have another question from the conference call participants?

Yes. Our next question is from Derek Tan at DBS.

Just 2 questions from me. I mean the first question is, I mean, William, can you give us an input on your thoughts on retention rates next year across your major markets? Do you like get a sense whether -- as you just continue push reversions, will tenants back off or take a smaller space? So I'm just wondering whether your occupancy remains stable. My second question is on Australia. I know the logistics portfolio is fairly solid. But just going forward, I mean, are we still expecting your rental reversions to be significant? And specially for your suburban office in Australia, could you give us some sense on the sources of demand, given that your occupancies have been quite stagnant for a while? Right. That's all.

Thanks, Derek. For retention, it's a balance of keeping the occupancy as well as the lease income that we can derive from each of these renewal. You are right, if we push hard -- very hard on our rental, it's quite obvious, as I mentioned, there are many landlords waiting to offer a good rental for their relocation. In fact, I mentioned previously in a few calls that we have in the whole of our 2020, while we do expect that tenants are more likely to retain with us as compared to relocation because CapEx is probably a more difficult approval from their management, but in fact, I think our experience in 2020 is that retention continues to be about 60% to 70%, as we have experienced in pre-COVID. So tenants do continue to make their choices. And I believe their choices are felt if they were to relocate to another building. Part of the other nonrenewal probably includes as well of folding up their business. They may -- the other excuse that I do hear is that they may not be folding up their business, but they are rationalizing in terms of their demand for space, and with work from home, some could have looked at the flexible options like a co-working as a bridge to a more permanent space. So with that, we also have experienced very good occupancy in our Workshop, our 2 co-working space. In Ang Mo Kio, it's about 90 -- over 96%. And then in Aperia, our new Workshop that came in, in 2020, we have experienced about 60% occupancy. So tenants have choices, and retention continued about 60%, 70%. Maybe for Australia, I'd maybe ask Paul. Are you on the line? Maybe you'd like to give some color in terms of our leasing market in Australia?