CapitaLand China Trust (AU8U) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to CLCT's Full Year 2025 Analyst and Media Briefing. I'm Xiuyi, Investor Relations for CLCT. Joining me today, we have our CEO, Gerry; CFO, Joanne; CFO Designate, Lintong; and Head of IPM, You Hong. For this briefing, we will start with a brief presentation followed by a Q&A session. [Operator Instructions] With that, I'll now hand over the time to Gerry. Please go ahead.

Welcome, everyone, to CLCT's Full Year 2025 Financial Results Briefing. Thank you for making time to attend our presentation this morning. First -- CLCT is the first and largest Chinese-focused S-REIT, and we uniquely offer connectivity to both S-REIT and C-REIT markets. Our total assets now is SGD 4.5 billion. We have 8 retail malls, 5 business parks and 4 logistics parks. We have predominantly Tier 1 and Tier 2 city exposure. Distribution yield based on our announced FY '25 -- full year '25 DPU is 6.2%. In terms of our asset allocation, retail is our largest and most resilient asset class at 69% of gross rental income. These bread and butter malls are relatively defensive and benefits from government initiatives to boost domestic consumption. We also have new economy assets, business parks, logistics parks, which form a smaller part of our portfolio at 31%, providing us some exposure to China's efforts to grow technology and innovation, including key sectors like semiconductors, electronics and ICT. Our retail portfolio -- for our retail portfolio, one of the key highlights in 2025 was our establishment and listing of our C-REIT platform, CLCR on Shanghai Stock Exchange together with our sponsor. We managed to securitize one of CLCT's asset, CapitaMall Yuhuating, which is from a Tier 2 city in Changsha, into the C-REIT CLCR at a premium to our valuation. CLCR has -- the C-REIT has also done well. And since listing has traded up almost 20% year-to-date. So all the transactions that we have done in 2025 validate the value and liquidity of our retail assets, and CLCT will continue to seek opportunities to utilize this unique S-REIT, C-REIT connection to benefit our unitholders. This also gave us greater confidence to actively source for new retail assets for investments where we want to repeat what we have done in Yuhuating's case, that is we buy well at value with our operational and AI expertise and recycle at a good price within a relatively short period of time. While we are happy with the successful divestment of Yuhuating and demonstration of our retail value proposition, we did lose some income, which we will need to replenish over time. This would show up in our full year revenue and NPI, which I will now address. For full year '25, overall business conditions have been soft. Among the 3 sectors, retail has relative resilience. Logistics, we have stabilized amidst our rent resets for that portfolio, but business park has seen weak demand. Portfolio gross revenue and NPI dropped about 9% year-on-year. Excluding Yuhuating, on same-store basis, portfolio GR and -- gross revenue and NPI narrows -- the drop narrows to about negative 6% year-on-year. For Retail, revenue declined by 9.6%, but narrows to 4.9% on a same-store basis, taking -- excluding the Yuhuating factor, which was the biggest factor for retail. This year, we have embarked also on a number of AEIs in Xizhimen, Rock Square, Wangjing and Xuefu, involving anchor or mini anchors upgrading. The AEIs at downtime around 4 to 9 months, but that will benefit us when the AEIs are completed and started fully contributing by year-end of 2025. Retail has also been affected by some of the continuing positioning at our weakest mall Xinnan and general weaker overall rents and occupancy in Grand Canyon mall and Wangjing. Next, for Business Park, our revenue declined by 9% year-on-year due to lower rents and occupancy in Hangzhou and Xi'an. Main factors were the pre-termination of the serviced office master tenants in Hangzhou Phase 2 and delays for AIT in backfilling the vacancy created from a large tenant relocation a year ago. We're happy to share that AIT has made good progress. Now AIT is at 85% occupancy, although most of it came in, in the last quarter of 2025. For Hangzhou Phase 2 for that -- for the serviced office operator backfilling, we have backfilled to 70% with single-digit positive reversion for the area that we have backfilled. In terms of occupancy for BP, first quarter of 2025 was the lowest point for BP occupancy at 83.7%, but we have since worked hard to lease it up. And by the end of the year, the whole BP portfolio had an occupancy of 86.7%. Logistics, our smaller sector generally had seen improvement as we have leased out our previously vacant Shanghai Fengxian asset and the lease was for a period of 8 years, a long-term lease. And we have also improved occupancy in Kunshan and Chengdu. So the whole lot portfolio looks in a much better shape than maybe a year plus ago. For our full year occupancy, it ends at 98.1%, which is higher than a year ago. DPU-wise, DPU for second half 2025 is SGD 0.0233. Full year '25 is at SGD 0.0482, right? So this SGD 0.0233, this includes a onetime top-up distribution for second half of SGD 0.0033, which amounts to about SGD 5.7 million. That roughly equates the loss DI from Yuhuating, which we divested in 2025. Our onetime top-up distribution is drawn from our past divestment gains that CLCT has done and will be funded through debt and we only have a marginal plus 0.1% gearing effect. What we seek to do here is to provide unitholders with some income stability despite difficult conditions, while we look for a quality replacement asset to replenish and hopefully exceed the lost income from Yuhuating. I would also like to emphasize, again, this interim measure. So what management is doing is therefore, focusing on finding a good asset this year in 2026 as well as working on different ways to deliver further cost savings in financial costs will boost our DPU, while continuing to work on preparations for further asset securitization to the C-REIT on our older mature retail assets, which will, of course, expand our pathway for portfolio reconstitution and rejuvenation for our assets in our portfolio. For retail assets, there's been an improvement in shopper traffic and tenant sales in 2025. On the whole, for the full year, traffic grew 2.7% year-on-year and tenant sales grew 2.1%. 4Q was a strong quarter for the year, outperforming 9 months with 4% to 5% growth in both traffic and sales as AI efforts kicked in, especially with the full reopening of the new supermarkets in Xuefu, Wangjing and Xizhimen, all of which the results came in, in the 4Q. In fact, for the supermarkets, we can see in 4Q, sales growth was plus 47%, which is a very strong 4Q number once supermarkets were open. Overall tenant sales now are above pre-COVID levels at slightly above -- about 2% above pre-COVID levels. In terms of overall occupancy costs, we are at 17.5%. That's a healthy level compared to pre-COVID range of above 20%. Trade cats, they have done well. Maybe I'll just mention a few highlights here. F&B, we had a positive 5.8% year-on-year. That's the biggest trade cat for retail for us at 39.4%. So there was strong acceleration in sales in 3Q and 4Q, driven by introduction of new high-performing trending brands, which have been pull factors for our shoppers. Growth was broad-based. You have old local favorites like Haidilao, and new ones like [indiscernible], Japanese Sushi Chain, Sushiro and Genki Sushi, and even Starbucks delivered growth. And we have also IT, which grew 9.3% for the full year. This sector is -- this trade cat is boosted by consumption vouchers as well as expansion of more digital brands during our AEIs in Xuefu and Wangjing, really to cater for the evolving consumer demand and broaden the appeal in the malls, right? So we -- in this sector, we have -- in this category, we have Apple, DJI, Xiaomi. These are some of the brands that have good growth in 2025. Jewelry and watches also did well, plus 18.3%. That's driven by increasing demand for investment in [ gold ]. Sales increased from established brands, especially in Beijing. Toys and hobbies done very well this year, plus 52.3%. This basically stems from the continued popularity of collectible toys market. POP MART, for example, year-on-year, the sales went up 100%. And MINISO, also a strong, very strong double-digit number. So they are still growing strong in this category. We also benefited from our AEIs. The supermarket upgrading in Wangjing, Xuefu and Xizhimen, as I mentioned, powered supermarket category in 4Q by 47% sales growth, which we expect to spill over to first half 2026, helping to reverse the supermarket downtrend in sales that we have seen in first half of 2025. Decathlon, which was introduced in one of the mini anchor AEIs in Rock Square in October has also done successfully and has basically produced sales growth from the sporting goods category for us. In 4Q, the sporting goods category actually grew 39%, right, largely due to the Decathlon's introduction. Of course, there are weaker trade cats that offset our general sales growth. We have mentioned before, fashion and beauty and health has been trending downwards. And for the full year, they have trended downwards, about single digits in sales for the full year. In terms of occupancy, our malls continue to be highly resilient with high retail occupancy of 97.2%, so similar to 3Q, with almost all malls above 95% occupancy, except for Xi'an, which continues to require some repositioning to attract shoppers. Rental reversion-wise, we clocked full year at negative 2.4%. We are affected by EV consolidation, which we have spoke about in previous quarters. And we are also -- and we are pivoting to less EV reliance across our portfolio. So without EV, the EV impact, the rental reversion for retail is actually negative 0.6%. For 2026, we still have some EV tenants to deal with, but that will be at half the number of lease that will expire when you compare 2026 and 2025. So there will be a lesser impact. So reversions probably slightly stronger than the 2025 print of minus 2.4%, but will still be mildly negative. In terms of business parks, our business park occupancy, which forms 27% of GRI, this sector generally faced weaker demand and ample supply. Our business park overall occupancy is now at 86.7%. This is an improvement from 3Q, which was at 85.2% due to our improvement in Xi'an AIT leasing progress. Our business parks assets generally outperformed their submarkets despite the general soft leasing environment for this sector. Xinsu, our strongest business park asset continued to have a strong year at 95% occupancy. For the Xi'an cluster, we have made good progress, especially with electronics and ICT tenants. AIT asset occupancy is now at 85.2%, and we have made big strides to backfill the major tenant that was relocated 1 year ago. So you can see that quarter-to-quarter, we actually improved from 75.4% in third quarter to 85.2% currently. But one of the bigger tenants that came in to the backfill space was ChangXin Memory, which took up half the space of that major tenant, which relocated. And ChangXin Memory is basically the largest DRAM manufacturer in China and is known as a domestic alternative, right, to Samsung, SK Hynix and Micron. So it's an important tenant, very much in team with the kind of companies that are being supported by the government in China nowadays. AIH also improved quarter-to-quarter at 86.7% occupancy. For Hangzhou, Hangzhou Phase 1 and 2, this cluster has a more challenging leasing environment compared to the rest of the BP clusters with lots of supply. Hangzhou Phase 1 occupancy slipped versus 3Q to 73.6% due to the loss of a large cultural tenant, about 2,600 square meters, which we are looking to build up. Hangzhou Phase 2, we have been working through our serviced office master tenants, which we have disclosed before, which, over the course of 2025, we basically took back about 55,000 square meters, and we have successfully released 70% of the area to our subtenants. And we managed to push by the end of the year, the overall Hangzhou Phase 2 occupancy to 74.9% for the full year versus 3Q, which was 70.7%. Overall, BP reversions at minus 8.1%, driven mostly by Xi'an and Hangzhou, where we are pursuing tenant occupancies in a soft market. For 2026 for BP, we feel that reversions will likely be in the same order of this year of 2025. For logistics part, the smallest segment, 3.7% of GRI. Our logistics portfolio have stabilized. Our Shanghai Fengxian asset, which has not leased for much of 2024 is now fully leased and rent paying from July 2025. And we have also improvements in Chengdu that drove our occupancy. So all this drove our occupancy up to 98.1% for the full year, higher than 3Q of 96.6%. In terms of bringing up the occupancy, we have required to basically use lower rents to get the portfolio lease up, right? So you can see that the rental reversion for 2025 for logistics is minus 24%. Also, it was -- there was some situation where we proactively renewed some of the major tenants so that 2026 will be a very stable year. So all our efforts combined, we feel that going forward for this 2026 year, our rents have bottomed in our logistics portfolio, and we aim to maintain the full occupancy at these rent levels. Valuation-wise, relatively stable valuations versus previous years. Slight overall drop of 0.8% with cap rate of largely unchanged. And the larger impairments were in assets with weaker performance, so Xizhimen, Aidemengdun and Shanghai Fengxian. Shanghai Fengxian had a bigger percentage drop to reflect the rent adjustment that we needed to do to sign in the long-term lease, which will provide income stability for this asset. Next, we'll go to capital management. I will let Lintong from our finance team to take that through.

Okay. Thank you, Gerry. So for FY 2025, CLCT continued to maintain healthy financial position. Our year-end total debt has reduced by SGD 150 million on a year-on-year basis. This is after Yuhuating divestment as well as the perpetual securities replacement in September 2025. Our year-end aggregate leverage is 40.7%, which is a significant improvement of almost 1.2% year-on-year and 0.6% from Q3. This is attributable to stabilizing renminbi and, of course, Yuhuating divestment proceeds. And we have also accelerated cross-border cash movement from China to Singapore, notwithstanding the property valuation has a slight dip. So through 2025, we have stepped up our balance sheet natural hedge effort to make our gearing less sensitive to FX movement. We will continue to bring cash from Singapore to China to maintain our aggregate leverage level. Average cost of debt has also gradually decreasing, now is at 3.32%, almost 20 basis point year-on-year improvement. CLCT has benefited from interest rate decrease, both in China and Singapore. I would say CLCT has more exposure to renminbi borrowing and renminbi interest rate right now, which will give us more interest savings if renminbi rate continue to ease. Our ICR has decreased slightly to 2.8x. This is mainly due to weaker asset performance. But this ICR is still much higher than MAS 1.5x limit under required stress test scenario of 100 basis point increase in cost of borrowing or 10% decrease in EBITDA, our ICR level are still very comfortable. And overall, for our distribution income FX hedge, we have 72% of our distribution income has been hedged from renminbi to Sing dollar. In Q4 2025, we successfully refinanced some Sing dollar loans with renminbi term loan, which boost our natural hedge and extended our debt maturity profile. Now our renminbi-denominated debt has increased to 60% of our total debt portfolio, up from 35% 1 year ago. This has exceeded our earlier target of 50% by the end of 2025. And we have also forward hedged to improve -- further improve our natural hedge position and reduce NAV impact due to renminbi and Sing dollar fluctuation. Our debt maturity profile is well staggered. We only have one offshore bond of CNY 600 million, which is due at the end of 2026. This was the FTZ bond issued 2 years ago. So notwithstanding, we have sufficient bank facility to refinance these bonds. We are still evaluating options which aim to continue our capital source diversification. Just to highlight that in early 2026, we announced that we have updated our MTN program, which is used to incorporate Hong Kong CMU clearing mechanism, which means that we are now able to issue in some bond -- renminbi denominated in some bond. The mechanism is ready. For interest rate hedge, we have 65% of our debt is hedged into fixed rate and the remaining floating rate loans are mostly in renminbi. With this...

Yes. Okay. Let me take over from Lintong. So looking forward, if you look at what we have done this year, we completed 4 AEIs. So we have done share through Wangjing, Rock Square and Xizhimen, and they have all opened in first -- by 4Q of this year. So all these supermarket AEIs, supermarket upgrading AEIs which is shared through Wangjing and Xizhimen, all produced good results with returns or rental increase more than 10%, right? The Decathlon introduction in Rock Square help us to strengthen the previously weak corner in B1 as part of our overall plan to drive traffic and improve rents in that part of the mall. With these successful AEIs, I think we have proven again, similar to the supermarket AEIs that we executed in 2023 for 3 other malls, that CLCT is able to extract value from our older malls and demonstrate our track record of doing so. When we look for new investment in the future, we also want to utilize our AI ability, not just to buy good malls at good price, but also to actively identify and add value to these malls. In terms of strategy, we are still focused on building a balanced portfolio. And how we go about doing it, I think in 2025, we have demonstrated a few initiatives, which we will continue in 2026. Unlocking value: We have successfully established our long-term capital recycling vehicle by the C-REIT platform. And in fact, we have managed to divest CapitaMall Yuhuating. This supports our ongoing portfolio reconstitution. We created value by the entering the C-REIT market in 2025. And 2026, our immediate priority is to source for a new retail asset to replenish Yuhuating's lost income while maintaining our existing operations at high occupancies. Extract value: Our track record of ability to identify and execute on AEIs speaks for itself. We will continue to see whether we have opportunities in our existing assets as well as using AEIs as a key part of extracting value from any new acquisition. Proactive capital management: We have been proactively working on capital management to drive interest cost savings, and that will include expanding renminbi debt access by reducing our FX risk where appropriate. So with that, I'll end my presentation. Maybe we will have time for some Q&A.

Thank you, Gerry, for the present. Now let's proceed to the Q&A segment. We have our first question from [indiscernible].

Can you hear me?

Yes, we can hear you.

I just have two questions. The first one actually, just looking at the Shanghai Logistics Park. This -- the valuation for this sank because of an adjustment, is that correct?

Because of the rent adjustment.

Okay. Can you just tell us a bit more about this fixed rate lease that you have here? And also, can you share the rental reversion for this asset specifically?

I will let Joanne take that question.

Yes. So this lease is an 8-year lease that we signed with, I would say, sea freight and logistics provider. So they actually -- together, we -- I mean, they have actually spent some time and CapEx to convert a portion of the part to fit their own use. So that's why it took a while. Actually, the reversion was already captured in 2024 -- 2025, right? So that is not in the 2025 reversion. But 2025 to begin with is actually a much smaller area that we are reverting, although the magnitude is quite similar. Yes. So I think that's about the color that I want to give.

Okay. Just looking...

There was -- in the year lease.

Yes. A normal step up. I can't remember the exact figure, but it's a typical 2 to 3 years, we will take it to -- we will have a step-up that's similar to the kind of market terms. Yes.

Okay. Sorry, when did this really start?

It's July 2025.

Okay. Got it. And my second question here is just looking at the overview of our strategy on Page 19, right, of the slides, there are 4 pieces -- 4 puzzle pieces. One is about CLCR, two are about the retail malls. The last one is capital management. Can you just provide some indication of your plans for the logistics and business part of your portfolio? Are you planning any divestments in these assets?

Actually, we -- well, it's maybe a little bit of a condensed statement. In my create value, we did say that we want to continue to maintain stable occupancy across these 2 business parks and logistics parks. So I think that's the first step that we have to do, right? Business parks, of course, at current stage, we still need to push up the occupancy, right? When the occupancy of some of our weaker business parks are stabilized, then we can talk about whether portfolio reconstitution is a good time to do it. Of course, if you want to reconstitute the asset or divest the asset, it has to be in good condition here first so we get good price. For logistics, I think we have stabilized occupancy. So I would say that if the right opportunity comes, we may consider it.

Okay. Sorry, just following up on the Shanghai asset as well. If you can provide a forecast about the valuation, how would that hold up this year? Because of course, the adjustment was the biggest impact last year. Would there be any impact from the submarket this year? How is the submarket performing outside of this asset?

I think we are seeing in Shanghai, the vacancy level is still there, but it actually has improved year-on-year. So I mean, I don't want to put forecast too much, but I think the situation is better. If rent stabilizes, I expect the valuation to be stable as well because I think from a term point of view, we are locked in already.

So I think this is a onetime cut, if you have it, right, because we have sort of locked in an 8-year lease and that reflects -- the valuation itself reflects the cut that we have done.

We have our next question from Terence.

This is Terence from JPMorgan. Actually, before I start on the questions, can I request that you provide the quarterly updates for the sectoral revenue and NPI for each of the -- on the RMB basis because I think previously, that was provided, I think, last year, maybe earlier this year, but it seems to -- the numbers seems to have been replaced by a full annual number. So it's a bit challenging to track on the underlying income. And maybe I'll start with the question. On this SGD 0.0033 top-up, SGD 5.7 million. In the event that did you don't acquire any asset perhaps, let's say, in the first half of next year, would you still consider continuing with this top-up? Or how should we think about it?

What I would say is management is very focused on trying to find the replacement assets, right, within this year. So that's our #1 priority. Between us and Board, we have many -- a lot of discussions about this, right? And we considered this and we thought because we are very focused on finding a replacement asset, so we were okay to give a onetime top-up for this in the interim.

Okay. Sure. I guess then in the sense that you're looking at replacement assets, could you share what you are looking at? Is it like Tier 1, Tier 2 cities? Is this something from your sponsor pipeline? How large would it be? And given the gearing is still -- I mean, it's come down, but it's still relatively elevated. How should we think about funding this?

Yes. I think in terms of asset, we are looking for retail assets because that's in our experience has been the most defensive. And of course, we do have the ability to provide more stable liquidity for retail assets through the C-REIT platform. So that's one. Two, in terms of the cities, I think we're casting our net wide. I mean, right now, in our mind, it's Tier 1, Tier 2 cities, right, that we have been looking for. In the start of the year, actually, the team visited China looking for some of those assets across different cities in China. So that's what we are focusing on. In terms of the size, we will calibrate it accordingly. I mean what we have said is we want to replenish Yuhuating's loss income and perhaps just exceed it slightly. But I don't think that we will do 2 big acquisitions that will stretch the balance sheet. So in terms of Yuhuating, that's CNY 700 million to CNY 800 million asset, right? I would think that that's probably where we are focusing in the ballpark, up to CNY 1 billion.

As to internal and external, I mean, obviously, we are open to both. We want to look at the best asset. Of course, like what Gerry mentioned, we want to have a little bit of a value-add angle as well, right? So I think, as of now, I would say external will also be part of the consideration.

And in terms of funding this?

In terms of funding this, I mean, we will look at the market situation at that moment, right? If it's not too big a deal, we may do it through that in the short term. If it's a bigger deal, we may fund part debt, part equity. That could be some of the considerations.

Okay. And maybe just a final question for me. Any outlook on borrowing costs for FY '26?

Borrowing costs, Lintong?

Yes. Sure. So for FY '26, we do see the borrowing cost inch -- we expect the borrowing cost to inch down, right? But I think not to the significant extent because we still have some earlier hedged IRS that is actually still ongoing. And then we have some bond that is on the fixed rate. So -- but we actually do note that our floating rate in renminbi has actually formed a significant component of our borrowing. So they are actually news that PBOC will continue easing. So that should actually benefit us.

If I may clarify, like when you say inch down, are we talking about maybe 10 to 30 basis points? Is that sort of like the ballpark that we are looking at?

Yes. I think probably 10 basis points, and then we will continue looking for cheaper debt to actually make it better.

Okay. And...

To mention -- to correct Lintong there. I mean, 2026, Lintong is saying is just happened to be the year that some of the some of the historically lower interest rate swaps expire, right? But in 2027 and 2028, right, we have more opportunities to drive down interest rate cost because that's where the higher weighted interest rate swaps are expiring. Having said that, like Lintong says, we will still find ways -- try to find ways to deliver more than the 10 bps that we are sort of using as a baseline.

And in terms of the -- sorry, RMB proportion, how much higher can we go?

Okay. So for renminbi loan -- sorry, this year, bearing any additional debt that is actually used to fund acquisition, right? So for this -- on the status quo basis, I think we only have one renminbi-denominated debt that is actually due for refinancing. We will aim to actually get the renminbi-denominated debt as well to maintain our natural hedge. So that doesn't mean that we don't have the Sing dollar market. It's just that we were actually -- while we find a cheaper source of debt and we also wanted -- are mindful that we have to actually maintain a high level of natural hedge.

I think taking into context, I think what Lintong is trying to say is, if everyone recall, maybe 1.5 years ago, maybe 35% of our debt was -- 30% to 35% of our debt was renminbi. Now we have brought it up to 60%, right, above our own target. So we do have a little bit of leeway. And depending on where we can get cheaper source of funding and what's appropriate, we may either losing or -- of course, the long-term direction is we want to be as natural hedge as possible.

We have the next question from Geraldine.

Maybe just three questions from me, sorry. If we look at second half without the capital gain, DPU is at SGD 0.02. And this, I presume there's some impact from AEI. So going to 2026, is this the kind of baseline that we should expect?

In terms of -- baseline in terms of SGD 0.0233?

Yes, for DPU.

I think second half of -- second half indeed have -- of course, we talk about the AEIs, right, that was an impact. So there will be some positive flow-through from the AEIs that have been completed in 2025 that will come through in the whole of 2026. Just as context, I think the downtime I said of 4 to 9 months, probably about CNY 15 million of NPI was lost from there, right? And the other thing that I spoke about, which is we are looking for an acquisition to top up the Yuhuating loss income. Yuhuating is while we're not a big asset, it still contributed about SGD 40 million of NPI that was lost in 2025, right? So I think that if we have managed to find the -- if we manage to acquire an asset, I think we should do probably better than SGD 0.02. if that's what you are trying to ask.

Okay. The CNY 15 million is in Sing or RMB?

It's RMB number, yes.

Okay. And the SGD 5.7 million top up this half will likely be one-off and you'll save your bullets for the acquisition?

Yes, it's our intent will be to find the assets so that we don't need to top up.

Okay. Okay. Maybe a quick second question on divestment back into your sponsor C-REIT platform. Any guidance in terms of time line and probably quantum? And yes, because just thinking about -- that proceeds will likely go towards your acquisition, just thinking about the steps.

Yes. We are actually concurrently working on this as well, right, identifying assets that are suitable for the next securitization. So you are right, depending on the time lines and when we find the asset, it could be that the sale may happen before -- the securitization may happen before the acquisition or the acquisition may happen with the securitization. So you touched on a good point, right? In fact, I think the earlier question that Terence has asked, I omitted one point, which, in fact, is true. If we manage to securitize the asset before we acquire, obviously, we will use the proceeds from the securitization to fund the asset purchase, right? So we are indeed working simultaneously both on the acquisition front as well as working on identifying and preparing our next securitization target. In terms of size, I think we would probably not want to give guidance at this moment. There are a few that we are looking at, right? So we definitely want to balance it a little bit depending on the kind of assets that we can also refresh our property, right? And we, of course, want to make sure that the DPU profile is maintained while we reconstitute our portfolio.

Okay. So if a sale -- if acquisition happen before the sale, you are okay with gearing going up a little higher, but it's going to be temporary?

Yes. I mean, as you know now, we have multiple ways of trying to manage the gearing of the trust.

Okay. Sorry, just one very last quick one on the business park rental incentive. The tenant profile sounds quite solid. But is this rental incentive the current market practice to retain tenants? And do you still see this ongoing?

Yes. I think -- I mean, the reversions that we are talking about, I think it is the current market to attract tenants to come in.

Okay. Are you able to share how much you get in terms of the incentive?

I mean, the general rental reversion was minus 8%. I probably don't want to comment on singular tenants, but it's a very good tenant. But I probably do not want to comment on singular tenant.

Okay. Yes. China Samsung. So the minus 8% already captured this rental incentive.

Yes, in 2025. Yes.

The next question is from [indiscernible].

First question, just to double check, is there a sort of blackout period post listing of CLCR before you can inject another asset into the vehicle?

Okay. I think you're referring to [ moratorium ], maybe?

Yes, the short answer is yes. So previously, it was about 12-month period before a new injection can be considered or submitted, so to speak, right? So last year, somewhere middle of last year, I think it was shortened to 6 months, right? So I think that's good. But then I think there's still regulatory approval, the process will still take a while. So in the normal circumstances, you will expect about kind of 1 year around that to -- for another asset to be injected.

Perfect. Are you seeing any interesting transactions come to market in the retail space recently? And how soon do you think you'll be able to acquire?

Interesting transactions...

We are actually following on a number of leads, right? But we also want to be prudent at the moment because although retail is actually one of the more resilient asset classes, but consumer sentiment and all that still remains to be seen. So I think we want to be very careful in selecting the right city, right location, but this is our brand. So I would say, yes, we are cautiously confident that we should be able to do something this year to get the priority going and then to, like what Gerry articulated, to deliver what we set out to do.

I think interesting transaction -- volume of transactions have been -- have came down, generally speaking. But if you talk about big moves, maybe slightly more maybe a platform or move, I mean, the PAG deal. Maybe Joanne talk about it a little bit. And then SAP as well. These 2 maybe show the interest in retail.

Yes, yes, indeed. So PAG is actually one of the sort of cornerstone in [ Wanda ] have been for a long time. So I think they acquired their management platform. And last year, I think they did quite a big separate venture that actually is an asset platform that actually, if I'm not mistaken, 40 over assets was put into that.

Retail assets.

Retail assets, right? So that's one deal. That's quite big. Another one is the SKP, I think [ Boyu] actually injected -- or rather took a substantial share in that. And of course, end of last year, I think they also did an asset deal. There was some outlet in Beijing. So that was also something that's interesting. So I think there are still deals ongoing.

I didn't want to jinx it, but touch wood, you see in the worst-case scenario, if you are not able to acquire to replace the loss income from CapitaMall Yuhuating, will you actually consider further distribution top-ups for this year?

2026 you mean?

Yes.

Yes, I think I answered that question. We are quite focused on getting an asset this year for 2026. And if the worst case, we consider at the end of the year, yes.

Okay. Got it. Just one last question for me. Does this mean that share buybacks will be off the book for now given that you are focusing on finding the replacement asset?

Actually, I don't want to use the word off the books, but we are guided by logic, right? Share buyback was mathematically accretive when the yield was very high and share price was very low. Right now that our share price has recovered, it may not make as much of a sense to do share buyback versus buying a higher-yielding asset.

The next question is from [indiscernible].

Just now you touched on the moratorium, right? Now it's 6 months instead of 12 months. And you mentioned that there's maybe some regulatory processes that might take a while. So more realistic to assume a year. Can you explain what's the regulatory issues here? And also, technically, you can start to maybe target assets to -- or identify assets to be divested maybe in another 2 months or 3 months' time, right?

I'll let Joanne to take the regulatory part. But I think in terms of preparing the asset, actually, we are already in preparation. I mean things like testing the valuation or going -- making sure it's doing up the numbers, so on and so forth. Those are all within our own team's work, which we have already started for a few assets.

Regulatory side, I think there is -- so I think maybe to put it that way, the follow-on listing of a few assets still requires quite regulatory screening. That's a bit different from how Singapore, right? Singapore is after -- the listing part is actually heavy regulatory involvement, but the follow-on is more market driven. I think in China, the market is still relatively new. The regulators still want to be a bit more careful. So the follow-on process, we will still have to -- it's just a vehicle is already set up. The investor base is there. It's slightly shorter, but everything still to go through the regulatory approval that -- so basically, when I mentioned regulators, NDRC, CSRC, yes.

So in terms of a proposed divestment, right, what should we -- how should we think about it in terms of size? And also, are you looking at the weaker assets? And also, is it going to be bigger, smaller than you're watching?

Like Gerry mentioned, I think at this moment, we are working on it, but we probably do not want to go so far as to say which asset, right? But the principle applies, right? It's basically where we actually completed AI and then we think there are not much further growth to be from that asset, then I think we will consider that injection. I think that's the principle that we always have. I mean when you talk about weaker asset, strong asset, I think that's -- I would rather put it in a more stabilized mature assets. That's the kind of category, right?

So maybe a little bit of [indiscernible]. Of course, we look at our own acquisition pipeline, right? If, for whatever reason, Joanne manage to find a very attractive asset, but if it has a higher quantum, then maybe out of the assets that we were thinking of securitizing, we may do the bigger one, right, so that we can match the funding needs. But if we don't manage to find a big one, maybe a more medium-sized one, then we will match it accordingly. As I said earlier, I want to basically have the DPU profile sort of maintained even as we do portfolio reconstitution.

I mean how should we think because both are lease co, right? So how should we think about it? And you have a stake in CLCR as well. So how should we think about the kind of asset? I mean, if you bring an existing asset post AEI, there's not much left to cream and then you sell it to CLCR. Would the CLCR shareholders, unitholders be happy because there's not much upside to this asset? And yes, so I'm just trying to understand that.

No, it's really -- if you summarize it for the investors in specific market, they are really insurance company pension funds. They are trying to have very regular payouts at income rate that is competitive to their own environment. And their own environment now, renminbi deposits are maybe 1%. Corporate rates, bond rates -- government bond rates are below 2%. Some tender bonds are just 2% plus or some corporate renminbi bonds are 2% plus, right? So for them to get a 3% plus yield, which is what CLCR is trading at right now, actually is enough for them, right, to buy those units. They are not looking for big growth or more than that. So I don't think that they are very concerned if there's a lot of value add in the asset.

In fact, just to share some color, some of the pockets that's under those insurance or banks, it's more like fixed income department doing that investing, right? So I think there's a bit of difference in how they are seeing it. In fact, they actually really are seeking you given that the China's domestic alternative are limited.

They just want to build whatever they can get in the corporate bond market.

Okay. Last one for me. So from the CLCR perspective, there's no regulations that prevent them from raising equity within first 12 months of listing to acquire stuff. Is it correct?

Like I said, I think after 6 months, they can do it.

After 6 months, they can actually acquire something and through equity raising.

Yes.

The next question is from [ Jessie ].

I'm aware of time, so I'll keep it short. I know that many of us have asked, but are you able to give us a little bit of a hint what kind of merchant assets, maybe which cities or which asset classes will possibly be divested into the C-REIT? And secondly, I note that CLCT marks its 20th anniversary this year. So are there any like major strategic plans you can share with us for the rest of this year?

I think both parts we kind of covered, but maybe just bear repeating. So first one for the securitization, right? As you put it and also, I think previously, I've shared, we are looking for assets that we feel that we have extracted full value from. Over the last many years, we actually -- a lot of our assets actually we have done AEIs on them. So you imagine many of them fit the category that we have done AI for them. But maybe some of them, we still feel that there's more value of keeping in our portfolio to continue to extract, right? So maybe we won't consider those, right? And in terms of size, I think because the CLCR itself is C-REIT, you can only sell basically 100% of the asset, right? You cannot do part sale, right? So that will be -- the size will determine which asset we put in. I mean, on our books of valuation, we have assets that are CNY 1 billion to also assets that are CNY 3 billion to CNY 4 billion. So that there's a whole range out there. So it's -- therefore, it's a bit difficult for me to pinpoint which range. But if you want to talk about range, CNY 1 billion to CNY 4 billion, that will be the range, CNY 1 billion. As far as our anniversary, thank you very much for mentioning it. I think CLCT have come a long way since we were listed 20 years ago. Along the way, we learned a lot of things about China. China is evolving. And what we have as a strategy today is really to tap into that evolution in China. Really, they are looking at trying to grow their domestic consumption and then also to have a very strong innovation-driven economy. So both of these themes, we're trying to cover true retail malls as well as the new economy assets. Of course, the new economy assets now is more challenging, right? But we are following it closely. Tenants like ChangXin Memory, I'm sure it's only one-off. There will be more such tenants that will be coming up. So we want to seek those opportunities so that we can put them into our business parks. As far as retail malls are concerned, right, that's certainly something that -- maybe you can say for the anniversary year, we want to focus on to basically continue to drive the narrative that we have deep expertise in retail malls in China. We want to make use of that, not only operational AEI, but also capital markets with our ability to get set up the C-REIT platform as well as hopefully, we will start to tap more on the renminbi capital markets for our debt financing. So these are things that we can look forward to for our anniversary.

We have one last question from Joy.

Can you hear me?

Yes.

I just have three questions. I think I'll take it one by one. The first is regarding your retail. I think I see your retail sales, tenant footfall, occupancy costs, these are all headed in the right direction. Just wondering why the retail rent reversions remain weak? And is this -- is it due to a supply situation? Or are tenants generally a bit more resistant to higher rents?

Maybe I can take that.

Sure.

So I think you probably have seen that the China business is more mature and all that. So I think we have seen some of that. I think previous quarters, we also have shared. Generally speaking, I think tenants are doing good sales, but their margins are actually also been, I would say, thinner than before because they needed to promote, they need to offer more and to entice the consumer to keep shopping, right? So I think that's a trend that we have seen. And then what you mentioned is supply is selective, right? Certain areas, there are, but not for all of our malls. So basically, I think that's that factor. But I think when these are -- the tenants behavior is actually quite closely related to how they look forward. So if they are looking forward to a good growth, then they will actually start to plan more shops. They see good business, they will do more, right? So I think at the moment, they are still a bit cautious, if you ask me.

Maybe I'll add to that, I don't think that the retail supply is that much of an issue for -- generally for most retail markets versus, say, if you talk about business park or logistics. So among all the sectors in real estate sector in China, I think retail is the one that have less of that supply issue. Then what Joanne say is right, the general economy is deflationary. So obviously, in the tenants mind, they see prices being difficult to increase, right? Well, that's -- I don't want to generalize it, but there are some sectors that are like the toys and hobbies that still maintain pricing power. But generally speaking, when tenant sees that they don't have pricing power on their own revenue side when it comes to increasing rentals, it's also difficult for them to increase rentals by too much. But having said that, if you think about the rental reversion, it's really a blended rental reversion. There are trade cats in our portfolio where you would see sales are increasing by a lot, right? Those trade cats, we are still seeing some rental reversions, some of the F&B brands, some IT and of course, toys and hobbies, we do get some positive rental reversion, right? But it's sort of off-setted -- for a long time now, it's sort of off-setted by the weakness in fashion and beauty and health, right, which I've said single-digit sales drop. So rental reversions there could have been negative as well. What I do observe when you talk about looking forward, right, we talk -- all these are historical. If we talk about looking forward, I see maybe 2 trends in relation to fashion, particularly, which is an important trade because they -- historically speaking, fashion trade, they usually have higher margins usually in the good days, and therefore, they can afford to pay higher occupancy costs, right, or rents in general, right? One is, I think, in our deck. Actually, we didn't go through that in the business outlook. In last year 3Q, there have been some changes to the taxation on e-commerce. Now all e-commerce players have to basically -- sellers have to also have to disclose their sales and therefore the tax, right? So we've been hearing that anecdotally that, that is leading to more online players thinking about setting offline stores, that means physical retail stores, right? That could -- and e-commerce, a large chunk of it is really fashion sales, right? And that could start to reverse maybe some of the damage that has been done to this sector over the last many years. And if I look at some of the reversions from fashion trade, I mean, I don't want to say that I'm gaining a trend, but the reversions and sales drop are probably lesser than previous years, right? So we are slowly finding -- hopefully slowly finding a bottom. And with some equalizing of the playing field, hopefully, from '26 and onwards, we can see some strengthening in the trade. So when -- either fashion or beauty and health, either one of the trade cats sort of even reverse the trend a little bit, I think that would help us finally be able to show some general positive reversion on a blended basis because our other trade cats are actually okay. It's just really fashion and beauty and health that is contributing to the more negative reversions.

Okay. Very clear. My next question is regarding acquisitions. I just referred to 2 -- I know your sponsor has 2 blockbuster assets, the Raffles City Chongqing and Suzhou Center Mall. I know it's not within your mentioned size of, I think, close to RMB 1 billion. But are these on your ROFR? And is this something you could potentially acquire in the further future?

RCCQ is not in our ROFR. Suzhou Center is also not in our ROFR.

They are not in our direct so-called acquisition ROFR list. But I think, for sure, we will be -- if there's any chance that we will be ahead. Having said that, these 2 are also very big. And so I think we will be careful and hopefully, the market will allow us to do big deals, then I think it will be a more opportune time to consider it, this is my opinion.

I think at this stage, we basically just start -- I would just say, have some headway in terms of our portfolio reconstitution journey here, having just started the C-REIT and then being having a stable channel of recycling assets. So we probably would err on the side of caution first. But if we get something going, then, of course, we have a proven model and the bigger assets will be something that we can have a deeper thing about.

Okay. My last question is regarding your RMB debt percentage. Is there an intention to raise it up to 100% over time? Or do you think 60-40 is pretty good?

I would say -- sorry, let me take this.

Sure.

So for CapitaLand China Trust, we are still a Singapore REIT. So we are actually very well supported by all our Singapore banks. So the Singapore Bank's natural funding currency is Sing dollar, right? So we can actually fund quite competitively in Singapore dollar. So that has actually been the case for many years. So I would say, we will continue to maintain quite a balanced profile. We wouldn't actually totally give up on our most competitive source of capital, which is Sing dollar, yet we do need to actually have a good percentage of our debt in renminbi. So that is actually both to benefit from the easing of renminbi interest rate as well as renminbi liquidity, right? And of course, that will actually also show up our balance sheet. So I would say, we will actually 60-40 or maybe 50-50 is something that we will be looking at. And of course, going forward, one of the most important factor is also to evaluate the relative cost of fund, right? So renminbi here has -- rate has been, I mean, decreasing, right? And Sing dollar actually now is also quite competitive. So we will actually continue tapping both markets.

Thank you, everyone, for joining. This concludes our session for today. Please feel free to reach out to me or my team if you have any further questions. Thank you all, and have a good day.