CapitaLand China Trust ($AU8U)

Good morning, everyone. Welcome to CLCT's 1Q 2026 Analyst Briefing. I'm Xiuyi, Investor Relations for CLCT. With me today, we have our CEO, Gerry; CFO, Joanne; CFO Designate, Lintong; and Head of IPM, You Hong. For this meeting, we will start with a brief presentation followed by a Q&A session. [Operator Instructions]. So with that Gerry, please go ahead.

Thanks, Xiuyi. Welcome everyone to CLCT's first Q 2026 business update. Thank you again to making some time this morning to attend this presentation. This is update. So I think it will be relatively short. There'll be more Q&A time later. So CLCT, we are the first and largest China-focused S-REIT. So now, of course, we also have connectivity to the C-REIT market through us jointly listing a C-REIT on the Shanghai Stock Exchange with our sponsor. Our current total asset is SGD 4.5 billion. We have 8 retail malls, 5 business parks, 4 logistics assets. And most of our assets are in Tier 1 and Tier 2 cities. Distribution yield using FY 2025 DPU with the unit price now is roughly about 7.5%, right? That reflects some of the unit price movement from the broad market winners after the start of the Iran war. In terms of our asset allocation, you can see that relatively unchanged. Our retail is still our largest and most resilient asset class, 70% of gross rental income, that's the biggest part. And then the remaining 30% is what we term as more new economy, so business parks 27% and logistics parks smaller at 7%. In terms of the different segments, generally speaking, the retail has been showing relatively more resilient with our AEI effects starting to flow in Q1 of this year. Logistics stabilized, of course, with some rent resets that we have done in 2025. And business parks, we will see that continue to have weak demand. So overall portfolio gross revenue and NPI dropped about 5% and 3%, respectively. And that's mainly due to the divested Yuhuating effect. So encouragingly, on a same-store basis, you will see that our portfolio gross revenue marginally negative at minus 0.4% year-on-year and NPI actually increased 1.3% year-on-year. If we dissect further for retail, again, on the headline revenue, it declined by 7.2%, but again, mainly due to the loss of Yuhuating's revenue, which alone was about RMB 21 million. So without that, if you exclude that on a same-store basis, it narrows to -- the drop narrows to minus 0.5% year-on-year. The other effect is -- for retail is that the completed AEIs started to provide us with new revenue flow. That's about RMB 5 million per quarter, and it was somewhat offset by some of the weakness -- continued weakness we see at Xinnan, Grand Canyon Mall and Aidemengdun. For BP and Logistics, when we combine together the revenue is relatively flat year-on-year. What we have done, of course, we continue to focus on operating efficiency. Our operating costs on a year-on-year basis, we reduced by 3.7% on same-store basis. Next, if you look at some of the retail operational statistics for first Q. Continued growth in traffic and tenant sales. You can see traffic grew by 3.3%. Tenant sales grew by 5.5%. And both of these statistics are generally faster than we have seen in terms of growth than the average of full year 2025 over that full year 2025, which grew about 2-plus percent for the full year 2025. But really, we are continuing the strong momentum that we saw 4Q 2025. Overall, occ cost is healthy, 17%. Again, there's a slight drop in occ cost and that's due to the good healthy sales growth that we have seen. Trade categories that have done well. F&B 4.2%, that's not a surprise, it has been a big category for us. Again, last quarter, I shared the same trends that are driving this F&B segment. We introduced new high-performing trading brands, which are 2 factors for [ shoppers ]. Growth also was broad-based. We have all local favorites, Japanese sushi chains and bakeries all doing well. IT up 8.5%, that's again boosted by consumption voucher as far as we mentioned, we expanded more digital brands during our AEI in Xuefu and Wangjing. Brands like Huawei continue to do very well in our malls. Jewelry & Watches plus 8%, again, driven by the trend to invest in gold. Toys & Hobbies, again, a standout, plus 59.6% this quarter, continued popularity of the collectible toys market. So again, POP MART was 100% up year-on-year. Again, we did very well. [indiscernible] Xuefu going strong. They are up about 58% in terms of sales growth. The other categories that are not in the slide, but I can share a little bit. Last year, we did a lot of supermarket AEIs. So the supermarket upgrading Wangjing share to Xizhimen did well, so those powered our supermarket category. Actually, it's there in the right-hand side. We had strong sales from that RMB 80 million, right? So the growth there is, of course, that double digit since last year's supermarkets, some of them have closed down. And once they were open, this supermarket drove good traffic growth at the 3 malls that we opened. Another category that did well, sporting category, we also opened Decathlon in Rock Square and very good ANTA Guanjun [indiscernible]. So the sporting category this quarter also did very well, plus 46%. One real surprise for me is that the fashion category actually turned positive this quarter, was positive 1.4%, a small positive, and growth was driven by the stronger malls and some of the names that have been going well, most of them, which is basically winter wear, thermal wear. And perhaps it's driven by the winter season. We had a strong overall growth of about 40% sales growth. While no one quarter is in a trend yet, but certainly, this is encouraging because we have had many quarters where we have not seen fashion had a positive sales growth. In terms of occupancy, our malls continue to have high occupancy. So this quarter, we had 97%, with almost all malls are above occupancy of 95% except for Xinnan, which is, of course, we are continuing to reposition. In terms of reversion, similar levels to 2025 at about minus 2% with 2 anchor renewals affecting our reversion number. We are doing some anchor renewals at Nuohemule and Aidemengdun. Business Park occupancy is at 86%, a slight drop from 4Q 2025. Usually, leasing momentum in the first Q is usually slower. But our Business Park assets outperform -- continue to outperform our submarkets despite generally softer environment for business parks. We see improvements in Xinsu and Ascendas Innovation Hub. But they are small -- they are decline in some of the other assets, for example, AIT, Ascendas Innovation Towers' occupancy dropped mainly due to one of the BPO tenants that did not renew upon expiry. We are looking to fill that. Hangzhou Phase 1 and 2 challenging market, which we shared before supply-wise, occupancy drop was from 2 bigger e-commerce tenants that pre-dominated that took up about 4% space of Hangzhou 2. Previously, we also shared that for Hangzhou 2, we had some X master lease service office that -- service office lease that we took back, that's about 55,000 square meters. And then where we subleased now from about 70% last year, we are now up to 74% backfill, right? So we'll continue to backfill that space. Overall Business Park's reversion is at minus 11%. We are, of course, prioritizing occupancy to actively trying to retain our tenants and conversion of the new leasing pipelines. You can see that actually this quarter, we did do quite a lot of leases, almost 60,000 square meters of renewals and new leases in first Q. So we are working hard at it. Logistics Parks, smallest part of our portfolio, 3% of GRI. We can probably say that I think the Logistics portfolio has stabilized. We further improved in Chengdu, driving occupancy of that asset to 96.2%, and also improving the overall logistics portfolio to about 99%. So we feel that rents have almost bottomed up in this Logistics portfolio. We aim to continue to achieve full occupancy at this level. Capital management before I hand it off to Lee to talk about it, I would like to just highlight that in terms of our average cost of debt, this quarter, we have managed to cut it down from 3.3%, where we ended off the year in 2025 to 3.1% by benefiting our efforts from [ RMB ] financing and overall constructive rate environment in both SGD and in RMB. So for this quarter, with the combined efforts, we managed to translate loan interest rate savings of about SGD 2.9 million. So that's about 18% year-on-year drop. So over to you, Lintong.

Thank you, Gerry. So capital management remain a core strength and priority for CLCT. So our focus is actually very clear. We wanted to maintain a healthy balance sheet and they're actively lowering our cost of borrowing and protect distribution stability across the cycle. So as at March 2026, our CLCT's debt level is slightly higher than 1 quarter ago, following our distribution. That has resulted in aggregate leverage of 41.4%, which still remain comfortably within the regulatory limit. More importantly, like what Gerry has just now highlighted, we actually have achieved year-to-date average cost of debt of 3.1%. This represents 40 basis point reduction year-on-year and 20 basis point reduction versus full year 2025. These are tangible outcomes from active actions taken early in 2025, when we proactively refinanced and shifted funding from higher cost SGD debt into lower cost RMB debt. And also, we have increased our proportion of RMB-denominated debt, which has strengthened our balance sheet against resilience FX -- make it more resilient against the FX movement. So in -- as we deliberately balanced our SGD and RMB debt mix to stay flexible across various macro conditions, I want to highlight that in the small table on the upper right corner, right? That actually shows our distribution sensitivity on SGD and RMB interest rate movement. We now have more floating rate debt in RMB in SGD, right? This actually positions CLCT to benefit from monetary easing in China while being better suited for any potential volatility in SGD interest rate, given the global macro environment. And with lower borrowing costs, that has also strengthened our credit profile. Our interest coverage ratio has improved to 2.9x under stress test scenario, where the 100 basis point increase in average cost of borrowing or 10% decrease in our EBITDA, our ICR, interest coverage ratio, is remaining -- is able to remain comfortably above 2.3x, well above various regulatory threshold. CLCT's debt maturity profile also is very well staggered with annual refinancing kept at around 25% of our total debt, that is to manage our refinancing risk. The only offshore bond that is maturing in 2026 is RMB 600 million, 3.8% FTZ bond, which is due for refinancing in Q4 2026. While CLCT has sufficient committed bank facility to refinance this bond, but we see this as a good opportunity for us to further diversify our cost of funding as well as to refinance our debt and meaningfully lower costs. So we will actually keep unitholders informed about our refinancing efforts in the following quarters. So finally, we have strengthened our natural hedge. Our RMB-denominated debt now represents about 60% of our total borrowing, including other hedging instruments, we have around 78% of our total debt in RMB-denominated form. So in summary, our capital management strategy is to deliver a very clear and measurable outcome for our unitholders, lower cost of debt and stronger resilience to interest rate and FX movement, right? So these efforts underpin our distribution stability and provides CLCT with long-term growth capacity. Over to Gerry.

Okay. Thanks, Lintong. I will just end off with maybe just a summary of our strategy in 2026, which is really a continuation of what we have done in 2025. We're trying to build a portfolio in the long term that aligns with China's focus on domestic consumption and innovation-driven economy. How we are doing it? We create value. We have, in 2025, established a long-term capital recycling vehicle via C-REIT platform. This will continue to support our ongoing portfolio reconstitution. 2026, our immediate target is to expand in -- some expansion in our new assets, especially retail, while continuing to make sure our properties have a stable occupancy. Unlock value, what we have done, of course, is last year, we have recycled CapitaMall Yuhuating. In 2026, our first priority is still to buy an asset to replace, replenish and reconstitute what we have sold in Yuhuating. But we will continue to work on and see whether there are suitable opportunities to recycle some of the noncore or mature assets where we feel that value has kicked. Extract value. Our AEIs, I think it's clear for everyone to see have been successfully completed and helping us in terms of organic income in 2026, right? So that will be -- continue to be a key part for us. We are trying to identify whether we can attract more value from existing assets. And as we look for new acquisition, we also want to see whether the new acquisitions that we are evaluating have potential and room for us to continue to apply our AEI expertise on them. Proactive capital management, I think Lintong has already touched on it. We will continue to drive down our average cost of debt while reducing our FX risk where appropriate. So that's the end of my presentation. I'll hand it back to Xiuyi for the Q&A session.

Thank you, Gerry for the presentation. Now let's proceed to the Q&A segment. We have our first question from Terence. Please go ahead.

Congrats on actually the strong numbers. Actually, I really wanted to ask on Q-on-Q. I noticed that in fourth quarter last year, actually both revenue and NPI did drop in sort of like the mid- to high single-digit number on a Q-on-Q basis in fourth quarter. And then this first quarter, it did improve quite substantially on the Q-o-Q from fourth quarter. So maybe can you share on the Q-on-Q movements in the numbers? That's my first question. Yes. Maybe you can answer this first.

I will answer that, and if there's some additional info that the CFO want to provide, he can do so. For the first Q numbers, I think if you look at this slide, we sort of have already laid that out. Of course, the big effect is Yuhuating, right, in terms of the revenue. And that's -- I think, I mentioned that actually quite for a big number, that's about RMB 21 million that we lost for revenue just because we lost -- we divested Yuhuating. But if you exclude that, you look at the other components, right? We have the AEI effects flowing through. So last year, most of our AEIs are completed, some at the late part of 3Q, some at the late end of 4Q. So most of the income really haven't come in. But this year, we have full contributions from all our AEIs. Just now I mentioned that the swing there is about RMB 5 million per quarter. So that's a key part of why I suppose you saw that retail revenue has on a same-store basis has been quite stable, right? Of course, as I mentioned, it's slightly offset by some of the poorer assets. I'm talking about Xinnan, Grand Canyon Mall and Aidemengdun. So that's basically how we come to about flat, excluding Yuhuating for the retail revenue. Business Parks. Business Parks NPI-wise, actually, if you look at the segmental breakdown, you would have saw that actually Business Parks also improve. Like part of it was because you recall last year, we had been trying to backfill some of the spaces in Hangzhou Phase 2, I mentioned about the service office master tenant, which we took back the leases from and then started releasing up. Last year, we said that we finally managed to lease it up to 70%, but a lot of it was really committed at the back end, right, of the year? And then, again, the income flows and effects started flowing in 2026, right? So that helped basically together with Logistics Park get us to a position where revenue is flat rather than declining in those sectors. And of course, generally, we're trying to maintain cost control. So I mentioned the cost control, and we have saved about 3.7% on a same-store basis. So that's why on overall basis, you can see the NPI is up 1.3%, excluding Yuhuating's effect. Is that...

Yes, that's very helpful. Maybe if I can ask a separate question. I understand that the C-REIT regime has changed quite dramatically. I mean your sponsor is looking at another separate C-REIT. So I wanted to get your views on how the changes impact the existing C-REIT and whether you may look to divest assets via C-REIT or how are you looking at asset divestments?

So two questions. I think one is about the new C-REIT and the relationship with us and the sponsor. Second one is whether we are looking for more securitization or divestment from our portfolio into the new C-REIT. I think those are the two questions. So the new C-REIT format is something that really picked up in concept only end of last year, and it's something that the CSRC in China, the securities regulator, is driving very hard to get going off the back of quite a successful -- already quite a successful C-REIT market that they have right now. And CapitaLand as a very reputable REIT player globally and also in China, right, has been invited to do that sort of the first pilot batch of this new C-REIT format. The differences -- I can let Lintong explain the 2 differences in the short while. But when this was discussed, right, certainly, CLCT was also in the loop. And we also were consulted to see whether we want to have any assets securitized into this vehicle, right, new vehicle that's coming up, which will probably be second and third Q by the time they listed of this year, right. And we decided that since we have done our first securitization quite recently, right, we wanted to pace up the pace of our securitization or divestment, so that our DPU can have some income stability. As you can see from the results, we -- even though Yuhuating's divestment was not that big, we still lost some income. And we wanted to see whether there are opportunities to basically buy some assets to put -- to basically replenish those income before we go on to the next securitization, right? And if you look at the general market for C-REIT, it's actually very buoyant. So we are in no hurry. The market will be there for quite a while for us to take advantage of when we need that liquidity, right? So it depends on whether we have the capital needs, maybe we find very good assets at very good attractive yields that then we may think of activating another round of securitization. You Hong can explain the diverse between a new and old C-REIT as well as what people are seeing in terms of how they work together.

Yes. So on the new regime, if I may, we can call it commercial C-REIT, just to terminology it differently from the previous regime called infrastructure C-REIT. They are actually quite similar in terms of leverage, the legal structure and all that. I would just say there are 2 to 3 main differences that drives them. One is the speed at which I think the regulatory wanted to move this faster. So I think they have sort of -- the approval window will be shorter because last time, there's NDRC, CSRC sequentially have to approve it. But now I think it's all in the CSRC's purview, so that's number one. Number two, I think asset class, they've expanded into a more bigger real estate focused commercial asset class, namely including office, hotel. Of course, retail are still in it, and all the other more generic type of income-producing real estate are all admitted to this commercial real estate, which previously it was very limited. Number three, I think they've also relaxed certain reinvestment obligations. So I will not go into too detail. But having -- so basically, I think this is welcomed generally by the market as a whole. And from our point of view, I think we are indifferent as to which vehicle is -- can be our offtake vehicle. I think there were also questions on why there are 2 [indiscernible] C-REITs in the -- under CapitaLand's name, I think the regulators also suggest that there could, in the future, be actions there to take care of that, but that will be a next-stage action, yes.

That's very, very clear. And hopefully, we can see more C-REITs to come. That's all I have.

The next question is from Geraldine.

Congrats on the more stable than expected set of results. Maybe just tying back to Terence's question on divestment, you'll probably look to phase out a little bit more to reduce DPU impact. Can we also say the same for the existing recycling to your -- to [ CRCR ] in terms of retail assets?

Yes, I think we view it the same actually because it's kind of, I would say, a slew of tools that we have in our disposal because we are part of the same group, right? So we will -- whether it is to the new C-REIT or the old C-REIT, we will place it according to our own needs.

Okay. Okay. You also mentioned about acquisition opportunity that you see in other retail assets. Just wondering, would you want to pace that with a divestment? Or if the opportunity is really very interesting, will you actually consider doing EFR given that gearing now is at 41%...

Well, it depends on how attractive the deal and basically the timing that we have basically to complete the deal. So there are quite a lot of permutations, yes. So it really depends.

Okay. Okay. Maybe just squeezing in question on Logistics and Business Park. Logistics reversion was a positive surprise. Is this lease specific or really reflecting a potential bottom -- early bottom for the Logistics asset class within China?

I think it's quite been a trend for about 2 quarters already. You Hong can add a little bit more color, but we have tried to communicate that we feel that rentals have really reset, so that's why if you look at the reversions, it's actually just mildly negative in this quarter.

The reversion mainly come from, if I recall correctly, Kunshan and Chengdu because these 2 are the ones that have a bit of change in leases. But having said that, I think our observation of the market, I think we have alluded to previously as well that we will hopefully be seeing the rent are stabilizing and following 2 years of quite, I would say, drastic drop. Of course, we can't say for the whole China because I think North part of China, Southern part of China may be in a different -- slightly different timing and cycle of the market. But in the 4 cities that we are in, I think this is generally observed.

Okay. China, very big. Maybe just on Logistics, right? If you look at your 4 assets, how many percent of the leases are still on the rent that has yet to be [indiscernible] versus the already mark-to-market rents?

I will say that our leases are generally in the 2, 3 years kind of lease cycle. And then we have more or less done with the [ marketing ], that's my view.

Okay. So it looks like one more year to go then.

No, I would say that we have more or less [indiscernible] to the market, although some of them are 2, 3 years, but I think we have done the big churn in the last 1 and 2 years.

The next question is from [indiscernible].

[indiscernible] from OCBC here. Just a few questions. I noticed that the retail reversion is still negative despite the trade sales going up. So what's causing the divergence? Is it just a timing issue or like tenants still being squeezed? And related to this question is occupancy cost. What should we think about as a steady state kind of occupancy cost like trended lower to 17%? And is this going to trend further lower? And another question I have is on cost reduction, 3.7%. So it is somewhat substantial. What was actually being done to drive that kind of cost reduction? And should we be expecting further cost reduction? Then my third question will be in terms of the cost of debt. So do you have some guidance on where it will go towards the end of this year?

Thanks for the question, 4 questions. So the first 2, I will touch on a little bit before I let You Hong to take the first 2 in detail and then I'll let Lintong answer second 2 in more detail. So generally speaking, the whole China environment is still in a deflationary or environment, right? So prices are not really moving up, right? And that certainly [ keep true ] when you try to ask tenants to increase rent. But of course, for those categories and those malls that we are really well, we have better ability to ask for higher rents, right? This quarter, I spoke about there was -- for the retail, there were some anchors that we renew that affected our reversions. I recall the number without them is minus 1.6%, minus 2%, but still negative. You're right, still on a negative trend or slight negative. And I shared previously, I think last quarter that what I'm -- we believe that sales trend are leading indicator for reversions, right? Of course, the timing you can debate of how much leading indicator it is, right? We have had a year -- almost a year plus or 2 years actually of sales growth, right, that outstrips -- obviously outstrips rental growth, right? So that to me shows actually our tenants are actually in a healthy position, right? That should continue to underpin the strength of our retail portfolio. In terms of the savings, we do work very hard on them. The details, I will let Lintong talk about it. And in terms of both operating expenses as well as our interest, we are working very hard on it. So the first details maybe on the operating side, occupancy costs, maybe You Hong, you want to add more color on that?

Yes. Thanks. So I think that's a really good question actually. We are also trying to understand and in my conversation with ground team, we are also trying to see whether there's room for us to drive ramp up. So I think the 70% is actually already below the levels of -- before the levels of the pre-COVID. So then again, I think our -- what we hear is that when we talk to the tenants, they are still relatively cautious on upping the rent, although they are able to still do good business, but I think the resistance is there because for one reason is that the they are also sort of in the deflationary environment, trying to promote and do more promotions, do more sales events. So they also felt that the margin -- their business margin is also not as good as the good old days, right? I think that's number one. And number two, I think in terms of the aggressive expansion tenants, what we are seeing is more in the drinking, in the bakeries, some of them still do. But the large format kind of tenants, F&B, fashions are still sort of lacking or rather the willingness to expand is still not there overall. I would say, so we would want to work with them to see how to drive it up. But I think at the moment, we are still seeing the rent being rather subdued, right? So I think that will probably take a bit of time. But hopefully that with now we see the new data on the DPI and all that. Hopefully, the CPI will also be able to go into the positive territory for a longer time, right? I think then people will start to feel that the inflation cycle will turn. I think that will help us generally.

So for the interest saving, yes, so for this quarter, we are very encouraged to see our cost of borrowing has actually come down. So, yes. So this is actually years of efforts. Since 2025, we have been actually very much focused on lowering cost of debt and also to use the renminbi borrowing to actually lower our overall cost of borrowing. This actually takes time to filter through because we do have some expensive swaps that actually need time to mature and reset. So I think for now, I guess, this level of cost of borrowing, I think we hope to actually hold it there because we still have some floating rate that are actually subject to macro environment, right? But we do hope that we are able to hold the interest rate here at this level. And then we are also looking for opportunities to further reduce our interest rate, right? Take for some example, our FTZ bond that is actually currently the passing coupon rate is 3.8%, right? So this bond is actually coming due. So I think we are able definitely to refinance this bond at below 3% kind of level, even better than that. So -- but this bond will actually -- any refinancing effect will probably be filled in 2027 and when they -- actually interest savings contribute full year, right? And also, we do observe that occasionally, there are opportunities for us to swap our SGD debt into RMB debt through cross-currency swap because the interest rate environments are actually still quite volatile on the long end, right? So opportunistically, we are able to capture some interest savings when we swap SGD into RMB using cross-currency swap. That is actually we might be able to actually pick up a few interest savings here and there. So generally, if you want to look for some guidance, I guess we will be able to keep at this level, like 3.1% kind of level and hopefully can do better. Also want to highlight that earlier, I mentioned our fixed and floating rate debt, right? The ratio is now 65%. And that actually allowed us to enjoy any interest rate savings if the SGD rate actually continue to stay low and then if there's any chance of RMB further monetary easing coming this year.

Source of operating costs?

Okay. Source of operating costs, right? So the team has actually been very focused on the cost measure, right? So a part of our operating costs actually come from revenue-linked expenses because if you look at our cost structure, we have a lot of expenses, including the property tax as well as some of the management fees are actually linked to our revenue. So this part, the decrease -- a portion of it is actually linked to our revenue decrease because we have actually some -- our Yuhuating has been divested. And on the operating front, we have actually seen significant savings in maintenance costs, right? So these are something that we continue to focus on and to actually save the NPI.

Maybe I'll just add a little bit color on that. So the property cost savings, of course, we work indeed very hard actually with our property managers, who, of course, you know is our sponsor, right? So as Lintong said, if you take out the Yuhuating effect, right, if you look at same-store basis, the minus 3.7%, half of it is the revenue-related cost drivers. Some of the costs basically goes and correlates to the revenue levels. The other half, somewhat like, I would say, somewhat like fixed cost, but we have trimmed that down by quite a bit. And the first Q actually, we have made very, very double-digit sort of cuts to those fixed costs on a year-on-year basis. So on a combined basis, that's why you get this minus 3.7%.

We have the next question from Terence Lee.

Terence Lee from UBS. If we look at Page 7, the 1Q year-on-year sales improvements, is there a way to just maybe talk through what would be like from the bottom of the list, like which sectors are more, I guess, worrisome or not performing that well?

Okay. You're talking about trade categories that we may not have shown here. I would say usually, when this question is asked, last quarter, I would say fashion, but this quarter, fashion sort of surprised us a little bit. So the other category is the beauty category, the cosmetics. Again, I think last quarter, I did say within the beauty category about minus single digit, minus, I would say, maybe mid-single digits. But actually, this quarter also not -- it's negative, but it's not so bad, a little bit. I think you also can talk about EVs a little bit that's a big trend.

Correct. So I think from what we are seeing, the 3 categories that we see year-on-year drop, which is more on the slightly higher side is ranking them vehicle EV sales. And secondly is -- I think EV sales is also reflected in the nationwide consolidation number that was published a while ago. And I think leisure and entertainment also dropped. I think last year, we had a good movie and all that. This year, I think the movie hasn't been -- we haven't seen any big blockbusters, right? So I think that's that. And thirdly, I think home livings, we also -- but that's a very small trade to begin with. But home livings has also seen a little bit of decline year-on-year. I think these are the 3 main ones that we see drop. The rest is a bit more like a mixed bag. There are malls that do better. Also on fashion, I think Gerry mentioned, overall, we see a slight positive. But between more malls, we see differences, right? So some of the strong must do better. I think our [indiscernible] negative. So I think the rest I wouldn't be able to generalize too much, I think.

I mean, in summary, I think this quarter, particularly the positive has more than the negatives.

Yes. I think it almost sounds like the negatives are not that negative broadly, like the range from slight negative to positive as it gets for Toys & Hobbies.

We hope the trend continues. I don't want to call a trend, but this is 1 quarter, yes.

Okay. And next question, remind us of the RMB hedge policy again? And I guess what would be the effective hedge rate on this first quarter results?

Okay. I'll turn that question to Lintong. So the hedge policy and...

FX hedge policy, sorry.

You're talking about the income, right?

RMB to SGD?

Okay. So we typically hedge -- we look at our RMB exposure and cash flow, right? We typically are forward looking at our upcoming distribution from China, right? We typically hedge about 75% to 90% and then probably 6 to 12 months ahead. So that actually really depends on the hedging cost because I mean, RMB and SGD depends on the tenure that might have some positive carry, which means the forward premium is in our favor. And sometimes the forward premium is actually quite expensive. So we actually look into these hedging costs to decide how much we hedge and for how long we hedge. But generally, it's about looking forward, right so 6 to 12 months and then hedge about 75% to 90%. So as you can see that actually RMB versus SGD recently has actually stabilized. That actually has helped us in terms of our hedging decision as well.

So just if you can help us make our job easier, what would be the effective rate for first quarter or even first half?

You mean we hedging. Yes. So we hedged about 80% of our forward rate. So our rate hedge is about 5.4%, around that kind of level.

Okay. That's weaker than spot.

Yes, because some of these hedges was actually done at the second half of last year and then some are actually done at the beginning of this year. So you can actually see that the spot rate has actually strengthened, especially after the [indiscernible], right? So actually towards the March, right, the RMB has actually reached, I think, [ 5.35 ] kind of level. So some of our hedges was actually done before that.

Usually, 6 to 12 months, can do in 6 to 12 months.

Got it. And maybe just going back to the comment by Gerry about wanting to buy first before doing securitization. Just a question on the rationale, like why isn't this more so done at the CLI level? And I guess a little bit more relatedly, related to capital deployment, is there not more value you see in buying back your stock now?

The first question, you were asking why is it not more with the CLI level?

Meaning to say like why -- I mean, if the plan was to so-called like buy or source for, let's say, malls in the market to buy, improve and sell, like why would this not be done at the CLI level? Like why would -- what is the strategic rationale for doing this at the CRCT level?

Okay. Okay. Same strategy. Why CLI is not doing it and why CRCT is doing it? Is that the question?

Or rather, why would it be done at both levels?

I think, first of all, I would say the objective and strategy for China-focused REIT will be very different from the objective and the strategy of global asset management or fund management platform, which CLI is trying to -- CLI is positioned for basically, right? So from CLI's perspective, I'm sure you have heard Paul and Chee Koon talk about it. It not only have China business, they got business basically across different jurisdictions. The asset allocate their business according to where it may bring them the best growth. So it may or may not be China. And in China, they may have different strategies than us. We are quite straightforward, right, because we are China focused. And China for us is Greater China, China, which means Mainland China, Hong Kong and Macao. These are the 3 places that we can look for assets. And we will portfolio reconstitute within these countries across asset class that we currently play in or we may in future, but not -- perhaps not immediate future to look at other asset class, right? So our acquisition, our divestment, our value add would therefore, be contained within China. So that's quite clear for us. I think the other thing that the relationship between us and the sponsor is that the sponsors have different strategies. But one thing that's certain is that they are supportive of our objective. And you will recall, we still have historical ROFRs with the sponsor, right? So when we are looking for assets that we -- assets to basically inject into the REIT, those assets are, of course, up for consideration together with third-party pipeline that we generate from [indiscernible], right? So that's in terms, I think, of the strategy. Second question is unit buyback, right, unit buyback. I think I addressed this in this manner, right? Of course, stock price, it's sort of volatile, sometimes it's down, sometimes it's up, right? And therefore, the trading yield present itself accordingly. Right now, our trading is about 7%. So in terms of capital allocation, right, for the same dollar, which we are using the same gearing headroom, we got to decide for ourselves whether we can find a deal that is basically accretive against the trading yield, right? And that's our ultimate test, right? We sold an asset only end of last year. You Hong is still working hard. Just now, I talked about the pipelines that we have assessed to see whether indeed we can find something that we can buy and add value. Of course, if you buy back our own stock, it could be immediate. But if you buy something that's an asset that's accretive, that means we are basically buying at a yield higher than our trading yield plus, as I said, we want to have some value add in there plus potential to improve on the assets that we buy in. That could actually prove to be a better proposition for the same unit of [indiscernible].

The next question is from [indiscernible].

I have two questions from me. First, how do you see rental reversions for the Business Park assets trending for the rest of this year? And how is the leasing sentiment like on the ground? Second question is more on aggregate leverage. Was the increase in the total debt a temporary bump to pay out the FY '25 distributions? And what is the ceiling that you'll be comfortable with if you were to acquire an asset and fund it with debt?

First question, I'll let You Hong take, then I'll comment on the second question.

Yes. On the reversion side, Business Park, I think we -- between assets, we see that since we are still the stronger one, although it also had slight negative this quarter, but the stress really comes from, I would say, Hangzhou. And the situation on the ground, I think we have shared before for the last couple of years, I think there were quite a bit of supply coming on board, but it has sort of I think the last bit of the supply should be already in, right, in that submarket per se. So I think within the submarket, we look at how the other people are doing. I think generally, we are looking at close to 70% already. We are also at slightly above 70%. So I think the kind of competition that we see probably will last a bit longer, but hopefully not that long. So for this year, I still expect that reversion to be stay within this kind of range level. But hopefully, by the time when all the supply glut have sort of been absorbed by the market, I think then we will see a more healthy situation going forward.

On the leverage, indeed, yes, first Q is affected by the fact that we drew on some loans for distributions. So we do expect, over the next few quarters, some money to come back as we extract dividends from our assets in China. So that's something to look out for. In terms of for acquisition, what's our limit? I think generally speaking, yes, the S-REIT environment, although MAS guideline is 50%, most S-REITs will try to contain themselves within 45%, right? And I think that we are now about 41%. So different REITs have different level of gearings. Also a little bit -- we have to look at it a little bit with regards to the -- maybe the cost of debt as well. I think our ICR is still quite healthy, right, a good buffer above the 1.5x required by MAS. So I think generally speaking, our financial metrics still look quite stable, yes. So that will be how I think about basically the leverage that we can take on.

The next question is from [ Joell ].

I just have two questions. The first is regarding electricity prices. I noted from your AGM Q&A is more impacted by coal prices rather than oil prices. I believe coal prices is probably up about 15% higher year-to-date. So I'm just wondering what is CRCT doing? Any proactive actions to handle the higher electricity costs going forward?

Okay. That's the first question. You Hong can take that. I think main thing is basically electricity trend in China as well as I think maybe you can talk about our ability to cut electricity consumption at the ground. Yes.

I think for the electricity price so far, based on our survey, it has not been affected by the Middle East situation. In China, generally, I think we have seen news that oil price, the gasoline price has gone up, but not the electricity. So I think the government also have -- would want to keep that stable for obvious reasons. So I think that's number one. I think for the ways to reduce consumption, I think this is -- has been always something that we have discussed and hopefully drive. Along -- over the years, I think we have also tapped on, [ for example ], the automation or data analytics to actually help our technicians to be able to drive the efficiency on the same chiller, same electricity level. Of course, the weather -- sometimes weather conditions fluctuate. So I think that can only help. But from our point of view, I think we do what we can in terms of equipping our technicians with smarter and better tools to analyze and to drive the unit rate down. The other thing I may just want to share a little bit that I think this is still [ probably ] coming. I mean we are trying to source our electricity, a portion of it from green renewable sources. In China, some of the cities, this has become available at a rate that's equivalent, not more expensive than the equivalent nongreen energy. So I would say so far, we have been sort of procuring a portion, I think, around slightly above 10% of our energy from the green sources. So I think this is something that we are also watching and experimenting without increasing our costs.

That's quite clear. My next question is regarding new leases versus renewed leases. Noted that roughly it's 40% new lease, 60% renewed lease across all your segments. Is there a preference? And also a follow-up on that, any incentives that you're giving on the ground?

You Hong?

Sure. For retail, I think we would generally like to see a healthy level of renewals, right? It ranges between -- or rather new brands, I would say, right? New brands inject new vibrancies and interesting ideas to the malls. So I think between 40, 50 of new brands is actually quite common. We have seen before, right? In times that's a bit more challenging, of course, then we tend to renew more. But if we have a choice, we do want to get new brands in. That's retail. But for Business Park and Logistics, I think our preference is more sticky tenants, right? So I think generally, the pie will shrink to more fit, I would say, renew, right? So I think usually, we see that figure between 60 to 70 renewal, another 30 to 40 in the new tenants, I mean. Okay. Of course, we do what we can to drive up occupancy and rent. But I think generally, we are also watchful of not going over the line. So I think generally, our save on core, the rent free or -- basically, we do save on core market type of rent-free on incentives. It's quite typical that we have first 1 to 2 months that's for renovation and it could also be some of the market where it requires, it can be about 1 month of rent free that also happens, right? So I think that's something that we will do.

And apart from incentive, I think what we want to do is to be responsive to the tenant needs, right? So in some situations where they need additional power, they need better transportation. We may upgrade power, we upgrade lease for them if the tenant is serious and a strong tenant, right? So these are the kind of things that we do take into consideration.

We have a final question from Vijay.

I have three quick questions. Maybe I'll take it one by one. Firstly, in terms of this Middle East conflict, have you seen any impacts to your portfolio of tenants? Is there any tenants who are exposed to energy, logistics, shipping, et cetera, in Business Parks, Logistics that you are -- that is facing some pressure. And from my understanding, China has a cash flow issue. Are you seeing in terms of rent collection, has this been improving and your rent collection is much more on time at this point of time compared to 1 year before?

Okay. I think for the Middle East conflict, one thing that has really stand out for me is China seems to be quite well controlled in terms of the effect. Utilities, I think You Hong has covered. But that's really tip of the iceberg in terms of they are owning self-sufficiency. Supply chains are being disrupted. But by and large, what we hear in China is things are still available, right? And then in terms of businesses, direct businesses to our tenants, retail, there's actually no issues because just like in last year, when we talked about tariff war, most of our retailers, many of them are local buyers, local sellers, basically selling to local crowd, buying from local producers, right? And the international brands, they do not typically ship from Middle East. Middle East is not a merchandise producing area, right? So retail is not that big an issue. Business Parks, there are a handful who have businesses or sell particularly to Middle East, but that's not a big portion of their business. Nobody really went out of business because of that in our Business Parks. And in terms of Logistics, again, our logistics portfolio, maybe half of it service domestic distribution, right, half of it export facing that's in Shanghai, right? Again, not much to report in terms of disruption from Middle East because they don't have that much business going with Middle East, right? What we do say is second order impacts you cannot ignore, which is in our outlook slide, because petrochemicals, which come from Middle East are a feedstock to some manufacturing inputs for some of the factories in China, for example, plastics and so on and so forth, right? But as many economies and China watches would also inform even that China have a solution because actually, you can produce the same petrochemical with coal, right? It depends on how much in terms of cost of production, basically. But with the prices that the petrochemicals from oil is -- we are talking about, it's making the coal chemicals quite actually a good alternative. So economy and production base is as diversified as China. Actually, we had just one economist spoke to us yesterday. In fact, you would say that strategically it favors China to withstand the pressures that come from the Iranian war. So that's my take on it. Sorry, the second the arrears. No problem with arrears.

Yes. We don't see any major change in pattern in terms of arrears.

Okay. My second and third question, okay, earlier, you touched upon acquisitions. Maybe can you touch upon which segments you would be looking at and what kind of yield benchmarks you would be looking at for potential acquisitions ahead? And third question is, is there a trend of retail tenants signing a slightly longer lease because I noticed your WALE going up a bit. I mean are the tenants trying to lock in the rents at these levels in the retail segment, especially?

Your first two questions, I will answer. Maybe You Hong can take the last one. The type of assets we're looking at and then the new levels, okay? So actually, we spoke about it, the type of assets that we are looking at. Today, we have 3 asset classes, retail, business park and logistics. We are more focused on the more defensive part, which is retail, right? 70% of our portfolio is in retail. We look at the trends, retail have been more resilient, particularly our sort of our subset, which I call bread and butter, malls, right, not the luxury malls, but maybe more the middle market ones. We are looking more in terms of that segment. But that doesn't stop us from looking at other asset classes. For example, while business park in general are not doing so well, you would have because of the manufacturing drive in China, right, would have seen factories actually doing quite well. And on and off, there may be industrial properties that are not so much decentralized offices, but more of the R&D, more catering to actual production, right, that may be available for sale. Those if they are at the quality of our Xinsu portfolio, which have been very, very strong, right, certainly is something that we can look at. But as a priority, of course, we are -- I think we want to stick to where we add the most value, which is really retail, right? So that's one thing that I can share. The other thing in terms of yield, I think it's very simple. As a REIT, we want to look for something that is yield-accretive. Today, our trading yield is about 7%. That's one way that you look at it. The last deal that we sold for our retail mall, we sold it at NPI cap of about 6-plus percent. So definitely we want to beat those metrics, right, in order to basically, over time, improve the average yield of our assets. You Hong, you want to touch on the next question.

Yes. WALE, so I don't think we have -- okay. Indeed, some of the retailers do ask for longer locking for both -- I mean, trying to sort of see that the rent is rather favorable and reasonable and also secondly to have a reasonable period of recovery of their investments, right? But we have been more careful in not lock ourselves in if we deem that the rent is [indiscernible]. So I think that will protect us and give us the chance, of course, to go back in terms of negotiating rent on a higher side when the cycle is due. So I think we don't see a big trend in having to lock in very, very long leases, fair to say that.

The bump you see in the first probably is the 2 anchors that we sort of [ resigned ].

Yes. Yes. Correct. Correct.

Thanks, Vijay. And thank you, everyone. Since we have no further questions, this concludes our session for today. Please feel free to reach out to me or my team if you have any questions. Thank you all, and have a good day.

Thank you.