CapitaLand Integrated Commercial Trust (C38U) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. A very warm welcome to all of you who are joining us via the live webcast of CapitaLand Integrated Commercial Trust or CICT results briefing today. We also welcome the small group of you here with us. A big picture of Capital Tower. I'm Mei Peng, the Head of Investor Relations for CICT, and we are pleased to have the management of CICT to share our 4Q and full year 2020 results. We will have a results presentation by CICT's CEO, followed by a question-and-answer session with the CICT management team. I'm pleased to now invite Mr. Tony Tan, CEO of the CICT manager, to share with us the details about CICT's performance. Tony, please.

So good morning, everyone. I think it's been a long time since I have the chance to meet at least a larger group of people on a face-to-face basis. Certainly means that I think it's a good beginning, hopefully, for 2021. And over the course of the year, we hope to be able to engage with you personally as well -- whether in this online context or on a one-on-one basis. Before I go into the results, I thought maybe I'll just put things in context. This number has got a lot nicer. I mean, as you know, we went through the merger process. In fact, exactly 1 year minus 1 day ago in 2020, I think it was 22nd January, we met and we announced the merger. It's been a long journey. Finally, we managed to complete the merger on the 20th of October. Normally, it could have been a lot shorter. We're guiding to finish it before end of June. Unfortunately, we were faced with the pandemic. And of course, a lot of knock-on effect on both the economy and operation. So to put that in context, the number you look at for the fourth Q specific will be a mixture of CMT number and partly the CCT portfolio number coming from 21st of October. On top of that, they were -- because a part of the merger process, we have to do a lot of cleanup. So typically, as any REIT manager, we will try to see how the financial profile of the entire will look like and calibrate on the -- accordingly, depending on the situation. But this time now, we were forced to do the cleanup exercise. So a lot of things -- in the past, we had a little bit of luxury of time to do it over the course of the year. We have -- we're forced to do it within fourth Q. So fourth Q number is very, very noisy. But more importantly, I think I want to set the stage for how things should look beyond that. I think I've engaged with many of you before individually in the course of 2020. I think this year, 2020 is -- from a retail perspective, of course, it's quite a war shock. We have taken a lot of measure to ensure the stability of the operation, a lot of effort going into supporting the tenant, ensure that they can survive from the operation perspective, from a cash flow perspective. With government coming in with various series of bills that was passed, we have to, of course, fulfill that. In fact, I'm proud to say that actually, we have more than fulfilled what -- that was mandated by the authority. So I think we can stand here high. When we face our retailer, we can be pretty proud to say that actually, we have done quite a lot to support them. And hopefully, going forward, we'll be able to establish that kind of relationship even stronger post the pandemic. During the course of the year also, we tried very hard to make sure those retailers who had been in trouble trying to pivot away from the traditional face-to-face brick-and-mortar business into a little bit more digital, which is critical, especially during the second breakout period. Fortunately, we'll be able to launch that -- the 2 platform, very quickly in June, just-in-time for Phase 2 reopening. And over the course of the last 6 months from July to December, obviously, was the ramping up period. So all in, I think we are setting the stage where we think that there will be obviously a little bit of change in the consumer behavior because of the pandemic. Hopefully, our platform allow them to be able to go to a single point of contact whether at a physical point or at a digital point and still do business with our retailer. I mean that's, at the end of the day, it's the whole aim. Okay. So a long story short, when you look at the number, [indiscernible] a lot of noise. I will explain part of the noise over there. But more importantly is just -- is it's more forward-looking that we are more concerned, and we're trying to build this platform going forward in the next -- [indiscernible] next 5 years. And hopefully, we can give a better picture of how that trajectory will look like, okay? So a little bit of highlight. All these are just highlight numbers, no. We're quite pleased that we managed to recapture a little bit of market cap during the -- along the process of the merger, I think the market has been volatile. It went down at one stage. On a combined basis, I think it was about [ $12 billion ]. Today, we are back above $14 billion. I think we're quite pleased that the market is beginning to understand how to look at this platform. Portfolio property value at $22.3 billion, slightly lower than the $22.4 billion, that was -- were pieced together on a pro forma basis. Occupancy remained pretty stable, 96.4%. Total NLA, 10.4 million, largest in Singapore, as we have mentioned many times. NAV at $2. And if you compare to that when we put out our circular on a pro forma basis at $2.02, I think we are pretty close to that, yes. So just a quick summary. Again, we have 11 retail properties. That's how we're going to break it up, 8 offices and 5 integrated development. Split between geography, 96% still in Singapore, largely Singapore. And I think we'll still be the largest proxy in Singapore and Germany 4%. So for the 4Q specific, we achieved a distributable income of DPU of $0.0263. That was included the $0.089 that we have distributed out just prior to the completion of the merger. So the remaining $0.0174 would be distributed for the rest of the fourth Q, right? Overall, we achieved a $0.0869. It's a combination of 1st to 20th of October, 1st of January to 20 October of CMT result, and then we add in the CCT portfolio contribution coming in, right? And in between, of course, the clean out distribution, we have [ distorted ] from the 4Q number as well. Also, bear in mind, historically, there's a little bit of a timing difference between how we recognize our GTO and the collection because there's a building timing effect, typically about 2 months effect, right? So we have -- let's say, we have December sales. We get a nice uplift in December sales. The GTO income will probably come in 2 months later. Yes, and that's how the cycle works. But again, because of the merger process, we actually fast track everything and may estimate as close as we can and distribution was done before the completion. So the fourth Q, which I'll later on elaborate, I think we've seen a pretty healthy encouraging on the sequential quarter-to-quarter improvement in the operating metrics. Hopefully, that would translate into a nice -- in the way, GTO income coming in, in first quarter this year, right? Let's move on. The valuation remains largely stable, which I mentioned just now at the beginning, $22.3 billion, slightly off compared to, if we were to piece together on a pro forma basis in June, which we also [indiscernible] valuation of $22.4 billion. We've seen a little bit of recouping of valuation that we marked down in June in the retail side, up by $22 million thereabout. Office, down slightly, 0.3%. And integrated is down by $77 million, largely attributable to Raffles City as well, yes. A little bit of update what we have done for the year, in fact, fourth quarter. We are quite pleased that we have still been able to tap the debt market at a very, very competitive rate. So we are not -- sometime in November, December, to raise a little bit of debt. 10 -- very long term, 10 to 12 years at about 2.15%. I think sustainability is something that's critically important. We have paid a very high focus. Now as the portfolio, you can see 96% of our assets are at least minimally, Green Mark Gold with 52% already achieved the platinum level, which is the highest level that you can attain in Singapore. So the remaining one, I think, of course, we will work on it. Hopefully, we'll be able to achieve at least 100% Green Mark, right? Tenant support that I mentioned at the beginning. In aggregate for fourth quarter, we [ dished out ] -- in fact, in aggregate for the whole year, we dish out about $128 million. It is our own piggy bank, our own pocket, that's for the entire year. For the remaining fourth quarter, we have about $20-plus million that we have also dished out here, yes. So that's included in the $128 million. Phase 3 reopening that was announced by government only took effect on the 28th December. We are pleased that they allow, at least for the F&B site, 5 to 8 person. Increased the, on a per square meter basis, the property from -- basically from 10 to 8. So we have a little bit more capacity to bring more people now, okay. This was announced yesterday. I think the topping-out, I think we achieved a major milestone. I think that's important because we also want to signal to the prospective tenant that there's a certainty of completion. If you recall, in last part of the second half 2020, many of the projects had to be delayed because they were not able to get the worker back on site. It took quite a bit of time. And finally, I think towards the fourth quarter, there's a little bit of ramping up in terms of getting the worker back on site. So we will be able to, with high level of certainty that we can at least achieve a period with high level of certainty. I think that will give a lot of confidence for the tenant that we've been engaging to make that decision because sometimes, they also have to weigh their own current commitment, where they are. Just like we do have tenants, office tenants with us, who may be considering moving into our property like CapitaSpring. The timing is critical because they have running lease that they need to deal with. So that certainty of completion, I think, will give additional, I would say, the push for them to make the critical decision. So it's quite important. Overall, the topping up level to achieve 30% and another 20% that we are already in a fairly advanced stage of negotiation, I think is pretty credible, right? I know we're looking at, in total, almost 60% already on hand that we are dealing with. Between topping up to TOP, typically 6 to 9 months kind of timing. We have a lot more room to work on it. In fact, we've got certainty of the date. I think we have high level confidence that more of the prospect may start to look at CapitaSpring more seriously, yes. Okay. So fourth Q, I think I won't elaborate too much on a quarter-to-quarter, a lot of noise. This is a combination of the CMT and CICT together for the fourth quarter. Of course, contribution from 21st of October and the office portfolio coming in. We tend to break it up into the 3 components. This will be the way we're going to present in the future. The 3 components: retail; office; and integrated development. The -- of course, there's no comparable for office since we're only taking over from 21st of October. For retail, I think fourth quarter, we continue to see the impact of the reversion as well as the operation impacting the performance on a year-on-year basis. Integrated development, we've seen a little bit of uplift largely because now our shares, we have 60% -- usually 60%. Over today, it's 100% owned. So that gives an uplift on the revenue and NPL contribution, yes. For the full year, needless to say, I think the first part of the impact from the retail has been recognized. Overall, I think we have managed to reduce the NPI impact, the revenue NPI impact to a single digit, yes. This is just a snapshot view. Against the fourth quarter based on, for example, fourth quarter NPI and that number is not very fully reflective of the full quarter of the entire portfolio. But nevertheless, I think we want to give the investors and yourself a snapshot view how they would look like. So the largest asset used to be Raffles City, about I think 12%. Today, it came down to about 9%, yes. But I think we're pretty confident that as we move along the journey, over time, we achieved an even wider diversification of all these distribution between the different assets. Balance sheet remained very healthy. NAV, I mentioned earlier on an ex dividend basis is about $2. Do not have to worry about 2021. We have all the financing in place. We are finding -- we are waiting for the right opportunity to look at capital markets, which we have done in December -- November, December. I think there's still a very good appetite for our kind of instrument, debt instrument. We are pretty confident we are able to secure very competitive kind of refinancing -- sorry, refinancing of the this [ tower ] so that we can release our bank line for other opportunities, right? So this one, happy to say that actually, technically it's refi, but we will look at opportunity to take it out in the capital market, yes. Also some [indiscernible] in the number here. So we used a 100% unencumbered. Today, we have some from the CCT office portfolio that we took over. Leverage has gone up to 40.6%, slightly elevated because we took on the $1 billion debt to complete the merger, plus also a further drawdown from the development project. Interest coverage dropped a little bit -- no, sorry, net debt/EBITDA is not a meaningful number because net debt, if you take the debt on day 1, without the EBITDA, it's really a meaningless number. So -- but we will -- just to give you a sense is -- if we were to do a pro forma basis, you'll be a low double digit, you have very low double digit, yes. Interest coverage came off slightly because I think some malls are impacted, I think, particularly Raffles City from a cover perspective. But overall, I think we'll try to work to improve that. Average term maturity, 4.1 years, slightly lower. And with the passage of time, some of the debts that are coming due in the next 2 to 3 years, naturally, it will creep up. But as we start to refi the 2021 and putting out on a long duration, you can see the -- this one should creep up over time. Average cost of debt. Again, we put on the portfolio of CCT, which helps to bring it down lower. CMT on their own, I think, if you recall, we are in the 3 handles, 3.1% handle. So that means that if you look at all those earlier tower that I mentioned, yes, this one, most are there in the 3 handles. So there's a lot of CCT portfolio which give us the opportunity to look at a potential in interest savings going forward, yes. Today, if you were to benchmark what we have done in November, December, tend to [ charter ] your money, we're getting about 2.15%. Even though, since then, the swap rate has moved up slightly. But overall, I think we are still -- probably see a fairly decent kind of uptick in terms of interest savings. The other thing I did not mention earlier was that the $1 billion that we took on, if you are seeing our pro forma during the merger, we actually packed a 2.75% interest funding in the model. We actually float it, we did not fix it. And that can explain the fixed and floating ratio, which came down. Why it's not moving, oh, yes. So today, 83% of debt. So despite the $1 billion over that we have took on a float basis, we are still maintaining above 80% on a fixed rate. So the platform is very stable. So we can easily see a nice in terms of interest saving from the merger of CCT that was funded by the debt. That, of course, will translate down, not so much in the fourth quarter, but obviously, from 2021. Now I can see the full year impact, yes. You can do assumptions yourself, right? Similarly, earlier, I mentioned about the debt, it's actually [ 0.1% ]. Today, if you will go out in the market, probably it can go 10 years. We're looking at maybe 2.2% to 2.3% at the top side. If they announced a [ 50 to 70 ] basis point, we think we can be able to get the interest carryover here. To me, that's a low-hanging fruit. I'll later on elaborate about the plan going forward, why we think we're looking at this platform, yes. So this is just some logistics to take note, dates out there, $0.0174 which I mentioned earlier, okay. So on the portfolio performance, if you look at this, this is really a combined effect of the merger, which we talk about a lot, the enlarged base. Typically, if you look at this, you have seen -- quite normal to see 30% expiry. Today has gone down to 15%. So of course, the offices went smaller with quite a lot of property still are not like especially the development projects. 21 Collyer Quay is not contributing yet. But I can say the diversification impact, I think, is going to be a great boost for stability on the platform. 2020 is the -- it is not normal. It's one that is -- once-in-a-decade kind of pandemic, so it affects all industry. But once market move back to the typical cycle, real estate cycle, you will see these diversification effect come in very strongly because it will give you that strong stability as a result of lower dependency on each sector, right? So I think that's the main thing I want to put across. The others -- the breakdown you can see for yourself. The other effect is, of course, the diversification on the exposure to your tenancy. Today, you look at the top -- there's no single one that crossed 6%, right? And all the top 10 contributed about 21% of our exposure. I mean, these are, to us, high-quality name. Of course, over time in the news lately, 1.6% overall as a group, which include not just Robinson's. You have Marks & Spencer, you have Zara. You have all the other brands that are carried under their name. But there is a pretty good decent, I would say, decent credit [indiscernible]. So I look again, it is a [ testament ] that -- of evidence that this platform would have a high level of stability in terms of credit exposure. To us, that mean it's credit exposure as well, right? I won't elaborate too much. EBITDA, it went into more -- a minor detail in our subcategory as all these -- less than -- less than 3% or -- right? So we also try to piece together the performance by different components in the CICT, the retail. This is a retail component. It's all the retail component. I think we are proud to maintain our occupancy at 98%. If you compare to third quarter, it was about almost about 98% as well. Of course, I was just discussing with some of you that it's a trade-off, know what you want. You want occupancy or you want to hang on to your end? And I mean, there's a lot of trade-off. The cash flow effect can be sometimes bigger than the reversion impact. So it depends on what kind of things, how fast [indiscernible] you want to turn into the tenant, right? So sometimes, you see a headline reversion very nice, but I don't know what kind of internal arrangement there is. So typically, we try to strike the right balance. It's very important for shopping mall business to have an environment that is uplifting. You want to be in an environment where you see a lot -- plenty of [ hoarding ]. There's no environment that will be very conducive for consumer. First of all, mindset psychology. Second is also the all -- the look and feel just as it feels right. So I think it's critically important to strike the right balance. So on the one hand, we know a lot of investors are drilling in very hard on the reversion number, which -- has -- that really requires ease compared to what we reported in September. But we think that during this period of time, which is more important? To me cash flow is important because your cash flow will impact a lot of other metrices. Your gearing, your ability to engage authority, I mean there are a lot of knock-on effect. But if you are able to achieve a sensible outcome with tenant arrangement where will help to temper-ease their cash flow in the short term, but then we share a little bit of risk on the upside when they do well, then I think it's a win-win situation. So while you see this is really a measure of the last outgoing, and remember, last outgoing could be leases that we locked in 3 years ago with escalation, right? And our first year incoming. So this is the number we report, right? Today, market is a bit distorted because -- and disrupted because of the pandemic. And the -- on the ground, a very dynamic situation. We have to be a bit more [indiscernible] and try to calibrate the right level. So going forward, we are reading how best to communicate this reversion number. I think we had, in the past, been -- when things are tight -- are running tight, I think we have been taking a very conservative number. The last outgoing, we had escalation, that was incoming. That's what the position we have taken. But today's market is somewhat in the -- again, we're in progress, I would say, situation. We will find a way to communicate more effectively, yes. Retention, very respectable. Again, it's about whether you're running cash flow, right? When I talk about reversion, sometimes, you think, okay, the tenant is not prepared to pay the amount that we think is fair. We try to market the space. In the meantime, we get an X amount that is probably closer to what we think is fair, but they use all the void period. So from a cash flow impact, which was so much even worse. On an effective basis, sometimes it was even worse. But nevertheless, I think we have achieved a pretty respectable 84.5% retention rate for the entire year. Fourth quarter, we are very encouraged to see the sequential improvement from -- on the ground. Shopper traffic has recovered to almost 68%. And later on, I'll give you a slide to show the range. And tenant sales for fourth quarter, we are just above 5.5% below last year, right? So I think it's pretty encouraging. This is the breakdown of all the different occupancy for the retail side. Just take note, I think the -- Clarke Quay remained one that we have to deal with. I think I pointed out many times, something that we are still working on it. So the occupancy is a tad lower than the rest. The rest, some are marginally down, marginally up. So on a net basis, it's about flat, yes. But I think, if you can benchmark against the URA island-wide of -- I think, occupancy, I think it's still a relatively credible number, yes. Yes. So this reversion, which I already elaborated earlier, it's a bit high on Raffles City. But you got to retake the number, there will be a [ circumstance ], right? So I don't want to harbor much on this. In any case, it represent about 15%, right? So 2021, we have about 900 leases to deal with, of which at different stage of completion between those that were signed and those that we have already sent out the agreement waiting for their response. I think we're looking at maybe in the teens that we have dealt with. So we have the rest of the year to deal with. This is a breakdown. Do not be alarmed to [ one of four ] -- actually owning -- it is [indiscernible] retail. The rest is the nonretail component, yes. This is the one that I thought I elaborate a little bit more. You can see -- we can show you the recovery between the suburban and downtown mall. Shopper traffic overall, 68 -- close to 68%. Between suburban and downtown, actually it's not too far apart, right? You can see the range. Of course, there are -- some very outliers, like only about -- in fact, only -- less than 50% recovery and a pretty strong one in downtown, close to 85% as well. Suburban, similarly, not all [indiscernible] are equal, right? We have 56% to 88%, right? Sales-wise, also a range. Overall, it's 94.5% compared to last year recovery. Suburban as a part of more over, actually, the sales outperformed last year. But the sales performance among the different trade cat is pretty uneven, right? So not all suburban are -- getting roses, right? And everything is nice and [indiscernible], but you do have to deal with some of the weaker performance as well. Suburban mall performance, 88-odd percent to 109%. So it's quite a big range. Downtown also very -- we know there's outlier here, but also a downtown mall. Last year, they are essentially done better in the fourth quarter, yes. So this is just the graphical way to represent how the traffic numbers stack up between downtown and suburban. So this year, so far, until today, maybe it's back to office because the malls are beginning to come back from their dreamland in December, November, right? Now it's back to work. It's a little bit slow start. We hope this can ramp-up in the cost towards the Chinese New Year. But we are seeing more healthy returns from -- to office. Overall, you're also right to -- I mean, the main thing is about -- again, about the fourth quarter sequential improvement. You can see the sales, overall, for the fourth quarter, I think you're looking at -- it's around -- although it's down, but no, it's still an improvement overall, right? That's representing the top 5. So the strong performance like home furnishing has done very well, 28%. But not every mall has got a big home furnishing component, right? Jewelry has done very well as well. Telco is a bit reversed from -- a fairly steep negative 9 -- almost 14% down to a plus 5%, perhaps because of the launch of the new phone, right? So it gives a little bit of push over there. Department store is down. Of course, the Robinson impact is there. Where is it -- the department store, let's see, where is it. Supermarket, which is quite expected as more people come out to dine. You see a little bit of an impact on -- negatively on the supermarket front. So that's quite expected. But for the whole year, the supermarket has been a star, right? So that's how it look like. We see supermarket rank, well, as one of the stars. For the office side, contrary to what people had been thinking, actually, the leasing momentum is picking up. I know we are seeing more inquiries, fourth quarter run in the first quarter. Perhaps more people are getting a better grip of how do you want to deal with the office real estate requirement. So we have seen some demand coming back. This is roughly the breakdown of the kind of new demand that we see coming in. The portfolio, overall, including German and Singapore, occupancy is about 94.9%. If you include or exclude the German asset, just the Singapore asset, it's about 95.1%, okay? So again, I think it's pretty credible considering overall the core CB locations, we are looking at below 94%, yes. Slightly lower retention rate than normal in office. That's largely attributable to the exit of Standard Chartered Bank at Six Battery Road, yes. Overall, average office rent I think in our portfolio is about $10.27, yes. So this is the breakdown of where we are. I think -- I don't want to elaborate too much. Overall, for the office portfolio, we have achieved a positive reversion. That's good. Then hopefully, that will translate to the financial 2021. In terms of what we are looking at 2022, the rate portion are those that's been completed. We have started to engage all the tenants in our portfolio already, yes. Migrating to -- we will have a higher expiring average lease of about $10.75, against where the consultants think the market rent is. So there's a possibility that we may see beyond negative reversion. But nevertheless, we've -- hopefully, with the economy start to take a little bit more steam and people who have been putting on hold expansion plan will start to rethink. Hopefully, we are able to achieve at least ending second half of the year. First half, maybe it's going to be still gradual. Hopefully, with second half, where we also have a portion of expiry coming up. We are able to catch up, yes. '22, '23, I won't elaborate too much. About 43% of people in our portfolio are back in office. Of course, government official stand is to allow no more than 50% still, yes. But I think it's a gradual improvement. I think you can see the chart here. Something is very encouraging. Again, we attempt to break down. This is the integrated development comprising Raffles City, Funan with -- and then Plaza Singapura and the Atrium. So we try to -- attempt to break it into this component on a combined basis, but we have given you the breakdown for the retail component as well, right? So this is just a snapshot of view. Overall, still healthy occupancy. Raffles City came down a fair bit, a little bit. Actually, office occupancy were not a little bit, but was sort of offset by a lower occupancy at the retail side. This is a lease expiry profile for 2021 and beyond. Retail, we have a bigger one to look -- we were to deal with. Again, I don't want to spend too much time on this. Okay. I think more important is looking forward, of course, everything is underpinned by how economy will perform. I think we are hopeful that the way Singapore has managed the whole crisis. In fact and totally, we do hear Singapore stand up very tall now in the world stage in many fronts. And it's actually, in a way, like a big kind of stability, looking at what's happening around the world. So I think that will put us in a very good state regardless going forward. The retail sector, I mentioned a little bit, we see the sequential recovery. Again, it's underpinned by economic environment. We hope 2021 will be a better year. The -- certainly, it's not going to be an even recovery. First half, so far, started with a little bit of slow start. We hope things can ramp up over the next couple of months especially with -- leading towards the festive period. But we will be very vigilant. Even though we are in Phase 3, we technically can allow more people in. But the last thing we want is to get caught in a situation where we have to put in control measure in again. So we'll be very careful with that. Office side, I mentioned briefly earlier, we are beginning to see some kind of demand trickling coming back. So our listing guys are being a lot more active now. Hopefully, we will be able to share more going forward. Germany side, they're in a lockdown. So outlook remained a little bit uncertain. Whether at that -- what people see happening in Brexit and how U.K. has handled the pandemic, whether this is a shift in strategy were to be seen. I mean, we have 2 property there, one is CBD, one in the airport location. It's not a big portfolio. Nevertheless, we are keeping a close watch over there, yes. I think this is something that we put forth during the process when we engaged the various investments and also knowledge of [indiscernible] strategy. Of course, organically, we will -- as a [indiscernible], we want to keep that stability because we think in the long run, the stability of this existing portfolio will give you that premium in a market where it's so volatile. So we -- of course, over time, we will strive to drive growth when the entire operating environment is a little bit more stabilized. So in short, in the immediate time, there'll be a bit more operational thing that we still have to deal with. Although, things has improved vastly compared to 6 months ago. So we'll continue to do [indiscernible] our asset hard. We have kickstart to explore some of the AEI potential. We'll share more when we have more details. There are specific assets that we need to deal with. And our teams are looking at different possibilities, right. Again, we will try to time it nicely so that the portfolio would be always in a fairly stable from a cash flow perspective and distribution perspective. Of course, we will be looking out for acquisition, right? We will find opportunity to also deal with our gearing. It's about 40.6%. It's not a level that we are uncomfortable with. We can deal with it. But ideally, we think we want to bring it down below 40%, so that we are always in a position to seize the opportunity that comes along the way because sometimes the market don't wait for you. If you don't come with a price and closure-completion certainty, the market will just run off, right? So I think we want to be always in that position. So that is something we strive to do over a period of time, right. That will probably include a little bit of maybe portfolio reconstitution that we are reviewing, right? Potentially, we may look at monetizing some of the assets that we think may not be -- will be not one hold in the long term. So that's something we're looking through. We'll continue to be very prudent in our capital management. I think all this are packaged right? And I think it's very -- if you can package these, all these things together, you will have a figure, very good strong base, visible growth from, whether it's your development or AEI project and the firepower to look at new opportunity. At the end of the day, that's what you try to achieve, right? So to break it down, more specifically, in medium term, I think there are already things on hand that we have strived to complete, Six Battery Road, 21 Collyer Quay, Lot One. These are the AEI projects, and we started to explore new ones as we work towards completion of all this, likely to be -- in fact, will be within this year, right? And then the execution on AEI would be more in medium term. It's not going to be this year. We may come out with a certain -- it depends on the final work to be done. It may stretch over a few years. Again, you see quite nicely, if you look at today's profile already, if you look at the financial road map, there will be development project currently not contributing started to come in. And that's where potentially we could time it nicer with any kind of new AEI initiative where you help create a new, better product with a higher growth potential, yes. We'll, obviously -- we'll start exploring redevelopment opportunity. This will be really a medium to longer term because even today, if you were to conclude on a specific project on redevelopment, assuming we do it today, the real execution will still take time. You have to deal with existing tenant, how to deal with them, displace easily 1 year. So it's not going to be an immediate actionable. And even though we say, yes, we're going to go ahead, right, it's not going to be like that, right? So I mean just want to put it in perspective. We are putting more -- setting the stage where if we were to proceed with any kind of redevelopment, assuming we're going ahead, right, then you're looking at more like 3 to 5 years kind of horizon were to happen, right? And by then, hopefully, the portfolio will be in a very good shape. With all the AEI, if we will -- it got put through coming nicely and redevelopment, any [ down ] in the income contribution will be [ buffered ]. Hopefully, and we are in a good shape to seize opportunity, look at new transaction to buffer the effect from any redevelopment. So it's all about execution and timing. CapitaSpring, I think we have elaborated too much. We've talk a little bit and is in the media already. So it's on track to complete by second half, right. So just some other things to see for you. I mean, notwithstanding all the [ gloom ] story, I think we have new retailers that are actually still opening up now for -- in the fourth quarter. So there's some of them in Westgate basement. New retailers are coming. The new, new brands, I think, will be a little bit more difficult in to this environment where traveling is still not allowed. But I think now, that is what we are trying to pursue, yes. Okay. I think I would stop here. The rest, you can read it on your own. I think I spent quite a fair bit of time. Hopefully, we can have more time for Q&A. Yes. All right, thank you.

Thank you, Tony. We now invite the rest of CICT management team to join Tony on stage. Okay, just sharing on how we will conduct the Q&A today. I think we will take questions direct from those of you present today with us, as well as those on the webcast. So for those in the big picture, please raise your hands if you have questions, and then our team will pass you the microphone. Please identify yourself before you ask your question. For those on webcast, you can ask questions by clicking on the post-question tab at the bottom right corner of the viewing page. We will read out the questions on your behalf. So before we start, we also like to introduce the panel on stage. In addition to Tony, we have Ms. Cindy Sze, our Chief Financial Officer, on Tony's right; and Ms. Jacqueline Lee, Head of Investment and Portfolio Management, on Tony's left. Now we can have the first question, and I've seen David has raised his hand.

David Lum from Daiwa. Just to reiterate what you mentioned, Tony, on the fact that you did not disclose any new AEIs or redevelopment activity. The priority is the stability of the income. And this is still a delicate, I guess, a time in the market. And over time, opportunistically, you might disclose more activities to the market. Am I missing anything? Or is that some...

Yes, you got it.

Okay. Okay, we have Yew Kiang, first. And then Derrick.

Yew Kiang from CLSA. It's good to see face-to-face again, Tony. I have 2 questions. One is on retail. Obviously, 4Q performance is quite good, probably because of some festive effect as well as Phase 3. But from the last first 2 weeks of this year, what can you say or give us some idea about retail performance? And in terms of like retail tenants negotiating their leases as well as the ongoing realignment framework, what are you seeing there in terms of color? On the office side, you mentioned demand seems to be coming back. So the 22% at CapitaSpring, can you give some color on who are these tenants and also whether you're getting any indication of downsizing when negotiations are taking places -- taking place now? That's it for me.

Okay. So the first 2 weeks, it's a little bit slow for the retail side. Could be because people are back to a new [indiscernible]. It's likely on a high on December, you're on a holiday mood right. January, back to reality, back to work. It could be the effect which we are seeing now. But we think that -- but even then, it came back down from the high in December. It is on -- from a shopper traffic perspective, it's still elevated. So I think we are -- we think that while we work to -- when we go towards the festive period, Chinese New Year, you'll see the ramp-up coming up again, yes. Overall, it's all about confidence level. I think overall, we see probably some confidence level creeping back. You can witness on that on the discretionary spend. People are spending quite a fair bit on the discretionary fund. The one that really uplift the lost sales are the jewelry, the watches, home furnishing, the [indiscernible] house, buy new furnitures or quite near dining out more. So it's quite a nice kind of in a way -- if you read in between the lines, a bit of confidence coming back. They're spending on a staycation for example. We think this year will definitely be a little bit better than last year in terms of mood. Of course, everyone is worried if there are more communicated cases that are -- become more prevalent, whether any new control measure may be reintroduced. So that's of course my own concern. But in terms on the ground mood, I think -- I think it's a lot better compared to last year, even compared to the quarter, probably, yes. Second question on your -- the demand -- it's a range financial institution of services, whether it's expansion, also a range, some are -- actually your question is whether when they negotiate, they are looking at reducing the size over time?

Yes. Like are you seeing so for tenants from the office coming to you? Are they downsizing? Are you seeing that trend?

So to make sure, we have both expansion and some are downsizing. And downsizing because they want it in a location where the layout fits them better. Yes.

Okay. I have a follow-up question on the retail side. The rental rebates, you gave about $128 million last year, right? Are you setting aside any ballpark figure for this year?

On a case-by-case basis. So we can do it in 2 ways, right? The -- either -- one way is if those tenants leases are coming due, we can give a little bit of discount on new coming leases. That's one way to do it. Then you see the negative reversion. That's one way we deal with it. The other way to deal with it is, if it's a very urgent basis, we give a little relief. So far, it's still early days. We think that the environment obviously has recovered, but has not gone back to basically pre-COVID period. Even the recovery is not even among the different trade category. We will see whether this tenant eventually makes sense to stay in the mall. So we have to be -- we are doing multiple factors into consideration. It's not going to be a one-size-fits-all, yes. So it's not about setting aside some of money, it's more like looking at situation. For Clarke Quay, it's a little bit different because Clarke Quay has very specific restriction that's imposed by government. So Clarke Quay is probably one that we will probably continue to be a bit more compassionate in a way to deal with the existing tenant while we work on longer term solution, yes? Derrick?

Derrick?

This is Derrick from Macquarie. I have 3 questions. The first one is kind of related to Yew Kiang's earlier question. So in fourth quarter, I noticed you have a $22 million of rebate. Can I confirm that this is not mandatory amount? And can you elaborate on the property and the trades that are actually receiving these rebates? That's the first one. The second is on the short-term lease that is being signed in the Robinsons space in Raffles City. Can you just share a little bit more about the arrangement? And are we seeing on a like-for-like basis, negative reversions? Third one is more of a housekeeping rule -- housekeeping question is on the WeWork lease at the 21 Collyer Quay, is everything on track? And are we expecting any kind of issues over there?

I see. So the $22 million -- actually, we call that relief. It's a mixture of some tenants, but a large part actually comes from Raffles City. To be very specific, I think we may make some provision for the hotel side, yes. So Raffles City has a -- the Singapore property would be probably close to 40% of the amount here. The rest are the -- they just spread over the rest of the property, yes. Short-term leases in Robinsons with BHG, I think it's a short-term arrangement. We also try to figure out what's the -- again, back to my main point, cash flow stability environment, right? BHG and us will work together to find -- in fact, we can take this opportunity to look at potentially finding new sparks to Raffles City. At the same time, maintaining certain essential core offerings that is critical for a shopping mall. So if you remember, Robinson, so we'll give a little bit detail. We're not going to give you full detail. Remember, Robinson Level 1 are substantially the beauty trade. With that is gone, a big part of your female traffic will disappear. So it's critically important to maintain some level of exposure over there. This is why the deal stays on. We deal direct in deals. And the remaining space we'll create together with BHG to ensure that level of visibility and presence is maintained, right? So we will take out 1 and 2. Of course, Level 2 would be a different kind of offering. So we'll have Level 3 to deal with. Along the way, we may change. When I say short term, it's really short term. Along the way, we may change. At the same time, we're also looking at the longer-term solution for Raffles City, how that whole space, 1, 2, 3, is it better utilized -- whether it makes more sense to recreate that whole space in a completely different setting. But that will take some time. We need to do some study as well. So that's ongoing, on track, yes. So that's a more longer-term arrangement. So short term, you may see a deep contribution from the space, yes.

[indiscernible]

We will. Sorry, I'll talk about it. We are on track to hand over to them in second quarter, yes.

Yes, Mervin?

I'm Mervin from JPMorgan. Maybe you can start with the retail side of things. I think, Tony, you touched on the fact that the rental reversion numbers is probably not a clean number given there is a bit more maybe GTO.

Sorry, Mervin, can you speak into the mic? Yes. We can't remove.

Yes. Just in terms of the retail side of things. I think, Tony, you mentioned that the numbers in terms of rental reversion is minus 6.6% is a bit messy. Maybe you can give us some sense of what is the net effective drop in rents if you adjust for the GTO component. Second question is, given the green shoots in the tenant sales recovery, especially in the suburban, I think on average, it is actually above pre COVID levels. Are we past the worst in terms of dropping rents and occupancies from here? In the office side of things or CapitaSpring, just a follow-up. Then the additional inquires you're receiving, is it meaning relocations or just actual expansion?

Yes. Okay. So the reversion number, of course, is a bit of trade-off. Typically, we want to [ pack ] a higher share of the turnover, that will be the typical cases. Whether we achieve that turnover equilibrium, it all depends on performance of tenants, right? So I think we are certainly trying to do that. The -- it could be also a case where it's just a onetime off in the first year. And then we pick up the second year. So it's common in different variables, different variation, I can see. Suburban, we certainly have passed the worst. For sure, it's past the worst. But recovery is not so even different trade -- the trade performance. We will still have to deal with some of the weaker ones. But compared to the worst period, of course, it's the second quarter, we're definitely way ahead, yes. The better performance during this year -- the dynamics could be like that. The better performing one in this environment over time may lose their so-called shine when things normalize, right? While the other suffered ones trade may gain ground, because the environment may change. It depends on how human travel, how the work from home situation will pan out as well, yes. So I think it's fairly dynamic on the ground, yes. Yes, the third question on additional demand coming in, is really a mixture of -- it could be relocation with expectation on bigger space because they couldn't find a big space they need, and they want the floor plate that will allow them to do that. There are also cases where people are downsizing, looking at small units, make sure, yes.

Okay. Yes. Brandon?

Just a couple of questions from my side. Brandon from Citi by the way. So on the reversion side, right, can you actually provide us more color on what you achieved in fourth quarter '20 alone? That's my first question. And the second question is on the tenant feel side, you're getting 94.5%. But if we were to strip off the discretionaries, where are we against 4Q '19?

We don't have that on hand. I think I'll get a team to look upon it. The fourth quarter alone is down now, but the rate of decline is not as bad as why you see the swing from second to third quarter. It's definitely down, yes. Yes. I don't want to give you a specific number. Yes, it's down. It is a range, yes. Tenant sales stripping out discretionary, not so easy to strip, honestly. But I'll get a team to look at it. Because dining up more often than regular, even though it's not a happy ticket sales, is it discretionary? I don't know. But to me, you have a choice, you either eat at home or you go out. But you see, people are coming out more often. To me, I can call that your additional spend compared to before, it's really an improvement in discretionary spend, right?

Actually, I'm not really referring to the discretionary of the F&Bs, it's more like the jewelries, the household.

So the definition is cut across because certainly, if you look at the home furnishing, you can choose whether you want to furnish your home, buy a new set of sofa, a working table, whatever it is, right? You have a choice. So that one is very clear. But if you're moving house, then it is not discretionary, it's a necessity. So all depends on situation. Watches, you can choose to buy a $500 watches, you can choose to buy $5,000 watches. So to me, if I choose a buy it. So probably the luxury part is a little clearer. Mobile phone, is it discretionary? Some people delayed out their purchase because they're just waiting for the upgrade. I'm one of them. I hold my iPhone for 4 years, right, before I bought the [ iPhone ] 12. It's not discretionary, but I think it's a necessity. Yes. But if you change every year and then, I think to me it's discretionary, yes. But we see the return, the velocity of coming back in the fourth quarter is very healthy. Actually, people are buying gifts, right? So the festive, I think, is very encouraging, yes.

Okay. I think, Chen, before coming to you, because since it's a related question that's asked now. There's a question from Donald from the webcast. I think it's comparing the -- on average, how many percent of our retail portfolio tenant sales typically come from tourists versus local spend? And will the incoming tourists receipts be offset by outgoing local receipts in the event of a full reopening?

So Don, a very good question. Tourist spend, I think downtown, a lot more. Clarke Quay is probably big. At Raffles City, we have a hazard of guests, because it's not easy to track, probably in the 20s, yes. Whether they will offset if the border reopen in a normal way, I think we are seeing Downtown, the impact is very big. Downtown mall, the absence of tourists, I think has got a bigger impact that cannot be fully offset by the presence of the local domestic consumption, not enough. Yes. Overall, I think on a net basis, the tourists, I think, contribute higher, yes, consumption wise.

Okay. I think, Chen?

Sorry, put aside. One potential casualty is the supermarket. If your border reopen again, we see Singapore going up, Malaysia or they go straight to on a regular basis. Today, obviously, it's not happening.

This is [ Tian Chen ] from Goldman. I have 2 questions. Firstly is on rental reversion. Do you get a sense that this year's rental reversion is the worst we should expect? Or -- yes, what's the sense on 2021? And secondly is on divestment. What's the interest level for retail and office assets? And which one are you more confident of selling significantly above book? And last question is on payout ratio. Can you give us a sense for 2021 and both for taxable and tax-exempt income and also management fees and units?

Okay. Reversion, we hope it's the worst now. But again, the reversion is a tactic. So to me, I know right from beginning, it's very tactical. For the right brand and the right concept that can capitalize the entire mall, I think we are prepared because the effect is a lot more positive for the whole thought than on a stand-alone transaction. So it's very tactical in nature. I cannot give you a straight answer on that. And we also want to pack the way we want to communicate in the future going forward. How best to measure reversion? There's still harmonized tender out there, right? And because the ground is still moving, the operational environment is still evolving. We certainly have to be very nimble and react accordingly, yes. The end objective is about still striking the right balance between cash flow and occupancy. That's the end objective. Divestment in interest. Honestly, I think if we were to put any asset out there, there will be interest. That's my honest view. You've already seen some transaction out there, yes. So we do not want to make any kind of judgment call. My own thing is that I think we are still assessing our portfolio at the right moment. Then obviously, we will share with you, yes, but we are still re looking at the portfolio. But interest, I think, will be there. Look at -- my earlier comment, I think, stays valid. Singapore will stand out very tall and nice when this is over. Long-term money, looking at capital preservation, this is the way, the place to part the money. Currency stability is already an announced policy of the authority to ensure your currency stay on a gradual appreciation direction. Notwithstanding volatility in between, right? But January, direction is. So it's a strong currency, strong market, stable environment. I think capital will flow here, yes. Payout ratio, taxable and non taxable. We do have some tax-exempt income that are not distributed yet. We will keep that. We will look at the right timing, we'll do that, yes. We have not been distributing our scarcity income. I think that's -- I think it's inconsistent. We will probably want to keep that to help buffer some of the CapEx, yes.

Okay. I think we'll give -- Joy, go first.

Yes. Joy from HSBC. Just 2 questions from me. First of all, on office. Could you give us a sense as to where the rental levels are, where you're seeing demand? And how this rental level is versus the original sort of projection for CapitaSpring? Second one is on debt. You do have a bit of debt refinancing. Can we see interest reduction -- interest cost reduction on that? And what sort of quantum are we looking at?

So office rent, I think you probably read all the reports, right, whether it's Knight Frank or Collyer, I mean all have their views and CBRE as well, market rents came off a little bit. Obviously, it'll be adjusted a little bit. Where we are pitching on CapSpring, I think we are not deviating too far away from what we originally wanted to. But we'll see how things move along the way. Interest cost -- absolute quantum will surely go up because additional debt was taken on to do the merger, right? But I think you'll see the overall costs that will float down, yes, towards closer to refi, yes, will go down.

Is it only the refi portion that you're looking at? Or are you looking to sort of change some of it?

So what you see the number here is with the effect of the so-called float rate that we have taken on from 21st October, right, for the completion. So only 1.5 months effect. So this year, you'll see the entire effect of the transaction, $1 billion. The refi will come in some in first half, some in second half, yes. That's only the first quarter. Yes. Maybe, Cindy, you want to help add some color?

Yes. I mean, of the $1.2 billion that is actually due, I think we have quite about $500,000 that's really due in the first Q. Yes. So I mean, maybe what I can just add on is, in the average cost of what's due in 2021, it's close to about 3%. So if you look at indicatively, what we have done last year to get a few, taking into account the fact that the swap really did rise almost 20 basis compared to last year, then you can get a feel of what kind of rates we might potentially get and what kind of potential savings based on that.

Yes?

Just a couple of questions about the valuation because Raffles City fell by $77 million. The most -- I mean the most declines from Raffles City. Was this just the impact of Robinson exiting and you getting lower rent?

It's over the retail component of the Raffles City. And the last -- actually, also, part of it is contributed by the expectation of Robinson City -- Robinson space, yes.

And it's not hotel or anything like that?

What?

It's not the hotel part?

No.

And then there was also another decline for the German properties. There was one -- what happened? Because I thought there was like a long lease for the CBD property. And what happened with the German properties because it can't have been cap rates because of the...

No, no change in cap rate, yes. You want to elaborate?

For Germany, generally, I think the feeling is that the rents and conditions are still soft and it's very uncertain, which is the reason why the German properties are actually down in terms of euro. And then we also had the exchange rate effect because I think what you see is the valuation as of October versus December. So as of October, when we translated the June valuation in euro to Sing dollars, we use the October exchange rate, and then that one moved against us. So there was an added effect of the exchange rate between October and December, in addition to the fall in euro terms.

Which is why I told you the number is really noisy. This is a double translation effect, yes. So although the euro is down about $1-plus million, right?

Yes. The cost is about 159 million versus 161 million. But if we had used like the June euro exchange rate, then it would have swung the other way. So quite a bit of noise there.

Yes. Sorry, Yew Kiang, before coming to you, I think, just to continue on the valuation. There's a question that asked, do we have a sense that the asset declines that we have seen is the worst for this real estate cycle? This one, Derek of DBS.

We think the worst is over. The question is whether we may see a bit of movement in between, all depends on -- it could be also depends on how the interest rate will look like. Of course, the value will apply a certain discount rate into the model. We think the risk premium possibly has stabilized for the different component. Hotel side, we are very marked down last year. We'll see how the hotels are performing when things normalize a little bit, yes.

Yes, Yew Kiang?

Yes, just a very quick one from me. In terms of the BHG taking of Robinsons, given that they are your tenant at Bugis Junction, right? Can you share a bit about their performance there? Because I don't think I've ever spent any money there. So I just want to know like what [ somebody ] bringing, yes.

Typically, we don't want to share individual tenant's detail. I mean these are confidential, right? I can only say they are fairly progressive as an operator. My experience with them in China I have witnessed it because they were also the tenant in China. They run both the department store, which they have basically significantly downsized and they run a very successful chain -- supermarket chain. So they are a dominant player in Beijing. The BHG Group also involved in the business of running luxury shopping center and the best-performing shopping center in China is partly owned by BHG. So they are the seasoned operator, [ I can put ] it enough, and the owner are pretty hands on, okay? So we think that collaboration may have a chance to succeed. We'll see how it goes. Again, like I say, this is short term. In the long term, whether will BHG staying on long term, we cannot comment at the moment. We're certainly looking at different kind of potential combination, yes.

Okay. Yes.

Yes, Tony, my math is probably [ too ]. But just had a question on [indiscernible] at Raffles City. I think you mentioned earlier there was a provision. Can you maybe quantify that? Is it more for 2021? Or there was a previous in the prior year? How should we think about the rent review that year, right?

Yes. We can't go into detail now on the -- this is still -- is something that we don't divulge the terms -- I mean, those are commercial terms. Certainly, a few things, we, of course, want to achieve that. First and foremost, I think we need also to help them during this period of time to weather through the crisis. They are our big anchor tenant, right? In fact, master lease and anchor tenant, very long lease. And this is also their single largest asset on balance sheet. So I think both sides has strong interest in making it work. So we are coming with that angle in mind. Eventually, we hope that any kind of solution or package, it will be a win-win. So the rent review, the operating condition today is all in the microscope as a discussion. So I mean, that's all I can tell you.

Sure. And in terms of portfolio reconstitution, in terms of the acquisition side of things, is there a preference for Singapore versus overseas? I mean saying Robinson is effectively stabilized at 90%.

Yes. It depends on which on conference, I think we're certainly interested in Singapore. This is a market that we're already in. So it could be Germany, yes, maybe within Frankfurt or outside Frankfurt, depends. That will be the ideal situation. So that we have sufficient scale over there. We really have people on the ground working on assets. It is local, local, the German guys are on the ground already working on the assets, yes.

Next, we have DBS, Rachel.

Thanks for the presentation and congratulations on your tenant sales in the fourth quarter. I just want to ask for the Downtown mall, if I were to ship out some of the outliers, what would it look like in terms of the tenant sales?

There's only one major, major outlier, a very small contributor. I don't think it'll shift the needle too much, yes.

Okay. I think secondly, on the valuations. If I look at it, I see the 2 assets that strike out had a little bit of drop in the valuations in your Asia Square and to CapitaGreen. Are you expecting some vacancy risk there in these 2 assets?

I mean, certainly, there are risk of course. We -- there are new -- I mean there are other options available for tenants, right? And we are engaging them actively. It's a question about how you want to position the property. We definitely want to maintain a priority of choice, retention, right, good retention. Retention not possible for a variety of reasons whether the space doesn't fit nor they couldn't -- whether they want a smaller size, we can't cut, they want expansion, we do not have the space. It could be multiple reasons or it could be commercial term we could not agree on. Yes, of course, we find alternatives, but we are trying to strike the right balance. But certainly, there's a risk -- there's a -- the vacancy risk is there. Yes.

Also, maybe a follow-up on that. Any discussions with your tenants? Are they trying to put a lot more pressure on the rental rate when you have negotiations with them?

Yes. If you're a tenant, every one of us will try to low ball. If I were them, I will do that as well, right. So that's the starting point of negotiation. Where we end, of course, at the end is about how they see the market dynamics. In fact, with the certainty of that completion that I earlier talked about on CapSpring, it potentially spurred their decision to the industrial. Bear in mind, there are also risk of them not being to find -- to be able to find their home -- permanent home, right. There will be tenant that will be displaced, extra tower and [ Fuji ] I mean these are tenant potentially will be displaced that were to find home as well. And they may not have that full visibility of where the new demands are coming in. Whether it's oversea, new companies setting up or company who are expanding the space, right? So sometimes, being the largest owner of this property and commercial office property, I think we -- it's also important on our part to really educate a little bit. If you are not moving, maybe you'll lose the space. So sometimes, that dynamic will change over time. It's something that we hope with the certainty put in place, it will start spurring. Because certainly, Robinson, it was 90% free, right? We are already working towards by TOP, more than 60%. Today's better and we are still working on a few. Some they start to worry -- get worried that they won't be able to find a place, yes.

Okay. Got it. Probably just my last question. I think you were saying that if you put the assets out there, there will be quite a big interest on it. So I was just wondering in terms of timing-wise, is it easier for you to do a divestment versus acquisition first? And hopefully, that will bring down the gearing ratio?

To begin with, yes, 40.6% is manageable. It's not ideal, it's manageable, right? If you want to do the act, then of course, we can go to the market and sell some assets easily, right. But do you want to do that? But we also want to fix a few thing right, concurrently. Improving the quality of the portfolio that's short, medium term, right, that we're looking at. They include potentially monetizing. And then, of course, hopefully, we can get something in. So that's something in, we have to see whether how quick we can access the something coming in. So you have to ensure you do not have too big a gap in terms of capital coming back in and then not being able to redeploy. Of course, you can pan out the debt, I mean that's the last thing the investor like to see. But I think we need to work the capital hard. And at the same time, find the right sweet spot. Again, we cannot time the market. The market -- of course, the market is very sweet and very conducive. And we feel that it's a little bit over exuberant, we maybe have decided differently. But today, I think we would spend priority, making sure that, first of all, we are very clear which part of the portfolio we think in the long run doesn't make sense. How are you going to look at new industrial coming when -- investments coming in when the capital is deployed. So it could be overseas, it could be local, right? And then also the timing of when you're going to take down, let's say, if we were to do AI, right, how that will impact your cash flow. So there's quite a few variable you manage concurrently. But safe to say, I think the -- all this, I think what I do want to do is still within our pie of road map in the next 5 years or so, we hope we can create a vehicle that's very stable, improve the quality of the portfolio, the quality comes with potential for organic growth, look at a little bit of inorganic growth, look at opportunity to even better improve the product that we have and create even stronger final product that can differentiate yourself from a competitor. And you can see for the [ South line ] assets, we needed to spend some time looking at it. Yes, it's not a core assets, yes.

Okay.

Yes, Jardin here from DBS, following Rachel's question. Are you able to share with us on an asset level, which are the ones that are outperforming for both the suburban and central category?

A few in the North, doing quite okay, yes. And the Northern site, they're doing okay. Yes. In fact, yes, majority are doing quite okay except Tower 1 that's a little bit more of the outlier, but majority are doing quite okay.

Yes, okay. I think I will just ask a couple of questions from the webcast. I think Morgan Stanley, Angeline, asking about some details about office tenants whom we are looking to reduce space. What percentage of these tenants are looking to reduce space? And what industries or business do they represent? That's the first question. And then the other question is about interest rate -- okay, second question is, does the recent spike in the U.S. bond yields affect our expectation for borrowing costs for upcoming refinancing? That's 2 questions.

Okay. So do we table it? Okay, I don't have the number, I do have to get back to the asset manager on -- we probably can give you a range, but I don't think it can be so precisionally correct in terms of number of people who are looking at expansion, looking at contraction, right? Because it all depends on your prospects, right? Your prospects was -- what they are telling you. They may initially say they need this space, eventually need this space or could advise you versus the other way around. Because if you look at the floor plate, they can perhaps scale back a little bit. So it all depends on tenant by tenant. But we -- I think we have to work on that. I think we get -- let Angeline know when we come back. On the U.S., yes, the yield curve has spiked a little bit about 10. It was below -- last year, when we did the $2.5 million -- 2.15% after sort all in like 10 to 12 years, Hong Kong dollar, part of it is Hong Kong dollars. I think the U.S. Treasury, if you benchmark U.S. Treasury at a point in time, it's probably 0-point something or 0.9. Today, it's gone up to about 1.1, so about 20 bps, both higher. Singapore rate has not shifted too much. It shifted up a little bit. I think to a large extent because of the influx of dollar coming in. The dollar seems been very weak now. So Sing dollar strengthened quite a fair bit but sort of swap rate actually helped to come down a little bit. That's one factor. The other factor, which we feel potentially, the industrial will start to price in, at the earlier stage, when the interest rate are so depressed, a lot of them pricing, you can say, increased credit spread requirement to compensate for the risk that you're taking on. And also it depends on the view on the asset component on a specific sector component. Today, we feel that, that spread requirement may have come off as a result of increasing the yield curve. So it sort of compensated a little bit. Overall, I think earlier, Cindy did mention, if you go out to the market now, I don't -- potentially, even though we are lucky, the timing is right, we do get a reverse inquiry. We may still be able to do at the same rate that were done in December. Yes, but if there's any impact on the higher shop rate today, U.S. especially the yield curve, maybe a couple of bits move up overall, yes. So it will -- I don't think it's a big change in terms of the all-in rate that we may be able to lock in. There could be some -- a little bit of awarding. Cindy, you want to -- anything you want to add?

I think we're good.

So we are quite fortunate that there's compensating. That is the beauty of the platform now, we have both the ETM program -- EMTM program, MTM program, right. We can take multiple currency. We have the flexibility to go market size or if all-in swap rate, it depends on which market is more favorable. Sometimes, the dollar rate may be more favorable. On an after swap basis, it's potentially more favorable than doing our rising dollar financing, we can do that. We've done that for Hong Kong dollar, we've done that for U.S. dollar before. So we have the program in place that allow us to do it. Yes. And if you can do at least a market-sized transaction, I think the demand will be good, yes. Because we already go out there in the -- outside of Sing dollar space.

Okay.

Tony, just a couple of more questions, right? Can you just remind us if CMT has the right of first refuser to CapitaLand's 50% stake in ION? That's the first question. The second question is can you just share about your leasing plans for the 2 malls, which are [ single op ] expiries for this year, mainly Bugis+ and also JCube. I think particularly for JCube, any change in plans after the HSR termination?

On the ROFR. Generally, CMT time, CMT time. The ROFR extend to third party. I mean the background is the time CMT went on for IPO, of course, the authority wants to ensure that there's a clear demarcation of your mandate, there will not be overlap. So third-party operating asset, we have the first cut. That doesn't apply for asset that they own, okay? Nonetheless, I think there's a lot interest. In fact, you probably can underappreciate well, the sponsor will prefer their own vehicle to be the [ MBIA ] possible. B+, we are working on the -- some of the bigger space, as [ Pari ], was still working on it. We will -- I don't think we ever announced that, but we are working on it. It's still on later part of the year. JCube leasing strategy, I don't think will change significantly. Okay. You ask me what's the impact of the withdrawal from the HSR, honestly speaking, I think, quite marginal because the district commercial center with or without the HSR, it was already in the plan anyway, right? They've got to figure out that space that has been set aside, what they want to do with that. I mean we will set a big broad land that was set aside for the station. So that's probably the detail that you are -- if you go back to the drawing board. We do engage them. So they also -- I mean, there are dialogues 2 ways, not just us, but of course, they are talking to general developer on their perception and the view on location, yes. So from a leasing perspective, what has changed if you -- I don't know when it was the last time you talked in JCube. Anyway, we have anchor tenant now. So we start to strip up the core format that we tried to operate, but won't do successful with multiple small shops. So we are amalgamated of a big space. I mean, Daiso is operating now, so it's doing pretty okay. They're now doing pretty okay there. We retain some of the smaller -- the old J.Avenue tenant over there. Over time, we will fine tune. Yes. I think the original intent is to create JCube as a place with high energy, high spot. I think that's still on track. I mean, that's something that we try to work towards to, whether we can execute that, I think it's hard to say because you have to differentiate JCube away from Westgate and Jem. Those 2 are the big giants collectively. Just like if you look at the East side, Tampines Mall -- Century Square, Tampines Mall has one big cluster, actually it's a big magnet. Similarly, for Westgate and Jem, it's is a big magnet. So to me, it's a regional cluster. Your immediate shoppers are not made of just surrounding people. There'll be people from Bukit Timah from potentially -- also Jurong part. Jurong, in between Jurong Point part of [ traffic -- ] part of [ traffic round ] as well. [ Infilink ] potentially next lower part of [ Tengah ] that's closer to the -- our location, there will be a catchment as well, right? So the JCube has to differentiate for sure, given that the size is not big and the 2 giants there has got everything you need. So naturally, as a human behavior who travel to the location, you will just draw the cloud there, yes.

Any other question on -- yes, Mervin?

Yes. Sorry, back to the office portfolio. For the renewals that you're currently negotiating, are you seeing a lot more tenants asking for, let's say, 1-year extension rather than going for 3 years? Because...

Yes, there are cases. They're asking for just a temporary 1-year extension to assess again right, to have a little bit of time to assess. Our preference is locking longer time, of course. But so on a case by case, we may agree to it. Some, we don't agree, then we may just have a shorter term, as mentioned, and then find a new one.

Is it a material amount? Or are they all trying to get sign 1 year, max 2 years, hoping to get cheaper rent with the new supply coming up 2 to 3 years' time? Is there a big...

Honestly, there's not a lot of supply coming up. So you are talking about new supply coming up, they are not. In the more mature location, so if you -- as a retailer, either you want to be there or don't want to be there. That's the most main decision. For us, same thing, whether we think this one fit in or don't fit in, yes.

On Six Battery, haven't really talked about it, but how is the progress of preleasing? How quickly can we ramp up?

So Six Battery Road is scheduled towards the end of the year, I think, completion mentioned. Some part of the component actually are retail related. We started to get the integration of the 2 commercial retail team to work so that the platform makes more sense. The entire retail management force within the retail, so expertise and the office management for -- within our office expertise. So our retail folks are going in more actively now. So that will be one part of it. We are trying to pin down -- it's not the concept that we are working on. The office side, the competition is clean. Because the composition of the Six Battery Road, the tenancy is quite similar to the immediate competition, which is the overall complex out there, so the tower -- so there's some competition over there. Yes, but nevertheless, I think the space typically tend to be a little bit smaller. I think we're working on it. The commitment level, I wouldn't say, is too far away from CapSpring, yes.

And just finally on Asia Square. Any updates in terms of the percentage of space that's been backfilled for the space [indiscernible] moving up?

Not yet. We're still working with it, yes.

Okay. Okay. I think we have to close. We already reached 1 hour of Q&A. So I think I'll just ask 1 last question from the webcast. The question is about whether there is a target credit rating that CICT is aiming for. But I think it's -- I think, Tony, you want to answer? I think not so much that we're aiming for, but yes.

Yes. I mean ideally, we'd like to defend. I think it's an A and B differentiator. As far as we can, we try to defend it, yes.

Okay. I think -- yes, I think there's still a few questions on the webcast, but I think a lot of them are into specific details of some of those questions that we have asked earlier. So I think for those on the webcast, we will come back to you on the responses. But I think we have addressed the questions we have on the floor here. So thank you very much for joining us today.

Thank you very much. Again, very nice to see you again. Take care. Have a good 2021.

Thank you. Okay. I think for those of you here, we have some fruits and coffee and tea. Please join us.

We can continue there.

Thank you.