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

Good morning, everyone. CICT released its first half 2022 financial results this morning, and we are pleased to have you join us both in person and online via Zoom webinar. A warm welcome to all of you. On the panel this morning, we have Mr. Tony Tan, Chief Executive Officer of CICT Manager; Ms. Wong Mei Lian, Chief Financial Officer; Ms. Jacqueline Lee, Head of Investment and I'm Mei Peng, Head of Investor Relations. We will start today's briefing with a presentation by Tony, our CEO, followed by a question-and-answer session. Please note that this session is recorded and uploaded -- and will be uploaded on CICT website later. Now may we have Tony shared with us the highlights of CICT's results. Tony, please?

Thanks, Mei Peng. Good morning, everyone. Good morning those online. Thank you for turning up today. I think it's a busy period for a lot of result reporting. And likewise, we have announced our result this morning. I think for many of you, you probably have caught me many times, I alluded before that this year our financial number will look very noisy given that a couple of things we've done. We have development project that became a completer. We are backfill the space, but then there will be a little bit of timing difference. And hence, this year result will be a very noisy result. So this is a little bit of a backdrop that I just want to emphasize. So let me zoom in quite quickly. I would not -- probably not draw too much time. I think probably -- based on what I see in the chat, I'm sure you have a lot of burning questions beyond all [the results publish]. It is easy to relate to. And obviously, we try to answer as much query as possible. So quite quickly, this first half result is of course it's a combination of things that we have done over the last 6 to 9 months. We look at some adjustment to our portfolio. We did some divestment last year with One George Street that was completed in December. And then we also saw a JCube was completed in March. We went through a transaction to acquire 3 Australian assets in December last year, 2 of the assets was completed late first quarter. And the final one was only completed almost towards the end of June. So this gives you a little bit of backdrop, some of the noises that will come across in the number. At the same time, we have also competition of some of the projects, namely like 21 CQ that was completed last year, starting to see some contribution, given that there will be a bit of period where the accorded [indiscernible] will start to get some income coming from the second quarter onwards. And then we have also completed CapitaSpring. Completion was last year in November, and gradually, we have been filling up the space quite nicely later you see in the slide. So today, we are almost 100% filled, right? Just left one units. But then there will be a bit of timing difference because when you hand over a channel that's where we start clocking the revenue, but then the old have setout period where there will be revenue recognition, but then there will be no corresponding ramp payable until the feed off peers over, right? So quite a noisy number, but more substantively from a CapitaSpring perspective, I think likely will come more meaningfully from second half and really more meaningfully substantial from 2023. Similarly, in Australia asset, we acquired and completed 2 of the assets in -- during the first half, but you only really see about 3 months or so of our income coming in. We also completed the final one in Australia already late June. So in fact, we have not even accounted for it on this first half, right, because it's just too late, it was completed during 6th June. So it's kind of noisy. But nevertheless, they put that in the context, I think overall, our rental revenue has grown of 6.5%, I think, yes and NPI has also grown. But then translate to DPU, I think, of course, you see it's quite a marginal improvement [5.22 cents] Overall, from an operational number perspective, I think it's been very healthy. We've seen quite nice uplift, including a backfilling of space has been vacated by some of the major tenants. Gradually, we have a secure commitment. So portfolio-wise, it's gone up to about 93.8%. That takes into account those 3 newly acquired assets, so already above mentioned. We also have taken in 79 Robinson Road, which is now renamed as CapitaSky. So it was only completed in April. So we see about 2 months or so of income contribution. So put it all together, the portfolio occupancy is up a little bit to 93.8%, taking into account all of the assets that would require some time to ramp up, especially those newly acquired one. From the retail perspective, I think the -- we are seeing quite nice uplift. I think probably not a surprise to many of you who have seen some of the other peers result. Retail result has seen quite nice uplift, particularly from second quarter onward, where the uplifting of the key measures, SME measures was lifted. I think that helps a lot. Downtown, not surprisingly, outperformed the urban mall given the -- partly because of the lower base, but also the fact that I think there's a little bit more [pent-up] with the help of some tourists that are trickling in. So we're seeing a nice uplift in the downtown mall. But nevertheless, a little bit more, so seen a little bit uplift given that now the dining option is widened. There's more restriction in a more traffic-wise has also seen nice uplift as well. CQ AEI have announced 2 days ago, and there's something that shouldn't be new to all of you. I have been telling you that we need to do something about it. We want to derisk this asset. It's been very heavy focused on night life, heavy party and it's somewhat associated to the that kind of positioning. We think in the long run, to be more sustainable from a rent perspective, we need to widen the trading hours, which is why we start to introduce trade that will bring in day [indiscernible]. At the same time, retain core element of Clarke Quay's that's been important. It's been also well known worldwide. Importantly, well now and will continue to be important attraction for tourists and people who want to have a good time at night as well. So we broadly zone into 3 areas: Riverfront, Warehouse acute. Riverfront is a bit focused on F&B. So high energy area, that's where people party and also stay there around that area location. And then the warehouse is probably the main transformation. Currently, we see multiple shopping malls, we're going to [indiscernible] little bit apart. Internally you'll see some nice skylight. Hopefully, there will be one major draw from people from all around the world, including Singapore as well. And it will fit in quite nicely, hopefully, by the time the project Clarke Quay is completed in 2025, '26, that were sort of bringing that food into phase and integration nicely with [liveable] family, a little bit of the [year] living family, but also an element that's important for a nice lifestyle. So to date, we have reached about 17% of precommitment. Currently, we are about 70% [of initial ground] and we have a tenant that slowly will be easing out as the lease expired. But as and when they are -- they fit into the timing of the AEI will move them to the new location. So there'll be a lit bit of adjustment going forward. The work will start in third quarter, in fact, in the next month or so. So there will be a little bit of adjustment from occupancy perspective and where as this thing kind of potentially will stay on, but they may be relocated to other locations. So stay tuned. Physically, here, you can pop in as and when this -- I think it will stay open. That's around 1 year or so of enhancement on [indiscernible]] So Raffles City, I think most of the world is on track. We are progressively filling it up. The AEI space, sort of new offerings, including Raffles City, I think we'll continue to bring in new exciting brand to reposition and strengthen the position the 3 names here. But Raffles City, I think stay tuned because we are entering to almost the final phase of the actual work. Progressively, we'll be handing over to tenants. From a timing perspective, we hope to target a majority of the tenant to be operational by fourth quarter period, which is where the -- I mean, the high season for shopping. And hopefully, by then, we see more influx of tourists coming to Raffles City as well. Yes. So having said that, I mean, retail has been seeing a nice uplift, given the general sentiments being more positive than what you'll hear 12 months ago. Well, we hope to -- we continue to be able to bring new exciting brand, including a new to market as well. So this is Raffles City I mentioned. You see quite a fair bit of brands here. This little bit -- I alluded before, we want to go a little bit not to higher positioning wise. This representation of the different category, beauty, health, fashion across, we secured quite good names. And hopefully, that will be a main anchor that will help to forecast the leasing forward here. So let me touch a little bit about the Core and Flex strategy, which will replicate, I think, over time in our other properties as well. I think we tried experimented in CapitaSpring, especially where we actually co-partner with TWP. So TWP is both a tenant with us, the occupied [indiscernible] floor. They're also managing 2 floor for us. And we think that this is probably a potential going trend especially many companies now are adopting core flex kind of arrangement. And be able to cater [indiscernible] period where they may see changes in the demand for space. So TWP managed the 2 floor for us. I think the thing has taken on very well. So far, we've been very, very pleased as of now. I think the space is high 90s percent filled already and that sort of fit into that narrative that talk about before. We have seen tenants actually secure tenancy with this building, but they need it immediately. But because of the construction work we couldn't deliver the space in time. This flex space comes in very handy or within the same building and is like blood and play kind of arrangement. We are also going to potentially roll out. I know we are working through our 2 -- 3 assets that we have been newly acquired in Australia to renew such strategy, space within such demand will pick the pace. Many companies are very careful about how they look at their footprint and their space requirement. And naturally, I think cost management is important. That kind of flexible space, I think, would play an important role in their overall strategy. So I think we'll start to look at it a little bit more in some of the overseas assets as well. Overall financial performance, I don't think I want to jump too much NPI, I already talked about it already. Revenue stream very diversified, you can see, but it's still going to be predominantly. It's a good wide spread. You have Suburban retail and Downtown retail as well as the office exposure. And overall, I think maybe a point out because these are also a point of interest for many of you. OpEx [measure] is going up. Utility cost and [indiscernible] cost are not. I told you this year, we have has to rate all the way to the end. It's already more than 90% compared to the last rate that repay. Albeit last rate we paid was a really low rate because we really contracted when the market was already at almost near bottom. So [indiscernible] an update. So energy cost is something we manage actively to proactively to different ways, obviously, consumption management is important. This is something that we do very actively. Looking at how we could even upgrade the efficiency of our own equipment. I think these are also things that are in the plan. We are also -- and it's probably not new to you, and I mentioned before, that we're also looking at how potentially we can explore recover some cost through service charge. You has to be [indiscernible]. It has to be substantiated. So we are going through the exercise. And hopefully, we will be able to have some lending. So take comfort that we are managing. We're trying to manage this as actively as possible. At the same time, I think it's -- it [warn us] for us to relook at some of the costs that may potentially have to be passed on. Balance sheet remained very healthy. We went out a little bit once 2.07 on the back of this substantially contributed from the divestment from JCube. Financing-wise, I think this year, more or less, is all done, right? Maybe Mei Lian can pass on a little bit more if you have some questions. We actually push back -- push out, if you look at -- if you recall, [2023, 2024] we are much higher thoroughly. So we managed to push back some of the -- well, [not push back] I mean, forward extension saw the financing, [2023, 2024] further down the road so that we have a little bit of thought that's a bit more manageable. And that was important to see that as a result, the average loan duration also has extened. Just some snapshot. Leverage gone up a little bit on the back of completion of some of the projects -- some of the acquisitions we have done, 40.6%. Hedge [indsicernible] moved down a little bit, 81% from 85%, we're moving down a little bit. I think we were fortunate that we are in a position to do that because we started with a very high fix. Today, the market dynamic in the interest rate fund has been very, very volatile. I think we need to have very active management on the interest rate side. And that cost us some flexibility in terms of protection because we started off with a very high fixed tax rate. Interest coverage quite flat around their 4.1x and 4.2x there above. Average term to maturity, we stranded further. So that's something I mentioned before. Overall, the average cost of debt hedged up about 10 basis points. So this I won't touch much. So portfolio occupancy, 93.8% is up slightly from 93.6%. I think, yes. But of course, it's a mixed bag. If we go down further down. WALE also, I think I touched a little bit on the extended a bit. This one I won't touch, much Exposure [indiscernible] later I go on to the Portfolio. So maybe just come back to this one. So this is the next bag [ 93-point ] including the newly acquired on where some of the assets are low -- also as crude -- so leases were already in a quite advanced negotiation, especially Capital Tower. We're looking at -- hopefully, you can hear that soon early taking longer than expected for the finance. But I think we are quite close to it. Let me zoom in to retail, 96.5% occupancy a marginal. I think it's quite flat. Last quarter, we reported was 96.6%, I think, yes, slightly lower. But then I think it's nothing to be alarm. Overall, I think the trading has been very healthy. We've seen a very nice uplift in the tenant sales, 16% almost close to 16% for the first half. Stronger performance from the Downtown uplift than the Suburban but Suburba track quite a decent kind of uplift. Overall, we continue to see rental reversion narrowing down. We -- again, I mentioned we are progressively adjusting the rent and we see the reversions narrowing already. In fact, yes, marginally [indiscernible] Downtown, yes. So this is the breakdown of all the different assets. You probably can see Clarke Quay is the main drag. If -- and then for some AEI space, withi Raffles City, we took it out. If you look at it, overall, if the Clarke Quay space is to be removed, we are looking at close to 98.4% kind of occupancy, yes. Reversion, I touched a little bit earlier. There is continued to narrow down. If you were to compare -- the first quarter, we reported -- we see the fact second quarter is tracking quite nicely. Over [indiscernible] the Downtown malls almost fair the second quarter. Suburban mall is a higher 1.4%, overall, we're looking at about 0.5% negative. But I think we are narrowing, yes. Portfolio hedged up a little bit, nothing to show about 2.1% here is manageable. Look at maybe the sales number, I think I did mentioned earlier, second quarter has been very strong. On the portfolio, in fact -- Portfolio dropped 32% on the back of, of course, lower last year with 15.9% improvement from Downtown mall and Suburban seeing about close to 13% higher [indiscernible], yeah. Not surprisingly, the trade that benefited most during the period where there were heightened safe management measures in place. That's been lifted up. Now those trades will see a little bit of reversal. So we see market sales coming off a little bit. Home furnishing will back our people, more people are being back to the office again. So it's not surprising. And on conversely, the trades has suffered a lot more during the period -- same period. I say a nice uplift, a bit down. People start to shop again for their own the [indiscernible] the shoes, the bags. So the department store has been done doing quite well. And not surprisingly, leisure, the club we've seen is getting very active again. They go down town to Clarke Quay and you've seen the cost been pretty decent. So it was not surprising at all. On office front, occupancy overall is 91.9%. Of course, this includes the Australia and the overseas asset, particularly. But if you look at Singapore occupancy on its own 92.9% is up from like 92.3%. There'll be a detail here. If you also notice, the main draft now is obviously the Capital Tower that we still are looking to fulfill that, including those space that I mentioned, we are almost nearing there. We don't get potentially adding in our 13% improvement in occupancy, hopefully, in the next 1 or 2 quarters, yes. On the overseas side, the German side pretty stable. Australia, we just took over, a little bit decline in the 66 Goldman Street on the back of a nonrenewal, but we have already begin to look at back filling. But we also want to take the opportunity to upgrade some of the part of the assets, which is, we think, a little bit dated, now especially the lift part of our acquisition plan was to really look at this asset and bring it up to a higher quality grade A building than it is today. So a few areas that we had planned in our investment from a CapEx perspective, we decided to bring for specialist leases flow are debt. The tenants are big eating well bringing back and doing a nice uplift. We've seen some traction also in the ARPU. We have build up 6% or so, and we are also in discussion with a few other prospects. Hopefully, you can see improvement in the next few quarters. 101-Miller is a joint venture with Mirvac, we completed in 26 June. So we are working through the plan. Potentially also may incorporate some of the strategy that we talked about in CapitaSpring. Hopefully, that will bring that -- the quality of the tenant even further. This is the one that I talked about a lot on noncommitted actual. It's a timing gap. So this is more for your own number projection. Progressively, we'll be handing over space. And that's where I think the accounting will start. And then once the fit-up year is over, you see the cash flow coming in. This is something I mentioned earlier, so I don't talk too much on it. WALEs I will talk to much. Expiry [indiscernible], I think this year with [indiscernible] surprise, I think some of the higher rent lease expiries area, we are able to, in fact, a positive reversion. So second quarter effect, all the property has achieved a positive reversion number yes. So these are more for I won't go too much. I think we're also seeing -- it's probably not new to you guys as well, the hospitality tracing is probably the major beneficiary in terms of this reopening and -- reopening team with the quartile rates are now going up quite aggressively. Occupancy also picking up quite nicely. Second half of the year will be a very busy calendar year for the social event well, we also get feedback from the hotel that the bookings are pretty robust, weddings and conventions are starting to come back. And of course, we have the highlights like the F1, all these are -- and then on National Day as well, has been seeing a very nice encouraging kind of update. And then in fact, the RevPAR for the hotel is resurpassed $300, which is quite happy. We have quite before them because we time part of this period where we did a bit of restructuring in the rank with the hotel was to bring that way we need for retail being done a fixed increase on comparable components. So we're enjoying a little bit of uplift from the variable yes. Outlook, something I mentioned before, we have to be ready for job and a very proactive in managing our cost. Interest rate slide, of course, I think we may have our own view, our interest rate will pent out, but we start off with a very good footing and very high fixed hedge position. We've seen the yield curve shifting all the time. As we speak today, you probably see some inversion already happened probably deeper now. We will take advantage of that and act accordingly and try to minimize. I think overall, the interest rate you expect to go up. We fair for the last 5 to 10 years, we have been enjoying a nice right. We are able to get even a 10-year money for 2%. These days, you can't get 10-year money or you'll be lucky to get maybe high 3s, even maybe slightly around 4%, all in yes. But I think the era of ultra low interest rate, I think it's over, that's a reality, but we try to manage as much as possible. Overall, I think we should expect the average cost of debt in [HR] This quarter, it's about 10 basis points. But as and when we find some of the expiry or you see some -- you will start the age of them as well. Okay. So I'll stop here, and we're happy to take questions often but here on.

Thank you. Tony. [Operator Instructions] So yes, Mervin, you can have the first question.

Mervin from JPMorgan. Maybe you can go to Slide 34, in terms of the cash flow timing this one. Yes. Just trying to maybe help us in terms of modeling. How do you see the actual occupancy hitting for these 3 buildings by end of third quarter and maybe fourth quarter? Yes. The cash flow impact yes.

The first and the third one, we were very close to committed -- the six Battery Road, we have a couple of deals that we are looking at. At the same time, we are also progressively taking back space to upgrade to the latest fire code. I mean, this is an agreement we had with the [SEDF] when the major expiry, we need to basically do the catching up with the latest fire requirement. So there will be a bit of timing difference. We hope by end of the year, we are aging closer to 90%-- maybe low 90%.

Yes. Sorry, did this confirm the Asia Square and CapitaSpring get close to committed by year-end?

[indiscernible] closer.

third quarter -- third quarter end of third quarter, how do you see that halfway between or?

Over the course of the fourth quarter.

Close to the fourth quarter, because of [indiscernilbe] Okay. Maybe turn to the retail tenant sales. Maybe give us some sense of how does it compare to pre-COVID and the occupancy costs? So give us a sense of how hard you can drive the rents going forward?

Okay. Occupancy cost has been healthy overall as a portfolio, it's about around 70%. So I think we are in a very healthy range. Compared to pre-COVID, suburban is higher, naturally. I think we're looking at about 5 over percent. They are about higher than pre-COVID, as overall basket of retail -- suburban retail as a basket of downtown were slightly down at about 5% ish down lower than reported.

So I guess thirs=d quarter downtime could get close to a pre-COVID, I assume.

PHope so. Yes.

Hope so. Okay. I'll leave to Mei Peng.

Thank you, Mervin. It's Jin.

This is Tien Jin Chee. Just a question on sizable acquisitions. I mean, given where gearing is -- just one question on sizable acquisitions. Given where the gearing is, how are you going to balance between making the acquisition accretive and also maintaining healthy balance sheet?

Yes. So there's no magical bullet. I mean the honest truth is we have to look at different options, right? When we -- it's no different from any kind of a transaction we have done. We have done different combination from a simple debt finance to a combination of debt and equity and then also obviously also that equity with a little bit of recycling of capital. And finally, we're also looking at partner, right? So I think we have done a different form of combination. I think we just have to explore what's the best way to do it. And it's all about timing, right? Whether -- talk about, let's say, equity partner, whether the timing fits nicely. So it's all about -- all this variable that you can control at a point in time when you look at any specific opportunity. But we have done all this before. So we will explore the best way [indiscernible]

Can I follow up how -- what's the max limit of gearing your volume goal in this cycle?

I think we mentioned many times, 40 plus/minus around there is something very manageable given the fact that, I think, of course, we've been driving that set performance over time, asset value will help covered part of it. The -- we also [call it] the fact that the interest rate is also rising, so a lot to strike the right [balance]. But 40% is something we feel is very manageable. There about plus/minus. Ideally, you give a little yourself a little bit more bandwidth in terms of headroom if you want to seize the opportunity very opportunistically, right? Then the lower gear definitely help for you to react faster. But nevertheless, I think we will manage [indiscernible].

Yes. Nicholas.

Nicholas from Credit Suisse. Just want to ask in terms of, I guess, when you look at the portfolio and potential divestments, which are the assets that would be on the periphery of non-coal that you could possibly look at or even you've already kind of started receiving more interest on? And then the other question I had was -- just on TWP, you talked about Six Battery Road and CapitaSpring. Just wanted to understand how the economics work for that. I guess they are operating the space for you, you'd have to pay them some fees. Just any details you have on how the income works there?

So first question in the -- we naturally, I think look at the opportunity, I think we also concur will look at our portfolio construct. I think it is -- it's a journey, I think I mentioned before it's a journey. Sometimes about when will be the right moment to do it. You have at the back room mine, okay, something that potentially -- if there are other alternatives that we can do that. Otherwise, there's no hard reason unless it's so compelling that somebody gives you a mirroring kind of things. There's no way we are going to run the asset to that kind of extent, right, then that will be a moment that we may consider seriously, yes. So -- but nevertheless, it may also trigger sometimes when you look at investment opportunity, that surface and define is so interesting. And perhaps we look at within our portfolio, this will be potentially a better deployment of capital than current onw we are holding, then they may another trigger point. But safe to say, overall, as a I think we position ourselves quite clearly. I think it is -- the function of [indiscernible] to really invest in the long run, in long-term income-generating assets, right? I mean that's the mandate we have. And there's something all the different authority looking at us to fulfill the role from MAS or MOs or IRAS. We have to be very careful. We are not in the business of doing training. We cannot be seen as doing the business of trading. So this year it will be a context. Naturally, what kind of candidate will be, potentially over time, we feel that it wouldn't fit so well. It's about timing, right? I think that we feel that maybe we can't really [mix up] anymore. We can't scale up because the limitation, regulatory limitation. That could be one candidate. Other candidate would be things that doesn't fit into our mandate geography wise. But then is it the right time? Is it is not -- does it -- is that compelling enough for you to act now? I mean it's not -- we're happy until the time is right, then we can do it yes. So these are January 2 area. We constantly try to see we could further bring more productivity and value into any specific asset. Whether it's through a very simple AEI or to a very extensive kind of regimen possibility. And eventually, we come to the analysis that [SARS] possibility is not fulfillable, there potentially could be a candidate. So [indiscernible] context.

Then on the TWP economics.

So by and large, there will be a bit of performance incentive driven. We do have a kind of base fee that we pay. Normally, it's not a lot, but we [indiscernible] to performance segment. So there will be certain targets for them to achieve. Beyond that, we have a profit share. That's more or less about the kind of [indiscernible]

Okay. How much space they could have take up?

2 floors. I don't have -- 2 floors in the CapitaSpring. I think Six Battery, we're looking at 1 floor as well, yes.

We go to Rachel first. Rachel?

Just a few questions from me. I think for start -- on the office front, what's your outlook on reversions? I see that your expiring rents are also creeping up. How strong is the office market for you to push the rents?

So good question. I mean, this is something that we also ask ourselves, right? I think overall, the momentum has been decent, given the context of what you hear around the world, right? Companies are also starting the [indiscernible] rightsizing. But overall, Singapore still stand pretty good shape in general. The supply situation is not overbearing, so you have a lit bit of supply advantage. And in the context of whether demand is going to pick up aggressively in the context, I think that one, a lot of wait-and-see. But new setup coming to Singapore, I think will be interesting. That's something we'll track closely given what's going on around the world. I think this is quite a natural one good location to be in. Subsector, you already show in the media I know it's reported by different analysts, family offices. I mean they are all aggressively trying to convert. So those are occupier here and they're supportive. But big company, I think that tend to be very careful, especially you are talking about whether you want [up move] or it's just an adjustment. So we have seen some adjustments. We are not hearing a major, major [up move]. There are some pocket of [up moving], but not major, major. But they are adjusting to cater for business that make more sense in this part of the world, to be anchored themselves in. So I think in that context, I would -- I think demand will still be fairly reasonable. As where the rent threshold, it will be, I think it's a question of the industry. Overall, I see inflation. It's all going up. We are talking about Asia Square potentially will also be going up. So in the context of everything, I think we have to be mindful at the end, we are entering a period where globally our expectation of a slowdown in growth. So that's really the backdrop that we have banks well.

Okay. Do you think rental reversions would remain at high single digit for the rest of the year?

I think we had a few low-hanging for which we captured right first quarter. So we saw anchor that in the remaining of the year, the leases expiring or [indiscernible] slightly below market rate. I think will be okay, I think it should be okay. Next year, if you look at the slides we have next year, we started to engage the key tenants, right? Next year overall, the expiring rent average is also not demanding. I think it would be okay. Whether it will be a high kind of reversion, I don't have the crystal ball. And I can only say that what you hear from the consultant so they are projecting a very, very strong nice number, I'm a little bit more conservative genuinely. I feel that there will still be an ongoing kind of adjustment, rightsizing, some expansion, but then there'll be complete we still want to rightsize because they are adopting flexible work arrangement, right? Then even if we have more and more demand coming in, you also will see how this rightsizing kind of a dynamic player. So there will be a bit of market there. It is probably not reported anywhere, but we call the sublet market and the gray market that we'll pay attention to as well.

Okay. My next question is what do you think of the Marcato's portfolio? Marcato's portfolio, the assets in the Marcato's portfolio [indiscernible] interesting.

[indiscernible] on behalf. If I mention -- if I mentioned -- we are not [indiscernible] nobody will at least on a own backyard. We treat it as one of those cutline we look at it. The is something we are familiar with, the space where family, we have the scale. I think we will naturally be interested to look at it.

Do you like the assets?

There are some classes and minuses overall. When you [indiscernible] I mean it's still in the process, right? So I would say there are some interesting elements within the portfolio, yes. But some of that. Okay.

Sorry, because there's a follow-up question from the webcast, it's quite linked to just now what we should ask the office. So I think [following the week] that want to question asked was, do we see any trade sectors seeing attrition from office space event? Because I think just now, we talked about the leasing demand.

You share a lot already in the general news media, some big tech company, crypto market is going through to winter, right? So I think the one is washed out a little bit, but these are not big space occupier. We don't have -- in fact, we hardly had any exposure on the capital space. So we are okay. Big tech company will be adjusting the narrative we hear now is that they probably have wished quite at a point where they are, okay? Those that are already announced the space and they need to expand. It will probably be enough for a couple of years. But again, the business landscape may change, the operating environment may change. We're talking about recession, but then how quick the recession, how short a recession is may be a be a quick turnaround. I already talking about slowing down the rate hike market reprojecting potentially even a rate cut, right? So all these things are very difficult to be project in the next few years, right? There's just 2 [indiscernible] do you have any kind of projection. This part of the world we are somewhat sheltered. Hopefully, hopefully, the China element will play out nicely and now we hope that they will be embarking on the route of [indiscernible]. And then I think this part of world especially Southeast Asia and Asia wise, a lot at intra Asia trading would benefit a lot that will give a nice uplift in terms of the sentiment. And that's where I think the demand may pick up in maybe 1 year, 2 year down or so, I don't. So very hard to project how that will pent up. So supply has been critically important. The supply situation in a way is pretty decent. Some of the older stock will come back to market, it's been taken up from a development, AXA tower, the one at Shanghai [indiscernible] 77 [indiscernible].

78.

[indiscernible] a few other smaller ones, in fact, small asset balance [indiscernible] will be coming up. Goulburn tower will be completing. There we have [indiscernible] that are short power, so also be completing. So there will be new supply that were taken up previously that will be reintroduced to the market. So there will be a bit of competition than I would say. Of course, they are different submarket. And it all depends on over time, how the demand will stack up coming from what sector they will be growing. So -- and the demand in this various sector will change over time. Over the last 5, 10 years, you've seen a nice move in the overall tech sector, it's been going up space, which will potentially the one or maybe they'll continue to grow, who knows. So supply situation, I would say generally been quite supportive for the market. And the rent -- market rent now, I don't think there's a reason to the point where it becomes a big problem for Singapore. So I think we still, overall, would not be deep as a very expensive place to place your business center, but that's a space actually the government watch quite closely and they have to act when the new supply coming to market, and that's where competition will start again.

Sorry. We'll go to BJ first, followed by Brandon and then [indiscernible]

I have a couple of questions. My first question is on the overseas portfolio. In terms of Australian market, the market seems to be a bit soft in terms of occupancy ramp-up. Maybe can you give us a bit of color in terms of physical occupancies? And I remember there was some rental support for some of the projects. When is it until and what's your outlook? And also in terms of German market, with what's happening in terms of German, European economy as well as the exiting offer anchor tenant, what's your thoughts on the market? And does these 2 market remains your overseas expansion plans?

I cannot [indiscernible]. Sorry, just go to the slide on the portfolio. The true observance that I don't think it's any surprise for us from the occupancy perspective, we're more or less expected. One by one, I can address it. 100 Arthur we know in the asset is good quality, 70% of the space are fully referred, there are some remaining space are occupied. And during the down period, the previous owner has done a major rig. So our job, make sure we do the leasing up when the market turned up, hopefully, we are ready for that. And the market demand dynamic is also shifting a little bit of a -- little bit like what I mentioned earlier. The [flexy] component become increasingly important for the occupier in Australia. So from the Arthur perspective, as to whether those currently occupied space that will be up for renewal, we will spend some CapEx to finish up the whole work, right? But overall, it's very full, right? So we hope that leasing will -- traditionally Australia leasing market because it's very active with closer to late third quarter, fourth quarter. I mean that's where they are. There's some are previous. I think that's traditionally the high demand period. So we are watching carefully. So we're going to put the asset in a ready position, including 66 Goulburn Street. So 66 Goulburn Street is a southern part of CBD. It's an area that will go to mountaineer [indiscernible] generation because of the focus on the new software government to -- I think they have not been benefiting from the tech one, I mean, Australia generally. There is no -- no major big, big tech companies in there. So do you want to create that pricing that will shape the landscape in the southern part of the CBD. So it will take years. So 66 Goulburn is a decent grade asset. Relative the price we pay, I think, is a good price. When we look at these asset we knew there are few things you have to do, is question on where do we do it right? Now we took it over any coincide with some tenants who decide not to renew. We think that it's timing for us to fast-track to upgrade that building, especially with the particular floor. And more importantly, I think to position it to ready for the higher leasing period, we want to upgrade the leaf, the ambience, the sense of welcoming arrival is not what -- it's not of the part. It's something that we are planning for in the next 12 to 18 months. Back to 100 Arthur, I think when you look at it, this was 2 asset that was negotiated with their previous vendor as a package. And we knew that it will take some time to reset under after that's why we bought the rental support not for the next 18 months, they will be able to rise through. 101-Miller is a joint venture. So it's a different dynamic. We don't have full 100% control. We jointly own the asset. So it will be a jointly managed asset. So both ours are asset probably a respectable player in the market. We will collaborate with them and we work out our strategy to bring the asset to the next level. But to begin with, it's a premium level asset at North Sea location. In fact, it's probably the most strategical located asset set on top of transport network. So you kind of replace that location-wise, 101-Miller is really -- probably it's not the best location in [indiscernible]. So we are okay. location-wise. Once you get a location right, 80%, 90% of that [indiscernible] -- the rest is about whether you're fulfilling the needs of the occupier and [indiscernible] occupier. The German market is quite of a market is kind of in stage of, I think, uncertainty. On your one hand, we bought the wall, I think it's ramping up very nicely. If you go to Frankfurt, it's busy, right? With the onset of wall and the implication on energy price and then the implication on the wider economy that Germany may take on a heat are becomes a [indiscernible]. So market is going through a bit of a wins. So at the moment, nobody is doing anything. It's relatively a quiet market [watch and see] market. We have 2 assets. One is in the airport location, so very much driven by the activity and the airport location, which is picking up. So to be fair, you've read a lot of news now in Europe, like travel has been picked up very strongly to the point when they come in a [indiscernible]. So the aviation industry has been strong, the airport location January would try when you see high traffic start to come back again. So it's been quite stable. In fact, we have our occupancy is cropping up. But in the long run, that location, I mean, the airport location, we have to see positioning, whether it's the right position. Gallileo, which is the one in the banking district, super prime, right? So it's within the CBD. So CBD is a big widespread area, right? Within the CBD, banking industry is the prime of the prime. So location-wise, high [value]. So the question is how are we going to fulfill the needs once commerce bank that came in January? So we are looking at different options, which I mentioned before. It could be a multi-let option or it could be a single option. Both options are possible. Implication, multi-let, longer downtime because a lot more work common area and all this is going to fix up, right? Potentially also longer downtime from a cash flow point of view because you can't expect everyone to move in a day 1. It will be a staggered kind of movement. So that's a multi-let. But of course, in a long, long run, multi-let will probably give you a little bit of lower risk [indiscernible]. Single-app scenario, which is not possible, the prospects, much shorter kind of downtime from a construction point of view. CapEx-wise potentially may not be get too far from its lower probably lower than the multi-let [indiscernible] far, but the cash flow will come in quite immediately, yes. So we are exploring both options. German-wise, I think no different than Australian and overseas market. We need to create a meaningful presence there. 2 assets is not meaningful at all. So we'll see whether the annual opportunity given the very uncertain market environment, we see how the market movement over there, whether there will be any adjustment to cap rate. Historically, very hard to compete. We can never be competitive against the local funds. And in a zero -- in fact, negative interest rate environment, we have a lot of speculation and redevelopment. Hopefully, that will stop. And that will change the whole dynamic. So we'll watch. But we are keen to expand, but we also know that after some time, we can get a meaningful presence there. And then we may exciting [indiscernible] yes. We'll see how it goes there.

Brendan?

Just 3 questions, right? The first one with regards to the overall acquisition strategy. Given the current environment, will you be prepared to take on DPU dilutive acquisitions at the outset. And then with some rental growth in to improve that subsequently. That's my first one.

I don't think -- my answer would be any different in any time. It all depends on the underlying asset you're looking at. I mean it's so different, right? We went into Australia, we got a good deal. I think the price was going to give us that run rate for us to [indiscernible]. So we can't be saying whether on the day 1, we should be looking at a [indiscernible]. Look it all depends on -- first of all, when you do a ideal scenario, we have enough time to do your full duty, including your asset plan day 1, sometimes you don't have a [current plan]. You look at it. So you have to do -- make adjustments. Is this opportunity? Quite obviously, certain areas we can [indiscernible] That potentially will not be diluted. But sometimes, we know that we see something there. Over time, we know that we can fix it. The question is how much time we need and how much capacity required, then we start to plan the whole CapEx. Do we want to fund it upfront today or fund it much later down. Then that's where I think the potential accretion dilution becomes storing. So I don't think I can give you a simple general statement whether this kind of environment will be -- it's all about how you're able to [indiscernible] your road map. What is going to look like in the next 2 to 3 years? And what are your plans? In our new situation, we have enough time to deep dive to get our team in to do a full asset plan. Yes, that will be great. But in many cases, you won't have the luxury, especially the part [indiscernible].

Okay. [indiscernible] will be on your service charge, right? For the retail properties, are you able to just increase the service charge like the office ones? At the clauses inside.

So I mean we can increase, of course, we just have to make sure you are able to justify your increase your cost has gone down. But what's the impact, right? So you probably know the [indiscernible] agreement, the core conduct was going to enter into. It will be less slated, but we have point adopted it. It means that existing contract is it [indiscernible] in different -- the [indiscernible] you to pay the dollars you save [ 150 ] is rent. If Sasha goes to [ 170 ], it's still great at mods. So as this contract will change -- then question is on the renewal. When you get renewal or bringing a new one, do you want to be upfront, but today, we're not increasing the rent. Overall, it's still service [ 170 ], right? So that's how you approach it, right? Realistically, we have to look at the market sentiment, market condition. It's a question of whether we had the pricing power to do it in the context of the general economic situation, the employment situation, the consumption strength, the consumer sentiment, these are all important and thing to consider we may be and a situation where we cannot pass the food through the adjustment to rent as much as we can, we try to, right? And tenant likewise are also through their own mechanism of passing on to the consumer. So it's all related, right? A consumer is prepared to pay a higher price for whatever product is always about demand supply -- so it's -- I think that's all in the time together. You cannot look at in isolation. But safe to say in a good economic environment, yes, we can go ahead and doing Okay.

[indiscernible].

Yew Kiang Wong from CLSA. I have one question on pricing of acquisitions. Because previously, you sold a sub-4 yield, right? And when you look at today's market, it seems that tenant sales for suburban malls is picking up above pre-COVID levels. And so my question is, do you think -- is it fair to say that you will not pay anything below 4%. And you've also mentioned that funding cost is inching closer to 3%, 4%. So how do we balance that?

Our cost of capital is definitely more than 4%. So blended basis more than 1% and 4%. So solid diluted -- that question is [indiscernible] mentioned, would that be -- so I don't think I want to generalize it a broad stroke statement that anything we can do. It can be so far for maybe an occupancy at 70%, right. So it has to be on a case by case.

4% to 4.5% looks palatable you think?

It's the same answer case by case, right? Some built, 4.5% is not doable because you may stop at a very high rent, high occupancy from offsite we see downside, right? So you have to look at case by case.

But this is a bundle right. It's not like a ...

Whether it's bundled deal or see asset I mean it has to be on the same principle where are we able to drive value coming in or it's not day 1 down the road. We have to have a clear idea.

Okay. I have 2 more questions. One is on Clarke, the $68 million was the ROI $62 million, what's the ROI on that.

ROI, I would say, the mid-single digit single-digit -- but you have to be careful how we define ROI. So we are spending quite a fair bit of money. Actually, we don't do that. This asset is at high risk, right? I think we announced 34% of it is really to make sure that we fulfill our obligation as with citizen upgrading Chile system over time will improve efficiency, upgrading the comfort level so that over time, the asset becomes more because I have read quite a fair bit of commentary in some form or precisely why are you trying to address.

No. But after spending this amount, is it -- will we just be able to bring the occupancy back to 100%, but passing a is similar to.

[indiscernible] 100%.

No, but -- but passing raw is would be higher as well?

Over time, yes, it may not be the.

Last question is on the service charge. Do you have an idea of how much of your portfolio on the retail side, you can actually pass through but you can actually confident of saying that can pass?

Question partial mall is under the code of conduct, we can touch it. So the whatever balance when it's renewal or new leases coming in, I think we can translate in the form of whether a service chart or higher rent. So it depends on how you look at it. Because in the tenant's mine, today are [indiscernible] [51, 50] let's say, sorry, -- now it cost us 170 to operate the more right because everything has gone down. sorry, I'm not -- when we pay that loss adjusting contract. When come renewal 170, but you used to pay 51, [indiscernible] 70 [indiscernible] in a very strong market environment, it can even double, right? You say 50, you be 170. So we will be very tactful on how we want to approach this. And it will be a case by case, strong performing tenants. Now we are doing a lot of -- Grant is going quite nicely, range from high is close to 15% mid in the portfolio to a low. So and then always is all, to some extent, tied to how we structure the rent. So I think the overall, what is more important is to look at the China specific, the sales the threshold where the occupancy cost ratio, then you determine what's the best way to position with the service chart in the back of your mind.

Tony, Derek, DBS. Just one question. I'm just looking at the [indiscernible] portfolio, which have been -- a lot of people are asking our question here. So in terms of funding right, right, if let's say you would like to acquire and let's say you would like to take a partial stake. Could we assume that you have also third party capital behind you in this particular acquisition EBITDA [indiscernible]?

On this is still in the process has concluded. That's why I say a lot of people are speaking will be in a -- but we are looking at -- I think it was reported, yes, you can just acknowledge that we have on -- and I earlier mentioned there are some as an okay so.

Sorry, just because it's related, let me just ask this question. I think it's also about the -- does not what we have discussed. But I think more broadly, this person would like to [indiscernible] would like to know what is our comfort level with our current portfolio asset composition. So because I think this question also talk about the Marcato's portfolio and all, but it's more how we want to look at -- we're comfortable with the current asset composition. I mean, because if you buy more retail than more heavily on retail or as such?

Yes. So this question will have different answers at different point in time, right, which is why this whole thing about a more balanced portfolio diversified in the way you adjust when market conditions change. I mean we have blood in our stream, the retail and office at this in us now as a portfolio. So we wouldn't say we want to avoid anything specific. What we do like is a product that has got more on is on a defensive mechanism. It's more a mixed use integrated where. Naturally, the component will sell in Fortis under. We think in the long run, such asset will be more lean than a stand-alone, we can stand the test of time. It may not be the best performer in any sector run, but I think it to be a long run a more stable and more region asset that will fit into the portfolio of [indiscernible]. So in general, I don't think we want to cut that nice for me. I think when we did the merger, it so happened, it's quite close about almost 1 [ per each ]. And over -- after 2 years fast track when we acquired the office of our portfolio has gone a little bit after the completion. But then that's because North office cyber seems to be favored, but things may change over. So I don't think we very agnostic about how -- we're quite a say about how things will shape out over time. We already know that the answer will be different today, maybe 3 or 5 may be different. But generally, I think a more integrated defensive asset on this phone will be something more desirable. And which is something that we are looking at a human overseas. And overseas also picking up this trend. We begin to see more component. Of course, they are a different market and different kind of components. We are seeing like rental market in an pass rental market in office coexistent. Singapore is not -- rental market is not popular other than the service department, right. But you begin to notice -- this trend is already taking shape in many markets. Even in Australia, single asset purpose owners are trying to diversify a way by bringing new element to the assets. And in the context where especially there are a sufficient land plot, where they can cope out, they are able to do it. So you've seen the trend very big, whether it's Australia, U.K. is happening.

I think [indiscernible] this question.

I have a couple of these general questions. How diversified do you want to be? Because you've seen Link REIT go into logistics and all that sort of thing? And CICT seems to be selling away all its malls one by one. So are you going to stay at 1/3, mix 1/3 retail and 1/3 office. So that's one question. The second one is -- there's a lot of focus on this greening of the portfolio and everyone's talking about ESG. But how does this benefit your investors? Because they are the ones you have to turn to for capital, if you want to expand. So that's the 2 general questions. One more. Okay. There used to be a lot of concern about e-commerce. But this morning, we've not had a single question. So I'm just wondering whether there is still a focus, et cetera, on this e-commerce being a threat to your properties? And the last one is a specific one on the balance sheet because in the SGX, I mean this does this does not apply to CICT, but the SGX has asked some of these Chinese REITs because they have a lot more long-term debt compared to their short-term assets because it affects the liquidity ratios. And I think CICT has around [ $1.1 billion ] of shorter-term debt. I think it expires within 1 year. If you look at the financial statement, I think they're all MTNs. So I just wondered -- I mean, I just wondered what is the market like for this part of the debt of demand for this kind of debt and what your plans are on that.

Don't think. I guess I forget a question.

The first one is just one, it's very general about a we have [indiscernible]

Fitch also is the main commercial player. Singapore is still a if you -- anyone we have Italian investors it's no different premature post merger. If you want to look at commercial space in [indiscernible], we should be the platform we can see a diversified base. So commercial -- so commercial defined office retail. It can be a little bit other component. We've been integrated, but generally, I think it's the 2 larger components is still the retail and commissure. So that as best gene. ESG, I don't think we can ignore that completely, although there's a lot of discussion how to that benefit. And of course, there are even wider discussion on fund specific, they are ESG focused, right? And I mean there's a lot of site tread discussion whether they are excessively charging investors because they didn't -- them as the premium print the number didn't stack up. They underperformed the general drug market. In fact, the non-ESG stocks that want -- so I mean these are in the context. But I don't think we can run away from is the fact that this trend will continue to be critically important because it's all about resilience of the portfolio at the end, right? Yes, investors may have a shorter time as on 3, 6 months, 9 month or one year for them to the financial performance is key, right? So we ask many investors, they think they will never say we consider all things, but financial performance still has to be #1. It means they are not prepared to have a lower return given the fact that their investors are. So it's like the supply chain, they are not they are not expecting a lower return because the investors are also not expecting to item. But I think that the dynamic is shifting really the ultimate end of where the source of money is coming in whether it's people, general people who put money in the mutual funds and then in which one investor will get who can manage the money right. They are starting to do. So it's a process -- it's just that over the last few years, corporate one, these are all countries are taking their position and setting the tone because I don't otherwise nothing right? So the country also to [indiscernible] Singapore -- so I don't think we can run away. And one glaring example that, in fact, we'd be able want to heighten our move is look at the cost of energy. The cost of energy 12 months ago, we are stretching or how to buy great energy renewals, is cost x-percent we premium. Today, the delta is so narrow. In fact, at some point in time, we even cheaper to walk us into a green energy. So I think the dynamics which age over time. So I don't think we can run away. I mean, that's only the , of course, the SNG will be very important. In the context today, I think asset is still going to be very important. And a company talk about it -- they talk about it. And they actually are executing it. flexible arrangement actually is really to fulfill a big part of the element of the employee. So -- but how that to translate to dollar and says, I cannot put a number to it. I can only say that we want the product to be resilient so that you and occupied. I think that is the place you want to be because they also focus the because it could be very binary, whether you are considered as a location or you are not. It could be as binary as that. And then we've been the pocket of they will consider the market. Are you in the front runner or your [indiscernible]. But as and when this momentum back space, more and more demand and end user will require them. And I think the spread the dynamic on the economy dynamic we show Today, Honestly speaking, we all move around asking tenant, hey, we have all these board. We are all these indexed Greens satisfied or sustained are you going to pay 20% more in very hard very, very hard, yes. But then at the beginning, there are some prepared to do it regardless and I said, no, we have to see our own. So there will be a growing list of and occupied invention. And when it comes to the financial institute in they'll also be pressured by the regulator, right, to move into refinancing. Hopefully, we see it a lot more savings from cost of borrowing. Today, margin, you're talking about a few basis points, not I mean these days, the market moved 10, 20 bps in hub. You look at the bond market that can move the 10, 20 bps in one hour so 2, 3 basis points nothing. But I think things will pick base over time, yes. So very long-winded answer, yes, it's important. We cannot ignore that is question of how over time we will do it? We started to plan about our CapEx over time, win CapEx. Long term, precisely to take in mind that we know that this financial return is still going to be important. We cannot be so blinding going to say, all our building going to upgrade [indiscernible] best-in-class chiller system where it's only about maybe 6, 7 years old. What this doesn't make economic sense, then that's where the kind of decision will come in with economic and logic and your [indiscernible's] check the company and we're going to make the adjustment, but we are starting to plan in the next 5 to 10 years. [indiscernible] property-by-property, which are the ones deal. Then just prioritize dose. We think it's a little bit more asked.

The questions about the.

E-commerce. Surprisingly, you're right. I don't know why anybody nobody ask just check, maybe it is very more transparent now in Singapore context, the departments that basically report the online sales number has been trending down, right? As the market reopened. I don't think it's surprisingly surprising at all, where we land. Today, we are [ up ] 12%. I have no answer. I knew that when things will open, you see the -- I think I've mentioned many times, you see a spike up, but once we open, you see the share will come back down here. It may hover around this, this level. Whether you go back to 78%, I don't think so. I think what's happens kicking your -- you're quite comfortable from a security point of view and from the corporate and the ease of transaction for view to transact online. I think that would be the -- how about retailer, how they play this game, how they position themselves in the context of consumer who are quite agnostic maybe about whether they should buy online or off-line. Maybe they want to buy online because I think it's always cheaper but not necessarily always so, right? But they may prefer to buy online after same offline. So then offline become important. Next question that retailer would say, hey, my offline tribe in the Waka location is important to be in location. I think this kind of strategy.

Sorry, my last question. It's about the [indiscernible] SGN market.

The interest the short-term liability reclass into I mean this quarter is due to the -- what you pointed out, 2023 maturities. So we do have a fair bit of bonds about $870 million due next year, yes. So in terms of refinancing option, as what Tony has mentioned, we do have available committed facilities on hand in excess of $1 billion that we could use to refinance these maturities over the next 12 months. Right now, we're still observing the bond market. On and off, we do have reverse inquires. It's a matter of whether -- what investors want and what we want, match."So they may want like much longer tenure than what we want. So it's more a matter of pricing and tenure what we are looking for. Depends on the tenor again. Yes. So for the same tenor, we're looking at, say, a midpoint of 5 years. investors can look at a longer term, like 10 years or even more longer. So for us, if we are comparing the bank's market is on a 5 years tenure, I would say that at this point, the bonds market may require a slightly more credit spread because of the volatility in interest rates.

I will just repeat the question at Gula asked because I think we get stood out microphone, I mean I have. I think Gula was asking any difference in the rates between the facilities and MTM. Wilson [indiscernible].

[indiscernible] Wilson from Morgan Stanley. Just a few short housekeeping questions. Could you remind us when 21 TennCare rental contributions coming in?

When does the 21 [indiscernible] start. So when you started [indiscernible].

Okay. Yes. And on utility costs, they increased quite a bit for the first half -- do you -- how much further increase do you see in the second half?

So second half, we'll see a little bit more than the first half because first half, we had the benefit of paper was a was extended from the old contract for 3 months. So we enjoyed a little bit lower rate on a branded basis, I mentioned we have about 90% for the whole year, about 90% higher than compared to last year. So second half, we'll probably see the day we see about 4.4%. I think it's same store, I'm not talking about new asset accounts in. [indiscernible] be about 5% [indiscernible] they all depend on consumption right so we are trying to [indiscernible].

Can I just ask a couple of questions from the web. So there's one question about what is the hedge duration for fixed debt? And what is the cost of new 3 Singapore debt today?

The average hedge duration is about 3.5 years. Current rates for 3-year referring to bank loans?

Yes.

I think in terms of all in, we're probably looking at closer to by slightly below 3, below 3 between 2.5 to 3.

Yes. Joe.

This is Joe from DBS. I have 3 questions. The first one, could you share your percentage of GRI contributed by gross turnover. And my second question is regarding the gross turnover, I understand like 5% to 14% on more basis is like GTO. And we want to understand whether that's by design? Or is it something that happened in the last 2 years? And my last question is regarding the co-working space. I understand your top 10 tenants have about 3.9% is co-working space kind of tenants like [indiscernible] and working place. So I want to understand like because some people see this that arrivals rather than complementary. So your thoughts behind that? And other question is like, why not do it yourself?

Okay. First question, GTO hovering around 7% caring about 7%. 4% to 15%, to some extent, not every deal will be different from design because you restructured the rent during the difficult period of time. But others are actually purely organic. The performing us very well. So I can even say 15% IMM, it's the top. We didn't do much on this only has gone up co-working space operator, we see both of them at them as complementary viral, honestly speaking. But it has to be quite -- so the position are quite different. So even the co-working space, the way they want to position our chin market will be quite different as well. So we work CWT, who is actually a competitor also our operators, right. And -- but day 1 when we decide that they want to operate for us then there has to be a discussion of how the position will be depreciated. So that would not over in the charter's position. So we know very clear when there's a tenant walk in, with a specific requirement quite immediately, we know which is stable. Should it be a managed area or in their own internal space. So the position could be quite clear day 1. But then if it's the work where we test entire 1Q, there we think this competition -- that's a -- the question is we our Yes, we are doing ourselves -- it's just that we are getting EWP in this case would be the one running the day to day still committing our own people to do -- and they also have their own network, they [indiscernible] the market as.

Could I understand for the TWP arrangement. So they rented the space or do they rent a space and they're operating on their own and then you have a space that they are operating for you?

So use catering as example, they ramp as a tenant with us at one long. Then another 2 for will say you help us to manage. We spent the CapEx on the repo where it helps us manage the space.

Okay. So I'm trying to understand because, say, someone approach them, how do they know who like go to their own space or your space?

So earlier I answer the question. I say differentiation between the managed area space and their own rented space has to be quite clean day 1, where you want to position the market. So that there will not be too much ambiguity when let's say, a specific payment comes for acquiring. But many a times actually is through the other where we go directly to the institution, to market the space and they have a list of requirements of which [indiscernible] about the string space they need, quite easily with senator space. So quite a fabrication coming for. [indiscernible].

I also want to take this chance to just also add on just now we talk about how much [indiscernible],how much of mining space at [indiscernible]. So here at CapitaSpring is 2 floors of managed space. Next batteries 3.

[indiscernible] 3 I missed [indiscernible].

Okay. Simon.

Simon from DBS. Just 2 questions. First one I wanted to ask is, given where interest rates are today, I'm just wondering, do you see in terms of balancing between encumbered and unencumbered assets, do you see that securitizing, either getting secured debt or perhaps doing more like your RCS Trust bonds. Would that be a viable solution today to addressing or managing your cost of funding. That's the first one. The second question I had is with regards to the office rentals. Is that currently -- are you ever sure if there's a close providing for inflation? And do you see a need to adjust those clauses for the current context to allow you to recover or increase your rent?

Okay. First question is -- maybe I'll take the second question first. Currently, we don't have such inflation index. It's not a common factor in Singapore. It's a very, very common overseas where it's indexed to certain kind of inflation index. It should be CPI for the RPI anything else. Singapore market doesn't really predicted. So our TA structure is such that it's all negotiated off-prem. We cut both way. Traditionally, you look at mister just looking at the news of had,right? Like a 4 decade kind of interest rate. So historically, interest rate has been very benign. So if you want to have an inflation index, cuts for win. You can also [ hurt ] you. That means you are forced not to be able to adjust the rate when the demand is strong, but inflation is still relatively benign circumstances. Whether we all move into that, we do not have a clear position on that at the moment. I don't think that we want to do it. I don't think we have that in [indiscernible] moment, yes.

And a question on secured debt.

The first question. Generally, we don't find that significant difference between secured versus unsecured. And I would say, in terms of the credit profile, I think that that's where the difference is we are rated. So that itself is a very good rating for us to assess the banks or the bond market without having to secure our property portfolio.

So mining, just to clarify, there's not much savings. You see VPN secured and unsecured , therefore ...

Unsecured is generally lower than secure.

As about the halo effect from a rated vehicle. Single export.

I see. So there's no need currently. Then how would you address the current outstanding for the RCS Trust? Do you intend to refi into bonds, say?

The intention is that as and when the RCS debt due comes up for refinancing, we would raise debt at CICT level to pay it down. and remove the security over time.

I think given time, just this last question from the webinar. The question from Steve is did CICT retain any cash in first half 2022? And do we have any retained cash [indiscernible], from previous years that are available for distribution? So 2 questions. One is whether we retain any cash in the first half and whether we have any retained cash from previous years that are available for distribution?

Well, we do have a very small amount of retained cash, largely coming from dividend income from the listed investments in the 2 REITs that we are quoting, very small. And for previous year, I would say, I do not believe that there's significant cash that we're holding that what we will hold is generally for working capital. There are small CapEx that we fund.

So we have a last question from the audience here.

Sorry, I just want to understand the, Xavier from Morningstar here. So I just want to understand the leasing market and office leasing market in Singapore a bit better. So I saw that number of leases signed has dropped about 60% from last quarter to this quarter. So just trying to understand why is it -- why is the leasing momentum so slow? And is there something with -- about the spec or location of, say, capital towers that new occupiers are put up being kind of like put off.

But when you look at our overall -- there's some big space backfill we've already done really. So I think more or less, our portfolio occupancy is creeping up as set for Capital Tower, we are looking at it. So generally, they are also, to some extent, linked to the available space we have. But there are also new supply coming into the market. They go midtowns also coming in. So there will be a little bit more competition, I would say. But by enlarge, the -- I would say the inquiry is not any worse off from a pace perspective, it's just that we don't have a lot of stock level as well for viewing.

Yes. And then for the last one, on the retail rental reversion. I think you have a slight note that says that excluding the retail component of Raffles City, rental reversion would have been a positive 1.1%. So I mean, given that Raffles City is going through a rejuvenation, I'm just curious why is it dragging down the rental reversion number?

So because I think that one will be very misleading. If you include because Raffles City used to be single line, right, a single sort of anchored by around one scenario now we are going to [indiscernible]. And some of them, we are bringing tenants that are used to be outside, they're going into that space. So kind of difficult to really measure that overall reversion, which is why we specific for comparison purposes. But just to give a sense if they were to go in, what kind of rent they're paying, where they are, which is what we're trying to do. That's all, yes.

The note is saying First, the note seems to be suggesting that the Raffles City component is the one that is dragging down, but the way you're describing it, it sounds like [indiscernible].

On the con component relation support rental reversion will be, Yes, because there are movements within Raffles City. I'm talking about the movement within Raffles City. So Raffles City as a stock. Actually, the number can be quite listing because the raw business space represents about 25% of [indiscernible] So within that, there will be tenant that -- so we are cutting up spaces, we're cutting our spaces, we will in a common corridor. So within there, there will be tenants that used to be within Robinson. And there are also some tenants that within Robinson, we are bringing them out into our own space. So it's very confusing from a reversion number perspective. Then there are some tenants we move from level 1 to level 2. There will be a bit a timing difference, which is why we thought that space should be in up completely. But the number is not a full representation. We will be more clear once I think it stabilized. While we are trying to ramp up the leasing. At the same time, we are also trying to -- of course, there are some tenants still want to stay on. The question is whether we want to put them in the right location or same location or other locations or other flows. So the reconfiguration will prebiotics.

Thank you. So I think we'll come to the end of our briefing and the Q&A session. Thank you very much, everyone, for joining us here and also online. For those online, the there are a lot more questions submitted. Some are already addressed by the audience questions here, and the rest will get back to you separately. Thank you very much.

Yes. Thanks a lot.

Have a good day.