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

Good morning, and thanks for joining us today for CICT's First Quarter 2025 Business Updates. I'm Clarisse from the Investor Relations team. Joining me on the call are Tony, our CEO, Choon Siang, our Deputy CEO; Mei Lian, our CFO; Yi Zhuan, our Head of Portfolio Management; Mei Peng, our Head of Investor Relations, as well as Allison and [indiscernible] from the IR team. Before we begin, please note that this zone meeting will be recorded and shared on CICT's website. To start things off today, I'd like to welcome Choon Siang, who will begin us through the key highlights for the quarter. Choon Siang, please.

Good morning, everyone. Thank you for joining us this morning. Tony is here as well, but he has allowed me to take this presentation today. He is in retirement mode already. Okay. Sorry, just a sec. So before we go into the details, maybe just give you a high-level overview of our performance. This quarter is our first quarter business update. I think you guys would have seen our announcement that has gone out in our deck. So I think overall, first quarter has been not too many surprises. Numbers were fairly healthy both on the operating front as well as on the financial front. Gross revenue and net property income came down marginally, but this is largely due to the fact that we sold 21 Collyer Quay last year in November. So there was income recognized in 2024 first quarter that was not here in first quarter 2025. So on a like-for-like basis, if we were to adjust out the income for 21 CQ from last year, our gross revenue and net property income would have been up 1.1% and 1.4%, respectively. Also one thing to note is that the contribution from JVs like ION Orchard is not reflected in the NPI level, even though we acquired it towards the end of last year, but this will only be reflected at the distribution level. Portfolio NPI margin was about 74%, which was relatively stable. On the operating front, we continue to see higher signing rents in terms of new and renewed leases. You can see from our rental reversions in the next slide. This is compared to our rents for the outgoing rents for the office and retail portfolio. Occupancy is down marginally due to expiries of some leases. Overall, capital management gearing is up slightly due to the payment of dividends. And -- but one piece of good news is that the average cost of debt, as you would have seen, is down 3.4% from 3.6% as of last quarter. Okay. So some overall highlights in terms of high-level numbers. NPI, as you mentioned, down 0.8% year-on-year, but on a same-store basis is up 1.4%. I think one key thing to highlight will be 3.4% average cost of debt, a meaningful drop from the last quarter. With this quarter, you will have seen from our announcement also that we issued a $150 million 7-year fixed rate note at 3.00%. So this contributed to the drop in our average cost of debt due to the refinancing of a loan that was done at a much higher rate previously. I think occupancy rate, we have touched on that. I think one thing we want to look at zoom into is rent reversions remains very healthy, retail portfolio at 5.4% office portfolio at 5.4%. There are some details in the subsequent slides. Tenant sales, these numbers are including ION. So if you remove ION, tenant sales are down marginally compared to the same quarter last year. Also one thing to add is that I think this last quarter, we recognized for the deal that was done last year for CICT's 2024 private placement as well as preferential offering. So FinanceAsia recognized CICT for the Best Equity Deal for Singapore. Okay. So I think on the financial numbers, just a higher resolution breakdown of the change in the retail as well as office numbers. As you can see, retail asset performance as well as the integrated development performance continued to grow quite strongly compared to last year. This is on the back of healthy rental reversions. And the fact that 21 Collyer Quay was not included was -- can be meaningfully shown in the office asset performance. So a large part of the drop is due to the absence of 20 Collyer Quay on a year-on-year basis. Next slide, please. Debt maturity profile, as you can see, I think we have refinanced quite a bit of our loans that are due this year. So we have moved it out to subsequent years. So this year, we are only left with about just slightly over 500 million left of refinancings. But overall, as you can see from our credit ratios, our gearing, they all remain quite healthy. Yes, I think we have gone through most of these numbers in terms of gearing as well as the average cost of debt. I think the only thing I will add is that our credit ratios have improved -- continued to improve on a quarter-on-quarter basis. ICR is now 3.2x as opposed to 3.1x. Because of our recent refinancing for the $150 million loan, our term to maturity has also lengthened to 4.2 years from 3.9 years. So in terms of occupancy, they are down marginally across the asset classes. Office actually remained quite stable. Retail is down. We have some expiries at some of the assets. I think the notable one is Clarke Quay. Integrated development, down marginally, largely due to a slight drop in the office occupancy for Raffles City Tower. So at the portfolio level, we are down marginally from 96.7% to 96.4%. I think this is a list of top 10 tenants, really just to reflect that we don't really have significant concentration risk. This list of tenants largely remain the same. I think for our WALE, now we are -- it still remains fairly healthy. We have about 11% of retail spaces up for expiry for the remaining part of this year and 4% of the office portfolio. But I think we are fairly confident that most of this will get retained and renewed or we are already in quite advanced discussions with for about 1/3 -- close to 1/3, 30% of this space already. So most of these are to get renewed. So our retention remains quite healthy at about 75% to 80%. leases renewed about 200,000 square feet for both office and retail. I think the trade that has done quite well in terms of leasing interest, F&B continue to be quite -- getting quite a lot of strong leasing inquiries, fashion as well as beauty and health on the retail front. And the office front, I think, remains quite healthy as well. Rental reversions. This chart is showing for the retail reversions. I think for office, we have mentioned in the earlier slides that it was about 5.4%. So for retail, it's about 10.4% broken down into 11.2% for downtown and 9.5% for suburban. So for tenant sales, I think we mentioned, I think these numbers are probably not a good reflection of the actual underlying operating performance in any case because of the -- it's not a like-for-like basis. Retail grew by about 17%, downtown 39%, suburban fairly flat because of the ION effect. So if you were to strip out the ION contributions across the portfolio, we are probably down about just slightly below 0.5%. Next. I think next few slides, we won't go into detail. These are some of the new tenants that were brought in. I think Bon Broth is a fairly new concept in Raffles City, doing very well. Interesting concept by André Chiang, the chef of the previous well-known restaurant by the same name. The next few slides we will go through in details. Okay. So office occupancy, as you have seen at the portfolio level, we are down slightly 0.1%, largely due to the overseas assets, in particular, in Australia, I think 66 Roman Street is down. We had an expiry, but Singapore portfolio helped to offset the drop in Australia. Singapore is up 97.9% compared to 97.6%. So overall portfolio were down only about 0.1%. Singapore average rents continue to inch up to 10.76% compared to 10.73% previously. I think you have seen some of the reports that came out over the last few days. I think on a quarter-on-quarter basis, Singapore rents at a spot level has also been inching up on a quarter-on- basis. Okay. So I think now that we have -- we are closing -- we are probably close to the completion for the 2 existing AEIs at IMM and then Gallileo. Those are likely to be completed in the third and fourth quarter of this year and will probably start income contribution soon. We are also looking at the next phase of our AEI. One of them is Tampines, which is likely to start. And this is quite opportunistic because you would have seen that the authorities are actually looking at a transformation of the entire Tampines Central area, looking at pedestrianizing the entire street in front of Tampines Mall, which is really -- I think this will be quite transformational for the mall actually because if you look at currently, there's actually -- I mean, there's actually a mall -- there's actually a road that is dividing the MRT from Tampines Mall itself. Although the mall still manages to attract a large part of the traffic from MRT. But of course, removing that road and not having to have crossed the [indiscernible], I think, will be a game changer for the mall. So we're taking the opportunity to refresh the interior as well as some of the ground floor access for Tampines Mall and looking to try to improve the tenant mix as well. So that should be able to give quite a significant uplift to Tampines Mall once it is completed. Next. Yes. So I think overall, in terms of outlook, I think we continue to focus on growing organically. As you can see, we have always been quite cautious going into the year. And the rental reversions continue to be quite strong. I think we have guided that this year might come off slightly from last year. But of course, first quarter continues to surprise on the upside. Retail rental reversion still remains in the double digits, office reversion at the mid-single digits. But we do think that a lot of these numbers obviously happened before the tariff trade war. So there could be a softening in this quarter if the macroeconomic environment persists. But I think -- but on the upside, interest rates have continued to come down due to the challenging environment. So we do expect interest cost to continue to moderate, which as you can see from the first quarter numbers has come down quite significantly in terms of financing costs. Okay. I can see that people can't wait for me to finish. Maybe we just jump straight into Q&A.

[Operator Instructions] So let's get started. We have Mervin.

Congrats Choon Siang on your inaugural briefing as CEO. Maybe a suggestion, is it possible to have attributable FPI or revenue, including CapitaSpring and ION because I think it is a full picture in terms of underlying performance rather than just the NPI. Yes. My question is, it's more the case of the tenant sales. It's been quite soft the last few quarters. Are you seeing people trading down? Or what exactly is happening at this point in time? And do you expect further weakness if indeed we do go into a recession in Singapore? And then the second question is on given the drop in borrowing costs, is there a new cost of debt guidance?

Okay. Maybe I will start and then Tony and Lian Wong, they can chime in. So on the NPI, I think quite tough for us to do that. But I think the trends are quite similar. So you should be able to draw parallels for the other portfolio based on the segmentation that we have presented for CapitaSpring. You can draw references from the office performance. And I think for ION, you should be able to do it from our downtown performance as well. I think the correlation is generally quite high. But I think -- I don't think we are able to break down into more individual asset level details. So that's the first point. So sorry about that, Mervin. Second point on sales, okay. So my view is that I think 3 months is a bit too early to draw a conclusion for this year. But if you look at the numbers in the quarter, I think if we look at it in a higher resolution and by the month, actually, January and February was relatively flat. March was down. But March was down for a good reason because last year, if you recall, I think there was a huge Taylor Swift effect, which definitely had some spillover effect to spend at the various malls. So on a like-for-like basis, if you were to compare to last year, actually, we are not surprised that sales are down because it was just not the same number of tourists this year in March. But if you look at Jan and Feb actually, it was almost quite consistent. So I think too early to draw a conclusion on whether this is a reflection of the trend going forward for the rest of the year. There was also a question on interest cost. What was the question on interest costs?

The guidance on interest cost now, is it going to be 3.4% will be lower from here? And then I guess May will get a boost from Lady Gaga fans on tenant sales, I presume?

Hopefully, Yes, I think financing cost...

Okay. I think financing cost guidance, the previous guidance was based on interest rate back -- in early Jan. And over the past few months, we've seen significant drop in terms of floating rates down by close to about 70, 80 bps. So that effect has actually flowed through to the average cost of debt this quarter. On a full year basis, where we guide, I think it very much depends on what happens from now, whether rates will continue to go down. And at this point in time, it's uncertain, right? So based on the current levels, I think the guidance would be -- we expect average cost of debt to be stable.

Okay. And in terms of margins with the benchmark floating rates coming off, are the margins expanding or they're still contracting?

Part of the average cost of debt reduction is also due to some loan repricing, which had resulted in lower credit spreads. So yes, generally, we have actually reduced our credit spreads for the bank loans.

Choon Siang, your record continues every week you joined so far that...

I have 2 questions. I think the first one on retail. I think there was a department store exit from your portfolio in this quarter. Are you able to share the opportunities and risk in terms of income for that space?

I suppose you are referring to the one that...

Yes.

So by and large, I would say that we are aware of what is happening to some of these tenant movements. And I think by and large, departmental store has not -- progressively, we have seen departmental store exposure is actually coming off a little bit. So actually, I would say it's quite in terms of the events. In terms of this is also then the opportunities is really how do we actually energize the space to we look at the tenant mix within that area. Typically, in the past, when we look at all these departmental stores, right, they have a certain purpose in how the kind of products that they actually carry and they carry a lot of rent within them. But at the same time, the model also means that in terms of rent, a little bit on the lower side. So this allows us to do a bit of reconfiguration and a little bit of refreshing that kind of mix given that actually the location of the area is actually quite common.

Okay. How long do you think that it will take to ramp up the occupancy back to full, is it 1 year or 6 months?

I don't think we will should take 1 yearbut there will be -- we will definitely have a little bit of down to do some. But I would say that by and large, when you look at JA as a whole, we also know that actually there's opportunities for us to give a little bit of refresh to really kind of energize the trade mix a little bit in that mall.

Okay. Can I just ask one on office? Any impact on the tariff trade war on tenant negotiations? I think other landlords are saying that tenants asking for shorter tenures as well?

I would say at this point, it's really a little bit too early to say that there's a very lasting. I think if we look at last year, there's a little bit of more confidence in how things may happen. And then, of course, there's this return to office. More and more companies are looking at [indiscernible], right? So there's a bit of interest and a little bit more confidence for tenants to look at expansions or looking at relocation even potentially this year. Of course, the recent kind of uncertainty does give a bit of reasons for them to again take a little bit of cost, there's no hurry. But some of the general themes has always been there, right? High cost of relocation, CapEx, all these things and market uncertainty will definitely give them a little bit more worry. What we do think is that at this point, if I say there's all this uncertainty, renewal again will become the preferred choice stopping shop them really to [indiscernible], but by and large, I think right now, a lot of times when 1, 2 years ago, people when they are not sure how to navigate this, then the natural tendency is that when they look for leases, they try to see whether they can do 3 years or even slightly short 3 years plus/minus, right, rather than go for the 5, 6 years that some of the tenants may ask for, especially in the case of renewals, right, and they know that they are nearing the end of their amortizing their CapEx, right? They will probably do a shorter-term expansion if they can. So it's a case by case, we look at it. But if I look at just the first quarter alone, we still have deals done. Of course the first quarter deals done is actually a bit of a result of things that happened in the past quarters, right? We actually still see a few tenants actually expanding within our portfolio. So hopefully, with things panning out, we see how things will go. But I think the other part that will support is market is also aware that if they are looking for premium and good quality offices, right, the supply limitation is also starting to kick in a little bit as progressively some of these new completions, right, and the secondary stock gets. So they have to weigh their own options between staying and also the relocation [indiscernible].

Rachael.

Okay. Maybe first question from me. For Orchard, would you be able to share some operating numbers like how is the tenant sales trending? What's the reversion line in Orchard?

I think generally, as I say downtown, the reversion is pretty healthy. So I think that I know you're trying to allude to numbers. Unfortunately, we are a little bit constrained. We don't want to disclose anything more than what our JV partners are disclosing. Broadly, I think the base rent are still going up. Like earlier, I think articulated before for downtown business [indiscernible] they have potentially a higher fluctuation in terms of the GPO. But the base rent, I think, is generally still because there are not a lot of -- I think occupancy in the downtown is [indiscernible] at this point in time and still good demand. There's still a lot of anticipation on the rejuvenation of story. I think those are positive potential catalysts looking at the long downtown offshore location. broadly, I think the base rate is still going up.

Is it better than your portfolio downtown, like this 11% or more moderate?

You can imagine the starting point not high, not lower, their starting point is now lower than ours. So I would say it's [indiscernible]. Sorry, I would say the reversion generally around the entire portfolio is reflective across the downtown metrics. And relatively one asset against the portfolio, there will always be plus/minus above and below depending on the leases that you are talking about. So it's not easy to just take a point number and to expect this is the trend going forward for this more relative to the long [indiscernible].

If you do this ION, if you really just go there ION do go there [indiscernible] . You can see physically for a sale what kind of work all doing there. A lot of [indiscernible], some movement from Level 3, Level 4, some expansion to [indiscernible]? So those are activities that actually is very -- from our point of view, it's a very good value creation exercise that is going to be ongoing for maybe the next 1 or 2 years. Some large space, I think at this point in time, we are looking at to resize it and also bring the better trade coming. So I think that's what we are seeing. But the traffic generally has been quite healthy, traffic, the footfall overall. Obviously, like Choon Siang mentioned last year, there's this bump up because of the activity happened in March, right? But we hope that we can see the flow-through in our activity coming through this year -- this second quarter.

Okay. Just a follow-up on the retail side. I mean we have seen that there are outlets that have been closed down across Singapore. But I think last quarter, you said you are still getting interest from the retailers. So I was just wondering, is it still as strong as what you've seen before? And what kind of retailers are you seeing, which industry? Are they still mainly from China or you are seeing some local ones as well?

I think quite mix. Broadly, they are still Chinese name looking either for expansion or new one, but there are also other new concept, non-Chinese in nature, they are looking at launching. So I think the broad location in Singapore as a test space is still a very strong decision for many retailers. So this is what we anticipate going forward is still going to be the case.

Okay. And just one last one. In terms of office, I think you have done very well for the Singapore office. I'm just wondering whether you can still push the office rents higher. I know first quarter office rents has gone up across the industry. But do you think with this trade war, you can still push rents up or you probably would start to moderate down your office rents?

I would say that previously, we have been guiding reversions on the low to mid-single on a full year basis. And at this point, we will still maintain that guidance for the full year. Of course, we will have to monitor carefully because at this point, some of these things is really quite early stage, right? And naturally, it will become part of the conversations when we talk about renewals upcoming discussions. But by and large, I would say that just as I mentioned, some of the other factors that they contribute, right, like supply limitations, the need for flight to quality. The flight to quality theme is still going to persist this year. So definitely, at the end of the day, we don't expect major shocks across a lot of the expiries. But definitely, I think for some of the cases on a case-by-case basis, we have to assess like, for example, if we have an exit, right, and then how fast we want to actually trade off that, getting securing a rent or holding out and [indiscernible]. So those are those on a case basis, we have...

So one thing to point is that some of the new supply like Central [indiscernible], I think they are quite well taken up. At this point, it's almost 80%, and we are very confident. That's what we hear from the Street that they are looking at 90% by end of the year. And then the other one coming out, Keppel South looks like the momentum seems to be picking up. So we have to watch all this space once it's absorbed, right, then I think the tension will be there. So we are equally keen to see how they're doing. But obviously, I don't think most of the tenant going there are not the kind of tenants that will be attracted to the more core of CBD location.

Brandon you can go ahead.

Just want to ask on your thoughts on potential acquisitions, especially with regards to CapitaSpring ahead of the 2026 call option, right? Your stock is obviously trading very well. That cost is coming down. Do you think that it's a good time to sort of look at this potential deal?

Brendon, thanks. Yes. So I think we are definitely exploring opportunities on the inorganic front. And that the asset you're alluding to, which is the 55% option that we have, we are looking at it and looking at when is the best time to review. But -- so we also look at it in the context of other potential opportunities as well. And I think you rightly pointed out that our cost of funding has gone down quite significantly over the last few months. So definitely an opportune time for us to look at it. But in terms of time line, I don't think we can lock in a specific time line. We also have just completed ION. I think we are also digesting the acquisition that just happened 9 months ago. So I think quite a few moving parts, but definitely something that we want to look at over the next 6 to 12 months.

Okay. With regards to the Tampines AEI, right? I'm not sure how much you can share. But when you look at this asset, was there any chance to sort of redevelop it? would you be keen to potentially look at [indiscernible] Park, right? It's just across the road that [indiscernible] and I understand that the zoning is commercial or potentially retail as well. So I just wanted to get your thoughts on that?

I think they are looking to sell. I'm not sure how true is that.

Tampines Is very key. Certainly, the potential for --[indiscernible]. But I think that will be more mid- to longer-term consideration. I think the immediate opportunity like earlier [indiscernible] mentioned is that the realization of that portion of the road closure, I think really opens up a tremendous opportunity for us to -- I would say, anchor our position stronger than competitor, put it that way. You look at the MRT is lower, it's quite binary. You come out, either you go to the left or go to the right, it's quite binary. The one that's affected the affected now is really just right in front of us. If we can execute that AEI and then a combination of what you are planning to do over there, then I think we have a big big edge in terms of being the most attractive assets over there. So I think this is a more immediate priority for us at this point in time.

Tampines mall. Can you say anything on it? Is this something that you will look at? Or is Tampines mall the only one that would be [indiscernible].

I don't think you want to comment on that. It's not linked to the property. So that's one obstacle, I would imagine. I mean if you want to operate more seamless asset like what we've done for [indiscernible]. I think the connection is important. Otherwise, you'll do stand-alone.

Just one quick one on numbers, right? Can you share the traffic growth split by the suburbs and downtown?

Maybe we get back.

Joy you can go ahead.

Yes, just a follow-up on Brandon's question. In terms of sort of investment environment post the Liberation Day, are you seeing capital sort of pulling back or deals that you are looking at changing? So basically, have you seen sort of investment environment changes?

To be honest, it's only been 3 weeks. I think the effect that it has is on sentiment, but on actual capital flows, it's hard to see because I mean, a lot of things that we look at it is not so liquid, right. I mean in the public market, you see the capital flows quite clearly. But I think it's hard to see it. I think people probably take a seat back and observe before they commit in this period of time. But there was no real transaction in any case. So it's hard to comment whether there was a transaction that should have been done, but was pull out. We didn't see any of that and whether there's a transaction that people put in bids and then subsequently, I mean, we were not active in any case over the last 2, 3 weeks. So it's hard to say definitively that there was a withdrawal of capital from specific transactions that we have closed. So I don't think we are able to have that insight. But I think in a way, the mood has changed again. You can feel that now the easiest way to make money is to bet that whatever Trump says you unwind it in 48 hours. So I think now the mood seems to be a bit more neutral now. So I think we are sort of -- whatever has happened over the last 2 weeks is kind of water under the bridge. Of course, anything can change overnight again. So it's really hard to make a comment on that specifically.

I don't think Singapore's position as a safe haven has been shaken and obviously has strenghtened . In fact, probably has strengthened. And post operation, I think it's actually even solidify Singapore's position, I would say. The impact on the economic front is really something that we are watching. Like [indiscernible] mentioned, right, what's the first order effect? We don't get the first order effect. Our sector is not directly exposed to the tariff issue. But we're watching the second order effect, question the second order effect affects multinational position here, which are office tenant, right? Would there be knock-on effect on the general wider economy and then it's a question of jobs, right, job stability, job growth, income growth then that may have a [indiscernible]. So all these -- I think at this point in time, it's really too early to comment. But the good thing that really give us a bit of tailwind, I think our sector generally is that the easing of the rate is quite volatile on the back of a softening inflation number. Obviously, Singapore -- [indiscernible] dollar is a currency to go to, at this point in time. That has certainly pushed that [indiscernible] strength. And obviously, I think the size the rate came off as well. So that is healthy from a capital-intensive business like us. We've seen that flow through in our numbers. So we do have some buffering effect -- but on the business front, that's something I think is up, but it can be a case of things normalize. But even things normalize, I think we will look even better because then all the costs are hidden away. We see how Singapore is being positioned. Look at, of course, general election no shocking outcome. I think people want that stability, that continuity of governance and strong business environment. So that's all in place. I think we should be in a very good position. I think us, Singapore and also CICT.

I guess just on that note, right, because we've seen sort of valuation being fairly strong for Singapore. Do you see, you know, opportunities for you to take advantage of that on recycling some of your assets in Singapore?

Yes, I think we do. I mean we are constantly reviewing our portfolio mix in our -- and of course, when we look at -- we also discussed that we are also looking at inorganic opportunities. And of course, one of the ways to fund it is actually through a potential divestment of one of our existing assets. So we are exploring that. Of course, nothing concrete that we can mention or announce at this point in time. But we are constantly looking at uplifting the entire portfolio and whether there can be some swapping of some existing assets for newer assets to uplift the overall portfolio.

Okay. And just lastly all -- given the ongoing sort of uncertainties, you're still sticking with your original sort of plans. There's no change of capital allocation, et cetera, right?

No. It's not -- I think it's hard to make any significant shifts or permanent shifts in your strategy, based on what has happened over the last 2 to 3 weeks. So for us, I think probably, I think other asset managers are also taking a similar view of taking a wait-and-see approach and see how this thing settles before making a more -- before going back to our BAU plans. So, but to answer your question, no, there's no change in our underlying strategy.

Vijay you can the next question.

My first question to you is, I think [indiscernible]. I think Tony is probably handing over a pretty solid portfolio at a good turning point kind of a situation. Based on your analysis of the portfolio, looking through the portfolio over the last few months, what are the opportunities or tweaks or strategies like low-hanging fruits, if any, you see in the portfolio? And what would be your priority maybe in the next 1, 2 years in terms of tweaks? I already see some changes to CapitalStar Loyalty Programs. I'm not sure if that is driven. But just want to understand what is your priorities and strategies, what we should expect?

Thanks for the question. I guess I'll take that question. So as you rightly pointed out, I think we -- I'm coming into CICT at a time where the portfolio is pretty solid, very good foundation. I think most of the assets are performing well. So I think if you were to ask me as an observer, having seen what I have seen over the last 2 months, I guess the changes are very marginal to improve the portfolio and the margins. I think what is probably apparent is, I mean, if you look at it, across the board, first thing is what are the assets that are slightly more challenging, right. Slightly lower occupancies or -- not performing as well as expected. I think it's no surprise to anyone is probably our overseas assets. So those are things that we would want to hope to turn around and put some efforts to look at how we can either improve the underlying performance or reconstitute some of the assets in that area. So that's something that is probably -- a priority over the next 1 to 2 years. And then coming back to Singapore, I think most of the assets in general are doing quite well. There could be one or two small assets that we could look at from a new perspective, whether we can look at either improving the yield or reconstitute it such that it elevates the portfolio, as I mentioned earlier. But that's provided we are able to find opportunities in the current market as well. But otherwise, I think on the organic front, I think overall, the assets, some, are obviously a bit dated. I think we are putting some efforts to review which are the assets [indiscernible] with some asset enhancement. I think we have laid out some of the plans over the next 12 months, key one being [indiscernible] which is quite tactical and opportunistic. So organically, I think there is some room to redeploy some capital as well to enhance the tenant mix as well as the performance of the underlying assets.

Okay I think just to follow up on that. You mentioned rightly that some of the overseas assets are underperforming and you would look to reject some of it. Maybe can you provide more color in terms of what's the mix you are looking at from a medium term from overseas to Singapore market? And would you be open to divest some of the Australian assets? Germany market seems to have recovered a bit. Has it translated a bit into your portfolio also?

Yes. So I am really speaking -- when I say that, I'm really speaking from a third-party observing for the first time at the overall portfolio, right. Some of the immediate low-hanging fruits. But of course, whether you can action on it immediately is another question. And whether we want to do it is also a separate question because while the assets -- so that's -- I mean, Australia and Germany are quite different animals as well. So we have to look at them quite separately. So Germany, actually, we have de-risked one of the bigger assets already, Gallileo. Although if you look at the country occupancy, it looks low, but actually, if you look -- but yes, because we haven't included that occupancy of Gallileo. So the really one challenging asset is basically the Airport and the [indiscernible] at the airport. So that I think we are putting quite a lot of efforts in terms of very focused asset management first. So we're not -- I mean, when you ask the question, I guess, underlying that question is whether we sell the assets. So with those mentioning those words, I think that's -- so to answer that specific question, long term, possibly, but I think in the medium term, our focus is to actually uplift the performance of the asset first. And then I think for Gallileo, we are quite happy with the progress of the [indiscernible] and what it has done for the asset. And we think that from our perspective, that asset is in a way derisk. So I think, in fact, when it gets completed, it should be a meaningful contribution to our NPI once it gets completed probably sometime in the second half of this year. But in the medium term, we were open to looking at reconstitution of the portfolio definitely. So on the Australian front, definitely, that is also going through a pretty challenging environment over the last few years, especially for Australia when the work-from-home trends have pretty much lasted longer than Singapore. But I think quite encouraging signs that people are actually moving back to the office. And I think from a supply perspective, because of what's been happening over the last few years, the supply has also come down quite significantly. And we do think that from a supply-demand dynamics, we hope the worst is over in Australia. And I think we do see green shoots that -- because based on our ground checks and our leasing inquiries, actually, the trend does look quite positive from Australia. So we want to focus our efforts to uplift the asset performance before we look at any major changes in terms of our portfolio.

Just one last question. Can you share some color in terms of the hospitality performance for the first quarter?

I guess you mean -- well, we only have two. One is Raffles City, the other one being Capital Spring service residence. So I think overall, like we mentioned, actually, the numbers are quite in line with sales trends actually for the retail, because no surprises. If you look at tourist numbers, it has come down. I think the STB just announced tourist numbers on a year-on-year comparison is down compared to last year. But no surprises there really because of the high base last year. So I think it does translate to a slight softening of hotel performance. But nothing alarming, just a marginal drop in terms of overall performance. But we -- our ground checks last suggest that the second quarter is quite a strong recovery. There's quite a bit of MICE activities coming in over the next few months. And of course, like you said, I think one of the analysts have brought up, [indiscernible] so that should help provide an uplift. So yes, to answer your question, I think a slightly softer first quarter, but we expect a rebound in the second quarter. But this is on a year-on-year basis, of course.

We have another question from Jonathan.

So two minor clarification. So firstly, your guidance on stable cost of debt. So I just want to make sure that you're referring to stable compared to 3.4% -- you're not talking about comparing to 3.6%. So steady at about 3.42% end of the year? Second question is on guidance for rental reversion for retail for 2025. What's your expectation? What are some of the factors or catalysts supporting that guidance?

So maybe I'll take the rental reversion, and I'll let Mei answer the interest rate question. I think our guidance for retail reversion is -- while the first quarter has been strong, just slightly over 10%, but we do think that we -- there is some caution throwing into the wind after the Liberation Day. So I think we should expect some moderation in terms of retail reversion. So now we can probably look at mid- to 3 quarter, mid- to mid-high single-digit kind of reversions for retail. But I think office, we will remain as low to mid single-digit reversions for guidance for the rest of the rest of the year.

Probably, I think I would say at this point, we are quite in line because we also look at the expiry profile and the expiring rents that we are seeing relative to the market movements. Generally, I think the downtown and suburban malls outlook is relatively resilient. And I think a lot of the consultants are also quite a lot negative yet at this point about how the rents will pan out. So I think we are in good shape to deliver on some of the guidance that [indiscernible] mentioned earlier.

On the cost of debt guidance, it is in relation to the first Q cost of debt, which is 3.4%. Yes.

And for retail, -- if tenant sales are quite flat. How do you push rental reversion to -- what is supporting that push in rental reversion towards mid or higher rental reversion?

I think -- if you look at rental -- I think it's the way rental reversion is calculated as well. So if you look -- I mean just take a step back, rental reversion is basically the average of the incoming rent, over the average of outgoing rent. So we are now in 2025. So a lot of the rents, expiring rents were entered into in 2022, which is just as we are coming out of COVID. So in a way, we are coming from a low base as well. So we do expect rental reversions to naturally be easier to negotiate this year, because of the low base. So a positive rental reversion despite the flat sales is actually not too challenging and surprising. But that's more from a technical explanation. Of course, you are right. At the end of the day, if sales continue to remain flat, at some point, we have to expect rental reversions to then also flat line as well. But we are aware of the trends in the market. So we are actually putting quite a lot of efforts in terms of driving initiatives on the marketing side to drive footfall to the market. One consolation is actually footfall is still quite healthy and eventually footfall should be correlated to sales.

Just a very quick thing on -- so relative to that, of course, we have to look at the Op cost, which we are monitoring quite carefully. And then -- so if let's say there's underperforming tenants, right. If let's say, for example, there's a strong performing tenants, strong performing tenants, but even the sales is flat and the market is not really delivering what we need to, then of course, we will have to see how we can actually make sure that what the rents that we propose to them is actually something sustainable. And if that means that the reversion numbers may not be a big jump, then we will have to look at it. On the other hand, if it's a tenant that we know the trade is irrelevant and underperforming relative to market, right, then that's where we can actually do the trading out, right, of underperforming tenants and then still secure some of the new tenants to market and to drive company performance going performance.

So I see there's still two more raised hands. So we'll take the next two questions as the last question. Mervin, please? Sorry Derek first.

I think I'll just ask anyway. I just ask on the decentralization team because we've been hearing from some of the corporates that we're seeing signs of tenants being interested in moving out of the CBD towards more decentralized suburban offices or even business parks because of cost pressures. Is that something that you are also seeing or hearing about, you know, in your negotiations?

I thought the trend is the other way around, because people are realizing that that's not working out as much as they have. I thought that trend started a few years ago and people are kind of thinking twice about that now. Largely more the other way around cases of tenant moving to suburb. But general tone is they want to be in the downtown location. I think the logic is that if you are used to working from home and to get people back to the office, it doesn't make sense to get them to get back to an office that is near your home or in the suburbs. People want to come to the city to kind of feel a different environment from home. So I think a lot of people are rethinking the move out and the decentralization of HQ concept. If you do -- okay, so maybe just to clarify, if you are talking about really, really deep decentralization all the way to like the [indiscernible] or the kind of location, right, I think it's quite -- it's a big challenge now. Those closer to the fringe, I think is still not so apparent. And it's probably those more like a business park that is a bit more challenged now, but they are different. The use of [indiscernible] are quite different.

Yes. No, I was talking about more like MBC, hearing the landlord over there starting to talk about seeing some possible tenant interest in moving out the CBDs, which caught me by surprise because as you say, decentralization hasn't really worked out over the last couple of years, but hearing that just now, it was a bit surprising. So thought I'll ask if you are seeing that as well?

Probably in the market, definitely, there's always going to be movements in and out, right? I say the broad team is still tight with quality centralization, East Singapore, even in Australia, we are seeing the same. So because there's a lot of things, for example, tenant attractions and then, of course, there of course there could be cases of tenants, for example, some of the tenants who moved into the CBD maybe 3, 5 years ago where rents were at a bit much lower. And then in their own business case, they say that, okay, now at this point of renewal cycle, they are looking at picking up more space and they are faced with some of these higher rents now, right? And they have to relook at their strategy. But I'll say by and large, the general theme still comes to quality at this point.

And just lastly, on op cost for retail, could you just remind us what your Op cost is right now?

Our Op cost is 17.4%.

Okay. And the last question from Mervin.

Yes. Just a question on the Tampines AEI, any sense on like the total CapEx square feet that we impacted and time frame to complete this year?

We'll probably share more details in the next round.

Will it be equivalent to like IMM, same ballpark?

We will have to finalize the scope and we will update. We're looking through more detail beyond just the immediate internal space, right, whether we can do more of the external space as well.

Okay. And in terms of the trade war for the office portfolio are you able to share with us percentage of categories or segments that could be impacted? I think on the APAC call earlier, they mentioned there were shipping companies that were impacted in the first trade war or you have any big AI exposed tenants given AI is not so hard these days?

No, it's not so visible. I say we don't really get any kind of first order in January. You look at our shipments, in our full year result, we have [indiscernible] it's quite diversified, not really industrial, not exactly in trading. We have a lot of financial services, non-bank financial services, asset management company, some IT and then some technology company. Not the first order impact, I would say, at this point in time.

In terms of Tampines Holdings, when does the lease at Atrium end? Sorry, when does it end? I missed that.

2028.

Okay. [indiscernible] We will be only doing AEIs [indiscernible].

It depends on what kind of AEI we are planning to do. And I will say that it's not just itself, right, but it's also relative to some of the broader works in the that vicinity have planned and also our broader things that we lay out to do. Maybe just one final words -- I think you should try to view some of the assets overseas that we're managing now as potentially the alpha that can deliver the additional [indiscernible]. I mean our existing business are quite robust. Those assets we are working on 1, 2 years down the road, potentially could be hopeful.

So we always laying out our income quite sensibly [indiscernible] no short persistent we get a good opportunistic kind of. But we are always laying out our cash flow and things in a non-disruptive way.

Okay. So before that, I just want to come back on the shopper traffic. So the portfolio shopper traffic year-on-year is 23% as we have shared. For downtown, it's about positive 49.7% and for suburban, it's negative 0.8%.

Thanks everyone for your, questions -- and thank you Tony, for -- do you have anything else you want to share with that?

I just want to thank all of you. I think it's been a good journey together for each other, we also must be [indiscernible] teach us something along the way, I think that's how we can make the market interesting, right? I think we are all this side of picture where we hope REIT in Singapore real estate in general continue to do well. Obviously, you are part of the ecosystem, and we try to do our part and hopefully, you will help to support the ecosystem. It's important. Thanks a lot.

Thanks, Tony, and thanks, everyone, for joining us. If you have any follow-ups, please feel free to reach out to our team. And that brings us to the end of meeting. Happy Friday, and we look forward to seeing you at our get together next week. Thank you.