CapitaLand Integrated Commercial Trust ($C38U)

Okay. Great. So thank you for joining us today. We know it's early start, and we appreciate you for dialing in on time. We have the management team with us here today. We have our CEO, Choon-Siang; Mei Lian, our CFO; Head of Investment, Jacqueline; Head of Portfolio Management, Yi Zhuan; and IR team here with us, we have Nathan, Tami and myself. We have to keep things focused today. So we'll start off with key highlights by Choon-Siang before moving on to the Q&A. With that, I will pass the time over to Choon-Siang.

Thank you, Allison. Good morning, everybody. Thank you for joining us today. I know it's bright and early, bright and early for me too. It feels like we have just spoken recently, and here we are back again. Okay. Today, we just announced business updates for the first quarter 2026. So the numbers could be a little stale given that we have already spent some time talking about some of the transactions earlier. And also, obviously, we have reported an advanced distribution. So some of you would have if you turn some of your numbers from there as well. But nevertheless, let's go through some of the operating numbers, and then we will take some Q&A. But there are some exciting updates in this business update as well. We will walk through in the subsequent slides. Okay. So first quarter net property income, very healthy, closed the quarter at $314 million, up 8%. But of course, this is -- has a lot of -- we've gone through a lot of changes in our portfolio. So we need to dissect the numbers a little bit. But overall, a very healthy set of financial numbers, as you would have seen from our advanced distribution anyway. Aggregate leverage, 38.5%, down 0.1 percentage points from the end of 2025. Average cost of debt has come down quite significantly from 3.2% as at 31st December 2025 to 31st March 2026. This quarter, in terms of cap market transaction, we issued $300 million fixed rate notes due in 2031, which is a 5-year note at 2.18% on 10th of March 2026. Portfolio occupancy, 95.2%, down 1.7% quarter-on-quarter. I'll spend some time walking you through some of the reasons why the occupancy is down for this particular quarter. I think it's mainly due to actually, I don't think it's a portfolio-wide reflection. It's actually very tenant-specific. The top 3 contributors to the decline in occupancy is actually a tenant in MAC in Frankfurt. We have the largest contribution. In fact, it contributed approximately half of the drop because by NLA, that tenant takes up quite a significant space and that contributed. But the rent on that tenant actually is not very significant. So the contribution was about 0.8% of portfolio occupancy. The rent contribution was actually less than 0.2%. So the impact on the financial is not as significant. Then the second tenant, we have a tenant departure from Funan office, one of the larger tenants that we have there. And also the third tenant contribution is a tenant in Clarke Quay that's on the third floor is an event organizer. Fairly large space, but as you can imagine the flow of Clarke Quay very little rent contribution. So the financial impact is more -- it's not as significant as the drop in occupancy suggests. But I want to highlight that we are very actively marketing the space. So of course, we all know that MAC itself has some challenges in terms of leasing. We actually did improve the occupancy last quarter. But I think when we highlighted last quarter as well, there's always some in and out in terms of the leasing momentum. So we will be working quite hard to try to improve the performance for that particular asset. Clarke Quay, a lot of -- it is work in progress. So the team is curating the tenant mix to try to dovetail with the completion of CanningHill, getting some good traction in the leasing discussion. So there could be some new names that will show up at Clarke Quay over the next few months. And also for Funan, the office tenant probably contributed about slightly over 10% of the Funan office occupancy. So we are also actively marketing that space, which we think is transitional. And the office space is actually quite nice because it's fitted out. So it should take us not too long to lease up that space. Okay. So these are the 3 main -- so it's actually very asset and tenant specific. I think overall, the portfolio is still very healthy as evidenced by the rental reversions, which is still very healthy at 4.4% for the retail portfolio. And for the office portfolio is at 6.1% rental reversion, quite in line with our guidance earlier to be trending around mid-single digits. Tenant sales per square foot, up 2.2% year-on-year, fairly healthy. This includes the March numbers as well even after the start of the Iran war. I think January and February numbers were very healthy, as you can see also from the national retail sales numbers. I think February, they reported 11% increase in year-on-year sales. Of course, there's some Chinese New Year effect. But then even if you combine the January and February sales, I think overall, it was up about close to 4%, if I'm not wrong. So in our malls, we are up about 2.2% per square foot, including March numbers. Okay. Next. Shopper traffic, also very healthy, up 3.2%, so quite in line with the -- I mean, slightly better than the tenant sales. In terms of the updates for first quarter, AEIs that we have previously announced, I think they are all work in progress. Lot One, Raffles City, Tampines Mall, all progressing quite well. Divestment of Bukit Panjang has been completed at the end of February. In terms of utilities costs, I think we have been getting a lot of questions in all of our meetings over the last 1 month. I think happy to reiterate that our utilities costs, energy rates are all locked in across our portfolio. For Singapore portfolio, locked in until end of 2026 at a better rate than what we locked in, in 2025, actually. So this year, we're actually expecting savings from our utilities costs. For our overseas properties, we are locked in as well until 2027, depending on which property and 2028 for some other properties overseas. Next. Okay. So I think we have spent some time over the last few days talking about this transaction already. So I won't spend too much time. We can take some questions as well, but I think a lot of you have already had a session with us on this. But I think the market reaction has been fairly positive. So we are quite happy with that. The placement was well oversubscribed at about -- I think it was about just almost 5x subscribed, just below 5, I think. That allowed us to upsize our placement from $600 million. So that's the key change from the last time we spoke. I think when we spoke, it was based on a $600 million equity offering. Now we have raised $750 million and at a tighter discount than what we originally assumed, which was 2.7%. The price that we did at 2.30% was actually a 2.36% discount to the adjusted VWAP. So all in all, very healthy demand for the offering. As a result of that, there will be some adjustments to the DPU accretion because of the larger equity offering, accretion is at 1.7%. But of course, that also means that it allows us to lower our leverage to 38.7%. I think previously, we reported just slightly over 39%. So that also means that it gives us larger debt headroom for other activities that we wish to pursue at least going forward in the future. Next. Okay. So I think this is the key update for this quarter. We want to also report that we have actually started the process for AEI at Plaza Singapura and The Atrium. I mean we have been looking at this for a while. I think we are now confident to go out and announce this asset enhancement, I think for a few reasons. I think timing-wise, of course, this is not like something that we take it quite lightly, asset enhancement. And this is quite a substantial asset enhancement at $160 million. I think we have always been quite deliberate in terms of the spacing of our asset enhancements, as you guys are familiar by now. We always try to time it with a minimal or execute it in a way that has minimal impact on our cash flows. So that has already contributing -- that has already started contributing to our numbers since February and March. And also that, in fact, give us the uplift in terms of financial performance. That was one of the key contributors to first quarter outperformance also in addition to CapitaSpring and in addition to ION acquisitions. So with Gallileo largely resolved and handed over to the tenant, we think that we are ready to take on another major AEI, which is Plaza Singapura. And most of you are familiar with the asset. It is an asset that has been around for a long time. And I think if you look at the performance of Plaza Singapura on a per square foot basis in terms of rent and sales, I think there is some room that we can value add when you compare it to some of the more neighboring malls in downtown, even within our portfolio. So the idea is to elevate the positioning. There are some infrastructure upgrades that we're doing. There is also a tenant refresh that we are planning. We will also be looking at -- probably looking at some -- transforming some spaces into a more immersive experiential entertainment concepts. This is something that we are exploring at the higher levels so that we are able to draw the crowd to the top floor. I think so that's one of the key feature and objective of this particular AEI. The other thing that we wanted to achieve was also to dovetail with the URA's Master Plan. There is a plan to pedestrianize the Orchard Road stretch in front of the mall. So we want to now plan for the seamless linkage between Plaza Singapura to the Istana Park that is right in front. So we will be doing some upgrades at the front to extend the park experience in so that it creates a more seamless connection between nature and retail. So to minimize the disruption, we do plan to carry out the AEI in phases with the mall remaining open and operational throughout this AEI period. So some of the pictures, I think, in the next page, artist impression. Maybe we go to the next page and show the pictures. So there will be some improvements in terms of the facade, there will be improvements to the drop-off point, creating a better experience. So the inside of the mall, we will definitely be upgrading to make the space a bit more open and also the look and feel and the tenant mix is likely to see significant changes at least for the first and second levels and as well as the top level. Okay. So I think the other thing that is interesting is also we are creating some of these bridges that link across -- I think we -- the idea is also because Plaza Singapura actually is quite a big mall. It's about 700,000 square feet. So the idea is also to create better movement across various parts of the mall. So we have all these link bridges, not only looks good from The Atrium area, but also facilitates the flow, creates a bit more vibrancy to some of the upper floors. So that overall effect on the mall is one of a little bit more exciting and vibrant across every floor and not just focus on the -- I mean today, we know that the basement for Plaza Sing is really doing very well. The ground floor is doing well. What we want to do is also to replicate the experience in the slightly quieter areas of the mall, okay? Okay. So in terms of the financial performance, I will touch on that. Gross revenue, we are up 8%. But of course, this includes the contribution from CapitaSpring, which previously was reported under JV structure. NPI up $314 million. Year-on-year, we are up about 7.9%. So this also excludes 1 month of Bukit Panjang because we have sold it in February. So there's a lot of movements within the numbers. Okay. Next. In terms of capital management, I think we have highlighted a very healthy balance sheet now. We are at 38.5% even with the acquisition and coupled with the equity offering, this is not likely to change significantly. Interest coverage, very healthy 3.8x. I think the key takeaway from this slide is that the average cost of debt has come down to 2.9% from 3.2%. Next, well spread out maturity profile. I think we only have about $450 million of loan left for refinancing for this year. And the rest of the years, I think, fairly healthy. Next year, we have about $1 billion up for refinancing. In terms of occupancy, I think we spent a lot of time at the beginning talking about occupancy. So I won't belabor the point. If you look at our retail, actually, it's generally -- it's come down slightly, but I think the largest contributor to that drop was the Clarke Quay that I mentioned, the Clarke Quay tenant I mentioned, but I think the financial impact is very small. Office, largely because this is a combined look, including Germany and Australia. We can have some detailed breakdown later, largely contributed by Germany. Integrated development, it's down slightly. There are some vacancies in I think this is Funan because it's contributed into the under integrated development. That's the drop that I was mentioning as well in the Funan tenant. Next. Top 10 tenants, no significant changes. I would just add that ECB, which we have put into the footnote will feature as a top 10 tenant going forward, but we're still in the process of handing over the last 2%, 3% of the -- so we haven't included it. Once it's 100% handed over, then we will start including it probably from the next quarter or the following quarter onwards. Next, maturity lease expiry profile, generally still doesn't look too dissimilar from our previous. We have 11% for expiry this year for retail and 5% for office. Out of that, probably 4.3% of the retail and 1.6%, which is about 1/3 each has been kind of resolved in advanced negotiations. Next. Okay. Healthy leasing activity. Despite the decline in occupancy, we still have a very healthy retention rate. For retail, it's at close to 90%, for office, about 70%. And we have had quite a lot of new leases and renewed leases as well, about 339,000 square feet spread across the various trade categories and also for office, about 121,000 square feet. Next. Retail occupancy broken down into suburban, downtown, downtown, as I mentioned, contributed primarily by the drop in Clarke Quay. Next. Our rental reversion of 4.4% for retail broken down into downtown and suburban. Downtown, 3.9%; suburban, 5.1%. Tenant sales, 2.2%, as we mentioned, broken down into suburban growth at 3% and also downtown at 1.7%. Next. Yes. Just some of the highlights on some of the new retail concept that we have, sio pasta, which is a maturing recognized casual pasta concept that just opened in Raffles City, Shiseido at Tampines Mall. I don't know whether you guys have been to Tampines Mall. I think you can see the slowly -- slow upgrade on the ground floor. We have also holded up the Isetan space. I think that's work in progress. So we expect to probably finish that over the next few months. But I think the ground floor area has been done in phases. So you can already see some of the new tenants showing up at the ground floor entrance area. Prada at Raffles City. We also have a new tenant at IMM, BYD, which is on the third floor. So that's quite interesting because it's on the third floor, and we have a massive car park at IMM, so which are able to showcase some of their cars. So fairly interesting concept there. Okay. Maybe we'll just move on. Okay. In terms of the office occupancy, as I mentioned, as you can see here from Germany, the significant drop in office is actually due to Germany from 91% to 83%, but financial impact is, I think, not as significant as what the numbers suggest. Australia, actually, the occupancy has been healthy. As we have mentioned a couple of times, we think that the leasing momentum is still -- is picking up. Occupancy in Australia actually improved from 91.8% to 92.8%. And Singapore, we have touched on, I think, generally quite healthy, slight drop due to the Funan vacancy. The good news is that our average rent continues to inch up from last quarter, 10.95% to 11.00%, 2.2%. Although I'll just caveat that, of course, you guys are aware that we have just announced the sale of Asia Square Tower 2, which is -- has a slightly average -- higher average rent than our overall portfolio. So this number could come down, but that's probably because it's not a like-for-like comparison once we take Asia Square out of the equation. Okay. Next. Focus and outlook. Yes. So I think overall, we are still on a pretty good and healthy space in terms of outlook. I don't think anything significant has changed from our last update. Rental reversions continue to provide the organic growth. CapitaSpring, we are still benefiting from the contribution because it was only accrued -- I mean the additional 55% was only included from 26 August onwards. So this first half of the year, we are likely to see that accretion coming from CapitaSpring. Gallileo, already -- our first quarter numbers have already started recognizing the income. So you can see it in the DPU impact as well. IMM already completed, performing well above our underwriting numbers. So we are very happy with the outcome. If you go to IMM today, you will see that the look and feel of the mall is significantly different from what it was before. So that was an area that we're very happy with. Okay. So I think organic growth and also some of the contribution from the inorganic growth has really done well for us. And going forward, we expect this recent announcement on the divestment of Asia Square and the acquisition of Paragon to continue to build on that momentum with the 1.7% accretion. You can also see that our capital management, Mei Lian's team has done a very good job in terms of our interest rate management. Over the last 1 quarter, we have brought the interest rate down from 3% -- 3.2% to 2.9%. That's actually a very significant tailwind, definitely helped to improve the bottom line performance, and we expect this to continue to contribute because as you can see, last year, we have been reporting even in the second half of last year, we were still at 3.3%, 3.2% average. So this 2.9%, even if it maintains, will be a significant savings compared to last year already. I think energy rates, we've talked about it. Okay. Yes. I think value creation strategy, I think this is the same slide we talked about it earlier at both when we brief on the transaction as well as at the AGM. I won't spend too much time. I think we remain -- the 5 pillars continue to drive our growth, organic asset enhancement, unlocking value through divestments and driving growth. And we have been very consistently unlocking value every year. In fact, we have been doing one divestment almost -- this year, we did 2 divestments. Last year, we did one, the year before we did one, and we have been doing one high-quality and meaningful significant, highly accretive acquisition every year for the last 2 years as well, okay? And capital management, of course, that's an important tailwind. All right. Sustainability, we are on track for most of our indicators. I think we won't spend too much time on that. Next, we just probably -- I think maybe we can start moving to Q&A.

Yes. Okay. I see a few raised hands. Yes. And I'm looking to have somebody other than Mervin. So Mervin, please go ahead.

Congrats on excellent set of results. Just a few questions. I think in prior cost of debt guidance was 3% to 3.1%, delivered 2.9%. Do you have an update for this year? On the Plaza Sing AEI, I'm personally quite excited by it. But at any point in time, what will the impact on occupancy? And is there any extra NLA you think you can activate, especially in front of the property with the new startup park? And in terms of Iran war, have you seen any impact on retail sales given petrol prices high today?

Okay. I'll take the easy question. I'll let Mei Lian do the first question, and then Yi Zhuan can talk about the Plaza Sing AEI. In terms of retail sales in March, actually, it has not -- we have not seen a significant impact. In fact, I think March sales is up year-on-year. It has decelerated in the sense that the growth rate for January, February is higher than the growth rate for March, but March is still a positive growth rate compared to last year. So it has surprised us as well on the upside. I think a couple of reasons. I think there's also some constraint in terms of flight capacity. So maybe people are not traveling out as much, spending more. And I think in the first few weeks of March, there was not as big of a -- in terms of sentiment, I think maybe there was -- it has not affected sentiment as much, maybe the first 2 weeks and people are expecting the war to end quite soon. So that could also be the reason. But in general, I think if you look at tourist numbers coming into Singapore, that has also improved year-on-year, quite healthy tourism numbers. So that has kind of provided a lift probably for some of the numbers. I think so quite a few confluence of factors that helped to drive the first quarter numbers. But I think to your specific question on whether March numbers, we are down, no, we are still up compared to last year.

About April, yes.

April, too early to -- I don't think we have the April numbers yet. Okay. Maybe Mei Lian can take the question on interest rate guidance and then Yi Zhuan can take the...

Okay. Earlier on, when we look at the interest rate guidance, we're seeing like around the 3% level. But given the -- what we're seeing in the Sing dollar floating rate movement in the past 2 months, it has generally been trending down. So that kind of allowed us to look at an overall lower cost of debt of below 3%. So guidance for this year, again, based on the current levels will be in the high -- high 2%, high 2%. Yes. So depending on where the rates go, right now, I think, yes, there should be continued looking at a year-on-year savings, yes.

Are you seeing tighter credit spreads or just being maintained?

For some of our loan facilities that are on floating rate, we have actually negotiated for tighter credit spread as well. That is around 10, 20 bps, yes. But mainly the cost savings is really from the floating rate movement.

Okay. Maybe Yi Zhuan.

Yes. Okay. I'll talk about the PS one. So during the course of the whole AEI, the reason why we kind of spread it out a little bit more because the works will be done in phases across the different parts of the property, it will largely remain open. And at any point in time, I think probably it's about 10%, 20% of the spaces that will be affected through the course of it. Nothing more. There will be a very small period, where there's a bit of overlap, but it's probably closer to 30%, but most of the malls will be open actually. The second part will be on the NLA question. Net-net, the NLA will be there about pretty much similar. While we create additional NLA on the ground floor in some of the spaces that we managed to identify, part of the AEI will also include compliance work where we will have and also a bit of upgrading works in terms of amenities, which will take a bit of the NLA away. And second part of it will be that as we know in Plaza Sing, right, the back end of the mall actually is quite deep. Some of the spaces are pretty deep. So rather than taking a big anchor that doesn't generate that much rent, right, we may subdivide some of these to create higher value spaces.

And there's no impact on the therma side of this section, right?

At this point, there's no major impact on the therma office side, the tower side. Most of the works in the tower side in Phase 1 is actually more along the ground floor where the entrance arrival is.

Okay. Congrats on the results and recent Paragon acquisition.

Thanks, Mervin. [ Jardin ], you're up.

Maybe just back to the portfolio refresh opportunities. Choon-Siang, maybe your thoughts on partaking in further development projects with sponsors. So after Hougang Central, there's still some quota to work with. So will this be something that you are interested in or prefer to phase out a little bit?

Okay. I don't know whether you're referring to the partial...

Very sizable.

Okay. So I think the way we think about it is, I think, firstly, we must like the location. And I think Hougang was unique in the way because it was underserved and it is in a very dense residential catchment, which we think a retail mall is very likely to succeed. And also the connectivity with the 2 major MRT lines and the connectivity to the interchange certainly helps. And the size precludes other significant competitors from coming in. So [ Bishan ], I think we haven't looked at it in detail, to be honest. But I mean, no harm for us to look at it, but then it will come down to a matter of pricing and whether we think that catchment makes sense for us because we -- the other thing that outcome makes a lot of sense for us because we don't have something in that area. So Bishan, of course, will be quite close to dome Mall. But Bishan is also in a private -- slightly more private residential estate. So the residential catchment is not deep as, say, somewhere like a -- And if I'm not wrong, I think the retail component is so small, it's like 200,000 square feet compared to [indiscernible], which is 300,000. So yes, but long story short, I think we will take a look. Question is whether we will consider -- I think we can consider we have room, but we also have to look at the impact. Obviously, there's no impact on DPU as what we mentioned. There will be an impact on balance sheet. We have already deployed quite a bit of capital to Alqam. We're deploying capital to Paragon and now we are deploying capital to Plaza Sing. So we have our hands full probably for the near term. But let's see the details of the project.

Okay. Maybe just one more on the tenant at MAC. Is it tied to the geopolitical tenant -- geopolitical headwinds or the tenant was already thinking of it? And any divestment overseas since you have done quite a number in Singapore already?

Thanks for raising that question. I was waiting for the opportunity to answer that question. Okay. So the tenant is actually all the airlines, and MAC is next to the airport. So I think, unfortunately, it's not due to any geopolitics. It's not due to any rent reasons or whatever. It's due to the fact that they want to consolidate back at the airport, which is obviously a better location for our airline. So actually -- so that's just unfortunate in terms of the business direction that the tenant took -- so that's where we are. In terms of divestment, yes, definitely, we are looking at divestment. And I think, in fact, we have been talking about this at the last business update and now the Iran war obviously spun us into the works because with interest rate expectations being slightly altered in the European area, it might make divestments slightly more challenging. But nevertheless, I think we are embarking on that process. So we are starting to sound out and getting our feet on the ground to see whether there is an opportunity. So yes, hopefully, we have good news. It's not easy. So I don't want to also raise expectations. Obviously, you guys know in this current environment. In Singapore, it looks like it's a lot easier for capital market transactions, but I think the same cannot be said for the European region. I think the number of capital market transactions that we've been observing in the market is few and far between and not at the kind of sizes that we are looking at.

Rachel?

Can you hear me now?

Yes, we can hear you.

Maybe just a first question on the reversions. I think it has moderated a little bit by first quarter. So I was just wondering what's your outlook for this year since there was some advanced negotiation on the lease that's expiring this year.

Okay. Maybe Yi Zhuan...

Well, for the reversions, right, generally, I think as I mentioned earlier, for the full year, we are still looking at around mid-singles. Of course, with some of the uncertainties in the wider global uncertainties, right, we probably might be a bit cautious on it, and we will see how this trends. For the retail, actually, largely most of the reversions have been quite strong. I think it was a little bit pulled down by a very specific tenant in a unique location. But by and large, I would say the retail reversions has been okay.

Can you give more color on this specific tenant?

It's the change of use of a tenant into F&B. And because of the location of the unit, it's actually not where the normal rate is. So that's the reason why for that, in that case, compared to the outgoing use, the reversion is a little bit on the downside on that sense.

Okay. Which is it?

I think you -- so maybe I will also just add, I think while we have guided fairly healthy rental reversions, I think one mall that we moderate because I mean Plaza Sing and TAO, we are likely to go through AEI. So we may have to moderate because when you do an AEI, obviously, it causes -- in the course of discussion and lease renewal with tenants, we also have to be mindful that they will be impacted by the renovation going forward. So we have to be a bit more flexible sometimes when it comes -- obviously, this is obviously only during the transition. So it could impact some of -- specifically for Plaza Sing and TAO, I think. So there could be some moderation in terms of rental reversion, which should not be unexpected. But I think the rest of the portfolio should be business as usual. So there could be some impact because of that.

Okay. Just moving to the office reversions. Now that you have sold AST 2, do you expect that the reversions may trend down more?

No, I don't think so. I mean if you look at -- if we break down our reversions and contributions, I think they are quite evenly contributing. So removing AST 2 should not make a significant impact.

Okay. Got it. Then maybe just on the tenant sales side, you mentioned that March was up year-on-year, but is -- do you see any impact on the downtown malls? Are they impacted a little bit more from the war?

I think it was the reverse, right? I think our downtown did better than suburban, if I'm not wrong.

For March this year.

I think downtown actually did better. If you strip out the numbers for March, I believe downtown we did better than suburban.

Okay. Interesting. Okay. Maybe just one last quick one, which is on ECB contribution. How much are they contributing in the first quarter? And how much more should we expect?

How much are they contributing? Mei Lian, do you have the numbers? I have the numbers, but more on the top line because we have to net off -- just in my mind, we have to net off the funding costs also.

Can we get back to you on this? Yes, because we have to net off funding costs and also provide for tax.

I think that contribution at the top line is probably about -- I think maybe about -- you want to say about $1.5 million to $2 million a month, if I'm not wrong. I'm trying to digest the DPU side and flow down the bottom line, but we need to do some work around that. And so it's also been about 1.5 to 2 months. So it's not a full contribution.

Can we move on to Upiang, please?

Can you hear me?

Yes.

Yes. Just on the Plaza Sing AEI, the amount seems quite big. And then how confident are we in securing that 6% to 7% ROI? And also given that, does this also mean that any AEI plans for Paragon will be shelved back because of this? Because when I look at Atrium going down and then Plaza seeing occupancy could also be impacted a little bit in terms of performance. So it does seem like we are in a quite uncertain period and then quite a few major assets could be seeing some -- a little bit of downtime. So that's the first question. And then second is on your retail, suburban seems to be meeting downtown. Do you expect this trend to continue in terms of reversions and also tenant sales?

I'll take the first question and Yi Zhuan can take the second one. Okay. So in terms of the expected return from Plaza Sing, I think -- I mean, you guys are familiar. We normally don't undertake AEI without a calculation of the financial return. And we have put down here that we are targeting about 6% to 7%. Question is whether we are confident of achieving. I think we have put it on to the slide. We wouldn't have put it there if we are not confident of achieving. That's one. Secondly, of course, but nobody knows this AEI will take -- years. It's also based on a certain assumption. I think -- but based on our track record, if you look at some of the past AEIs in Singapore, like Raffles City, we have done, IMM, we have done, I think we -- safe to say we have firstly, met our underwriting. And secondly, not just meet our underwriting, I think the part of the AEI, the objective is also to transform the mall to make it relevant and to make it able for the current taste and environment and shopping behavior and the new consumer. So all of that is also taken into consideration when we plan an AEI. And I think if you go into -- I think there's no argument that Plaza Singapura has been without AEI for a while, and I think it will definitely be helpful to rejuvenate the space. And also like what we mentioned is also really to dovetail with -- I mean, we have been very deliberate about this. It's not just about, okay, improving the tenant mix and then make it better. It's also -- we want to also think a few years ahead, what will happen to this mall when the pedestrianization of the mall, the road in front comes up. So we want to be positioned when that happens. We will transform the area, and we want to be there and ready when it happens. And I think our portfolio is large. I think we can definitely cushion if there is a bit of downtime. But of course, when we try to do any AEI, we will try to minimize the impact to our cash flow, which is why it will be done in phases so that the downtime doesn't stretch beyond 10% to 20% of the tenants or malls. So question -- so hopefully, that answers your question in terms of whether we are confident.

Yes. Can I also check if the construction costs have been locked in?

Yes.

So even if construction cost escalates from now on, your target ROI 6% to 7% is still comfortable?

Yes. So I think we have also been deliberately trying to upgrade slowly the various assets. I think you have seen that Raffles City was upgraded. Now we are moving on to Plaza Singapura. Then the question in people's mind is, okay, is Paragon next and whether this -- some people may think, okay, we like what you mentioned, if we are doing Plaza Sing, does that mean we have no capacity to do Paragon. I don't think that's the case. And I don't want to jump -- I don't want to prejump the conclusion that we are not doing anything. I think like what we mentioned, it's only been about 4 days since we announced. We want to go in, take a thorough look at what they have done. And there is already an AEI in plan in place, no harm and no skin off our nose to take a look at what they have planned, and we will see whether the plan involves any and how -- you do in phases, whatever they have planned or whatever we want to look at with fresh eyes, we also have to -- obviously, for us, we have to look at it from a portfolio-wide perspective and whether it makes sense for us, both on the asset level as well as the portfolio level in terms of cash flows. So that -- all of that will all have to be taken into consideration. But in any case, so I think Plaza Sing starts third quarter of this year. Paragon completion will only be third quarter of this year probably. So by the time we take over, it's not like we're going to do on day 1. We will definitely have to review the performance, the asset mix. I mean, the tenant mix. And then by the time -- if and when we do take a decision to do anything, it will probably be like possibly 1 year down the road, we're not sure. But I think that's not pre-conclude that it will or will not happen. I don't think I answered that question right now.

Okay. Second question is on the retail, the performance within suburban and downtown.

So for tenant sales, right, I would say that actually between downtown and suburban, if I just look back at the past few quarters, right, sometimes it will be downtown and suburban. So actually, the 2 of them are really quite closely matched. And I would expect that to kind of go forward in this year also. Of course, naturally, given some of these uncertainties in this few months, right, probably the suburban side, we will probably see a bit more resilience as because with some of these higher cost operating costs and worries over inflation and stuff like that, discretionary spending on large items will probably be a little bit held back for a while, while the day-to-day people still have to spend. So I would say that's the kind of trend that we foresee for the going forward. And I think the related question to this was actually on the reversion side of things. By and large, I would say both retail and downtown -- sorry, for both downtown and suburban, generally, we look at sustainable kind of reversion levels that we go to our tenants. But of course, with downtown, as I think Choon-Siang mentioned earlier, when we do some of these AEI works, right, some of these impact short-term extensions and stuff that we may do to retain a tenant in the near term to kind of time our AEIs a bit better may distort some of these reversion numbers that we may see.

Okay. It's just that I noticed your tenant sales have been quite soft in the past few quarters and then reversions have been going up. So just wondering, just a little bit concern on occupancy costs. Yes.

I think on occupancy cost year-on-year, we are quite stable actually. This time around, we are around 17.4%, which I believe is 0.1% lower than the previous year. So downtown cost is higher than the suburbans. Suburban, we are looking at high 16s, which is quite actually in line with the market and it's actually quite sustainable.

And I think the other thing I just want to add that actually 2.2% sales compared to rental reversion of 6%, actually not that out of line because actually 6% rental reversion because it's average over 3 years, actually, it's quite in line with a 2% sales growth. So I wouldn't actually say that it's not in line.

Okay. Okay. Last one is, is there any -- do you disclose on ION tenant sales? I think in the past quarters, there was like one small footnote. Maybe I missed that.

No, it's included. Last time we used to show a footnote as in we strip out the ION because it was not like-for-like. But now ION, we have owned it for a full year already. So there's no need to strip out the effects of ION anymore. So ION has contributed -- ION is in 2025 and 2026 numbers now. So this 2% includes the total sales from ION as well.

Can we go on to Brandon, please?

Just touching on a bit on occupancy, right? Could you sort of guide us a bit on the forward occupancy for the different like retail office, right? Because when I look at this quarter's numbers, it's kind of quite low. In fact, it's like a 4-year low, right, whether you look at retail office or portfolio. So is that something that you can sort of guide us? Or is this something that we should be concerned about?

No. So I think quite -- I think I spent some time trying to address this point because I expect this to be an issue and to be raised, which is why I think I have addressed it right from the get-go. So it's actually unique to 3 specific assets that we have and very unique to 3 specific tenants. And the financial impact is quite small because these are all low rent spaces and not one of -- actually half of it -- more than half of it is due to Germany, which doesn't affect our Singapore performance. So I don't -- I won't take this as a read-through on the portfolio to answer your question directly. So no, because at the end of the day, if you look at rental reversion, it's still healthy, which means that we still have the negotiating because we still have the negotiating leverage to negotiate for higher rents. So it's unique to MAC, Germany and unique to Clarke Quay. Clarke Quay, of course, is work in progress until CanningHill gets completed end of this year.

So if you look at it on a portfolio standpoint, right, should we sort of expect that 95.2% to sort of get back to your usual like 96% to 98% kind of range?

No, I think we can expect to improve. If you're asking whether this is the new steady state, no, the answer is no. I think we can expect this number to improve. For the simple reason, let's say, for example, today, we were to sell MAC immediately improves and normalizes to that higher level if -- but I would say that as a noncore asset, so we shouldn't even use that as a contributor to look at normalized occupancy. So I do -- but even if we were to include it, we do expect some of these vacancies are very transitory frictional. We do think that the 95.2% is not a reflection of what we are able to achieve with the current portfolio.

Are you comfortable to share the occupancy of those 3 unique assets?

Yes, we can. So of the -- I think MAC now we are just trending somewhere above 70%. Clarke Quay, 84%. Funan office was 100%. I think one of the Towers now had vacancy. What is Funan? 87%. But we are quite confident of leasing out that space. So that's a very transitional vacancy. MAC could be a bit more -- take us a bit longer, but I think we will work hard to try to replace or look at divesting at some point. But yes. So those are the 3 assets that probably contributed to this quarter's movement, one of which we are quite confident of re-leasing quite soon, hopefully. But the other 2, I don't think will actually affect the financial because those are very low rent spaces anyway, although they are quite large, and hence, it contributes to the drop. Our financial performance has not been impacted. That's the bottom line.

Okay. Great. And just going to -- can you talk a bit on Bugis Plaza? I mean, historically, if you look at like CICT, right, when you guys sort of amalgamate your assets and other assets, right, these assets usually get divested, right? So could we sort of expect the same for Bugis Plaza or there should be a wider plan for it given that you really own Bugis Junction?

Sorry, I don't get your -- you're saying that -- what are you saying about Bugis Plaza? I didn't quite catch your drift.

Yes. So historically, if you look at CMT, CICT, right, you guys tend to amalgamate the performance of certain assets under other assets, right? And then after that, subsequently, we see you selling those assets, right? Should we expect the same for Bugis Plaza? Is it a noncore asset in your view?

I think the short answer is no.

I think we have also shown that we can sell assets that are not in the others category. So it's not -- it doesn't indicate anything. There was a period of time when there's only so much space and there's only so many buildings you can squeeze into it. So some of the smaller assets tend to be parked under others.

Yes, yes. Okay. I mean, it's good to know that it's core, okay? So we shouldn't be.

It's actually a very vibrant area and coming out very nicely. In fact, I see it as a high growth area going forward.

I'll just end with one last question, right? So if there are opportunities, right, to acquire something that's pretty decent, is CICT sort of open to raising equity more than once a year?

We try not to. I have been reminded by investors to try not to do that. So we will try not to do that.

Move on to Vijay, please.

Three questions from me, maybe I'll take one by one. Firstly, in terms of the Funan, can you give some bit more color in terms of the tenant who exited. What was the reasons? And how much downtime do you expect for this property?

Tough question, I leave it to Yi Zhuan.

You mean the tenant.

Funan.

So for Funan, the tenant Adidas moving. Actually, it's more of an issue of them trying to consolidate some of the space in terms of the efficiency and their corporate planning. So that was the reason for the move.

And how long do we expect...

How long do we expect to backfill it? Well, okay, typically, I would say that if we start from scratch for a tenant of -- because okay, for adidas, right, it's about 28,000 square feet of space. If there's a few ways we can do it. I mean, we subdivide then naturally downtime is a bit shorter, at least for part of the space. But for tenants usually of this kind of size, if they start to look for space, typically, they'll be looking at it around 6 to 9 months ahead of time because they have to plan to move from the previous space. So some of the -- we are already starting talking some interest along the way, and it's really down to how it converts as well as how the negotiations with the other options that they have, right? So it's hard to say for sure, but I would say probably half year.

Got it. My second question is just sharing my observation. I think for a Clarke Quay perspective, it does look like the impact seems to be structural for some time. I mean the asset went a major upgrade after COVID, but still seems to be having a lot more of tenant churn over the last 1, 2 years. Maybe what's your thought on this asset? And would you be willing to divest it? And are you seeing tenant sales improve since last year?

Okay. So I think Clarke Quay, I won't say it's structural because we have not seen it in its stabilized state. There is definitely a structural difference between the construct of Clarke Quay and some of the other malls for sure. Definitely a slightly different positioning. And of course, it's not a natural mall per se. And of course, now currently it is impacted by CanningHill. I know we have been saying that for the last few quarters, but that is the reality, major construction. We do expect the vibrancy of the whole area would change once you have this few hundred residential units being filled up; and two, hotel blocks being completed. So I mean, hotels generally creates a round-the-clock footfall. So we do expect -- and this is right across the road from them. So definitely there will be some improvements. Whether the improvements will be enough will be one of your questions as well once it becomes stabilized. But we are confident that there will definitely be improvements once that happens. And the challenge with the leasing discussion now is also nobody will commit until they have seen the hotel being completed. That's the reality. I mean, if I were a tenant, I mean, no point for me to take the risk today, I might wait until 6 months later when the hotel is completed. So a lot of the tenant churn is also because a lot of our tenants within Clarke Quay, some of them can be -- some of the movements and the margins is also due to us bringing in shorter leases coming in to fill up the space, create the footfall and vibrancy to that area. But we are doing a lot of things to -- I mean, we have a team that is very focused on marketing the asset. If you go to Clarke Quay, there are a lot of marketing activities going on every weekend. We have now clusters coming in on every Wednesday. We have just done a cycling circuit competition, making use of Clarke Quay natural outdoor roads to create kind of a cycling circuit. We are also -- every time there's a major sporting events, we have organized live shows and all that. So we are making a conscious effort. It's not a natural place where there's natural footfall. So we need to create a more destinational effect to bring in the crowd while CanningHill is being completed. When after completion of CanningHill, we do expect it to have more natural footfall. Yes. So we are making very good efforts. And to your second question on whether we will be open to divesting, I think we have demonstrated our willingness to divest anything, I think, if necessary. I will say that -- I mean, we just divested 2 assets and one of which is fairly large and performing well as well. So I think the question to that is anything is possible, including Clarke Quay as we are divesting Clarke Quay.

If 10% premium, I think, yes, that's what you are alluding to.

Yes. You hit the nail on the head. I think it's always a matter of pricing, right? But I think the yield is still decent for Clarke Quay based on the current book value.

Okay. My last question, I think in terms of energy rates, you mentioned that this year, you mentioned it is lower than last year. Maybe how low is it for this year compared to last year? And if it normalizes, if you have to go for open market and purchase a contract for next year, should we have to expect a jump in terms of electricity cost and NPA going down.

No. Thanks for the question. Actually, I also want to take this opportunity to highlight that next year, actually, we do expect utilities cost to come down further. The reason is because although it's not been locked in, we have achieved a better formula. There's -- the formula for utilities cost is always a function of certain input prices. And of course, oil price and gas prices are a key component of it. So even at today's price, if we were to enter into the contract, we are still achieving savings because of the better formula that we have achieved with our supplier. So we do expect savings next year as well compared to this year.

So you're not impacted by external environment or even at this higher price, you can still achieve savings?

Yes.

No, we are impacted because -- but what we are saying is that at the same price -- at the same input price next year, we will achieve savings because of a better formula. But so even though prices have gone up, we will still achieve savings. It takes a very significant increase in the price of oil for us not to achieve savings for next year, and we are not anywhere close to that.

So this is based on the management contract we have signed with calxiaxite?

No. It's based on our contract with our energy provider, utilities provider. One thing is that we procure energy as a group. So we do have quite a bit of negotiating power. So for example, CICT, Clarke, the whole CLI Group, we are procuring energy as a bulk contract. So as you can imagine, because given our size, we do have some negotiating leverage. So we are able to lock in a better formula for next year.

Can we go to [ Diyash ].

This is actually Derek from Morgan Stanley. I just assumed another by accident. No, I just want to ask a couple of questions on the cost of debt outlook. I think, Mei Lian, you're alluding to -- it seems like you're alluding to about 10 to 20 basis point savings from the current 2.9%. Does that take into account, I presume, the debt paydown from using proceeds from the raise -- from the equity raise. And when you take on fresh debt for Paragon, is that all taken into account already?

No. We have -- I mean, -- depending on the fixed float assumption for the Paragon debt, we believe that there is some room in terms of floating rate because we continue to see the movement over the past months where floating rate has actually even gone below 1%. So if this kind of continue, there could be even more savings from that anchor. We haven't taken into account the Paragon debt yet, because it will depend on the actual fixing structure.

Is there a rough number that you could -- I mean, could we be looking at 2.5%, 2.6%? I mean I also assume you'll be in lieu of the acquisition coming in, you'll pay down debt first, right, with the equity raise proceeds?

Yes, yes. The assumed debt for interest rate for Paragon debt is about 2.6% to 2.7%, yes. So that could kind of lower the average based on this assumption as well.

And that number actually looks high also compared to what you recently raised at 2.18%, right? So could that number also be a lower number?

We will try to do better. The 2.18% was raised when the fixed benchmark was actually lower than current. So today, if we were to raise the bonds again, it may require slightly higher margin. So it all depends on, first, the timing; second, the tenant that we want to lock in and how much is going to be fixed and float. But generally, we try to keep on an overall basis, at least 70% of our debt portfolio on a fixed basis.

Understood. And if you were to raise fresh debt right now fixed, what will be the number?

Well, probably looking at the secondary trades, close to, say, 2.4%, 2.5%.

1 Okay. Got it. And just last question, if I may. I think I got some investor queries on the equity raise, why raise at a lower -- at the lower end of the range of the pricing range, given the robust takeup?

Yes. Okay. I'll take that. Actually, we -- I would say that this is the low end of the range. The low end of range is 2.7%. But you are right, could we have raised it at, say, 2% possibly. But then the quality of the book could be different. So typically, in an equity raise, you guys will be familiar, there will be 3 main types of investors. The first group is what we call the real estate long-only investors. These are the buy and hold investors, right, because they like the assets, they are real estate specialist, they are long only, they buy because they want to achieve the yield that we provide and the growth that we provide going forward. Then there's the hedge funds and then there is a private bank who may or may not buy and hold depending on the valuation, depending on the momentum and depending on the market conditions. So we typically try to allocate a larger part of the book to long-only real estate because these are the investors that will stay with us and grow with us. But of course, these are -- so looking at the book to encourage a larger allocation to debt, that was the reason why we decided to -- but even with the decision, we also are able to bring everybody up from, say, 2.7% discount to 2.36% discount, which was the final price that we did that. And if you look at all of the equity raise done in the last 20 -- I don't know, last 5 years, this is probably the tightest. I don't know whether I can think of a tighter. So I don't think we can say that this is not a tight discount. I think we probably have been spoiling investors a little bit because we went out with a very tight low end in the first place. Most equity offerings will not go out with a 2.7% at the very low end. They typically will go up with 3.5%, 3%, 4%. But we are fairly confident of doing that, and we are able to negotiate because we also want to protect our own downside, and we're able to lock in the underwriting by the banks at 2.7% because our last equity offering was done at 2.7%. And despite that very tight low end, we were able to tighten it further at 2.36%. And I think the other consideration is we also upsize. It's actually very challenging to upsize the equity offering by 25% and still tighten the discount. Usually, you have to choose between the 2, price or quantity. I think that's a very standard trade-off. You want better price, you have to sacrifice on quantity. You want a better quantity, you sacrifice on price, and we are able to achieve both. So it's not -- so I will not actually fully agree with the statement that we are not achieving a tight discount and we didn't -- I think the third thing I will also add is that I think could we have squeezed to say, 2.2%, 2.1%, possibly. But I think we also want to watch the aftermarket performance. We want to make sure that the momentum is maintained to ensure a strong market performance, you also have to allocate and price accordingly. And I think if you look at the post-market performance, I think -- we do think that we did the right thing, and there is definitely some strong market outperformance following the EFR.

Just one question on full year DPU growth. Because of the upsized equity issuance in Asia Square 2 that will come in before Paragon acquisitions, are the growth levers that you mentioned sufficient to offset this? Or what are the other mitigating factors on the capital management front such that full year, you're still expecting DPU growth, right?

Sorry, I didn't get the -- can you summarize the question again?

Yes. So equity issuance was upsized. So that will drive dilution. Asia Square 2 loss of income second quarter. This 2 will actually come in before the Paragon acquisition, right? So full year, what are the mitigating factors? And are we still forecasting DPU growth?

Okay. Okay. Okay. I get what you're saying now. Okay. Firstly, there are 2 potential things. There are quite a few things, right? One is Asia Square divestment is unlikely to close before actually. Asia Square divestment is likely to close after Paragon acquisition because the buyer for Asia Square also needs an EGM and the process takes a bit longer. So we are expecting to close probably at least 1 to 2 months before that, 2 months. So quite counterintuitive, but actually, that is better for accretion. Because before they close, we will have to do a bit of a bridge loan. So if we borrow for 1 to 2 months bridging to bridge the funding gap before we divest Asia Square, that cost of funding is actually lower than the asset yield because we're still earning NPI when -- as long as AST 2 is not being sold, right? So the asset yield at 3% is still better than -- is still higher than the funding cost. And bridging loan we will be borrowing on floating, which, as Mei Lian mentioned, is very -- still today is still very low at about -- the float rise is about 1% today. And spread, you are probably saving a good 1% on the funding cost. So actually, it's more accretive, fairly counterintuitive. But of course, you take a bit of a stretch on the balance sheet for that 1, 2 months, but I think that's okay as long as there's certainty on closing. So that's -- it shouldn't affect -- that part of the equation shouldn't affect accretion, but it can only improve accretion. Second part, I think what you're driving at is also the equity offering being done before the closing of Paragon debt will be dilutive. But of course, we will pay down debt in between. The net effect of both combined together, I think is this dilute -- see, we are buying $3.9 billion. Typically, equity offering makes up a larger proportion of any transaction. But in our case, the equity offering, $750 million is only about, call it, 18 acquisition size. So the dilution impact is actually very small, and it's only for about -- maybe about 2 months. And we are not suffering that entire dilution because we pay down debt. So based on my calculation, plus the accretion that we will get from $2.5 billion, 2 months of bridging loans, actually, the net-net is positive. So we will actually not suffer any dilution. If anything, we will still be fully benefiting from that 1.7% accretion for the year.

We have Mervin, who seems like the last one to go.

Just a question on the retail margins. It fell Q-on-Q and year-on-year. What's causing that given you have some interest cost savings?

Interest cost savings will not affect retail margin.

Electricity costs, sorry.

Why the margin go down? Yes, I noticed. Why the margin go down, do you know? Let me think. Was there a change in the portfolio constitution? You sort of BPP, but that's for 1 month. I think the reason is the top line came down slightly on a year-on-year basis because we started AEI. So like, for example, I think Tampines because we did the AEI, I think the margin for Tampines came down because of the top line dropped slightly. So that's one of the key reasons, I think. The other reason, of course, is also Clarke Quay. Clarke Quay, the margins came down because of the significant drop in occupancy compared to last year. So these 2 assets would have contributed to the margin compression.

Any updates on Junction 8 given the change of more commercial?

You mean like redevelopment plans?

Redevelopment plans or will you take on the office component?

Well, I think that one is -- that's -- I don't think that will happen anytime soon. If anything, we're in discussion with many, many stakeholders. So we don't have that -- we don't have the clarity now. But Junction 8 is doing very well in the meantime. Yes, sorry, the short answer is no, we don't have anything to provide at this point. No update to provide for Junction 8.

Yes. Just back on the office portfolio, we hosted the IOI properties a couple of days ago, and they said that we could push Asia Square Tower rents towards $13. Is there something you can do on average across your whole portfolio?

Across our portfolio, that's a tough question because our portfolio obviously has different varying locations and age of building. Obviously, those in -- I think IOI's building obviously is newer than ours. Asia Square, if you compare it to some of our portfolio, is also slightly higher, right? And I mentioned earlier in my presentation that average rent for Asia Square 2 is really higher than our rest of our portfolio. So I think if your question is whether we can do it for the rest of -- I think selectively possible. We are seeing some of the renewals done at those levels for some of our spaces. But I won't say that we can do it for the entire portfolio because there are also big anchor spaces in some of our portfolio.

And in terms of portfolio allocation, like how are you thinking about mix between retail and office, we now have a bit more retail?

Yes. No, I don't think it was deliberate. It was more -- I think it's a consequence of some of the opportunistic decisions that we made. I don't think if you ask us whether do we design it to be this way? No, we are not deliberately trying to sell office to buy retail. I think we are quite happy with both asset classes. And I think increasingly, the differentiation is not as important. I think what is important for us, even merge both the office and the retail component is what is the most and best construct for our portfolio that will deliver the most stable and highest growth DPU for our unitholders. And I think because we are already so big, so the stability is there. So the question is how to drive the growth. And I think people are more focused on underlying performance -- underlying financial performance than the marginal movement between retail and office.

Okay. Look forward to continued strong results and hopefully high share prices.

Thanks, Mervin. Looks like we have no more questions. So I guess we'll end the session here. Thank you for your time. Have a good Friday and a good weekend.

Thank you.

Thank you.

Thank you.