Frasers Centrepoint Trust (J69U) Earnings Call Transcript & Summary

All right. Good morning, everyone. Thanks for logging on FCT's business update for the first quarter ended 31st of December 2024. Very good morning for everyone. And today, we have the full team with us, CEO, Richard Ng; CFO, Annie Khung; and our Head of Investment and -- our Head of Asset and Investment, Pauline Lim. So without further ado, let me hand this session over to Richard to kick off the session. Richard, please?

Yes. Thanks, Fung Leng. Good morning, everyone. I understand you guys have back-to-back call. So hopefully, you had a chance to look at our presentation, which was already uploaded. Okay. This is the key highlights of our performance in the first quarter. As you're aware, this is actually a business update quarter. So we'll talk and focus a lot more on the operational metrics and also some of the happenings around our malls. So if I may just run very quickly in terms of the highlights. So in terms of occupancy, you can look at it, still above 99%. For this quarter, it's slightly marginally dropped from 99.7% to 99.5%, but we could talk about the reasons behind this in greater detail later on. Healthy financial position. We are still around that kind of region, 39% thereabouts, in terms of gearing level. Shopper traffic continued to see recovery, 2.7% quarter-to-quarter -- year-on-year change. And also tenant sales, again, we see pretty strong performance for our retailers. On the year-on-year for the quarter, it's about 2.5% increase in sales. Cost of debt, as we shared before, probably we have seen the peak of our cost of debt back in the first quarter of '24 at 4.3%, and now, we are looking at about 4%. A few other updates, which we will again go in greater detail. One, firstly, will be in terms of the Hougang Mall AEI. We shared this during our full year result announcement back in October 2024. But just a bit of update. Happy to say that we have achieved around 50% of pre-commitment ahead of work commencement. Again, a testament of the demand of our malls and the fact that tenants are still looking for good space to operate their businesses. We are also -- want to share some ideas of the place making initiatives that we have done and also wanted to share that this is something that we think is very important for our malls to continue to be able to create activities because at the end of the day, I think what we want to position our mall is not just a transactional marketplace where you come to our mall because you need to buy something, you need to get some services done, but also a community hub where people constantly can come back. So we can come back all the time and do different things. We will share a little bit more details later on. Big picture in the market. These numbers probably very familiar to you guys. GDP grew stronger than expected, 4% in the full year for 2024. Core inflation, and that's something that, again, is going to be very helpful for us, for our retailers as well, moderated to below 2%. We hope that this trend continues in this FY. Retail sales, a little bit mixed for November. The broader market, the RSI, saw a dip of 1.4%. So again, it's a mixed bag for us. And the whole quarter itself, we actually saw an increase. F&B sales continue to be one of the key driver, 3.9% for the wider market perspective. And similar trend is being observed at our portfolio as well that F&B continued to thrive. Retail rents for suburban prime retail rents grew 1.6% year-on-year. And if you look at the chart on the right, this is where, again, you can see that it has continued to grow for the prime suburban as well as the Orchard Road sector of the market. Another very important key aspect of strong demand is underpinned by the fact that we see very limited or muted supply that's going to come on stream between 2025 to 2027. That's less than 1% overall stock that's coming to the market. And then if you break it down, specifically for suburban, that is denoted by the red color on the chart itself, it's even lesser. So muted supply, strong performance, and that's one of the key drivers that we are seeing continuous demand for our malls. Okay. This is something extracted from our annual report, looking at, firstly, in terms of occupancy, the chart on the left, you can see that suburban market has outperformed the other sector of the market at an average about 96% as of third quarter 2024. If you compare this to our portfolio, as I shared just now, we are achieving 99.5%. So we're actually outperforming the wider market. And again, that's the testament of the fact that if you look at our portfolio of assets, I would say that it's differentiated from a wider market perspective in terms of the quality of the assets we have and also the performance of our retailers. Prime rent, this is a trajectory that was provided by CBRE in the report that we have included in our annual report. And you can see that for the red line, that's the suburban market. And CBRE also expect the trend to continue to grow -- for the rental to continue to grow all the way to 2027. So I think this is something that we are happy to see that the expectation is also similar for the retail sector as a whole that the rental trends will be on an uptrend perspective. Okay. Besides, we talk about supply limitation. There are also some other key components or elements that underpins the strength of prime suburban retail malls. And these are some of the key aspects that we have been seeing, we have been sharing. And probably you guys are also familiar with some of this. And there are 3 factors that we have provided here. The first being the continuous growth in terms of additional households into the various catchment markets where we have our malls located. This is something that probably has been shared a lot in terms of publicity in the newspaper, in various news and so on that the government is really building a lot of flats around the island, and also there is a good supply of hybrid residential that's coming up. And based on what, again, you've seen in the news, there's a very strong pickup for the private sale as well. So overall, we expect catchment markets to continue to grow. We are also seeing median income continue to grow, right? So again, this is what we always look out for, especially for our sector, growth in population, growth in income, and that is going to give you the support level that you need for your shoppers to be able to continue to come and spend at our mall and more people will come to the mall. And the third aspect is something which is unique to us as well. The government policies that has been rolled out, the various support measures we are all familiar with. The CDC voucher has already been issued, and I think most of us would have used it by now. And besides that, there are so many different support that has been dished out, right? In December, the cash handout and then followed by CDC, but an ongoing vouchers or handouts has been given to support the wider markets in terms of utilities rebates, GST rebates, transport rebates. So there are actually a slew of all the support measures that helps the wider population of the mass market. And again, this is the market that we are serving, right? These are our catchment market that comes to our malls. And the other very key component that I think is going to be here to stay and something that really helps us underpin the sales productivity of our malls going forward, that is the progressive wage model, where many industries are, today, included in this progressive wage model where every year, people working in this particular -- in these sectors that has really been placed under progressive wage model will see an increase in their salary regardless of outcome, right? So you have your cleaning sector, your security sector, the retail sector, F&B sector, landscaping, people who are doing our maintenance for lift and escalator and many more, right? So this is where, again, very strong support given by the government, and we see this as a good potential that underpins the performance of our malls because if these people has an increase in income, then the propensity for them to spend at our mall will also grow. I'm not going to go into detail. This is, again, an area that we have spent a lot of time sharing with all of you. We included this slide because in case we have investors who have not heard us before, we can also elaborate a little bit more. But just overall, in summary, there is a lot of development. There are a lot of developments that's happening in the northern region: Increase in population, increase in commercial activities, increase in infrastructure works, which we -- for us, as far as we are concerned, we see this as not just a risk factor from the RTS development, but if you look at an overall perspective, there are opportunities for us to tap on for our malls in the northern region as well. We have also shared this particular information because, again, the question has always been because a lot of people are shopping in Johor and so on, so what's the impact to our malls. So we thought maybe to give an overview that, look, shopping in JB is nothing new. It's been ongoing forever. Even the last few years, a lot more people are going because of the difference in terms of the ForEx exchange. But if you look at our malls, right, in terms of revenue from 2019 to 2024, we have increased double digit, right? So what does it mean, right? It means that -- and at the same time, we have also seen a very strong occupancy for all our malls. And even the sales of our retailers is also double digit, right? So the perspective that we are coming from is that the market is growing overall, right? So there are people who go shop in Malaysia, and they will continue to shop in Malaysia. But we feel that our malls are also doing better because of the underlying attributes that I spoke about in terms of growth in catchment, growth in income and a very strong support by the government. Okay. For financial highlights, I will hand over to Annie to share a little bit more on this. Annie, please?

Thank you, Richard. Good morning, everyone. Let me take you through the financial metrics for this quarter. We continued to deliver a healthy financial position for this quarter with the improved average cost of debt. As at 31st December 2024, the aggregate leverage is at 39.3%, which is slightly higher than last quarter. The interest coverage ratio is at 3.33x, and we are pleased to report that the average cost of debt has decreased by 10 basis points to 4.0% for this quarter. The average debt maturity has lengthened to 3.03 years following the refinancing of the loans that was done recently. 65.5% of our debt has been hedged to fixed rate. The decrease is mainly due to the expiry of the MTN, which was refinanced using loans. The percentage of green loan has also increased to 88.3% in this quarter. And the total undrawn facility as at 31st December is at $549 million. Credit rating for Moody's remained unchanged at Baa2 stable. Next slide, please. We have a well-spread debt maturity profile, as can be seen from the chart, with no refinancing raised in this financial year. The debts that were due in FY '25 were already refinanced using bank borrowings, and we got the maturity shifted to FY 2030. As at 31st December, 15.8% of our debts are secured. I'll now hand over to Pauline, who will take you through the portfolio highlights in the next section.

Yes. Thank you, Annie. Good morning, everyone, and I hope everyone had a great start to 2025. I'll take you through the portfolio retail performance metrics as at the first quarter of FY '25. I think Richard did touch about committed occupancy earlier. I think one of the key observations that we had from the trend chart is that the occupancy had actually maintained at very respectable levels, exceeding the Singapore suburban market as well, as shown in one of the earlier charts. And this is a testament to the quality of our portfolio in terms of location, connectivity as well as the strength of the respective catchment. And it's also attributed to the proactive management. Retail is a lot of hard work to drive the performance in terms of the occupancy as well as the rental reversion. There are some variability, transient variability due to tenancy churn across our portfolio. I shall touch -- go into that in a little bit of detail. So for Tiong Bahru Plaza, we see that it has come down on a quarter-to-quarter basis. I'll speak about some of the plans that are ongoing at this asset. The other one is for White Sands. There's a drop, but it's largely just due to, again, 1 transient vacancy on an upper floor, just 1 unit per se. And also for Hougang Mall, last quarter, we have actually announced the plans to undertake AEI. So the vacancy is largely due to some of the short-term leases in preparation for the forthcoming AEI. Next slide, please, Fung Leng. Yes. We have seen continued growth in footfall and sales of the FCT portfolio, not just in the preceding quarters that we've shown earlier, actually over the years coming out from the pandemic. And like what Richard highlighted earlier, this is largely supported by population growth as well as increase in the median income of the population residing in the Singapore suburbs, right? And again, active management plays a part to reap the positive impact to unlock the value through asset enhancement and repositioning. So in my subsequent slides, I will talk a little bit about some of these active management AEI. AEI can be large scale or on a smaller scale, but that's something that we are consistently doing across our portfolio when we recognize opportunities. Next slide, please, Fung Leng. Okay. This slide is -- we show it every quarter. It's a continuation of our focus to delight our shoppers with new retail experiences as well as options, right? And the high occupancy within our portfolio as well as the robust demand for space from retailers actually enable us to take on a more intentional and strategic tenancy curation. And over the course of the first quarter of the new financial year, we have brought in 28 new retail concepts into our portfolio of malls. And on average, we refreshed about 20% to 30% of expiring leases. So this is a very important aspect of remaining relevant to our catchment, constantly catering to changing retail trends and meeting -- anticipating some of the -- bringing some of the new retailer concepts into our mall. Next slide, please. Right. Richard mentioned earlier that one of our focus is, given where our malls are located in the heart of the Heartlands, we position ourselves to be the community hub to be a very essential part of the everyday lifestyle of the suburban Heartland population. So placemaking is a key component of our marketing strategy, and we position our malls as an integral part of the suburban community lifestyle. The benefits of activating the malls, having signature events, unique events, it not only helps us to retain the loyalty of our immediate catchment, but it also enables our malls to attract shoppers from a wider radius. Next slide, please, right? I spoke about the ongoing active management, smaller scale AEI. So I wanted to share with everyone what we have done at Tiong Bahru Plaza Level 2, whereby we have undertaken some -- the remix of the tenancies and physical enhancements to improve the retail experience for this mall. So what you see on the slide, the picture on the left is the food street that connects the mall to the office at Level 2. So before, it was rather dark, not as appealing, I would say, right? But over the course of the past few months, we've transformed it into something that is more inviting. We've also improved the visibility and porosity of the shops within this area. So that's on the hardware. In terms of the tenancy mix, we've introduced -- taken the opportunity to introduce popular F&B options that we've illustrated on this slide and also taken the opportunity to look at subdivision of some of the bigger spaces to introduce a greater variety of retail offering, new to mall retail offering. So watch this space. We are excited. I mean, if I refer you to the big space in the middle of the after illustration, we are actually bringing a new to Singapore Trendy Lifestyle. So watch this space on what is coming. We are excited about it. And for this ROI, we have delivered -- for this AEI, sorry, we've delivered an ROI of north of 20%, right? So it's good returns. And this is part of the active management, whereby we don't rely just purely on the organic growth of the catchment, but also actively look at areas whereby we can further unlock the value for our real estate. Next slide, please, right. Hougang Mall, we announced the exciting plans for Hougang Mall last quarter. This is a continuation of our pipeline of asset enhancement -- major asset enhancement initiatives. Just a little bit of rehash of our targets. We are targeting 7% ROI on the $51 million CapEx. Happy to update all that the progress is on track, although it's still in the early stages. But in terms of leasing, we have -- it has been encouraging with leasing interest from not just F&B tenants, but varied retail tenants. And we are talking to -- some of them to actually bring in new-to-market concept. So that has been quite exciting. Now in terms of the value enhancement, maybe just to elaborate a little bit more of the areas of value enhancement that we are seeking from this project. Essentially, we'll be increasing the retail offering on the prime floors of B1, Level 1 and Level 3. We're also looking at introducing takeaway stretch all-day dining on Level 1. So these are all prime retail spaces, which we seek to unlock higher rental productivity as well as higher sales productivity. And also coming back to the point that was made earlier about positioning our malls as community node. We'll have an enlarged CSFS, and that will help to then entrench Hougang Mall as a third place or even a second place for the residents. Okay. Next slide, please, Fung Leng. Just wanted to elaborate a little bit about what is the developments in the area. We are not just excited about the plans that we have in the mall. We're also excited about the changes in the immediate catchment of Hougang Mall. So I think in the early part of this year, the government announced a slew of infrastructural as well as residential developments for the area. In terms of connectivity, Hougang Central accessibility as well as the connectivity to other parts of Singapore will be enhanced with the upcoming Cross Island line. So this is an interchange line. And if we look at some of the successful malls on interchange lines, I think we -- a few of that come to mind. So NEX being one of them is on an interchange line. Then there's also from our competitor malls, the likes of Junction 8 and so forth. So these are all very successful malls because they not only cater to the immediate catchment, but to an expanded catchment. And when we look at Hougang by itself, it's the seventh largest planning area in Singapore out of 55. The point to note is we -- Hougang performance has been very strong over the -- I mean, it has maintained at a very strong level, and it has been very, very strong as well even during the pandemic period. And this can be attributed to the fact that in terms of the retail offering, to a certain extent, it's underserved, right? So we look at the retail space per capita of 2.8 square feet, it's lower -- significantly lower than the national average of 12.1. So all in all, I just want to say that there are tremendous opportunities to unlock not just within Hougang Mall, but it's also future-proofing it to tap on the growth in its immediate catchment. Okay. Next slide, please. And sorry. Okay. With this, I'll hand over to Richard to take us through a summary of the presentation. Thank you.

Okay. In summary, what we have shared with you today is the performance of our portfolio. That has been consistent in terms of occupancy performance in the retailers, sales, traffic coming back to the mall, things that we are doing to again create activities, making our malls more than just a transactional place, driving, again, traffic, more traffic coming to the mall, not only in immediate catchment, but if you have activities that is attractive, you're actually able to bring in catchment beyond your primary market. So that's the intent. We want to grow our catchment market, right? I also shared about why we believe that suburban -- prime suburban malls continued to grow in terms of the strength and performance because it's underpinned by some very key attributes like growth in catchment area, growth in median income and also the support measures that we continue to see. So if I may summarize why we have been consistently able to deliver very good performance at our mall is partly -- you look at a few key attributes, and Pauline has also shared some of this as well as in my presentation at the front section as well. Firstly, I think location of our malls, right? They are all located right smack in the heart of the various townships that you have, right? So firstly, in terms of convenience to your shoppers and also in terms of the next attribute is connectivity. We are -- our malls are seated on top or at least very close by next to the MRT station. And in some instances, there are also bus interchange directly connected to it. Catchment market is something we spoke about at length. Not only are we looking at the current size of the catchment market, but also the potential growth that the catchment market within the area we are serving, they are growing. But today, we are serving about 3 million people if you add up all the catchment market that we have, but we see this as an opportunity for us to continue to grow. So in terms of the size of the catchment, but also in terms of the quality, right, we are getting the catchment market having a higher propensity to spend because of all the measures that I spoke about. And the fourth one we look at is also in terms of the scale that we have with our portfolio. Today, we have 10 -- we have 9 very high-quality malls in our portfolio, right? And of which, 4 of them are amongst the top 10 largest mall across Singapore. So the scale, the size, the strength of our portfolio continue to improve. And the last bit, which Pauline alluded to earlier, is the fact that retail sector is a very tough sector of the market. So it requires a lot of management capabilities in terms of property management, in terms of asset management. So this is something that we have been able to continuously improve in terms of the strength and bench of our people from both property management and asset management. And with that, I'll end my presentation, and let's move on to Q&A. Back to you, Fung Leng.

Thank you, Richard. Let's move on to the FAQ -- sorry, the Q&A session. So we have the first question hands up from Terence, JPMorgan.

Congrats, Richard and team, strong set of operating numbers. Yes, maybe I could start with the first question on traffic and tenant sales growth. Actually, it is relatively strong. So can I check, does it include Tampines 1? And how much of it was on the back of this placemaking during the festive period? And also following on from that, any outlook on reversions from this?

Yes, Terence. So maybe I'll pick up the question on reversion, and I would ask Pauline to share on the traffic and tenant sales. Reversion, we're not showing any financial numbers this round, this quarter, but I'm happy to say that we are pretty much keeping on track to what we have achieved last -- full year of last year, right? We achieved 7.7% reversion. So as what we can see, it's only been a quarter, but I think the demand has continued to be very strong. So we are keeping on track to that. Pauline, do you want to take the other question.

Yes. So in terms of -- I think, Terence, your 2 questions is with regards to the slide that shows the footfall as well as sales, did we include Tampines 1? The answer is yes. But having said that, when I look at the -- when I deep dive into the respective assets within our portfolio, we do see growth across most of the assets as well in terms of footfall. So overall footfall has been picking up as we emerge from the pandemic. And as we speak, actually, overall portfolio, we are looking at close to single digit below pre-COVID levels. So footfall has recovered very well. In terms of sales as well, for the first quarter of FY '25, we are still seeing that improvement in sales on a year-on-year basis.

And was it on the back of the placemaking or the placemaking was separate to this?

So placemaking, we had a slide in the presentation that shows the benefits, right? It drove more than 500,000 additional shoppers during that period. I'm not sure whether that was your question.

Yes. So I'm trying to get a sense that can this additional footfall and tenant sales be sustained? Or was it just because of the festive placemaking?

I think maybe it's not just because of that. But what we wanted to highlight is an area that we think is very important for us to grow that is the catchment beyond our primary area, right? So this is where placemaking events curation becomes very important, right? I mean we only showed a little bit of snippets of what we did. And what we are trying to say that events like this can generate very good traffic. And this is where we're going to do more, more and more. So besides very successfully, the team were able to carry out for the Christmas market theme, we have also done a series of very attractive food themed kind of events. We had I think Taiwan Food Fair, I remember it was Thai Food Fair, different type of food fair in different parts of our portfolio because certain market, there is very strong demand on certain cuisine and so on. And sometimes we use the opportunity to bring this around our portfolio because, again, fundamentally is today, we have a very good portfolio of assets that organizers wants to work with us, right? So they want to come in and say, look, I want to have this event across 3, 4 of your malls. And that is the part about where I said one of the key aspect of our portfolio is the strength and the quality of assets that we have.

Terence, sorry, I think to answer your question earlier also whether it's -- the improvement this year is a function of what we are doing. We are looking at the same period last year, right? So it would have stripped out some of the seasonality, if that's what you're alluding to.

Yes. And maybe just to close this off, I just wanted to check, the placemaking efforts, does it -- would this increase your marketing costs? Or is it like -- do you get cost recovery of it?

It's a bit of -- I think cost recovery is one where we -- at times, we work with certain organizers, certain tenants. We do share costs. But by and large, we are not expecting this to drive the overall expenses to increase. We just reallocate. And I think the thing about this is being creative with the budget that we have. This is to see how best can we put the money to good and better use.

All right. Thank you, Terence. I'm just going to just go to the next question, which appears in sequence. And I think that is from Geraldine Wong, DBS.

Maybe just 2 questions. In terms of December tenant sales and traffic, do you see any softness? Because it seems the outbound travel appears to be very strong amongst Singaporeans on the news. Yes, just wondering on that.

If you look at -- for the quarter, there was an increase. But for the month of December, you are right that we saw a little bit of reduction in terms of both traffic and sales. And rightly or wrongly, one of the key attributes is the fact that people do travel. So how should we explain this? So maybe perhaps one explanation is maybe the earlier month, October, November, where people are still around, largely around. So that's where they spend a little bit more and more. And then in December, where they travel, right? So they go out, and maybe that kind of impacted both the traffic and sales. We hope that now January, it's back. Most people are back in schools, work and so on. So this is kind of normalized. And this is something that we have been observing the trend. But what's more important is not about a month. I think what we want to make sure is across the whole year, how the traffic performs, how the sales performs, right? So we are not just looking at a specific month per se.

Okay. So really it was the effect of October and November that helped the quarterly numbers.

Yes.

Okay. If I can just ask one more on the completion of AEI at Tampines 1 and refresh of Tiong Bahru. Do you see some of the leases you signed there achieving above portfolio average reversions? Yes. Just wondering.

The short answer is yes. Definitely, as part of our AEI, we try to bring in tenants that can also perform better. And if they can perform better, they will be able to give you a better rent, partly also because of the fact that we put in quite a lot of effort, money and so on to revamp the mall, right? So the mall looks better and the quality of the mall has also improved. And that is also what we expect to be able to generate high income to give us the kind of ROI that we are looking at. Otherwise, we won't be able to achieve that.

Thank you, Geraldine. The next queue number that appears on my screen is Yew Kiang from CLSA.

Just 2 questions. First is on the Hougang Mall ROI 7%. And then given that what you're doing in terms of providing more community element to your malls, right? And then when I look at Tiong Bahru, which is ROI of 20%, it seems like should we expect all the future AEIs to achieve lower ROI in the future?

I think, Yew Kiang, I think you have to take the scale into consideration, right? So TBP, the ROI is a very targeted area, which is only the subdivision and also changing out of the tenants. So those things that like what Pauline mentioned is we do it ongoing basis. We thought we pick it up this time around to share, partly also to give a sense that, look, it's not just the big AEI that we are always focusing on, but the team on the ground, the property manager, the asset managers are working very hard all the time to identify opportunities. And this is just one example, right? It happens in Waterway Point. It happens in many other location of our malls as well. Those 7%, 8% are the big AEI that we do, we carry out. So the cost or the CapEx that we spend is a lot more significant. It includes also revamping, refurbishment, refreshing the mall. So those AEI would also include spending money in the common area, the amenities. So the Tampines 1 , for example, if you go there today, the toilets will look very different, still very different from what it is today. And we need to do that because as malls, we need to continue this work, rejuvenate, give freshness to the shoppers. Otherwise, we will become one of the malls that continue to be on a decline. So that's why in terms of CapEx spend and ROI, it's very different for the big targeted. The smaller ones, we will continue to do it. It's not...

For the rest of your remaining portfolio, how much would you say has the high ROI kind of like opportunities? And how many would have like the lower end of that ROI?

The smaller ones is on a continuous basis, right? Like what I say. I mean, sometimes it's just about a subdivision. Again, I wouldn't say how many more because it happens. Whenever we have opportunity to resize significant tenants, we will do it. Sometimes it's because we bring in a different trade that gives us the reversion. So I wouldn't say from that perspective of how many more, but we -- it's an ongoing thing. But the bigger ones, what I'd like to say is something that we continue to find opportunity, right? So now we are rolling out outcome. Even as we speak, we are now working on the next possibility that we can roll out when outcome is concluded. But then again, even the 7%, you can -- it's not a small number, right? Because you look at -- you spend $50 million, you get 7%. I mean if you buy an asset today, you get maybe 4.5% or less than 4% -- or less than 4.5% in some instances in the market. So actually, the 7% is quite attractive and accretive to what we have in our portfolio.

Yes. And on to that, Yew Kiang, the ROI is on an unleveraged basis, right? So this was what Richard was explaining earlier, right? You get -- it's essentially the upside on the NPI on your CapEx spending. So it comes back not just in terms of your recurring returns, it also increases the asset value as well. So that is the outcome that we get from some of these enhancements.

Okay. My final question is on the balance sheet. With the changing outlook in interest rates, right, would you be changing any policy towards your hedging policy? Like would you still keep it at around 60% hedged or you want to increase this or lower this?

No, I think the aim is always trying to probably achieve around the 70-ish hedging level. Again, it depends on the market. I think what we want to make sure is a balance that we can achieve overall cost of fund vis-a-vis the risk that we have to take, right? So if there's opportunity perhaps and we think that it's better for us to increase the hedge slightly, I think we would do it. But at this point in time, what we are seeing is that at this point in time, we are at about 65% level, and we feel that maybe we can wait for a while before we go into a hedging position. And every year, we have financing that comes up, right? So of course, 2025, we have done. So this year -- but then again, 2026, we have another tranche. So this is where the balance comes in. And this is where capital management, where Annie and her team involved, we look at the market, assess the market, talk to banks, understand a little bit better. And also from time to time, we have reverse inquiry of different possibilities that is available to us in the market. So by and large, where we are today, we feel that we are comfortable. If opportunity comes in, we will increase the hedge.

Right. Thank you, Yew Kiang. Next question on my queue comes from Rachel Tan from Macquarie.

Maybe just first question. I think in terms of what you said, is it right to say that the retailers are still quite optimistic for this year? And hence, if you're saying that rental reversions is still strong, are you already signing rents that is like at all-time high now?

Okay. Maybe the first part, right? I think if you look at retailers or the retail market as a whole, I just want to differentiate a little bit. It's not that every location or every retailers are performing the same, right? So there must be some form of differentiation. And what we are experiencing is pertaining to our own portfolio that we continue to see strong demand. But at the same time, you have also read that retailers are consolidating, some retailers are closing shops elsewhere. So it's more a case of flight to quality where they feel that they want to focus on areas that they are really generating sales, they are able to do good sales and generate profits, right? Because, again, cost is a question to these retailers. Manpower is also an issue to these retailers. So we are seeing retailers pivoting to the quality malls around the island and probably consolidating in other areas. So that's why we feel that they are still optimistic in our portfolio. But I can't say the same for every other malls that's out in the market. So there must be a point of differentiation and which is what I alluded to, when we look at quality of the malls, I mean, some of those attributes, you got to look at those attributes, the malls having this kind of attributes or not. That's where the retailers will also be asking themselves. So the second part about reversion, I think it's not about is it an all-time high or otherwise, but we see, because of the strong demand and the performance of the retailers in terms of sales and occupancy costs, that's where we see the ability for us to also be able to get a little bit more in terms of reversion. It's happening now. It's not a case of all-time high or whatever the case may be, right? So which is reasonable reversion we feel at this market at this point in time.

Okay. I'm just thinking of whether you can still push rents up further. That's one. And in terms of -- could you remind me your FY 2025 reversions, what's your guidance again?

We did not provide any guidance, but FY 2024, we ended the full year at 7.7%. So the guidance was that we will work very hard to try and to achieve something around that kind of level, right? That was the guidance.

Okay. Then my next question is on a follow-up from Yew Kiang's question on interest rates. I see that your interest rate has been coming off, which is quite good. But looking forward this year, do you still have any more low rate debt that needs to be refinancing or hedges swaps expiring? And what's your outlook on the interest rates for this year?

Maybe I will ask Annie to take that.

Yes, I'll take the question. Thanks, Rachel. Yes, we don't have any interest rate swap that is due in this financial year. So I think based on the current outlook, the cost of borrowing is likely to be around the 4% range.

Okay. Got it. And one last question. I think any guidance on potential acquisitions for this year? Are you still looking at pipeline or third party?

I wish I could give guidance on acquisition because acquisition is always opportunistic. We want to buy, we want to grow, but whether sellers out there or sellers of assets, which we think are good for us to add into our portfolio, are they looking at selling? And when do they want to sell? So the long and short of it is we always look for opportunities that we can enhance our portfolio, grow our portfolio, value add to our portfolio. But very much, these are all opportunistic.

Maybe I'll be more direct. Is it time to buy? At what point?

Probably you could have attended the calls for FPL or our AGM for FPL, they may be able to give you a better response to that. Again, like what I said, I mean, it's very much depending on the seller.

Thank you, Rachel. Next question from Vijay, RHB.

Can you hear me?

Yes.

I have a couple of quick questions. Maybe first question, any update on the income transparency for the NEX mall? What's the time line? Is it still something that we should expect?

Okay. There hasn't been much progress on that front. I mean, again, it's a case of we need unanimous agreement amongst all shareholders, and we have not reached a point where we can all agree on that.

So should we still keep our hopes on this? Or should we -- for time being, it's not something that is likely to happen?

I would say for -- as I shared in a couple of our recent results and also business update is to focus on the asset itself, the organic growth for the asset, the AEI. And as we continue to work with the partners on this, we don't have a time line because they don't give us a time line.

Got it. My second question is in terms of Hougang Mall AEI. Should we expect some temporary occupancy drop in the near term? And in terms of CapEx spend, no money has been spent yet, right? So we have to expect $51 million CapEx drawdown for the upcoming year, correct?

Okay. Whenever we do AEI, there will be disruption, right, when works are being carried out. But what we have always been able to do is we'll keep the mall open. We will work through in phases or what I call micro phases, right? Some of them are very small, very targeted all over the different parts of the mall at different point in time. That's one. Secondly, in terms of CapEx drawdown, there's also a progress payment that we do, both in terms of the construction and also the consultants fee. So it's done progressively. It's not going to be drawn down entirely in this year because the whole work will only complete towards the end of our FY 2026. And in most instances, the payment actually exceed that time frame because there's still areas of work that we will continue even though the major AEI will have been completed, right? So this progress payment is not going to happen at one go. And the other important aspect is just to remind everyone that whenever we do AEI and there's an impact to the income of the asset during the interim period, we will actually use the AMC to cover that shortfall by what we did for T1 AEI, right? So that is something that we always do to make sure that we don't disrupt the distribution that we are planning to give to our unitholders.

Okay. Maybe some guidance in terms of what kind of occupancy drop, if at all, we have to see. Maybe around 90%? Or is it something I'm too bearish on that?

Pauline, you have that response?

So Vijay, did you mention 90% occupancy drop?

Yes, yes. No, occupancy dropped to 90% kind of range in the temporary -- in the interim period.

Yes. So like what Richard mentioned earlier, right, the works will be undertaken in stages, right? If I put things into perspective, we'll be affecting, say, 30% of the mall, but not all 30% would be impacted at the same time, right? And there are also certain periods of time where the works are only to common areas. So I would put it at maybe, say, 80% to -- yes, around 80% in terms of the maximum impact.

Okay. Got it. My last question is in terms of buyback. Are you trying to do any potential share buybacks at this point of time? And I saw that there has been some changes to the supplemental deed announcement recently. Maybe can you just expand on what that was?

I think buyback is something that's not new to the industry. In fact, FCT is a bit behind the curve when it comes to that. Most of the other REITs have this mandate available. So what does this give us, right? For us, it's more a case of having additional flexibility available to us. And if we see a situation whereby we think that the share price is really, really way, way below what we think is reasonable and also maybe to have the flexibility to come in when there's certain huge volatility for reasons that we don't think are reasonable. But it's not a case of we do this, and then we have set ourselves and say, okay, this is when -- now that we have the mandate, we're going to go out and do it because it also requires funding, right? I mean today, our gearing is not a gearing level whereby we have a lot of headroom just to do this. But it's more like what I say, providing us with flexibility in terms of where we think is necessary. So there isn't any plan, per se, to do it at this point in time. The changes to the trustee is because in order to do this buyback, there are certain insertions that we need to provide in the trustee for us to be able to do this. This just -- it goes hand in hand and last year with the requirement that will allow us to be able to do this buyback mandate.

Sorry, does that mean that you didn't have a buyback mandate so far and you have put a buyback mandate now?

Yes, we never had this mandate.

Thank you, Vijay. Next question from Xuan Tan, Goldman.

Richard, I just have one follow-up on Northpoint City South Wing. From a REIT perspective, right, can you share what's your thought process on what's the pros and cons of buying Northpoint City North Wing before or after RTS starts operation?

Okay. Maybe the part about before or after RTS, for me, that is quite a straightforward response because, as I said, acquisitions are always opportunistic. When an asset -- when the seller wants to sell an asset, right, it's not a case of the seller will wait for before or after RTS. And if you don't buy the asset, I mean, if we think that it's not a good asset, then you miss the opportunity. This is as simple as that. But for us, we look at asset, firstly, in terms of -- like what I said, it has to be value adding to what already we have, how do we see the asset performance, what we think of the growth potential in the asset. If you look at the North region, we continue to feel that there's growth opportunity for us and then I've shared at length why we think so, right, the growth in population, the growth in all the various activities. And also the trajectory that we have shared in terms of our North assets, in the North region despite that. Everybody is talking about 300,000 people on average going to JV every day and so on and 0.5 million when there's a festivity or holidays. But our revenue has grown double digit. Our sales, I've shared with you, have grown double digit over the period. So Northpoint City is one asset, and we always feel that it's strongest when it's the whole asset, right? So which is why, to me, if you ask me what will be my growth in terms of owning the asset is also to leverage on this extended scale. Today, we own half the asset, right? So is it the best way to own this asset? Probably not because there could be things that we can achieve if this asset is under one single ownership. This asset is also not forgetting the fact that it has got -- it is directly connected to the bus interchange on one side. So can you imagine if we -- one day, somebody else were to own this asset, what happens to Northpoint North Wing, I mean there's a question mark, right? Whether that porosity of movement of traffic will continue, that is something that is very subjective. But if you own these 2 assets, you are able to manage and control how you want the traffic to flow, how it gets from South Wing to North Wing and so on. So to me, I believe, in my opinion, that Northpoint City strength lies on the fact that it's the whole mall, north and south. So I hope that I give you my perspective on that.

Yes. Very helpful. So other than whether the sponsor wants to sell, what would be your other key consideration at this point?

Okay. I mean, if they're going to sell, again, the question is what kind of price they are selling at, what kind of return can we expect? How does it fit in when we put into our portfolio, measuring accretion, which is what all you guys will be looking at. How do we fund it? What's the best way? And at that point in time, what's the market condition? So all those considerations will have to come into play when we want to acquire or make any acquisition per se, right? No different from when we acquired, say, most recently when we acquired the first half of NEX, the 25.5% stake and also the additional 24.5% stake. These are all the questions that we have to answer.

Thank you, Xuan Tan. Last question from Brandon, Citi.

I just want to touch on this tenant sales and traffic growth, right? Can you sort of elaborate on how both Northpoint and Causeway Point did for the quarter ending December, just on tenant sales and traffic growth, both malls.

Pauline, are you able to give some guidance? Pauline?

Richard, maybe I'll attempt to answer the question. So Brandon, you are referring to just for the quarter itself?

Yes, yes. And just specifically these 2 malls.

Okay. For the North, right? So actually, we do see that the sales has largely helped for the quarter. In fact, for Northpoint City itself, it continues to grow, right, from a very high base. So the malls in the northern part, in terms of the sales growth and actually across our portfolio, right, I mean, just to put things into perspective, the growth in the sales, we are looking at 20-over percent right, compared to pre-pandemic of 2019, right? It continues to pick up. We do see it maintaining in the first quarter of FY '25 for these 2 malls.

So -- but if I just were to compare it, I mean, overall, you sort of grew at about 2-plus percent, right, for the whole portfolio. So for Northpoint and Causeway, is it safe to say that they are above this level? Or are they just in line?

Northpoint would be largely in line. Causeway Point, a little bit of weakening in the month of -- in the quarter for the first quarter of FY '25, but not significant. So I would say it's largely flattish.

Okay. Okay. Got it. And also, Richard, just are you looking to make any more divestments? I think just looking at the current gearing, it's pretty near 40%.

I think, again, it comes hand in hand on whether we have opportunities to redeploy capital, right? Because even if we do have something that we think that may not be a long-term hold, but still giving us pretty good return, that's a question that we can ask ourselves, we divest that asset, what we're going to do with the funds? We always review our portfolio. Every year, we look at the performance of our assets, whether is it optimum, whether is it time for us to consider other usage for the funds on certain assets. This, again, will be done in conjunction with the opportunities that will be available to us.

Richard, sorry, can I just come back to Brandon's question earlier, right? So when we see the variability of sales growth, right, across the assets within our portfolio, it's also a function of the offering, the trade mix as well, right? So for Causeway Point, I think the cinema, because it has a cinema. So in terms of its performance, right, when we compare across the portfolio, there will be some additions and minuses, right, due to certain aspects of its trade mix. So Brandon, I'm not sure whether that gives you a little bit more perspective. But if you strip out some of these trades that are performing lesser compared to the rest, I think in terms of the -- some of the specialties and some of the other trades, it would be on par with the rest of the portfolio.

Okay. Maybe just one last one, right? Richard, so I just want to get a sense, right, for both Northpoint and Hougang Mall, right? You do see a couple of very interesting mixed-use sites that's coming out in the GRS area. So is your strategy in the medium term or even in the near term more towards similar to what you did for [indiscernible] what sense? Or are you going to take on a very different approach?

Northpoint -- firstly, maybe I touch on Northpoint City, right? Probably you're talking about the Chencharu development. We look at what's available or what's being offered. The retail quantum is actually quite small. It's very smallish, insignificant size in terms of the overall perspective. So we believe actually the development in Chencharu area is going to help us, right, because it's one stop away from Northpoint City. And Northpoint City, as a whole, is 500,000 square feet compared to what potentially could come once about 100,000 square feet. It's more like a neighborhood type of facility or amenities, right, to cater to this, a smaller perspective, but not something that we are concerned with. In fact, we are excited about the fact that the whole area is going to grow, is going to expect about 8,000 units of housing coming in the next 5 years. And the Chencharu area itself is going to another 10,000. So it's about 18,000 that's going to come on stream. So to us, that's a good huge opportunity for us to tap into the market. For Hougang, similarly, we are excited by the fact that, yes, there's another site potentially could come. And as what Pauline has alluded to just now, the catchment market is really quite significant, right? Today, 150,000, 160,000 square feet of Hougang Mall is not actually very big, right? You can actually accommodate another mall. And collectively, if you have like 400,000 or 500,000 square feet size of retail offering in that location that's growing, we feel that, that's somewhere -- something that can accommodate that kind of size of retail offering in the upcoming years. When the MRT interchange is connected, is done, is completed, the HDB blocks that are currently being planned are built, the catchment will continue to grow. So for us, as far as we're concerned, that's where we see ourselves, which is why we have positioned ourselves to also be ready when all the new amenities and also growth in that area comes on stream.

Thank you. Actually, we are out of time, but we have an urgent request to insert a short question from Terence.

Just a quick question. I wanted to ask on the NEX AEI, whether there's any progress or update on that? And given that this Hougang Mall AEI is going to be until end of FY '26, would you consider layering another AEI, like 2 AEIs together?

Okay. I will leave the updates to Pauline, but from how we see the 2 AEI is slightly very different. For Hougang, it's actually 100% owned by FCT, and the CapEx comes from our balance sheet, right? For NEX, it's actually a joint venture. And within the joint venture company itself, that will be funded from that perspective. So we are not expecting to actually provide any additional injection that's required for the AEI. So it will be funded at the company level. Maybe in terms of update from Pauline.

Yes. So in terms of the progress, we have actually been engaging the authorities. In fact, we've put in formal applications and so forth. So generally on track to what we had represented in terms of timing. The other thing that we are working around is also engaging some of the tenants because if you recall, the value proposition for NEX would also entail reconfiguring and rightsizing some of the bigger spaces as well. On the site, I think the indications from the other JV partner has also been positive. They are keen to take on this asset enhancement. So that -- have I...

On the timing, can we get a sense of the timing? When could this...

So we are looking at sometime in the early part of next year, in line with the upcoming expiries of the leases that are affected. Yes.

All right. Thank you, Terence. That was the last question. So we have come to the end of the briefing session this morning, and we'd like to thank everyone for your time and presence today. Richard, any closing remarks?

This -- hopefully, that gives you a bit more perspective on how our portfolio is performing. I'd also like to take this opportunity to wish everybody a healthy, happy and prosperous new year business. Thank you. Bye.

Thank you, Richard. Thank you, everyone. You may log off now.

Thank you.

Thank you.