Link Real Estate Investment Trust (823) Earnings Call Transcript & Summary

[Audio Gap] everyone again. So we will have George to start with the results and key highlights, and then Greg will then share the operational update of our Hong Kong and overseas portfolio. K.S will talk about our operational update on Mainland China and our capital management strategy, and then John will follow to share some updates on our strategies. Lastly, George will share our views on the outlook of the market and Link in particular. Now without further ado, let me hand over the floor to George.

Thank you, Christy, and thank you, everyone, for joining us. I'm pleased to have K.S., Greg and John with me here today. During the year, the portfolio fine-tuning continues even against adverse market conditions, our achievements in Link REIT portfolio, SMN enhancement capital management were by no means an easy fleet in this market that we're working in. In general, the high occupancy rates in retail were underpinned by very strong leasing demand, tenant remixing and the ability to attract new tenants to our newly renovated spaces. Comparing tenant sales growth indices, the Link portfolio was 101.3% compared to 2018, '19 and outperformance against the broader Hong Kong market, which was 85.3% for the same period. Meanwhile, in Mainland China, retail rental reversion returned to positive to 2.8%. Additionally, the benefits of diversification were apparent where the uplift in Singapore and Australia was countercyclical to Hong Kong and Mainland China. Leaving no stone unturned though, there is always room for improvement. For instance, our steadfast commitment to operational excellence was demonstrated with the upgrade of our car park management system, which is in the progress of being migrated to a cloud-based AI platform to sharpen the car park portfolio performance. Asset enhancement in Hong Kong and Mainland China also yield positive results, achieving double-digit ROI. For example, a key project we completed in Link Plaza Tianhe in Guangzhou achieved an ROI of 12%. Under capital management, our strong financial position was an advantage to weather volatile financial conditions over the past year, particularly as interest rate were in a up cycle. Looking ahead, our refinancing requirements over the next 2 years are manageable with not more than 20% of the total debt maturing in a single year. As we move on to the annual results, I'm pleased to share a snapshot of our financial performance with you. Despite the slower-than-expected retail consumption recovery in Hong Kong and China, our diversification strategy has enabled us to produce a solid set of results. Revenue and NPI grew by 11.0% year-on-year and 9.5% year-on-year, respectively, mainly due to the contribution from the Singapore assets acquired last year, as well as a full year effect of the last year's acquisition in Australia and Mainland China. Total distribution amount grew 6.4% year-on-year to HKD 6.7 billion, while DPU for the year declined 4.3% year-on-year to HKD 2.63 due to rights issue dilution. Adversely tight financial conditions, our balance sheet exhibits financial strength underpinned by a healthy net gearing ratio of 19.5%. Net asset value per unit amounted to HKD 70.02. Taking a closer look at the first and second half performance separately, we were able to at least maintain, if not grow on most major matrix shown here. Using our Hong Kong portfolio, as an example, occupancy levels were sustained at almost fully level and maintained at 98% since September 2023, even amidst the concern of consumption slowing down and [ Link issue ] Shenzhen. With the -- with the decent operating performance, our revenue experienced robust growth in both the first and second half and registered a year-on-year increase of 11.3% and 10.7%, respectively, thanks to the contributions from new acquisitions and support by our tenants. While a slight more duration in net property income was observed from the first half, it maintained a positive trajectory cumulating in 10.4% and 8.6% year-on-year growth in the first and the second half of the year. Despite slower-than-expected growth in most of our operating markets, DPU in the second half increased 1.9% as compared to the first half. Now let me pass on to Greg to share more of the operational update.

Thank you, George, and good afternoon, everyone. And I'll start with the performance for Hong Kong retail, where our occupancy rate sustained at an all-time high level of 98%, which highlights the resilient demand of our retail portfolio and the important role our assets hold in the daily life of Hong Kong. Rental reversion in this segment has seen a healthy expansion with an increase of 7.9%. In line with these achievements, the average unit rent reached HKD 64.40 per square foot and notably is the highest level since COVID time. With tenant sales performance, this has shown a moderate increase of 0.4% over the reporting period and analyzing our trade mix, with our largest trade category of F&B, this has remained at the forefront with a steady growth of 4.6%, while supermarkets and food stuff categories continue to lag and general retail expanded by 1.3%. Altogether, these factors contributed to the continued stability of our occupancy costs across the portfolio at a sustainable level of 12.6%. Moving on, I'd like to focus on the trend of cross-border consumption. And the growing appeal of Shenzhen to Hong Kong shoppers for entertainment and dining experiences has been evident. This shift has dampened Hong Kong's overall retail sales performance in the latter half of the reporting period. Although this trend is yet to significantly affect our portfolio, the market is expected to see equilibrium in the current months. It's essential then that we continue to respond to these developments. We remain open to recycling of assets and optimizing our portfolio as suitable opportunities arise. Despite a modest year-on-year increase for tenant sales, most notably, our tenant sales growth when compared to financial year '18, '19 levels achieved 101.3, outperforming the broader market, which has only reached 85.3. Now looking at retail leasing, and we achieved really good outcomes over the financial year '23, '24 with over 660 new leases successfully signed. In this we've introduced 270 new brands, and this played a crucial role in our efforts to maintain the relevance of our portfolio. Coupled with this, we've seen 115 of our existing tenants expand their presence. This demonstrates their confidence in the growth potential within our portfolio as they've seen opportunities to continue to scale their business with us. Top 5 trades listed here have been carefully selected to reflect current consumption trends. Now moving on to Hong Kong car parks, where the structural shortage of car parking spaces in Hong Kong, underpins our steady income growth in this segment, positioning it as a constant driver of revenue. In financial year '23, '24, we saw a 3.4% increase in revenue from our Car Parks and related businesses year-on-year. Despite a decline in parking ticket sales, this was compensated by higher parking rates and an increase in the total parking hours. We are dedicated to keeping a close watch on market trends and formulating strategic plans to maintain our performance. This includes the ongoing implementation of our new car park management system, which George just alluded to and I will touch on in more detail on the next slide. Our commitment to upholding operational excellence is demonstrated through the management by data initiative and ongoing technological upgrades. Through this, we aim to increase productivity and efficiency to provide tenants and shoppers with high-quality experiences. The revamped car park system, which better -- provides better analytics and integration also with our Link Up app, is one such example. The system is currently being rolled out and implemented over 121 sites throughout Hong Kong and completion is expected at the end of June. The use of car park payments via [ serverly ] platforms, including Link Up as well as the digitized customer service, improve the customer experience and drive footfall to our car parks and our malls. In the long term, we're looking at the possibility of a dynamic pricing model to enhance revenue and we'll look to try this over the next 12 months. In terms of asset enhancements, our continued efforts to maximize the potential of the portfolio are evident. Over the past year, we completed 4 asset enhancement projects in Hong Kong, investing some $230 million. These projects have yielded pleasing outcomes to enhance our tenant mix and customer offerings. And importantly, the return on investment for these initiatives is ranged in the low to mid-teens. Currently, we have a further 3 projects in motion in Hong Kong with a combined CapEx of $151 million. Additionally, we've earmarked around $640 million for upcoming projects that are in various stages of planning and some awaiting statutory approvals. I will just leave Hong Kong for -- move across to Singapore, where I'm pleased to say that the portfolio we acquired a little over 12 months ago is now fully integrated, as is the team there in Singapore. And we're achieving good traction, which is evidenced by rental reversions nearing 10%. The strong rebounded shopper traffic has driven tenant performances, particularly in the categories of food and beverage and wellness and beauty. We've maintained high occupancy rates, but a slight dip to 97.8% is very temporary and true to tenantry mixing and space optimization at Jurong Point, and this is expected to result in near-term improved rental incomes. And on to Australia, where retail activity continues to grow. Sales at our Australian retail assets have now returned to pre-COVID levels despite footfall still being on its pathway to recovery. Our food and beverage tenants are doing well, and this follows the introduction of significant numbers of new and unique offerings. Portfolio occupancy has edged up further to near full occupancy at 99.7%, underpinning the stability of our rent there, and demonstrates the strong mark positioning of our properties in Sydney CBD. International office and although the broader challenges in the office sector remain, the flight to quality [ formatic ] is evident and is a mitigating factor for our portfolio of office assets. The core [ precinct ] in Sydney where the majority of our assets are located, recorded a net positive absorption in 2023. We've seen a dip in portfolio occupancy, which is due to the reinclusion of space, following the completion of our asset enhancement project and speculative [indiscernible] works at 347 Kent Street in Sydney, and occupancy will improve as active leasing of these space progresses, and I'm pleased to report that we've struck 6 new leases there over the last 4 months. Overall portfolio WALE has maintained above 5 years and provides a buffer against sector headwinds. Finally, in Sydney, we forecast the lack of new supply over the coming 2 years will improve leasing absorption in the office sector. And now I'll hand over to K.S. Thank you.

Thank you, Greg. Good afternoon to all of you. I'm pleased to present that the Mainland China portfolio experienced a significant improvement. We witnessed a turnaround in rental reversion posting a positive 2.8% in FY 2023, 2024. The positive transformation can be attributed to our strategic approach of filling the vacant space in Linked CentralWalk Shenzhen basement after the departure of an anchor tenant. While consumers lean towards rational spending habits, our proactive asset management efforts have yielded positive results. Leasing sentiments continue to remain strong with our particular focus areas being F&B, outdoor and leisure activities and sportswear. Average occupancy reached 96.6% with over 560 new leases signed, demonstrating the resilience of our portfolio as well as our ability to cater to the evolving preferences of our target markets. The acquisition of the remaining 50% of the Qibao Vanke Plaza in February has begun contributing to our bottom line. Our efforts for integrating these assets are ongoing to ensure seamless transition into the portfolio. In July, we will rebrand this asset as Link Plaza Qibao, aligning it with established brand identity in Mainland. Link CentralWalk, another growth driver is currently undergoing a basement renovation with an estimated CapEx of RMB 24 million, targeting an ROI of over 20%, completion should be somewhere in July 2024. We are excited about the revitalization of this space. We intend to elevate it [indiscernible] as a vibrant destination within the mall for Hong Kong for at least coming through on weekends, which encompass the stylish foot corridor, a boutique supermarket in addition to an array of popular dining and lifestyle options. We maintain our focus on creating value through the implementation of asset enhancement initiatives. We will be rolling out 2 projects in Mainland at Tianhe and Tung Tau. These 2 AEIs are projected to require an estimate CapEx of RMB 120 million and RMB 60 million, respectively. Both are anticipated to commence second half of 2024. The Logistics portfolio experienced growth as 2 assets in Guangzhou were acquired and added to the portfolio in April and May 2023. The majority of leases in the portfolio include rental escalations ranging from 3% to 5%, which are favorable to our cash flow. The portfolio maintained a healthy occupancy rate of 96%. This stability in leasing demand is particularly noteworthy in the Greater Bay Area, fueled by the e-commerce auto parts and supply chain industries. Moving on to capital management. We continue to be positioned to leverage on opportunities as and when they arise, bolstered by our solid financial foundation. Our available liquidity amounted to HKD 18.5 billion. After acquiring Qibao net gearing is now at 19.5%. By March EBITDA interest coverage ratio stands at 4.3x. Average borrowing costs has stayed competitive at 3.78%, benefiting from a fixed rate debt ratio of 69.8%. The upcoming refinancing amounting to HKD 19.9 billion over the next 2 years is well staggered. Our debt maturity profile is 3.0 years. Our financial stability is reinforced through FX management, which includes extensive hedging of non-Hong Kong dollar distributable income and the currency [ lease ] of overseas assets. Alongside capitalizing on lower R&D interest rates and generating positive carry by increasing RMB asset hedging to now over 70%. Our A ratings with all major credit agencies have been maintained, providing us favorable access to capital and maintaining competitive financing costs. This strong position is evident in our key financial components, which remain well below the threshold set by these agencies, underscoring our robust financial health, providing us capacity to capture acquisitions and other opportunities. Our portfolio value increased by 3% on a half year basis. Excluding the acquisition of Qibao Vanke Plaza, the value of our investment properties would have decreased by 0.3% half-on-half. This decline is primarily attributable to the expansion of cap rates, especially in the office sectors. On a like-for-like basis, excluding the additional 50% stake in Qibao and the acquisition of 2 logistics assets in Guangzhou, the valuation of the investment properties would have declined 4% year-on-year. I'll now hand the time over to John to cover and provide us with more insight about this strategy.

Well, thank you, K.S., and I'd like to extend my welcome to you all. Thank you very much for coming. You can see on the screen, the current state of the real estate balance sheet investments, and through portfolio diversification and optimization, our aim is to strengthen the Link REIT portfolio so that it can withstand varying businesses or varying business and economic cycles and over time, to decrease the concentration risk. We're closely following current regional repricing trends. We'll continue to look for market dislocation opportunities and which will allow us to deploy our extremely strong balance sheet to accretive investment opportunities in Australia, Singapore and Japan or in short-term capital to opportunities in order to produce returns for unitholders. We are open to other sectors with growth potential and where they have structural tailwinds. And we also continue to monitor other markets for those repricing opportunities. And in addition, we will continue to evaluate the potential for asset recycling opportunities. In terms of asset management, our asset management excellence, our value creation and our operational strength are really the key drivers of total return for unitholders. And the targeted outcome, of course, is a complement of stable income as well as sustainable long-term growth. First and foremost, a point I'd like to make, and I think George did earlier to a degree is that Link is already a fully fledged asset management platform with a strong track record in fiduciary duties, in governance and in value creation. And I think that's evidenced by the very solid and strong results that have been delivered from the Link REIT portfolio over the past 18 years. As part of Link 3.0 and in addition to managing the Link REIT portfolio, we intend to expand our investment management business by leveraging on our asset and investment management foundation to create value through the matching of capital to investment opportunities. The benefits from this are capturing new growth through new income streams, and this will be in the form of fees as well as creating cost efficiencies through economies of scale throughout the business. Finally, and most importantly, we're building on our strengths, and this includes our ESG stewardship, our financial robustness whilst we continue to adhere to our disciplined capital management approach. We're also growing our investment in asset management capabilities, which will be done to complement the current focus, and this will help us progress towards our long-term goal to be an industry steward in the investment management business going forward. And with that let me pass to George, who will give you an update on the market outlook. George?

Thanks, John. For elaborating on our investment management strategy. And for those of you who have followed us over many years, you'll realize that this is a significant and essential step in Link strategic growth path. Unlike buying assets with income streaming to be stabilized, this is a corporate development initiative, which will take a few years to bear fruit. We will try to produce some bottom line results as soon as we can. We are building a team to lead this, and you see some of them with us today. We have already announced that Duncan Owen will be the Chairman elect. Today, we announced that Barry Brakey will be a new INED. For some of you who know who -- Barry, he was for a long time, the Head of Property Investment for Future Fund in Australia. We are looking at both organic and inorganic growth options, and we will update you as we progress. As we navigate the complexity of the global economy, several key themes framing the macro outlook are on our radar. And let me just highlight them briefly. The stronger-than-expected economic data in the U.S. has diminished prospect for rate cuts. And indeed, the Federal Reserve has signaled that it is no longer in a hurry to do so. As such, interest rates are expected to remain high for longer, as we predicted in the early part of 2023. While this may be unfavorable to those who have high -- who are highly leveraged, we believe this creates opportunity for us as it excludes marginal player from transaction markets. And furthermore, asset sales at discount to book value due to high cap rates are a way in which deals could be more accretive despite the higher funding costs. In addition to tight labor conditions in many developed markets, we think that inflation will continue to be contributed by conflicts in the Middle East in spikes in crude oil prices and higher cost of shipping attributable to Red Sea crisis. And so the sustained tight financing condition and higher cost of living are expected to continue to weigh on the economy and thus consumer sentiment. Narrowing our focus to a few of the key operating markets in Hong Kong, consumption is underpinned by low unemployment of 2.9%, which has been stable since December 2023, the potential minimum wage hike of 4.5% to $41.80 as an added catalyst. In addition, the economy grew at a commandable 2.7% in the first quarter of '24. The inclusion of REIT in Stock Connect [indiscernible] on April 20 is a positive impetus to Link's future liquidity and the initiative expands the pool of capital by broadening the investment base. Meanwhile, cross-border consumption has had a moderate impact on retail sector in Hong Kong. Mainland China is expected to grow at 5% in 2024 despite numerous macro headwinds. Signs of stabilization are repriced, but there is headroom for further potential economic stimulus. Nonetheless, weak consumer sentiment remains a risk for us. Singapore 2024 GDP growth at 2.5% is expected to be supported by manufacturing and services. Macro risks are external shocks and persistent inflationary pressure with some mitigation by government efforts. The backdrop in Australia is relatively subdued. Inflation has persisted. GDP is expected to grow at 1.4% in 2024. Meanwhile, net migration growth of 2% to 3% is positive for consumption. It is estimated that additional retail spending from annual net migration could amount to AUD 4.7 billion. And then real estate, retail is looking promising with encouraging leasing spreads, while the downward pressure on offers appear to be bottoming out. The fewer macro environment highlights, a need to remain vigilant for us to adjust to the challenges preemptively and to do the best we can to our [indiscernible]. Here are the dates for payment of distribution with a script election. In a nutshell, just to summarize, there have been many challenges from flooding to all the economic environment, financial markets, at the same time, we see opportunities in markets and sectors that we operate in. We have benefited from managing a resilient and diversified portfolio overall. And despite all the headwinds, Link we have and we will continue to provide our unitholders with a stable return and a sustainable long-term growth. The development of our investment management business strategy is ongoing, it is a long term project that aims to create a new avenue of growth by enhancing our capabilities so that we can better match capital with investment opportunities to create value. Let's move on to Q&A.

[Operator Instructions]

This is Karl from JPMorgan. From my side, I have two questions. The first one is, obviously, I guess, the biggest concern from investors, which is like in the past few months, we have seen that in Hong Kong, the overall retail sales are seeing further decline, right? On a year-on-year basis, it's negative. So I'm just curious, does management have any guidance or any expectation on how the tenant sales of Link REIT will be like in the next 12 months? Are we expecting that it might turn negative in this financial year? And then with that, do you any forecast or guidance on the rental reversion? And also in a stressing area, let's assume that, let's say, tenants sales are going to drop by less, say, 10%, 20%. Will we have any pressure on further reducing the rents in Hong Kong? So this is the first question. And the second question is about the financing cost as we all know, it seems like interest rates are going to be higher for longer. Any guidance on the average financing costs in the coming year?

I'll start with Hong Kong. So a lot of questions in all that color. I'll do my best to address most of them. I mean, I guess, first things first, it's a matter of looking at the purpose of the Link portfolio. We'll be here to serve Hong Kongers for their daily needs. So with that, we believe we bring a very strong level of resilience. We've demonstrated that in the results we've just spoken through. No two ways about it, there has been an impact coming through, particularly in the second half of the period. Looking through our numbers, Q3 sales decline was worse than Q4. So we did see some improvement in Q4. But still, if you do the numbers from what we reported at the half year to what we just reported in the second half, our sales did go negative. So sales growth was negative. We see the moderation of sales performance for Hong Kong to more than likely continue. We believe we're in a position of strength to be able to deal with that given we've got near full occupancy at 98%. We have very stable and sustainable occupancy cost at 12.6%. Your summation at 10%, 20% sales decline is something that's not on our agenda, and it's something that we are not observing in the current operations. But still, the way that I would guide you for leasing reversions is that we are anticipating a fairly flattish year, if flattish is a word. We are in tune to the risks and, I guess, some of the challenges to the market. Some have posed that it's an issue for the Northern new territories. We see it as a broader issue for Hong Kong. And we're not just looking at what we're doing in the Northern new territories. We're looking at what we're doing across our broader portfolio. I'd point you to the fact that we've continued to complete fairly significant asset enhancement projects, which is allowing us to refresh our offerings. And at the same time, over 40% of the new 660-odd new leases that we wrote last year were tenants new to our portfolio, coupled with, I think it was around 120 of our existing tenants [indiscernible] footprint with us. So demand and supply is a big part of rental growth and occupancy in any portfolio, whether it be office or retail for that matter and we think the dynamics of our portfolio are pretty sound. And we will still netting of servicing Hong Kong as for their daily needs. That's very clear.

I just want to ensure that you continue to distinguish our portfolio from other in Northern Hong Kong, as Greg said, we do serve the daily need of a lot of the Hong Kong people. Convenient retail on its own that means you don't go to Shenzhen to buy your grocery on a daily basis. We can -- we see some weakness. And that's where we want to continue to refine the tenant mix, making sure that we continue to be relevant. So we bring in new brands, as Greg has already mentioned, and continue to keep very high occupancy so far. I think if you stand in the shoes of the tenant, then if they need to control cost to deal with their own business challenges, then they need to find shops, restaurants, location where they have the highest productivity. And I think what we have provided to them is guaranteed footfall because people are looking right next to it or about it. That continues to be the case to attract people. And so if I want to decided to cut in [indiscernible], I want to make sure that I actually have more shops at the Link portfolio. And that's why we have this queue of tenants coming in. So I think there is challenge overall, we're not complacent. But at the same time, we are not destination mall. We have maybe 1 or 2 that we call destination mall, but we are not really. And so the challenges are not the same as some of the other landlords. We hope that with what the team continue to focus on, which is continue to follow our shoppers what they want and provide that in a convenient location in a good shopping environment, then we will protect that income.

On the average borrowing cost we delivered at 3.78% for the full year. If you look at the profile of the hedging at 70% and also the fact that HKD 9 billion will come due this year. So we have left that unhedged because we have paid down using the unitholders funds. And in fact, the RMB was only about 70% hedged. So we do have quite a lot of ability to continue to use RMB financing to be -- to help carry over some of the financing costs versus HIBOR. So I think when we look at our own forecast, I assume HIBOR stays where it is and so far, it's been more so than the last 2 years. And we expect the ABC to be hovering just slightly below 4%. So it's not a major movement in that sense.

It's important to look at the color of the bar as well. [indiscernible] someone have asked us a question about the blue bar coming up. That's a bond, right? So we either replace it with a bond and the bank has been chasing after this. That's why they are in this room. And maybe we will face it with some bank loan. But when it comes to '25, '26 or '26, '27 where the bar looks higher and maybe some will ask and you will be challenged, but these are bank loans. So we can start talking to a bank early compared to bonds where you can't. And so we have -- we say we have foresight, but we didn't. But it's all happened that I think the way that we have made that maturity each year is not that high. The composition whether it is bank loan versus bonds, it's also managing in a way that I think we can manage our average borrowing costs quite well.

Can we have another question, Sam?

Congrats on the great restult. This is Sam Wong from Jefferies. I have two questions, if I may. First one is on China. So China reversion had a nice catch-up in the second half. I just wonder how we should think about the China reversion for next year? And the second question is on Japan. I think John just mentioned that Japan as a potential market. So could you share more details as to which asset class we are focusing on? And any time line for our venture into Japan?

On the China rental reversion, I think indeed, we started very hard the last 6 months to get ourselves out of the negative rental reversion you saw in the first half. I think the way I look at it is that it remains a challenging market, simply because the spending is not strong for footfall. But we do have more footfall than pre-COVID. And if you look at the quality of spend, clearly, the discretionary part is starting to taper off a lot more focus on F&B, leisure entertainment, which in a way can't pay as much rent or high OC. But I think where the team has comfort is CentralWalk basement is now being rebuilt into a grab and go smaller shop, higher square foot versus a restaurant that maybe does 1.5, 2 times per meal. We think that we would be able to do a low single digit, flattish rental reversion. I'm not willing to see the negative anymore. The other dimension is clearly with all the changes in the market, the way to look at it is with the more footfall how do we generate higher marketing income? It's always about the rate lines, the leasing. There's a lot of money in marketing when you have catchment, you have defined demographics. And so there are a lot of things that we are doing. And my view is I look at the NPI as well as a rental reversion. Because a lot of things may not just come through 2.8% going where the business is. So we are getting more and more creative in how to run the China business given that you have to really sweat the lemons versus the last 20 years where people were queuing the back space from Gary from George. Can we come into the mall? Now this we have to go there and we have to be very creative. But I think the target is that we are not willing to see the negative rental reversion. So the low single digit is where I would target in the next 6 months.

Talking -- without putting a lot of pressure on John, let me just give you a few highlights. We've talked about investments of Hong Kong in several countries for several years. Japan has been on that list for quite some time. We've been to Japan for 7, 8 years. We have been -- we have not been able to agree on any deals yet. But also when we look at opportunities we're not just looking at, oh, that's the best positive carry and therefore, that's the way to go. We were looking at other skill set that we have, for example, the asset management skillset that we have build up. And so I would use Singapore as a good example is how do you break the chicken and eggs -- asset first or people first? You don't have people, then sometimes your underwriting is a little bit more conservative. You never buy the asset because I understate it. If you have the people, have the asset, you don't have the people, then our Board will question, you will question whether we know how to manage? So John is there to break that -- so he -- are you the chicken or the egg?

I decline to answer that.

But the point is we are building a team. We are -- we're wanting to make sure that we get to look get these assets to make sure we can tell you, we know how to manage it. We know that there is -- not just asset management, but asset enhancement, if there is improvement. And that's one of the experience, I guess, John can talk about his own experience in a different organization, doing a lot of improvement in assets, producing good return, and he will be building his team and give him some time.

Yes, I think that's right. I think the only thing I would add, I mean, I have a 30-odd year association with Japan. So I've seen a few cycles there. And I think it does remain an interesting market. As with all investments that we look at, everything has a high bar to cross. And to George's point, it needs to be something that is the right asset at the right price and that we can deliver in terms of the improvements. But I think there are still opportunities there. I think in a macro sense, the ability to raise interest rates by too much is impeded obviously, by the significant debt to GDP ratio. So again, at the macro level, perhaps that means more declines in currency together with a significant yield gap over the funding cost. But to George's point, that's fine, that's the macro, but we buy buildings one-by-one. So every asset has to stand on its own feet. And if you've looked at our style over the last sort of 18 years, which I've only recently sort of become a part of, the ability to do asset enhancement in order to manufacture returns is as important or more important than simply taking a directional trade. So yes, we're lucky. It's part of this business of matching capital to opportunities, which is as valid for the balance sheet as it is for third-party capital. But everything will have a high bar to across, if that answers your question.