Mapletree Industrial Trust ($ME8U)

Thanks for joining us this morning for MIT 4Q and Full Year FY '26 Results Briefing. MIT has released its results yesterday after market closed. I'll ask the management team to present the key highlights of the results. Ms. Ler Lily, CEO; Khoo Geng Foong, CFO; Mr. Peter Tan Head of Investments; Ms Serene Tan, Head of Asset Management; Ms. Chng Siok Khim of Marketing; and Ms. Sara Wayson, Head of Asset Management Data Center U.S. Now I'll pass to Geng Foong to bring us through the highlights of the results.

Good morning, everyone. Thank you for joining us for MIT Full Year FY '25-'26 Financial Results Briefing. I'll bring you through the financial performance and update on capital management. Thereafter, Lily will go through portfolio update and give you some color on MIT's outlook. For full year, during the year, we divested 3 properties in Singapore. The lower NPI is largely due to absence of income from these 3 properties. There is also lower contribution from nonrenewal of leases in the North American portfolio and a weaker U.S. dollar against Sing dollar. These were partially offset by higher contribution from Japan portfolio mainly full year contribution from Tokyo property, which we acquired in November 2024 and completion of final fit-out works at Osaka Data Center, which was completed in May 2025, as well as renewals and new leases from Singapore portfolio, borrowing costs fees, mainly due to repayment of borrowings with the divestment proceeds lower interest on unhedged floating rate loans and effects of weaker U.S. dollar against Sing dollar. These were partially offset by higher borrowing cost in relation to the Japan portfolio. Cash declared by joint venture decreased due to higher borrowing costs from the repricing of matured interest rate swaps, which were previously locked in when interest rates were lower. On a full year basis, MIT DPU for FY '25-'26 is at 0.01271 which is 6.3% lower than prior financial year. However, if we exclude the divestment gain that we have distributed in FY '24-'25, our DPU would have been lower by 3.2% instead. So on -- for quarter-on-quarter, our net property income decreased due to nonrenewal of leases at North American portfolio, higher property maintenance and property taxes, partially offset by full quarter impact of renewals and new leases from Singapore portfolio. Borrowing costs decreased due to temporary repayment of borrowings with the proceeds from the new perpetual securities that we issued in March ahead of redemption of the existing perpetual securities. Cash distribution declared by joint venture decreased due to higher borrowing costs from the repricing of mature interest rate swaps. Accordingly, DPU quarter-on-quarter decreased slightly 2.5% to $0.0309. Our NAV per unit is lower by about 4.7% to $1.63 as compared to prior year actually due to revaluation loss, weaker U.S. dollar and lower mark-to-market on derivatives. As at 31st March 2026, total valuation of the 136 properties in MIT's portfolio stands at $8.2 billion, a decrease of about [ $230 ] million as compared to $9 billion as at 31st March 2025. Excluding the $535 million properties divested and lower translated asset value of $234 million from the weaker U.S. dollar and Japanese yen, our portfolio valuation decreased by $58.5 million year-on-year. So within our North American portfolio, we do have some properties that are vacant, or with pending nonrenewals. So for some of these properties, the valuer has adopted sales comparison approach, hence, the lower valuation. These were partly mitigated by the completion of the final phase of the fitting out works at the Osaka Data Center and the improved operational performance of the Singapore portfolio. During the quarter, we successfully issued $300 million of perpetual at 3.25%, ahead of the redemption of the existing perp in May 2026. In the interim, we have paid down debt with the perp proceeds and accordingly, leverage is lower at 34%. While this is expected to increase to around 37.5% when we draw the $300 million debt to redeem the existing perp in May, we still have ample debt headroom for growth. With the $300 million debt, the hedge ratio is also expected to reduce to around 80% level. Average borrowing cost increased slightly to 3.2% as compared to prior quarter, mainly due to higher interest on expiring interest rate swaps, which were previously locked in when interest rates were much lower. We have about $600 million of IRS coming due in financial year '26-'27. These were previously locked in when interest rates were lower. So assuming if we replace this maturing IRS with a new 5-year rate today, maybe about 3.6%, 3.7%. The borrowing cost is expected to increase to about 3.4% to 3.5% in FY '26-'27. As we pursue further divestments and we use the divestment proceeds to pay down loans in the interim, we will be able to reduce the impact of these expiring hedges on borrowing costs. Of course, we will continue to monitor the market and be nimble when entering to replacement hedges, say, $20 million, $30 million each tranche when opportunity arise, i.e., when any dip in interest rates. On our debt maturity profile, it remains well staggered, with average debt duration of about 3.4 years. We have sufficient commercial credit facilities to refi loans in FY to '26-'27. On FX front, as much as local currency loans to provide for a natural hedge. This helps to mitigate impact of FX fluctuation on our NAV and DPU. So for example, about 50% to 52% of our U.S. portfolio is funded with U.S. dollar loans. What our exposure to the U.S. by AUM is around 47%. Net of the onshore U.S. dollar borrowings, our DPU exposure is reduced to around 80%, 20%. So just to give a sense, for every 5% depreciation in U.S. dollar, the impact to DPU is not 5% but it's only around 1% to 1.5%.

Good morning, everyone. I will bring you through the operating performance for the portfolio. I think to start off with, that would be the occupancy. If you look on the overall basis, the overall portfolio occupancy has declined very marginally from 91.4% to 91.2% as compared to last quarter. As you can see, the Singapore and Japan portfolio remains a stable base. And if we focus a bit on the Singapore portfolio at this point, the Singapore portfolio occupancy has actually improved by about 0.4% -- 0.4 percentage points across both the Hi-Tech and the Business Park segment as well as the general industrial segment. These 2 segments continues to see positive rental revision. I think on a weighted average basis, you're looking at about 6.2%. Between the 2 segments, we are seeing both rental revision, 5% to 6%. Based on the Kallang Way occupancy, committed occupancy at this point is about 65.5%. If you compare to last quarter, it has improved marginally, very slightly. But having said that, we do continue to have a few discussion that is ongoing. So we do hope that we are able to bring the occupancy up further by next financial year may be somewhere around the 75%. Looking at North America data center portfolio, the average occupancy went down from 87.5% last quarter to 86.1%. I think this is mainly arising from the full effect of the expiry at 2005 East Tech, which has the lease has actually expired in December 2025 as well as tenants in 250 Williams, who has renewed its data center space but return is office base with effect from February 2026. I think this is something that we have flagged up earlier. In terms of the lease renewal, if you look at the portfolio WALE, portfolio Wale declined marginally by about 0.1 years from last quarter. That's largely due to the natural progression of time for Singapore and Japan portfolio. But if you look at the North American portfolio, there is actually an increase with the commencement of a long-term lease at Morrisville.. So I think that is something that the team has put in place some time ago. So now that the lease has commenced, it actually starts to contribute in terms of the -- towards percent WALE. On a year-on-year basis, our portfolio WALE has maintained across all the geographies, including in North America with these efforts on getting some of these renewals done. So our focus during the year was very much to address the re-leasing challenges. About 400,000 square feet of leases were executed in financial year '25-'26, that is about 5.6% of MIT's North American portfolio NLA. So these are also for long. We have also signed this for long lease period ranging from 5 years to 15 years. So about 34.3% of the leases executed were actually new leases, while the balance 66% are renewals, which includes also forward renewals at a weighted average rental revision rate of about 3%. If we look at the lease expiry profile for FY '26-'27 17% of the portfolio GRI will be expiring. So specifically for North American data center, more than half of the leases are set to expire after FY '30-'31, which is in more than 5 years' time. Within the portfolio or the North American portfolio, 5.4% of the portfolio is expected to expire in FY '26-'27 We have highlighted in the past quarters as well that the -- there are confirmed nonrenewals, and that stands around 4.7%. And as we all know, these are mainly from 3 properties. We are actively working on the nonrenewals. And in fact, I'm quite happy to share that we are in advanced negotiation and quite close to signing a backfill lease. Although I will not be able to provide any information at this point. I think you understand the sensitivity be high at this point. For the remaining leases due in FY '26-'27, we don't think that will be an issue. Now beyond what has already been highlighted, there are no new confirmed non renewals. And if you look at the expiry profile, you'll also note that after FY '26-'27, the expiry profile is actually more manageable. You're talking around the 2% to 3% range. So if you look ahead at the next financial year or FY '27-'28, we think that the renewal -- the risk of nonrenewal is not high. Now we have generally been very focused in managing the expiries. So over the past 2 years, we have proactively executed forward renewals, which actually helps to spread out the expiry. Say, for example, you have the 2 leases at Richmond and Houston, which are both enterprise users. In addition, we have also been signing the leases for new space. So if you look at the vacant or those properties with upcoming nonrenewals, divestment backfilling or even reletting to industrial users would be the possible options that we are exploring. So we are seeing greater interest from prospects for certain properties in the key data center market or those with potential to increase power capacity. So as I mentioned earlier, we are close to signing one of the backfill. So we do hope that we can bring the good news and bring it across the line and bring the good news soon. In terms of the divestment targets, we continue to look at about $500 million to $600 million. So this would largely be the portfolios with vacancies or upcoming non renewals, we have pushed out quite a few divestment exercise. And I would say that we are starting to make some meaningful progress. As we pursue this divestment, we are also actively monitoring the market for suitable acquisitions opportunities. So I think if you look at some of the potential deals in the market that we are seeing, we do have some that is in the Asia, say, Japan. And of course, Europe continue to be area that we would like to expand in. So our goal very much is to then rebalance the portfolio, achieving the greater geographic diversification and enhancing the overall portfolio quality to ensure that the portfolio is future-proof. I think what you see here is some of the activities that we have done in FY '25-'26, where we have actually completed more than $500 million of divestments and these are done at a premium to book value. So the proactive portfolio rebalancing will continue to be will continue to be the key strategy that we are pursuing right now. So we hope that with this, we will be able to provide a better portfolio to the unitholders.

Thanks, Lily and Geng Foong. Now we will take questions from the analysts. [Operator Instructions]

It looks like some exciting developments in terms of backfilling. Just wondering whether you can disclose which property is that related to? And were there any updates on potential redevelopments? Second question I have is in terms of FX rates, U.S. seeing, what's the hedge rate that you have for this coming financial year?

I'll take Steve the first question. I think at this point, I would -- I don't think I'll be able to release a lot of information on this. I think that is something that the team has always been working on. So we do really hope that we are able to share the news shortly. At this point, I think there is some sensitivity, so we'd rather keep it as it is right now.

for the second question. In terms of hedging forward there's a cost in terms of hedging because given the interest differential between U.S. dollar and Sing dollar rates, so currently, it's quite high 2% to 2.5% for 1 year. For the next 12 months, we have hedged close to 60% of our income to about 1.26 FX rate.

And the rest, you progressively hedge, I presume throughout the course of the year?

Yes.

Sorry, just my first question, the update on the redevelopment.

Sorry, again?

Any updates on potential redevelopment? In some properties, you've undertaken power studies. So I don't know whether that is...

Nothing that we can think that we can say at this point. But I think you will also understand that redevelopment is something that we -- is 1 of the options that we will look at. Although I think the focus perhaps is a little bit more on the divestments and reletting of the properties.

Okay. I look forward to some positive news soon.

We have Derek from DBS to ask the next question.

Can you hear me? .

Yes.

Just a few questions. Just wondering, Lily, can you give us an update on your plans for San Diego and Hawthorne? Given that the leases are coming off, right? So I understand Hawthorne has a significant power allocation right? So any positives around these two assets? Or what are your planned leasing, selling or what we can think about in terms of the next move? Maybe that's my first question. Then maybe my second one, if I can. If we look at Singapore portfolio, right, I think your occupancy, it appears quite strong already. Is there any room to still move it higher? And in terms of divestments wise, while you put $500 million, $600 million in largely in the U.S., right? Are you looking to sell Singapore as well? That's all I have for now. Yes.

Okay. I think for San Diego, I think we saw the situation for San Diego, if you look at the market right now, I would say that the interest for data centers or life science in San Diego is not exactly very strong. So one of the possible options that we are looking at divesting or relettings to the industrial users. So I think that will be something that we will continue to work on, right? As for Hawthorne, yes, you are right. Hawthorne's facilities where there potentially can be more power. So as it is that it's probably one of the properties where we can see some interest coming through for people who are looking for more power or there is some bright spot, I guess, we can say that for the Hawthorne.

Okay. Sorry for Hawthorne, the power is secured already, right? Or it's just still getting the study.

We have gotten the studies. So the studies basically shows that we are able to bring it up to I think, up to 99 megawatt. But of course, it's not something that you -- it's not immediately, you want it, you get it type. So there will be certain time that is required for the power to be brought in. But I think we are seeing prospects who are interested in tapping such potential of more additional power. So I think that basically spells something quite positive for Hawthorne.

Okay. And you will relet it at that extra power, right? I mean I expect a lot of increase in revenue.

The structure of our lease is actually more as a real estate. So much on a per megawatt basis.

Okay. Got it. Got it. Okay. Sorry, Singapore?

Yes. So for Singapore, I think you know that we have divested $500 million of 3 properties. I think that one basically idea was to maximize or to look at those properties where we have maximized our potential as well as the business part where we know that the demand for Business Park is soft, and we have always been trying to push up the occupancy. But for the past 10 years, it's not easy to do that. So that hints the rationale behind the portfolio divestment. Whether will we continue to look at Singapore, the we will continue to always look at opportunities when it arises, right? Because I think if you look at the Singapore portfolio, there are still some potential that we can unlock. And of course, that's also some of the properties with short land tenure, right? But I think having said that, the focus for us at this point would still very much be on the North American portfolio where we know that, that is where we need to -- that is the area that we need to address at this point. I hope that answered your question.

Yes, that's -- sorry. Last one is Singapore organic growth still stable coming year?

Singapore organic growth, well, I think if you look at the rental revision, we still continue to see or to believe that we are able to achieve a positive rental reversion I think the previous guidance of single digit is still there.

We have Jonathan from UOB to ask the next question?

Yes. My first question relates to impact of higher electric city tariffs. So the 76.5% triple net leases, they are not affected. But what about the other two segments, the double net leases and gross leases, are they affected by higher cost of electric city? And then second question relates to like renewal. I think for this quarter, you renewed McCrimmon and Parkway and then also Sir Timothy Drive. So one of them you renewed 11 years, what about the one, Sir Timothy Drive, how many years do you renew? And for these two renewals, what's the rental reversion like?

Okay. Address the utilities first. I think that one is easier. I think generally, even those or the North American portfolio even though some of them are on a gross net basis or double net basis. In terms of electricity, it is still very much passed through to the tenants or borne by the tenants. So I think from that perspective, we don't see the effect. We don't expect the effect to filter true on us for the North America and the Japan assets. I think where the where it possibly may hit will be basically on the Singapore portfolio where we have quite a bit of multi-tenant buildings. But having said that, we have actually done some hedges for the electricity where we have entered into power procurement contracts. And these are till December. So that's about 20% of the portfolio. So what we are open with will be 80% portion. Yes. So I think if you look in terms -- just to give some sense in terms of the impact, if, let's say, the tariff rate were to -- if the tariff rate were to say, increase by 50%, the impact on our DPU will probably be...

Sorry? So we can't hear you.

At 1%.

So for double net leases, for data center, the tenant pay for the 80% unhedged is quite high.

I think -- well, I mean, if you look at the numbers in itself, like 80% seems quite high, the utilities forms only about 30% of our operating expenses, right? Of course, I think as things move on, we will always be looking potentially at increasing this hedge ratio if you want. Sorry. The next question is on the renewals that we see. Yes, this quarter, we have the Morrisville, which the lease has commenced in this quarter. But actually, this renewal was signed, I think, quite some time back. This is one of the -- this was signed quite some time back, I think, for 11 years. And if you talk in terms of reversion, there's actually no reversion because this is a new space. This is not a backfill lease. So you don't have a comparison to make. So what we have done then is we have actually filled up an empty space, which is already there. And the other one that you're talking about, that's the one at Sir Timothy Drive. I think the renewal is actually for a short period, like about 2 years, but this is one of the hyperscalers. So I think for them, they tend not to lock in very long, but it is an auto renewal that you just keep going. So I think our past experience is they will just renew when it comes to the expiry.

The new space at Morrisville, does it mean that you added space to the data center.

It's added the space in terms of occupancy, yes. But I think this is a small space. I think it's about 34,000 square feet. So -- and this is -- I think -- I believe this is more for industrial use.

Vijay to ask the next question.

Just a couple of questions. First one is a bit of a follow-up to Jonathan's question. Quarter-on-quarter, the increase in property maintenance and taxes. Was it one-off? Or what -- how much was it was and do we expect it to recur?

You are talking about quarter-on-quarter, right?

Yes.

I think for this quarter, you see the margin a bit lower. So because of the operating expenses, increasing, but that's because we have kind of -- this is more a timing issue where we did our facade maintenance in this quarter. That's why it kind of bumped up a bit in the quarter.

So It's a one-off?

So it's a one-off for the quarter.

Okay. But looking ahead, you would expect some margin pressure to continue because of utilities in general. Is that right to say?

Yes. But we think that the impact is not that significant. As I said, even if the tariffs were to increase by 50%, the impact on our DPU is less than 1%.

Okay. Got it. So my second question is in terms of divestment, you have done well quite well last year. This year, also a targeting $500 million, $600 million. What are your plans to redeploy the proceeds as there will be an income that came from these divestments?

Yes, we are definitely looking at acquisitions now that we have really divested $500 million with more divestment the way that will actually give us quite a nice headroom for us to look at our acquisitions. So I think that will be something that the investment team will always be looking at. I think in terms of where we want to or what kind of properties we're looking to invest, we continue to keep our eyes on data center, but we wanted to have some diversification in terms of geography. Hence, we have always been talking about us wanting to look at the Asia Pac region, looking at Europe. As you will note that I think in Europe at this point, we have no presence at all, right? So I think when it comes to geographies like U.S., we tend to be very, very selective because of the -- because we already have quite some presence in the U.S. So not so much into U.S., but for Europe and Asia Pac. So I think, again, if you look in terms of the yield spread, what seems to make sense at this point is perhaps in Japan and Europe as well.

So just to confirm that your balance 50% of the stake on the data center, your priority is focusing on Japan and Europe over this balance acquisition of balance with 50% stake.

I think the 50% also very much depends on what -- whether the sponsors want to let that go, right? So I think that is something that we will want to get if the opportunity comes. I think if you look at the portfolio of the joint venture, it is definitely a good quality portfolio, where we have almost I would say about more than 50% of that portfolio are actually the hyperscalers, which is something that we would like to have a little bit more exposure on, right? But I guess it's also really if I have -- if I'm able to do more diversifications for my portfolio through getting more exposure in hyperscalers, that will be great. And in terms of geography, if we are able to get more diversification by looking at other regions, that will be something that is quite welcome as well. And I believe all this will actually help to improve the resilience of the portfolio.

Just one last question. In terms of your data centers, do you expect CapEx for the ones which you have vacated, and how much CapEx would it be? Just to give some sense in terms of new tenants.

I think it very much depends on who the tenant is and what is the condition of the property at that point of time, right? For some of the leases that we are talking or we have been discussing or we have executed. The CapEx may not be very huge. Say, for example, the one at tenancy, I think the CapEx was kept relatively low at about $4 million. I think for some of those, we do have tenants who are prepared to say that it doesn't matter, I'm okay with the structure with everything that is with the property. And hence, I don't really need a lot of CapEx. Any CapEx will probably come in the form of like repaving the drive way, making sure that the walls are not leaking, repainting, that kind things. So, not significant CapEx as far as we can see.

We have Bill to ask the next question.

Just a quick question for me. With regards to the renewals and backfilling of the North American portfolio, I just wanted to get an idea as a percentage of revenues, how should we look at it?

Meaning?

No. So basically, for the renewals that were done, right, in the North American portfolio, I think that the 400,000 or so you did mention it's about 5-plus percent of NLA, but as a percentage of revenues, does it differ a lot? Just wanted to get a sense.

I don't think it will fall very significantly away from that number. I would say most of the leases that we have signed, okay, let's say, if you are talking about renewal, the renewals are coming through with -- the renewals are coming through with a positive rental revision. I think just now, I mentioned our revision is about 3%. So if you look in terms of the contribution, it will be higher than what we were looking at, at least for the renewals, right? And of course, all these also come with escalation.

On average, do you have average escalations for these renewals and new leases?

Average escalation, I think it actually ranges, I would say, largely around 2% to 3%. Earlier on the revision, I think we are looking at is about -- with average 3%. Of course I think we will also highlight that for some of these there is actually rent-free included. So the real contribution may come in see in about 6 to 12 months' time.

Okay. So on average, safe to assume that rent-free is typically 6 to 12 months for a 5-year lease?

I think it depends. Very generally, rule of thunbs tends to be 1 year, 1 month right? But a lot of this also depends on negotiations. Say, for example, if you look at the Brentwood, the Tennessee property that we have leased out to Vanderbilt. The lease was for a good 30 years, but my rent-free is only 12 months.

We have Tan Xuan to ask the next question.

I understand you mentioned earlier that the rest of nonrenewal for FY '28 is not high. Would you -- do you think that the occupancy for the portfolio will actually trough in FY '27 then?

We -- of course we hope so. Well, I think -- okay. Seriously, if you look at it in terms of your expiry profile, you see that the tower in '27-'28 is the highest, right? And that is also where we see we faced quite a bit of increase. I think we have mentioned the 4.7% nonrenewal that, I think everybody knows of which the larger component actually comes from San Diego. If you look going forward, the renewal proportion is actually quite small. A large part of the portfolio for North American portfolio is still, I would say, almost 50% -- more than 50% is actually due in 5 years' time. So if you just look at the next few years, the lease expiry is actually quite manageable. I think the range is around 2% to 3%. So once the nonrenewal wave is kind of stabilized, right? All the efforts that we are putting in, into saying, divesting some of these vacant or coming to be vacant type of properties or our efforts to be able to backfill them is definitely going to have some positive impact.

Following up on FY '27-'28, right, do you see any risk for the Singapore lease expiry?

No. In fact, I think that there is a lease that is coming up for renewal. That's why I think you see the tower a little bit higher, right? But we have already commenced our discussion with that tenant. And we are very confident that this renewal is there.

Okay. And just one last question on the divestment that you're looking at. Are these assets that are vacant? And also how should we think about gains or loss against book value?

Okay. I think if the $500 million to $600 million, a large part of that would be the vacant and coming due to vacant type of properties. I mean, naturally, right, because these are some of the properties that we want to be able to address the releasing challenges. But we have also -- if you remember, I have mentioned previously that we have actually take a very critical look at the list of properties that we have. And for some of those which we feel that there may not be that may not be able to contribute very positively towards the growth will be packed into this potential divestment. So I think some of these may be income producing. But I think if you're looking from it from a longer term, if there's no, say, on a low power capacity type or we think that there is -- it's not as easy for us to try to gather the releasing later on, if it never happens. Then I think it's best for us to do the divestment. So we have actually run through a very -- take a very critical look at the portfolio to identify some of these properties. So that all in would then give us around $500 million to $600 million.

How does -- how do you think this will compare against book value? Is it divestment price versus book.

I think if you look at our valuation, this round, we have actually taken some valuation loss on certain properties. So I think those would mainly be the ones which are going to be vacant right? So I think if you're talking about whether will we be insisting that we must sell at book value, I think that is something that we have to be practical and we have to look at what are the alternative for us, right? So we -- of course, we hope to be neutral on an overall basis. But we are not insisting that we must sell above valuation. I mean for those property that is not going to contribute, it's actually better for us to just take the hard decision and divest it so that we can recycle it into something that is contributing to the portfolio.

We have Derrick Heng for the next question.

Can you hear me?

Derrick, you need to speak up a bit near to your mic.

Is it better?

Yes.

Okay. I just -- sorry, I missed out the earlier part of -- earlier half of the call, but I caught something about the utility impact. I mean there was a 1% DPU number being mentioned, is it if utility costs were to increase by X percentage, it leads to a 1% DPU impact?

Yes. I think you were saying that if the tariff rate increased by 50%, then we -- the impact on the overall DPU will be about less than 1%.

Less than 1%, okay, from current rates and from current base tariff rates?

Yes.

Okay. Got it. And when do you intend to hedge the remaining 80% of the Singapore assets -- sorry, 80% of the rates?

I think the decision to hedge very much is weighing what is the cost of it. I think you also require us to switch to the same power. But I think that it will take some time for us to be able to do that.

Okay. Okay. And switching to U.S. the U.S. portfolio, you mentioned that $500 million to $600 million divestment. Does that include assets which you're currently doing power studies on? And is the -- does the $500 million, $600 million already in into account the effect of the power study or it doesn't?

I think for some of these properties, whether we are done power study or not, okay? If we are not seeing significant contribution coming through, then I think they will be in the lease, right? Having said that, I think the power in itself, having the power capacity in itself doesn't mean that we are going to get it immediately. So there is going to be some level of CapEx that's required to put through and time is also required to bring the additional power in, right? So I think for some of these properties that we have done, we would consider divestment if there is a good value or if there is someone who is prepared. So we are not close to the option to say that just because I've done power study, there is potential, therefore, will not divest or I will only do a redevelopment think we have to also weigh the various factors.

Okay. And on -- just on that, right. This Hawthorne, for example, you're looking to intensify to 24 or even potentially 99 megawatts. The current valuation $15 million is on current power capacity only, right? Do you expect an uplift in valuation if you were to secure a larger power bank?

As I said, because this core and shell basis, the rentals are actually based on the area. That means based on the NLA rather than based on the megawatts.

Do you not sell on the basis of power bank?

Sorry?

Do you not sell on the basis of power bank?

We don't charge based on the megawatts.

I mean, that divestment when you sold the asset when you put it on a market, can you sell on basis of power Bank?

Sure. I think just to answer the question, I mean, this asset is actually on a power shell basis, all right? What we have done in the power study is that we already spoke to the grid, and they actually told us that they can actually increase the power up to 99 megawatt. I mean with that, there will also be quite a significant capital investments. But to answer your question, the -- if we go -- do go to the market to sell, the potential buyer will definitely look at the potential uplift of the power to 99 megawatts, but they will also have to consider the CapEx that we will need to put in. But of course, that will increase the attractiveness for the asset, whether are we looking to release it or to sell it.

Okay. So I mean, so expectations basically would be probably hoping to sell that around current valuations even for Hawthorne?

I mean, yes, that's the current valuation we have. Yes.

We have Rachel from Macquarie to ask the next question.

Yes. Sorry, I dialed in a bit late. I just want to confirm the San Diego, you're looking to divest, right? And then San Jose and Alpharetta what are your plans?

Okay. As I said, San Diego is not exactly in the key data center market. So divestment is definitely on the card. If you are talking about Alpharetta and San Jose, I think these are still very much in a good data center market, re-leasing is something potentially that we expect to get. Of course, again, we don't close the door in terms of the divestment.

Okay. Got it. Okay. Yes. And then my next question is on the divestment the $500 million and $600 million, mainly vacant assets going to vacant. Does that mean that it will take a while for you to divest? Current asset, and I would presume that the interest would be quite low?

So we -- I mean we have been cooking this for quite some time already. So I think in terms of vacant or versus income producing, we are probably looking at a mix of both, all right? But I think what we can say is that we are looking at both the vacant and income-producing assets for this $500 million to $600 million. And definitely, this will be our target, at least within the next 12 months or so within this FY. So I think some of them we are already in slightly more advanced discussion. So hopefully, we can have some good news coming out in the next 6 months or so.

Okay. Understood. Okay. And then if I hear correctly, your interest on acquisitions is still Japan and Europe, right? But I think looking at your peers, they have been acquiring some Japan data center assets and from the same sellers. So I'm just wondering whether you have looked into it. And is it your decision of not acquiring? Is it because you haven't done much divestments?

I mean that's part of that decision. But of course, as you mentioned, those acquisitions that our peers have done are probably very similar to the -- some of the other acquisitions that we have done, right? So essentially, this decision was made at that point of time, we do have a lot of factors that in our mind about we want to divest more, we want to diversify out of existing countries that we have and so on. So -- but I mean it's good that we -- at least we are keeping some balance sheet for other acquisitions that we are looking at. But again, with more divestments, it will actually improve our balance sheet and our appetite to invest.

Okay. All right. And maybe just one last one FY '27 interest rate guidance.

Sorry, is it '27-'28 or '26-'27.

'26-'27 coming financial year, right, the coming financial year.

For FY '26-'27, we do have $600 million IRS coming due. The interest rate is expected to increase to around 3.4% to 3.5%.

We got Brandon from Citi to ask the next question.

Can you hear me? .

Yes, we can.

I just want to check, right, on this $300 million to $600 million, right? Does this refer to your carrying value or the expected valuation that you can fetch? Because I think if you look at the latest reval exercise and some of these assets have really taken quite a bit of reval losses, right? Yes. So I just want to check that. And also what is -- if you can share with us, is there a rough timing on how fast you can execute these divestments and the general level of interest in this kind of assets in the current market?

Okay. I think we'll addressed the first question first. These numbers would have taken these properties at around revaluation. I mean naturally, right? Because we will always minimally try to hit the valuation. But if the demand is such that we might have to take below valuation that we take up. But our first stance is always, as I said, right? And as for how long it will take, I think, generally, the $500 million to $600 million we probably can get it done within the next 1, 2 years. To be frank, when we pushed out, I think we will have pushed out a little bit more. So this is what we think we probably can achieve. Am I missing any other questions -- that's it right. Yes.

Okay. So basically, there is a certain kind of interest in this asset, right, is it going to stay that? Because obviously, you're not selling your best assets, right?

Yes. Well, we are not selling our best. But I think we do -- sometimes we do try to sell the slightly better assets with the not so good assets and then you sell the portfolio. I mean that is one of the user divestment strategy that people will look at. So I think we apply across all the various strategies that we can, when we look at to divestment.

And I just wanted to just double check, right, for your assets in San Diego, Milwaukee and San Jose, right? Which we saw a very significant fall year-on-year in valuation. That is really because of the vacancy.

That is because of the vacancies. And I think the -- when it comes to the valuation, the valuers have taken a slightly different approach. So they actually use the sales comparison approach, and they look at it from an industrial land perspective. So I think that is the reason why value has been dropping for quite some time. But I think you -- the value has dropped. But I think we also recognize that these are the properties where we have seen vacancies for quite some time.

Okay. Just one last one, right? Are you intending to sell anything in Singapore? And should we expect some form of compensation, say for some of your more prime assets like your 2 Kallang assets, right? I think over this quarter, they did see a very sharp fall in the valuation.

You're talking about Kallang 1 and 2, right?

Yes, I think it was a 20% fall right, yes.

That is because of the short land tenure. Those are the ones. I think the remaining tenure is about 7 years -- 5 years. So as the usual valuation, it will go when you hit a certain remaining life, they will start to bring them down very quite a huge jump all the way down to 0 because these have limited kind of life spend, right? So it is expected that when your short land tenure, when your land tenure comes closer to the expiry, you will see impact on devaluation. So whether we are looking to divest some of these, of course, we will be looking at it, right? Given that there is a land tender decay, I think that will be something that we will want to be able to do some divestment because that will then help us in maintaining the capital value for. But I think the question then is always out there in the market will be prepared to buy. There are people who like to look at it, but it's not a very wide market as you would appreciate, right? So whether we are potentially looking at some of these divestments, yes, we are. But I think as I mentioned earlier, the key focus at this point is really on the North American side. the short land tenure is something that we will continuously be looking at. So I think for the short land tenure, what we have been trying to do is to engage JTC as much as we can to see whether there's any possibility for us to do that extension. We have been also looking at seeing whether we are able to find a user which the Singapore government would love to have, and therefore, on that basis, be willing to extend the land lease for us, right? I think other than that, divestment is a potential option that we can look at. And of course, the other way to address this structural issue in Singapore is really that you try to dilute the effect by growing elsewhere with freehold land. I think that is something that is a strategy that a lot of the Singapore REITs has done in the past years. Does that answer your question?

Yes, great. Thank you very much.

Maybe we'll just take 1 question from the online audience. This question was [indiscernible] and paying off debt is important. New balance between selling assets to pay debt versus acquiring assets to increase revenue and DPU. I would like to hear your strategic approach?

I mean the best is always that is divest today. And today, in the very same minute I divest, I can buy. That is the best dream or transactions that we can have. But unfortunately, we have to be realistic about it that your divestment and acquisition are not -- it's very difficult for us to time it that way. So there will always be a time difference between the acquisitions and the divestment. In which situation, then the question we ask ourselves is what do I do with these, let's say, I do my divestment first. The question then will be, what can I do with the money? Do I sit on it, put it in the bank and earn very low interest income right? So the best option for us to do is actually to repay some of the debt, you take interest on that component, right? I think that will be more for temporary. That's why every time when we say we do a divestment, it is really to create a headroom, okay, which will allow us to look at our acquisitions with ease and with flexibility. And at this point, if you look at our gearing, we are about 34% if you take into consideration the refinancing of the perps 37%, which is a very nice headroom that we have created with the divestment of the 3 properties in Singapore that we have done earlier on.

We are mindful that we are coming close to the hour. So if you have any questions, please feel free to reach out to us. Thank you for joining us today.