Good morning. Welcome to CICT's briefing.

I'm Allison from the Investor Relations team. I hope you had a good start to the morning.

We had a very busy one. We released 2 announcements this morning: our first half results and the proposed acquisition of the 55% interest in CapitaSpring.

Our CEO, Tan Choon-Siang, he will be covering them in his presentation later. We will actually also have the Q&A session.

We'll be happy to hear your thoughts and address any questions that you may have. Without further ado, I'd like to invite Choon-Siang on to the stage.

Choon-Siang, please.

Okay. Good morning, everyone.

Thank you for joining us today. We have quite a bit to cover today, so without further ado, we will start.

Maybe I'll just run through the presentations for both the results and the transaction, and then we will just take some Q&A at the end. Okay.

So we will try to -- I think most people will be more interested in the transaction, so we will try to focus on some of the key highlights for the results first, just go through a few slides before we talk about the transaction proper. I'm sure you guys have some burning questions on the transaction itself, so we will want to jump straight into that as soon as possible.

Okay. So today, we announced the result.

CICT delivered a fairly good set of performance for the first half of 2025. Gross revenue came in about $787.6 million.

This is a slight decline of 0.5% year-on-year due to the absence of income from 21 Collyer Quay, which was, as you know, divested in November 2024. However, on a like-for-like basis, excluding 21 Collyer Quay, gross revenue grew 1.4%, and similarly, for NPI, it was down 0.4% year-on-year but up 1.7% on a like-for-like basis.

And these numbers really reflect the underlying strength and stability of our portfolio. Distributable income rose 12.4% year-on-year to a record $411.9 million for the first half.

Unitholders will be pleased to also note that our first half DPU increased 3.5% to a new high of $0.0562 despite enlarged unit base as a result the EFR that we did late last year. This was underpinned by the full 6-month contribution from ION Orchard, better performance of our existing portfolio as well as lower interest expenses.

Our proactive capital management continues to put CICT in a favorable position. Aggregate leverage improved to 37.9%, down 0.6 percentage points from end 2024, giving us greater financial flexibility.

At the same time, our average cost of debt has declined to 3.4% from 3.6% 6 months ago, supported by the easing interest rate environment and as well as our proactive refinancing efforts. These metrics underscore the robustness of our balance sheet and the resilience of our diversified portfolio.

Operationally, our portfolio remains robust. Overall occupancy stood at 96.3%, with WALE holding steady at 3.2 years.

Tenant retention rates remain high with retail and office showing improvement compared to the first quarter. This also reflects the tenant confidence in our properties.

Rent reversion for the office portfolio was 4.8%; for the retail portfolio, 7.7%, with suburban malls achieving 8.8% and downtown malls 6.9%. As we guided earlier, we expect rental reversions to moderate to a more sustainable pace in the coming quarters.

Tenant sales per square foot increased 17.9%, but this was largely due to the inclusion of ION in the numbers. Excluding ION, tenant sales per square foot was about flat, but shopper traffic increased by about 3.4%, indicating that conversion opportunities are intact.

In May, we completed the divestment of service residence component of CapitaSpring, which actually allow us to do the transaction that we are announcing today as well. So we'll talk a bit about that later.

So CICT's 45% stake was valued at $126 million. We divested it at an exit yield of approximately 3.6%.

Proceeds were used to reduce debt and support working capital, demonstrating our disciplined capital recycling and focus on financial flexibility. And our AEIs, which is our other value-add strategy, at Gallileo and IMM Building are progressing well.

Gallileo has reached 97.7% committed occupancy. We target handover to the anchor tenant from late third quarter.

Income contribution will ramp up meaningfully from 2026. At IMM, the AEI space for Phase 3 has been handed over with post AEI occupancy at about 98.6%.

With over 100 outlet stores, IMM continues to strengthen its position as a regional outlet destination. We have 2 AEIs in the pipeline commencing in the fourth quarter.

At Lot One, we will be adding an additional 15,000 square feet of NLA at Basement 2, leveraging URA's surplus carpark conversion scheme. The space will focus on daily essentials and convenience- driven retail.

We will also enhance the connectivity to the mall with a new shortened bridge extension that links directly to the residential area across the road. The mall will remain fully operational throughout the AEI, and we target to complete this in the first quarter of 2027.

In the previous quarter, we also shared that we have some AEI works planned at Tampines Mall. Here are some of the details.

In line with LTA's pedestrianization plans, we will be rejuvenating the main entrance at Tampines Mall and refreshing the tenant mix and increase product offerings through the improved configuration. The works will be carried out while the mall remains fully operational, and we target to complete this AEI in the third quarter next year.

So that concludes the key highlights of our first half results, and I'm happy to take some questions on this later. But before that, I think we would like to proceed to share about our other announcement released this morning, which is the acquisition of -- the proposed acquisition of our remaining 55% interest in CapitaSpring.

Okay. So having worked through our first half results, which reflects the resilience and quality of our portfolio, we want to now look at this particular transaction that we announced this morning.

I'm sure a lot of you have many questions. We'll try to address most of the important points in the presentation, but if you have any further questions, we can take them later.

As a background, currently, we own 45%, as most of you are well aware, of CapitaSpring, the commercial component, excluding the serviced resident. The proposed acquisition is to acquire the remaining 55% interest from our partners, CapitaLand Development, which owns 45%; and Mitsubishi Estate, which owns the remaining 10%.

The agreed property value on 100% basis is $1.9 billion, which is the average of 2 valuations done by Knight Frank and Savills, which is -- they are both appointed by the manager and the trustee, respectively. We understand that the cap rates assumed by the 2 appraisals and this latest valuations are compressed by 5 to 10 basis points compared to that of the valuation assumptions in December 2024.

That is from 3.75% back then to now 3.65% and 3.7%, respectively. Based on the agreed property value of $1.9 billion, the entry yield is approximately 4.2% based on the first half 2025 NPI.

CICT is acquiring units in Glory Office Trust for the remaining 55% interest. The total acquisition outlay is about $482 million.

CapitaSpring is a 51-story integrated development comprising of Grade -- premium Grade A office tower, ancillary retail as well as a serviced residence component, which we divested in May 2025, as pointed out earlier. I think most of you are familiar with this building.

It's not a new building in our portfolio. We already previously owned 25%.

We have provided regular operational updates on the building, so it should be something that is not unfamiliar to all of you and to us as well, which is why we are -- which is why we like the asset and we are proposing to do the acquisition. We like the property as it has consistently performed well, maintaining almost full occupancy as at 30th June 2025, underpinned by quality tenants from diverse trade sectors.

The proposed acquisition aligns with our strategic goal to deepen our presence in Singapore, our core market. With this move, our Singapore exposure will increase from 94% to 95%, reinforcing our commitment to deliver long- term value and resilience to our unitholders.

Apart from being a high-performing asset, CapitaSpring has received several recognitions for its architectural excellence and commitment to sustainability and inclusive design. They further affirm the quality of the property.

This slide shows our ownership structure before and after the acquisition. It's quite straightforward.

We won't spend too much time on this. Next.

So why are we buying the remaining 55% interest in CapitaSpring? I think the investment merit and the transaction rationale is quite clear, but we will articulate them more clearly in this slide.

We do believe in the asset. As an owner, we have seen the performance.

We were able to track the potential and the performance of the underlying asset over the last, call it, 4 to 5 years since it was completed. This acquisition aligns with our commitment for long-term value creation.

CapitaSpring is a prime example of a development-led growth, transforming from a multistory carpark -- you guys recall, that used to be the Golden Shoe Car Park -- into a vibrant commercial hub in the heart of the CBD. It offers entry yield in the low 4% and potential upside especially given the limited pipeline of new Grade A office supply in the core CBD.

Beyond financials, CapitaSpring enhances the quality and resilience of our portfolio being a premium Grade A property. Importantly, this acquisition is accretive to DPU, 1.1% on a pro forma first half 2025 basis and reinforces our position as the proxy for high-quality Singapore commercial real estate.

Let's go through the detail in the subsequent slides. So CapitaSpring is more than just a building.

It is a reflection of our value creation strategy via redevelopment and portfolio reconstitution. We started this journey in 2017 with our JV partners to redevelop the site and completed it in November 2021.

As part of our portfolio reconstitution, we divested the serviced residence component at an exit yield of 3.6% this year. And now we are requiring -- acquiring the remaining 55%.

CapitaSpring is a thoughtfully designed space that brings together work, live, play in one integrated development. Since its completion in 2021, CapitaSpring stands among the best premium Grade A office assets in Singapore CBD.

The property has 3 elements that reflect our commitment to -- has these elements that reflect our commitment to creating spaces that go beyond functionality, offering a holistic experience that attracts and retains tenants. One of the key reasons we are confident in CapitaSpring's long-term value is the limited pipeline of new Grade A office supply in the core CBD.

As you can see from the table on the right, there is no material new supply in 2025 and limited developments coming onstream in the subsequent years. This supply-demand dynamic supports renters' ability and potential upside for well-located, high- quality assets such as CapitaSpring.

You'll be further supported by flight to quality demand as occupiers prioritize premium office space for relocations. CapitaSpring's average rents for expiring office leases remain healthy with a well-spread lease expiry profile, giving us flexibility to capture rental growth over time.

In the last 2 years, CapitaSpring has signed leases with positive rental reversions in the range of 5% to 7%. Specifically, for the first half of 2025 up to now, the positive rent reversions achieved is approximately about 7% for CapitaSpring, and tenant retention for the building is above 90%.

CapitaSpring's occupancy has been strong since its completion, anchored by leading financial institutions and financial services. It is underpinned by diverse business trade sectors, supporting stable cash flows and enhances portfolio resilience.

One of the strengths of CapitaSpring is its tenant profile. Post acquisition, JPMorgan joins our top 10 tenants, alongside other well-established names.

In terms of portfolio trade mix, we remain diversified across trade sectors with banking, insurance and financial services increasing to about 18.9% from 17.6%. With this acquisition, we are strengthening our ownership and further reinforcing CICT's leading position in Singapore's office market.

From this map, you can see all our office properties located from Tanjong Pagar MRT to Raffles Place and City Hall MRT stations. They give us scale, visibility and relevance in the market.

Being deeply entrenched in the CBD allows us to better serve our tenants, respond to market shifts and continue to deliver long-term value to our unitholders. Post acquisition, our exposure to office will increase from around 38% to 40% of our total portfolio value.

Our Singapore exposure will grow to 95% as mentioned earlier. This reinforces our strategy of being Singapore focused with high-quality assets in prime locations.

As such, the acquisition of CapitaSpring will further re-enhance -- reinforce CICT's position as a proxy for high-quality Singapore commercial real estate. In terms of the financial effects, so let's look at the impact following our acquisition.

The acquisition is expected to deliver DPU accretion of 1.1% on a pro forma basis for the first half 2025. This assumes the acquisition was completed in 1st January 2025 and CICT had operated 100% of the commercial component up to 30th June 2025.

I think pretty respectable accretion numbers considering that this transaction, based on the $1 billion total value, it's about, call it, 3% to 4% of our total assets under management. So to deliver a 1.1% accretion is a pretty respectable number.

The funding will be supported by a private placement with proceeds to cover the estimated purchase consideration and vendor loans as well as transaction-related expenses. Any remaining proceeds will be used to pay down debt.

So we are balancing growth with financial prudence. Our aggregate leverage remains consistently below 40%.

Post acquisition, leverage is expected to be at about 38.3%, which is lower than our gearing level at 31st March 2025. So this is a quick table of expenses relating to the total acquisition outlay.

So subject to completion adjustments, the purchase consideration takes into account, amongst other things, 55% of the agreed property value and net liabilities. For CLD's 45% interest, CICT will receive -- will pay a 1% acquisition fee in units given that it is an interested party transaction.

Post acquisition, there's no change in the number of properties, portfolio, NLA and will as this -- because our current 45% interest in CICT -- in CapitaSpring has already included these numbers in our current portfolio. So there's no additional increase in terms of number of properties as well as NLA.

However, the property value will increase to $27 billion, while property portfolio committed occupancy will be up slightly at 96.4% instead of 96.3% as at June 2025 on a pro forma basis. Okay.

So I've given you some good insights on the transaction and why we are entering into the transaction today. If you have any questions, we are happy to take them in the Q&A segment very fast.

Yes. Mervin is not here today, but Terence is just as fast as we realized.

Okay.

Can we invite the management team on to the stage for the Q&A, please? Okay.

Before we start the Q&A, I would like to introduce the management team. On Choon-Siang's right, we have Mei Lian, our CFO.

And on Choon-Siang's left, we have Jacqueline, Head of Investment; and on her left, we have Yi Zhuan, Head of Portfolio Management. So some housekeeping rules before we start.

If you have any questions, please raise your hand and wait for the mic to come to you. Try to keep to 2 questions at a time, and we'll come back to you, you have more.

[Operator Instructions] All right. With that out of the way, would like to open -- I would like to open the floor to questions.

Okay. I see perhaps Terence, please.

This is Terence Khi from JPMorgan. Congrats on the very, very strong results.

The DPU growth is strong and of course, on the acquisition of CapitaSpring. I'd like to double click a little bit more into the acquisition yield.

You mentioned 4.2% yield. Maybe could you highlight whether there's any potential upside to the yield?

And in terms of the rentals, which are upcoming for renewal, what is the market rents today? And how under rented is the property?

And for my second question, I'd like to ask on what's the assumed financing costs for the transaction.

Okay. Thanks, Terence, for the questions.

Maybe I'll start and then let each one and Mei Lian jump in on the rents and financing questions as well. So in terms of upside, okay, so we have announced this transaction at an entry yield of 4.2%.

So last year, it was 4.1%. So this year, it's 4.2%, so it's going up, on uptrend in the right direction that we like.

But if you look at this, 4.2% is actually based on straight- line rent, which is typically how we announce, which is based on accounting NPI. Typically, accounting NPI and cash NPI, not that much difference, but because it's a relatively new building, you would expect slightly more incentives at the beginning for the first term.

So in this case, actually, the cash NPI is slightly higher than the accounting NPI. And then when you renew, you're likely to then reference the cash rent rather than the accounting rent.

So with that, we do expect that at renewal, it's likely to track closer to the cash rents and cash NPI going forward. And the cash NPI actually is higher than the accounting NPI today.

And we distribute based on cash NPI. So that's one.

So that's kind of a roundabout way of answering where the growth is going to come from. But if you want to zoom into the actual rentals, safe to say, I think we have covered in the presentation, in the last 2 years, rental reversions has been positive, ranging from about 5% to 7% depending on which lease we are talking about.

But of course, at the beginning of the -- we are still at the beginning of the first-time renewal. So there aren't that many renewals that were renewed.

Most -- bulk of our renewals, as you can see from the slide, is happening in '27 to '28. I think we do expect positive rental reversions for most of these leases coming up for expiry.

So this year, rental reversions were about 7% across all the leases that were renewed in the first, call it, 6, 7 months of this year. And then you have seen the expiring rents.

I think we put up in the slide as well, range from about $12-plus to about $13 per square foot over the next 2 years. While it looks relatively high for CBD office, if you look at -- depending on which report we referred to, but I think for CapitaSpring we are trading at above average CBD rent.

And so we are quite confident that we are able to renew them at positive rental reversions. So that's the [ first ] question.

And on -- maybe Yi Zhuan, do you have anything to add on the rental?

I think Choon-Siang covered pretty much. I think first and foremost, one of the upsides hopefully comes from JPM, right, the renewal.

But I mean, if you look at it broadly, right, the few anchor tenants, we have SMBC, we have Millennia Capital and of course, JPM. The other 2 of the anchors, the deals were kind of signed around the period of COVID, so we can understand that rents then is a little bit on the compressed side of things.

So hopefully, at the next renewal, we will have a bit of upside from there.

Second question is on financing costs, right? Mei Lian?

Yes. On the loan, at GOT level, there is a project loan that we will be taking over with the entity.

And the interest rate we have assumed is 2.7%, is on the basis that we are resetting the interest rate on the loan to the current prevailing levels.

If I may follow up, I mean, since the building was opened, I think, in 4Q '21, Raffles Place rents are up about 18%. Is this something that is potentially possible, doable in terms of rent reversions, let's say, when you are renewing some of the anchors?

Again, I have to ask JPM whether they want to contribute to the 18%. But I think, first and foremost, I would say that definitely, if I look at the property now, right, actually post CapitaSpring, we have 1 or 2 other completions, and there's not -- and we know what is the supply that's coming up in the next 3 years.

And I mean I know the property pretty well. I'm pretty confident to say we will remain as one of the top buildings within CBD, right?

So definitely, with this whole flight to quality and there's not a lot of alternatives, I think it will give us a very good position in negotiations. But having said that, we are also quite mindful that there's a balance drawing between when we talk about big anchors versus smaller tenants, right?

The ones that -- the rent delta that we see between anchors like -- and then, of course, some of the later tenants where they are smaller [ stops ] taking the top floors, right? That's quite a big delta.

But we will see some meaningful -- we wouldn't all see everything is like $16, $17, right? But we will probably see some meaningful upside in the next few years, especially if I see the company still put a lot of priority in having a well-thought-out space with all these kind of amenities.

And I would say that since -- when we did CapitaSpring, we also see a few of our neighbors in general have also actively upgrade and redevelop their properties. So there's a little bit of a momentum shift back to Raffles Place as a key business district compared to MBFC area.

So I think that's a positive sign for us.

Thank you for that benchmark. We will use that as a reference point for our next negotiation with one of our anchor tenants.

But I think just to add on the rental side, I think -- I mean, you obviously working in the building. I think the feedback from our tenants is very positive.

I mean almost all our tenants, I think they have given us very good feedback on the building, I mean, in terms of specs, in terms of the amenities and in terms of the location as well. So I think tenants generally love the -- all aspects of the building.

So I think -- and that which is partly the reason why it's 99.9% occupied. And actually, we do get inquiries of existing tenants wanting to expand, but the challenge for us is finding space for them to expand within the existing building.

Yes.

Thank you for the question, Terence. Can we have Derek?

Then, we have Joy.

All right. Derek from DBS here.

Choon-Siang, I'll just ask 2 questions, so 1 on the transaction and 1 on the results. So far, I noted that you mentioned there's a bit of a cap rate compression, right, 3.75% to 3.6% versus where we see values at the end of the year.

I'm just curious whether should we take that as a benchmark that your office portfolio also enjoy a bit of compression end of the year. So NAV today is considered low versus what we expect to see end of the year.

My second question is something that's been asked a lot. And can you give us an update on this ION tax transparency?

So 2 quick easy ones, yes.

Second one, not so easy. That second one, I would defer to Mei Lian.

I'll take the easy one. What's the first?

Oh, cap rate compression. Okay.

Yes, we expected this question. Okay.

So I think the -- well, firstly, interest rates have dropped and risk-free rate has declined quite significantly in the last 6 months, so no surprises that there's a little bit of cap rate compression. Whether it will extend to the rest of the portfolio, we have to ask the valuers at the end of the year.

I can't really give an answer to that. But if you compare that to the rest of our buildings in our portfolio, I think it's more or less in line in any case, I mean, 5 to 10 bps.

I mean our cap rates are fairly transparent. So if you compare it to 2 similar buildings in that location, will be CapitaGreen and maybe CapitaSky.

So they were in the range of 3.6% to 3.75% cap rate. So I think 3.65% to 3.7% is still well within that range, so may or may not lead to movements in other cap rates.

So I think that's kind of a -- but I viewed -- but I always viewed our NAV as undervalued, so...

Okay. The question on ION tax transparency, we have made progress in terms of having some clarity on the structure, proposed structure that we think we'll provide for that tax transparency.

But the question would be the discussion that we supposed to have with the JV partner. So that one is still something that we have to engage them.

Yes. To talk about the details, it's actually quite complex.

Yes. So it's not going to be immediate.

If anything, it would take at least a year.

Okay. Okay.

I'll keep that as a surprise. All right..

That's all.

Joy?

Two questions from me. First on the transaction itself.

In terms of anchor tenant, when is the earliest time we can actually see some of the repricing coming through? And if also you can talk broadly about rental reversion outlook for office portfolio in Singapore.

So that's question #1. Question #2, on interest expense.

The 2.7%, can you do that immediately after takeover? Or there is a repricing gap on the debt?

And also, what's your guidance for your full portfolio debt, cost of debt?

Okay. So I think for the first question, our rental reversion, there will always be leases coming up for renewal.

This year, I think there's not that much left. I think there's only 3% of leases coming up for renewal.

All of them, I think, are already in advanced negotiation, about to be signed at positive rental reversions. So that's a few.

I think next year, we have about 15% if I'm not wrong, according to the chart. And then subsequently [ 36% ].

So I think the first major anchor tenant will probably be in '27 and then '28. I think it's quite clear if you look at the stacking of the expiries any way that the 2 anchor tenants are coming out in '27, '28.

I think that answers the first question. Second question on...

Sorry, second part of the first question is the broader office rental reversion.

So I think the trend -- well, this is a tough question. Maybe I'll leave it to Yi Zhuan.

I think, generally, we do expect the trend to be quite similar, maybe a slight moderation from the first half. We'll probably be at what?

I think the supply is actually still quite tight. That's how we feel.

The question is whether there's demand to drive the rents going forward. I think organically, we do see demand for existing tenants to expand space within our buildings.

Most of the time, our challenge is finding space for them because most of our buildings are quite near full occupancy. So I will say that if I were to -- I would say that it will be quite similar trends with the first half, maybe with a slight moderation.

Yi Zhuan?

So if you talk about guidance for the reversion for a full year basis, we are still on track, probably looking at mid-singles. Hopefully, on the better half of the mid-singles, yes.

Okay. The question on the assumed interest rate reset, it would be -- I mean, we intend to do it before completion at the JV level.

So when we take over, it'll be based on the prevailing market rate. And the guidance on the cost of debt for the group, we have 3.4% as of June.

So we're looking to -- for full year this year, we'll be closer to the mid-low 3s level. Yes.

You'll inch down. Yes.

Yes. And sorry, just the 2.7% is based on what tenure?

We've assumed it based on fixed, yes, between 3 to 5 years. Yes.

And I can take that as assumptions for all your upcoming debt refi?

Well, you see, average cost of debt is the average number. So within that number, there are some rates that are higher, some rates that are lower.

So when we look at the prospect for trending down, that will also depend on whether there are some lower cost debt that will be reset to prevailing levels. And actually, we do have some euro borrowings that is at historically low rates, yes, that were locked in like 5, 7 years ago.

Yes. So that will impact on the magnitude of the leasing interest rate.

Yes, we expect to complete the acquisition in third quarter. I saw Rachel has a question.

Then after, we can go to [ Xuan ].

Congrats on your first acquisition. Maybe just -- I think most of my questions are answered, but maybe just go to -- in terms of retail rent reversions.

I think this quarter, we saw that suburban is holding a little bit better versus the downtown, so if you could give us a sense, your guidance on rent reversions. And how is ION tracking?

Okay. So I think we have -- I think last few quarters, we have done quite well in terms of rental reversions.

Retail on average was about 10%. But we know that, that was not sustainable in the longer term, firstly, because it was coming off a slightly lower base.

I think we have also guided that it's slightly to moderate going forward, which it has. Now it's about -- now we are averaging, what, about 7.7%, with suburban at 8.8% and downtown 6.9%.

So I think this quarter, there were some leases that we think were slightly out of the norm. So it did track the reversion down slightly compared to where it was end of last quarter.

Now question is whether these reversions are likely to continue for the rest of the year. I think -- now that it has come down to these levels from 10%, it's probably slightly more sustainable.

I think our -- we're probably guiding from closer to these levels closer to the end of the year, maybe mid- to -- somewhere between mid-single digits to where we are currently showing for this June 30.

ION? ION, how is it performing?

Oh, ION. ION, generally, has done quite well for us.

If you look at it compared to our underwriting assumptions, if you recall, I think when we acquired ION kind of to meet the numbers where we were, at one point, looking at giving higher MFU, which we didn't have to. So that speaks volumes about how the transaction itself has contributed without having to make the subsequent adjustments that was needed.

So I think ION, as a whole, has done better than what we expected. But of course, having said that, we know that the whole world is suffering because -- in terms of luxury spending, and Singapore is not spared.

So the trend is definitely down on a year-on-year basis for lux spending. But I think ION is holding up well when compared to the rest of the world.

I think Singapore, for some reason, lux spending is down but not as much as the rest of the world. Yes.

So we are hoping that -- we're doing quite a bit of work at ION as well. I think if you have visited ION, you will see that there's a lot of halting.

Part of the reason -- this is by design. It's not due to tenants leaving or -- retention remains quite high.

Actually, it's part of our asset enhancement to bring some of the activity to the higher floors because if you notice, ION actually is 2 different malls. There is a slightly more mass market more at the basement.

There's kind of a lux mall at the -- and then the third, fourth floors are slightly quieter compared to the basement and ground floor. So we're also trying to improve the performance of the asset by trying to move somewhat performing tenants up and then opening up space at the ground floor for potentially new tenants and a new tenant mix.

So it rejuvenates the mall as well as improve the vibrancy of the entire mall for ION. Yes.

So the other way we -- the other thing that we've been doing is also, if you notice now we have more double -- duplex and triplex stores in ION. So that is also a way to improve the performance of the mall because, for example, by -- instead of a well-performing brand occupying of 2,000 or 5,000 square feet on 1 floor, if we have them at 2,500 on ground floor, 2,500 second floor, it also bring the footfall up to the second floor without -- while preserving the ground floor for a more larger variety of tenants.

So that's the other thing that we are trying to do in ION as well.

Okay. But in terms of the tenant space, it's pretty much similar, no expansion.

Yes. Not -- in terms of NLA, yes.

Okay. Then my next question is I know you have just done this acquisition.

The next question is what's next. So I mean, just to hear your thoughts, is divestment your focus?

Or is -- would that be redevelopment? I think URA master plan has a few targeted areas that affects -- that your malls are in, so yes.

Yes. Okay.

So I think that very simple answer is inorganic. I mean there's nothing to -- I mean, we -- there's nothing for us to talk about unless there's something definitive anyway.

So the answer to the first question, it is inorganic acquisition. There's not much for us to comment on.

But we are always looking for opportunities. I think the current environment also allows us to be -- to explore for new interesting opportunities given our lower cost of funding going forward.

So that's helpful. Whether there will be any divestments, I think we're always reevaluating our portfolio.

So in terms of -- I mean, you have seen us divest 2 assets in the last, call it, 8 months, 9 months, serviced residence as well as 21 Collyer Quay. So we're always reviewing whether it makes sense in terms of any of our assets.

I think we -- I think the existing Singapore portfolio generally looks quite good the way it is now. I think most of the assets are doing very well.

Most of them are trading well in terms of yield, and most of them, we do see the potential in terms of growth going forward. And also with good cost of funding, there's also less need to do divestment to fund future acquisitions.

So I think -- okay. So that's on the inorganic part and asset recycling.

In terms of asset enhancement, I think that's one of the core pillars of value-add creation for us. So we will continue to go down that path.

We have already talked about -- I mean we have already completed 2 this -- well, completing 2 this year. So we are already on the lookout for the next 2, which we have just announced 1 being Lot One, the other 1 being Tampines Mall, slightly smaller in scale but still something that we -- I mean, there's only so much you can do in terms of existing organic, a -- sort of a complete redevelopment, which, as you already pointed out, we can also explore for some of our sites that are slightly older.

We are quite fortunate, the draft master plan from URA. Actually, a lot of the precincts that have been identified are in areas where we already have a presence in.

So it is helpful for us in 2 ways. One is we can participate in the rejuvenation.

The other way is even if we don't do anything, the rejuvenation will actually help us anyway. So either way, we benefit.

So for us, whether we do the -- participate in the rejuvenation, I think, depends on the commercial population. I mean, to be fair to our unitholders, I think whatever we put into the redevelopment must be commensurate with the returns that comes with it.

So we are starting all the plans, but I think, unfortunately, we don't have anything specific that we can disclose. It's quite preliminary.

I mean, the plans just came out last month. So we are working with authorities to see if there's anything that can be harvested.

Okay. [ Xuan ]?

Can I follow up on the question, right? If you think about next 12 months, how would you prioritize between portfolio management, acquisition and enhancement?

Because CICT has been very active over the past 12 months, so just trying to get a sense how should we think about time line.

Yes. We want to do everything.

Okay. So I think -- I mean, there's no -- I think it has opportunities.

So there's no straight answer to that question unfortunately. I think asset management is bread and butter.

I think it's -- again, we do that every day. So we have a team that is very good at what it does in terms of enhancing the performance of the assets.

So I think that's an ongoing basis. And then asset enhancement, as I said is also one of the bread and butter for us, although it's not a daily thing that we do, but we always want to -- we are constantly looking for areas to improve the asset performance, especially for some of our more tired and dated properties.

I don't think it answers your questions directly. But if you look at our track record over the last few years, I think we focus on all 3 things at the same time.

I don't think it's a zero- sum game. Just because we focus on asset enhancement doesn't detract us from the possibility of doing acquisitions.

In fact, we have different teams doing different things. So we are able to do all at one go.

So it's not necessarily mutually exclusive in that sense, which is kind of where the question is kind of driving it. But under -- implicit in the question is that they are mutually exclusive, but actually, they're kind of not.

Yes. And also after acquisition, we always have to do -- we don't just acquire and then leave it as it is.

We continue to improve like we are doing with ION and some of the other assets that we have acquired along the way and then at some point, do asset enhancement as well. So I don't know if that answers your question.

Can I also get your thoughts on fundraising? I guess, cost of equity has -- came down, right?

Do you roll out more fundraising over the next 6 months?

We wouldn't do fundraising for fundraising's sake. Let's put it that way.

So if we were to do fundraising, it has come with attractive acquisition like today, an acquisition that is accretive, that adds long-term value to our portfolio, that is something that we think will add long-term value to the unitholders as well. So in that sense, if there is an opportunity that comes out that requires fundraising, then so be it, but it must go hand in hand with acquisition that makes sense.

But having said that, our gearing, it also depends on the size of the transaction, right? I mean, we are now at maybe about, just call it, 38%.

We still have some debt headroom technically, but we try not to get there. If it's a small transaction, we don't actually need to do equity fundraising or like small AEIs or redevelopments.

Yes. So I think the short answer to your question is we won't rule it out, but we will only do it if it makes sense.

Yes. Can we have -- now turn to the online question?

Mei Peng will actually help. Yes.

I have a few questions from online. The first one is from [ Tien Cha ].

He's asking, given that cap rates have remained firm, why is the exit yield at 4.2% for, I think, CapitaSpring higher than Mapletree Anson's 3.8% yield? It's the first question.

Why is...

I think actually, the 4.2% we talk about is the entry yield but I think is why is our entry yield higher.

So it's asking us how do we manage to get it cheaper than Anson. Double check the question.

The Mapletree Anson one, right, has -- it's a slightly different tenure. The remaining tenure is different.

So...

I think I would just add that it's probably different timing. Yes.

Also different timing. So I mean that's -- yes, the land tenure, the remaining land tenure is like 82 years.

Okay. The second question is from [ Kay Hee ].

She's asking us how much tax savings approximately can we expect from ION Orchard. It's probably relating to the tax transparency.

I think as Mei Lian pointed out, I think don't hold your breath for the tax transparency. It's probably -- well, it's -- it can happen, but it will take a long time.

The restructuring might take a long time. So I think she has mentioned that it will take probably at least a year.

So it's -- just take it as a positive surprise if it happens subsequently.

Okay. The third question is on operations, so from Geraldine, DBS.

Noted that the suburban sales was flat year-on-year. What would our suburban mall sales trend be if we strip out IMM AEI?

So it's flattish and slightly down if we take out the -- so currently, it's slightly down. So if you take it out, IMM from it, right, it will be also flattish but it's slightly up.

It's about 0.2% up.

[indiscernible]

Sorry. I will just probably repeat that.

If we take out IMM AEI, it -- excluding that, it will still be flattish, slight up at 0.2% across both quantum as well as the per square foot basis.

Okay. Then there's a couple of questions from Bloomberg, [ Dexter ].

Okay. So firstly, is that [ Dexter's ] asking that as recently as May, the management was guiding that it was not in a rush to acquire CapitaSpring stake.

So what changed in the last few months? That's his first question.

Second question is that there has been some chatter about the retail rents, so whether we have heard similar feedback from tenants. And any concerns about the -- I think the talks about rental controls going forward?

Okay. So I can't remember what we said.

First one, yes.

Did we say that we're not in a rush to get CapitaSpring? Okay.

But -- well, May to August, 3 months is not really a rush. So I think -- okay.

I think on a more serious note, I think it always depends on the opportunity, the timing, the market conditions. I think all along, we knew that CapitaSpring was something that we could execute because it was an option on our part.

So we could have done it sort of at our own timing. Then the question is when is the best time.

To me, actually, now is probably as good a time as any for a few reasons. One is, as we mentioned, I think the cost of funding is attractive.

It has come down over the last few months. So that makes the attraction -- the acquisition more attractive in that sense from a financial perspective.

Secondly, the core option is based on formula. And the formula -- I think its formula is publicly available information.

It has actually an embedded creep in terms of the purchase price. So if you were to buy it later, actually, the price continues to go up.

So buying early actually makes the -- allows us to buy it slightly cheaper as well. I think thirdly, the option expires -- while we are not in a hurry, but the option expires November next year.

The closer we get to the option expiry, the more our hands are tied because this transaction, most people know would need to go with equity fundraising because the transaction size is fairly significant. So if we leave too little room towards the option -- between the transaction timing as well as the option expiry, then the overhang will be a lot more significant, as in that the market will be expecting the transaction, in which case, it makes it harder for us to do the transaction as well.

So I think now is probably as good a time as any. Was there a second question?

Yes, the second question is more on the retail rents, whether we have heard feedback from tenants.

Oh, on the recent online. We always refer them to [ Irwin's ] article on LinkedIn.

Okay. But jokes aside, I think actually, if we talk to tenants, a lot of the online backlash on rents is not really coming from more tenants because a lot of them are coming from tenants that are operating in maybe like strata units, shop houses for a few reasons, typically, either the previous rent was very low and then suddenly, there was rerating of the rent because the new landlord took over or maybe because they just had very low rents for a long time.

Because in a mall, we will never jack out rents by 50%, as you all know. You never see rental reversions at 50%.

We wish we could, but it never ever happens. In fact, we are guiding mid to 7% -- 7%, 8% kind of rental reversion over 3-year lease, which is about 2% to 2.5% per annum kind of escalation, which kind of tracks inflation, which is the way it should be.

I mean in the long term, rental should track long-term inflation rates. So -- okay.

So I think -- one is, I think, we are not getting that kind of negative feedback from our tenants. I think the other thing is also, I think, tenants also appreciate that the landlord makes a big difference in terms of the footfall, in terms of the marketability of the mall and in terms of the driving of the traffic and footfall to the mall with our marketing promotions, with our loyalty program as well as our tenant mix.

So I think the -- and there's a reason why most of the malls that we have are still at -- close to 100% occupancy, is because the tenants are able to see the value that we provide to the space. Anything to add, Yi Zhuan?

I'll probably just say that if we look back at the past few quarter results, every time when we talk about reversions, I've always stressed that the importance is really to ensure that it's also sustainable to our retailers and because it's a long-term relationship that we have. And I think at the start of the session, if you could see some of the things we put up, there's actually a lot of our tenants who have been with us for 10, 15, 20, 30 years.

And the important thing is really to make sure that we have a mix that actually makes sense for the community that it serves, right? Whether you're a downtown mall, whether you're in a suburban mall.

So of course, there's -- unfortunate that in the media, sometimes we pick out 1 or 2 examples and then we make an article of it. Rent is one component.

I think the retailers nowadays face a lot of pressures from all fronts. One, we have the consumer habits changing.

At the same time, you have also manpower cost, manpower limitation and stuff like that. And what is important for us is not just looking at cutting rents per se, right?

It's what -- there's no point cutting rents, right? [ If end up ] your mall, it's irrelevant.

You don't get footfall. You don't have outcomes, everything.

The important thing is constantly having that engagement. And I think our asset managers or leasing managers is doing that on the ground, talking to tenants to see how to help them grow their business, how to make sure that they are performing well within our malls.

So I will say that, at this point, definitely, it's something that we are continuously working on. We don't take it for granted, right?

And we will continue to make sure that across our malls, we keep that vibrancy, keep that relevance. And I think it reflects in the numbers that we are seeing now and hopefully, you can keep that going forward.

Okay. Just last 2 questions from online.

First would be the operating margins, whether we can give any guidance for this year also to 2026, whether any further savings in utilities, this operation. And then the second one, it's more about moving to overseas for Germany and Australia, whether the -- what's -- how's the asset performing and whether the income contribution from Gallileo has kicked in.

Yes.

Maybe I'll take the second question first and then Yi Zhuan can take the first question. So I think overseas performance -- actually, overseas performance of our assets, we're actually quite -- we think that -- okay.

Let's look at the market separately, right, Germany and Australia. I think Germany, we have 2 -- we only have 2 assets.

One is Gallileo, which is basically derisked, right? It's already fully tenanted to a single tenant with a small retail space.

That is the reason why -- retail space plus a villa space that is -- takes out a very small percentage. That's why the occupancy is not 100%, but otherwise, it's largely derisked and income recognition -- well, we will hand over Phase 1 to the tenant hopefully by the end of third quarter.

And then there's a Phase 2 that we will hand over possibly end of the year or beginning of next year. So then the income recognition will start after we hand over.

Maybe with some rent free but generally, I will say, expect most of the income to only start beginning of next year. Okay.

So that's on Germany. So the Germany occupancy that you -- that we normally show in the slide doesn't include Gallileo because it's still under construction -- I mean, renovation.

So if we add that in, actually, our occupancy for Germany probably tracks closer to about 90%. 80% is the remaining asset, which is the one at the airport.

But I think for Germany, we are also quite constructive. The government has actually been putting out a lot of news and measures to pump, right, the economy.

So we are hopeful that this will help translate into the general economy and eventually to real estate rents at some point in time. I think the other thing that is happening in Germany, of course, is that euro rates are also coming off slowly, but it's definitely in the right direction.

So we think that, that is also conducive for the real estate market eventually. So I think give it some time.

I think we do think that the market will turn around, hopefully in the next 12 to 18 months. I think in Australia, we have 3 assets.

Actually, Australia, out of the 3 assets, 2 assets are actually doing quite well, close to full occupancy for 101 Miller as well as 66 Goulburn. The 1 asset that is slightly more challenging is 100 Arthur Street, which is about -- close to about 80% occupancy.

But we are seeing green shoots. I was just in Sydney with the team last month, and actually, the Sydney market looks like it's bottoming up.

I mean, based on the conversations that we have with the stakeholders there, the tenants as well as consultants, it does seem like people are taking a fairly slight bullish turn on the Sydney real estate market. But of course, like all general CBD markets, I think the one that moves first is the core CBD.

So we are seeing that happening in Sydney already, and hopefully, that momentum will then spread to the peripheral CBD area including some of the areas where we have assets in. And in terms of leasing, we are also actually -- we're seeing a lot of inquiries for some of the space.

So we are hoping that some of these, fingers crossed, will lead to conversions in the next 3 months. So potentially, there could also be some improvements in the occupancy for some of the -- for our assets in Australia.

Just back to the first question on the utility. We do expect it to be relatively flattish, if not, [ we can build ] savings from that for 2026.

Do you have any more questions from the floor. Terence?

Terence.

Maybe 2 more questions from my side. I guess for Junction 8, during the draft master plan, they've unveiled new plans for some regional center in Bishan, and there's a lot of potential office developments.

It's in the draft master plan. So I wanted to understand a little bit more whether Junction 8 could benefit from extra potential GFA.

And second question from me, I wanted to understand a bit more about ION, too. Are you able to share the reversions and the cash occupancy for ION?

Okay. Easier one first, Junction 8.

I think Junction 8 -- okay. So I think just overall, the -- actually, we are quite happy with the way the draft master plan has come up because I think 2 key things, right?

One is decentralization of office, as you mentioned. I think some of the regional hubs that we have identified are like Jurong, Bishan, Paya Lebar, Tampines.

Why is this good for us? It's good for us -- if you notice, none of it talks about increasing supply in the CBD.

And we already have office in the CBD. So that one, that will benefit our, I think, overall positioning of our -- and the supply-demand dynamics of all of the buildings that we have in CBD, including the one transaction that we're announcing today.

So I think that's very conducive for us. Secondly, all the things that we have outside the CBD are malls.

And if you add the office buildings in some of these hubs and neighborhood centers, it's likely to make it more vibrant, higher footfall and rejuvenate some of these town centers. And I think in some of these areas that we have malls and we are ready to benefit regardless of whether we will increase.

So we are ready -- we think that this actually bodes well for our overall portfolio in Singapore in general. So that's just on a high level.

Specifically, for Bishan, whether there will be additional GFA, we can't answer that question right now because it really depends. I mean that's a conversation we need to have with authorities.

So it also depends on whether it makes sense overall, right, because there is existing income at Junction 8. So to make the development make sense, there needs to be a fairly significant uplift in terms of GFA.

If there's no increase in GFA, definitely nothing can be done because then you are really putting your existing NPI into land value if you do a redevelopment. So the conversation -- I mean, it has barely started and it's a multi-stakeholder kind of conversation.

So I'm afraid I can't give you clarity on that at this point in time. But in any case, even without that, I think existing Junction 8 is doing very well.

So we are happy to continue to earn the core income that we have based on the existing [ as is ] yield. What's the second question?

About ION.

ION rental reversion, I'm afraid we can't share that. So...

You mentioned that there's a lot of [indiscernible].

Oh, cash occupancy. Do you have the number, Yi Zhuan?

Physical occupancy, right? Not -- we don't have a number.

Sorry. We can get back to you, but we don't have the number offhand.

So online questions again, Mei Peng?

Sorry. Just 4 more.

One is on the CapitaSpring acquisition. So the question from Derek, it's -- from Morgan Stanley.

What is the JV loan that's costing now? Is there the delta between the current JV loan interest and versus the 2.7% that was mentioned and whether this is already factored into the 1.1% accretion?

The question is -- okay. So I think the JV loan, I think what confuses the matter is that it's kind of like a related party transaction.

But actually, if you look at it as a third-party unrelated transaction, we will never assume the loan of a third party. So when we buy the asset, it's always up to the seller to unwind the existing loan, and then we come in and take on the loan ourselves.

So in that sense, actually, to keep it simple, actually, investors and analysts should assume that whatever we buy should assume our existing cost structure and financing cost structure. So actually, the outgoing financing cost is irrelevant.

Okay. And another question is about that -- the equity.

So I think the question from [ Gideon ] is that because since CICT, we have the gearing headroom and borrowing costs are trending lower, he just wanted to understand management's thoughts about going through this using the equity funding to acquire the 55%. I think asking why we're not using debt line.

Yes. I think if we use debt, our gearing will probably go up to just above 40%.

Doable but not ideal. So I think there's always a trade- off.

In fact, if you do 100% debt, your accretion will look super attractive because of the low cost of funding now. But I think we have to balance this with the long-term growth of the REIT because if we are at 40%, in any case, we cannot -- it leaves us very limited room to grow from then onwards.

So I think a few important consideration is that we want to position the REIT for long-term growth as well. So we want to have the financial flexibility.

So by doing this transaction together with equity fundraising, we then preserve the ability to be more financially nimble. So that's one.

I think secondly is because we can also because there is sufficient accretion in this transaction that gives us the ability to throw in a mix of debt and equity funding. And despite the $500 million -- close to $500 million of equity fundraising that we are doing, our accretion is still about 1.1%.

So the accretion already took into account the equity fundraising. So that's another important consideration.

Okay. I think the last question online, it's about ION Orchard.

I think this is a hypothetical question. I think it's asking whether will ION Orchard be DPU accretive in FY 2025 if we strip out all the divestment acquisitions announced this year and the fact that we did not have the tax transparency.

Probably more about the operation.

No, the simple answer to the question is yes because actually, it doesn't matter whether we are doing any divestment or acquisition. ION acquisition can always be analyzed on a stand-alone basis based on the financing structure that was done then.

So if it makes sense back then and we have already said that our performance in -- ION performance is better than underwriting, based on the underwriting, it was accretive. Then without -- if it's better than underwriting, then it will be even more accretive.

So that's the short answer. So whether we are doing more acquisitions this year does not detract from the performance of ION and the accretion of the ION transaction.

Okay. The last one is a very simple one.

The retail occupancy costs.

What about it?

What is our retail? I think still close to the full year one, I think, yes.

Oh, you mean...

Retail occupancy costs.

17.6%. As in what is the year-end?

[indiscernible]

17.6%, yes.

Okay. Let's go to Joy.

Just one question from me. How strategic is your 2% in Germany and Australia each?

You spoke about green shoots. So will you exit with these green shoots or scale up?

We wouldn't scale up.

Do we have one last question? If not, Choon-Siang, would you like to give some closing remarks?

No, I think thank you, everyone, for coming. I am quite excited by the many questions that were asked during this briefing.

I think I can tell that everyone is quite excited about the transaction, about the briefing and about -- so yes, thank you very much. We hope that it's a good outcome for all our unitholders.

We'll probably update again this evening or tomorrow on the outcome of the equity fundraising.

Thank you, Choon-Siang.

But if there any questions, please feel free to e-mail if you...

Yes. Please send them my way if you have any questions.

Thank you for being with us today. If you have time, please do stay around.

We have some refreshments outside for you. And to those online and everybody else, we'll see you next time.

Thank you.