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Allison Chen: I hope you can hear us. If you guys -- if you cannot hear us, please let us know. So before we get into it, let me share the agenda for today. So we will have Tan Choon-Siang, who will get us through the third quarter key highlights. After that, we'll delve into the Q&A. And then please also note that this meeting will be recorded. A quick round of introductions of the management. We have today here Choon Siang, our CEO; Mei Lian, our CFO; Mei Peng, our Head of Investment; Yi Zhuan, our Head of Portfolio Management; and I'm Allison, Investor Relations at CICT. Okay. Now let's bring on Choon-Sian to share his highlights. Choon-Siang, please.
Choon-Siang Tan: Good morning, everyone. Thanks for joining us today. I know you guys are excited to ask us questions. So we'll try to spend just a couple of 3 minutes. You probably have gone through the slide deck. I think safe to say this is quite a good quarter in terms of operating performance as well as financial performance. You can see that we are pretty much firing on all engines. Office is doing well. Retail is doing well. AEI is getting complete contributing and acquisitions are helping to help with the growth of the operating numbers as well as the financial numbers as well. So NPI up about -- for the year-to-date, we are up 0.2%, but that's, of course, due to the fact that we sold 21 Collyer Quay. Like-for-like up about 1.4%. On a quarter basis, it's quite similar numbers. Gearing is up 39.2%. I think some of you might be surprised why the number went up compared to last quarter, but it is because of the distribution that we did as well as the advanced distribution that we did as a result of the EFR. So there's a reason why the gearing creeped up slightly. Cost of debt, as expected, came down slightly, 3.3%. Bear in mind that this is a year-to-date calculation of cost of debt. So you don't expect it to move by quantum leaps because you are averaging over 9 months, whereas the previous quarter, we are averaging 6 months. We did a good financing, $300 million for the quarter. You guys have seen the news, 2.25%, probably the lowest financing done by the REIT this year. Operating metrics, maybe I'll just quickly skip to the next slide. I think operating metrics, we can talk about it a bit later. So AEI, we have -- I think we have announced some of this earlier, but we have now started works on these 3 projects already, at least from this quarter onwards. Lot One, we have gotten commitment from FairPrice to expand into Basement 2. This will be a conversion of the existing carpark. So that will be a good uplift in terms of NLA and should help contribute meaningfully from next year -- towards the end of next year onwards. Tampines Mall, we have already started work. If you have visited, you would have seen some of the works at the entrance area. We will also be moving the works further in once that exits. We have already got a commitment from some of these key tenants that you see here. So a very exciting list of new tenants that we hope will uplift the overall mall. And then we are also starting work on Raffles City. But this is not really a significant asset enhancement. It's more an upgrade of existing facilities given some of the facilities and some of the amenities that are lacking compared to some of the newer buildings. For example, end-of-trip facilities, which is common for new buildings now, which is not present for R City. We're trying to add that as an amenity for our tenant in Raffles City Tower. Next slide, please. I think financial performance, we've talked about that. We are up 1.5% year-on-year in terms of gross revenue, NPI as well, about 1.6%. So fairly happy with the numbers. So contributions from all areas from rental reversions, from improvements in occupancies as well as the acquisitions are contributing to the numbers. Next slide, please. Next slide, I think year-to-date, we talked about it. Leverage ratios and capital management numbers, we've touched on the key numbers in terms of gearing and average cost of debt. So I don't think we need to dwell too much. Next slide, please. I think we don't have to focus on this. Maybe just go through the rental reversions and occupancy. Next slide. Yes, maybe just a quick one on occupancy. I think all of our assets are doing well, all in Singapore, Germany as well as Australia. Office occupancy has improved due to improvements in Australia as well as Germany. We have leased out some additional space in 100 Arthur as well as MAC. So that's a very positive news for us, given the lack of momentum over the last few quarters for leasing some of this. And now we are seeing some green shoots. So we are very happy with the outcome. Integrated development occupancy came down slightly due to mainly Raffles City. It's a accumulation of a few different buildings. So it adds up to about 0.5% due to Raffles City Tower as well as Funan. There are some exits, but we have already backfilled some of the spaces and we are continuing to see some momentum in terms of backfilling. So I don't think we see that as a major concern. Next, Rental reversions, very pleased to say that improvements against the last quarter, you guys probably have seen the numbers already. If you look at it compared to second quarter, these numbers are up compared to last quarter. Last quarter, overall, retail, we are probably up 7.7%. Now we're up 7.8%. I think the more meaningful number actually is office. Office is up 6%. Rental reversion is 6-plus percent compared to 4.8% last quarter. Retail sales, very positive quarter. So I think as we highlighted in previous briefings, I think second quarter was a bit muted, partly due to liberation day, right, it was purely based on effects of that, in April and May. So we had a slight -- I mean, excluding ION, we had a slight downtick in terms of tenant sales, but now it's back up about 1% per annum year-on-year growth if we exclude ION. If you ION, of course, there's a more significant growth rate. So I think overall, it does look like the momentum is swinging back to positive. So very pleased with the outcome as well in terms of operating numbers. Next, some of the new brands, I don't think we want to spend too much time, but I think if you have visited some of our malls, I think we have quite a lot of exciting brands. Hai Kah Lang, if you have gone to Funan, you'll see that every day, there's a long queue there. Legendary Hong Kong in Tampines Mall is doing very well, some new brands in some of the others. I think it's probably not your focus. Maybe just one last bit, one last slide. This is the improvements in occupancy across the 3 countries, as you can see, we are indeed improving the occupancy as what we promised. I think we wanted to improve the asset performance for some of our overseas assets, and we have delivered on that. Germany is now up to -- we leased out a major space in bank, which has been quite stubborn. So now occupancy there is about 86%. And bear in mind, this is you excludes Gallileo. So if you include Gallileo, that number will probably move a little bit higher. Australia, we also managed to lease up -- actually, the only challenging asset in Australia was 100 Arthur, so that we have leased up quite a big space over there. So now that moves the average of the 3 buildings up from 88% to 91.2%. Okay. Sorry, I think that's probably more than 3 minutes, but maybe we can move to Q&A.
Allison Chen: [Operator Instructions] I see quite a few raised hands, but perhaps then we will go to Mervin.
Mervin Song: Congrats, Choon-Siang and team. Very good business update. I can't see many negatives per se. Can you touch on the tenant sales? FCC also reported improvement. I'm just wondering what's happening for third quarter? And do you think this will continue into fourth quarter considering the last 2 Decembers has been down year-on-year? And the second question I have is in terms of cost of debt guidance noted it did fall Q-on-Q. Do you have updated guidance for year-end as well as FY '26?
Choon-Siang Tan: So I think -- I think that -- I would say that Q2 is more an anomaly. So we are back to normalized pattern, I mean going up. Normally, you wouldn't have been so excited if we tell you tenant sales are up 1%. I think you will see that as business as usual. I think it was because second quarter, we were down and now it looks like an uptick. But I feel that second quarter was more an anomaly because of Liberation Day, there was a lot of caution thrown into consumer spend. So I think some of that savings that people locked up in second quarter might have contributed to the uptick in third quarter. And of course, if you look at year-on-year, 1% growth means that the third quarter sales was higher than 1%. So it's quite strong momentum. I think part of it was also contributed by CDC vouchers, right, because those went up in July, but probably did not account for that full delta. But in fact, we probably saw an increase overall across most of the trade categories and not just supermarkets. Okay, so I think our second part of the question is whether we can see that continuing in Q4? I think that's a bit hard to -- I mean, hard to extrapolate. It always depends on how much time people spend traveling outside of Singapore. I think that's always a big determinant of whether a lot of them spend days in Singapore. Sorry does answer your question on December numbers?
Mervin Song: Not a problem, yes just wondering your thoughts. A lot of negativity in the retail space, but I think this is a positive data point. We will just to need to keep writing on LinkedIn about how great retail in Singapore is.
Choon-Siang Tan: I mean negative news always gets more eyeballs. That's all I can say. So don't always believe everything you need in the newspapers.
Mervin Song: And cost of debt...
Choon-Siang Tan: At the macro numbers from [indiscernible] right? I think the retail sales numbers are actually up in third quarter quite a bit as well. So it's not just limited to sales in malls. I think overall macro across the country, retail sales are up quite a bit. I think if I'm not wrong, it was about August or July up about 4% to 5%. Yes, I think August 4.6% retail sales.
Mei Lian Wong: Then there was a question on cost of debt. So the averaging down of Q-on-Q is that we're actually seeing lower cost per Q, it is close to about 3.17%, so guiding towards the end, we continue to see the cost of debt slightly down. But to the nearest decimal point, it is probably close to 3.3% -- but when we round it up to the nearest, it is still around 3.3%.
Mervin Song: Sorry, you're a bit softer. So can I say that -- so the third quarter itself was 3.17%?
Mei Lian Wong: Yes, yes.
Mervin Song: Yes. Okay. So next year, it will be at least 3.1%, if not 3%.
Mei Lian Wong: Yes, yes, closer to 3.1% to 3.2%.
Mervin Song: Next year.
Allison Chen: All right. Next, shall we move on to Geraldine?
Geraldine Wong: Choon-Siang team, maybe just following on to Mervin's question. If your full loan book resets at today's rate, what could your average cost of borrowing look like?
Choon-Siang Tan: Well, theoretically, it should be the same as what we just borrowed, I mean it is 2.25%, right?
Geraldine Wong: Okay.
Choon-Siang Tan: Yes. I mean I'm just giving a very simplistic -- I mean, we have the capability of borrowing at 2.25% today. So if we reset the whole loan book, it should be that or even lower because there was a 7-year bond, right? Technically, our average term to maturity is 4 years typically because you have some nearer data ones and some floating. Floating are usually even lower. So if you -- I think 2.25% is probably conservative if you reset today, but yes.
Geraldine Wong: Okay. Yes, it's the lowest rate we've seen in a while. Maybe just on office, if I just look at 3Q reversions, it looks to be closer to 10%. So just wondering what's driving the numbers? Is it more Australia? And how much of it is due to the CapitaSpring consolidation?
Unknown Executive: Our reversion numbers does not include the overseas properties, just the Singapore reversion numbers. We saw some of the leases in some of the properties, but currently however the reversion number is pretty strong.
Geraldine Wong: Okay. So it's [indiscernible] plus CapitaSpring console.
Unknown Executive: Yes, there's a bit of a blend across the board.
Geraldine Wong: Okay. Okay. Maybe just last quick one on acquisitions. Now with CapitaSpring already under your belt, what could be next for us to excite the market?
Choon-Siang Tan: You're not excited enough?
Geraldine Wong: Very exciting, but...
Choon-Siang Tan: Well, we are looking at a few things that I'm quite excited about, but I don't think I'm ready to share with you. Okay. I think in terms of things that are visible, the only thing we can share, I guess, is sponsor pipeline, right? I mean those are at least clearly visible. Sponsor pipeline, I think what is left in the books is Jewel and Jewel is quite an exciting project, but we don't know whether -- yes, I guess that's a matter of timing as well. So that's one potential. I'm not sure whether it's something for '26 or '27 or '28. So we'll see what happens. Also looking at some other stuff, but yes I think the other thing that is getting us also excited is also I think we do -- we are trying to do a few AEIs. And I think those have quite meaningful contributions. I mean they are a bit smaller in terms of capital deployment, but they do add vibrancy, add some new tenants and also contribute meaningfully to our numbers on a consolidated basis. We're also exploring new potential AEI for some of the other malls. So as and when they are ready, we'll be sharing that next year if they come to fruition.
Allison Chen: Next, [indiscernible].
Unknown Analyst: Three questions. The first one is on ION. Tenant sales have been very strong. How long can this sustain?
Choon-Siang Tan: So far, I think so good. I will say that ION sales, if you look at it compared to -- I mean, the numbers are because it's absent last year, right? I think on a year-on-year basis, I will not say that it's -- I will not say that it's stronger than our other malls. I think they are probably more in line. So actually, they do trend quite similarly to some of our downtown malls. So I wouldn't treat ION sales as separate in terms of trending. They still remain quite correlated with, for example, Raffles City or even some of the suburban malls. Even though we see it as slightly higher end and maybe slightly higher tourist content, but I think at the end of the day, it's still about 70% domestic. So it's still highly correlated with our domestic traffic. But we are hopeful that the numbers will continue because bear in mind, ION is not operating at 100% capacity. If you go to ION today, you will see that some of the shops are still not fully operational because we have been doing a bit of a rejigging, moving some of the tenants and trying to elevate the experience on the ground floor and moving some -- shifting some of the tenant. So if you ask me on that basis, actually, there is some room to grow because if all the tenants are operating, actually, you should expect tenant sales to improve. And I think if you look at tourist numbers in Singapore, I think ION does have some reliance on tourism in terms of spend, right? If you look at tourist numbers, while we do not have big concerts like Taylor Swift, which contributed quite meaningfully to last year, but the government and tourism board still does -- makes a very good effort. If you look at tourist numbers, actually, it is still -- it is higher -- we are tracking higher than last year. So there is still strong momentum. There are a lot of -- my calendar is very strong. And bear in mind, this year, F1 was actually in October, not in September. So F1 numbers on a like-for-like basis actually have not contributed to September numbers. So that you might see some skew and some positive momentum in the October numbers.
Unknown Analyst: Okay. Then my second question is on your comment on Jewel, right? What's the passing rent for Jewel? Can you share?
Choon-Siang Tan: Oh, it's not our asset. I don't even know the numbers.
Unknown Analyst: Then is there anything on the market right now that is exciting -- that is making you excited other than your sponsor pipeline?
Choon-Siang Tan: I mean, you know in Singapore, there aren't that many opportunities...
Unknown Analyst: Others on the market are not so exciting in terms of pricing?
Choon-Siang Tan: No, I think if it's a third party, unfortunately, I think in terms -- it could be exciting, but the pricing usually is not as exciting. If you have to run through a competitive process, it's usually a bit harder. We also want to stay disciplined in terms of acquisitions. We want it to be exciting, but we also want to price to be exciting also. It doesn't really answer your question. But we are looking at a few things also.
Unknown Analyst: Yes. I was just thinking about next year, what's the plan? Is it going to be a quiet year? Because this year has been relatively busy for you from the beginning of the year to date.
Choon-Siang Tan: Yes, we hope it won't be quiet. Unfortunately, it's hard to articulate very clearly. If you ask -- if you look back 9 months ago, you probably thought this year might be a quiet year too.
Unknown Analyst: Yes. Because I look at AEI. AEIs doesn't really leave much to your -- it doesn't bring much to your portfolio because your portfolio is so huge, right? You add another $10 million, it's like it doesn't move the needle, yes.
Choon-Siang Tan: Unfortunately, it's very hard for us to share things that we are working on unless it's quite finalized anyway. So usually, this question is very hard to answer. But, we are excited a lot. In any case, next year, actually, we do still will benefit from the existing organic. I mean we have only -- even for this year, CapitaSpring has only contributed 1 month starting from September onwards. So it will still continue to contribute next year. There are things that are announced already. I mean, while it's not a new acquisition, like, for example, it has not contributed for the last 18 months, but we are quite excited that it will contribute -- start contributing early next year. And this one is substantial because it's an entire building, right?
Allison Chen: We shall move on to Rachel.
Unknown Analyst: Can you hear me?
Choon-Siang Tan: Yes.
Unknown Analyst: Yes, I don't know why my video is not working anyways. Yes. Maybe just following on, on this exciting transactions or assets that you're looking at. Is it still Singapore office or retail?
Choon-Siang Tan: If we were to look at -- if you were looking at staff, it will probably be Singapore for now.
Unknown Analyst: Okay. Office or retail or both?
Choon-Siang Tan: I think we are open to both depending on -- we are quite pragmatic people. I mean, at the end of the day, it depends on pricing, right? So we are value hunters. We like -- as long as we think it's -- it adds value to our portfolio, and we think that we are able to acquire something at a reasonable valuation, yes. So it's a matter relative to market. Although if you look at -- I mean, most people -- if you look at it simplistically, you know that retail trades at a higher yield, right? Technically, it's more feasible and easier to do retail. Of course, the risk is different. So people cannot just look at you solely as well.
Unknown Analyst: Okay. Is the Paragon's portfolio still in your this exciting assets or not really?
Choon-Siang Tan: I think Paragon, I'm not...
Unknown Analyst: Paragon REIT.
Choon-Siang Tan: So I suspect that might take a while. I don't think it's in -- I mean, I don't know, but it doesn't feel like it will be in the market in the near term given that they have to do AEI.
Unknown Analyst: Okay. Okay. But there are other assets in Paragon as well, right, Paragon REIT, ex-Paragon.
Choon-Siang Tan: I think that's Clementi Mall, they're running a process now, right? I think that's public knowledge. And the other one -- they only have Marion after that, which is in Australia. I think these are the 3 assets that you have.
Unknown Analyst: Okay. All right. Then my next question is on Gallileo. Now that you have leased up, is looking good. Are you keen to sell? And is the market ready to sell?
Choon-Siang Tan: I think we focus on handing over to the tenant first. Actually, it's not completely done. While we have started -- actually, it's a multiphase handover. So we will only be completing the handover to the tenant, probably coming close to the end of Q1, which is another 5 months from -- 4, 5 months. So I think we want to focus on -- and when you do handover, there could be issues at the beginning. So we'd rather try to be a good landlord and sort of all these issues with the tenant to ensure a very smooth handover first.
Unknown Analyst: Okay. But the income from this Gallileo will be full contribution starting from end first quarter, is it when you are fully handing over? Is it full?
Choon-Siang Tan: Yes. No. So it will be staggered. So it will also -- contribution will also be based on phases. We only get rent for the area that we have handed over.
Unknown Analyst: Okay. So when should we expect like the full...
Choon-Siang Tan: Full contribution was -- partial maybe Q1 and full probably Q2 onwards.
Unknown Analyst: Okay. Got it.
Choon-Siang Tan: We already own 94.9% of the asset. So when we say full, we mean the full contribution from our share.
Unknown Analyst: Yes. Okay. And just one last one, quick one. In terms of ION, I know there's some rejigging. When can we expect all this rejigging to complete and then we will see some flows in income?
Choon-Siang Tan: It will probably take a while because we are actually -- because actually, we are doing a few movements, and you cannot do all at one time. So that's sort of as a bit of a musical chairs. Tenant A move to tenant B, tenant B moves to tenant C. So it will be ongoing for a while, I think, at least it will continue until next year. But at least those that are not operating now when they open and contribute, then you will it will be incremental. Yes, we don't expect everything to open up to get the...
Allison Chen: Next, we hear from Brandon.
Brandon Lee: I just want to touch a bit on your asset sales, right? Can you share what's your guidance here? I mean we have been seeing cap rates compressing quite a bit domestically. So are you still looking to sell if we do see that, is it more office or retail?
Choon-Siang Tan: I think we have done some divestments in the last 12 months already. In fact, yes, it's really still within the last 12 months. We've done 2 asset disposals [indiscernible] and the service residence at CapitaSpring. So I don't think we are in a hurry. But as you rightly pointed out, it does seem like the market yields are compressing quite fast, partly due to probably no good assets available for sale in the market and also coupled with the sharp decline in interest rate in the last couple of quarters, right? So there's been -- I mean, we are looking forward to what currently the mall transacts at eventually. But we do think that, yes, the cap rate compression is quite significant. So -- it could make us reevaluate our portfolio a little. But I think safe to say we are generally quite happy with our portfolio construct now. We do think that most of our portfolio are very strategic and quite core to our business. I would say that if we were to divest, we may want to look at -- I mean, I think some of you alluded to some of our overseas assets that will be more meaningful for us to look at in terms of divestment. In Singapore, I don't see us divesting significantly. We could potentially look at 1 or 2 assets, but not urgently because they are all yielding quite well. So we will also have to evaluate. So when they are yielding well, unless we get a very significant uplift to our valuation of book value, it's likely to be dilutive. So we have to evaluate that quite carefully. So it depends on what kind of yield I can get.
Brandon Lee: So basically, at the current 39.3% gearing, you're quite comfortable.
Choon-Siang Tan: Okay. So 39% is not -- actually because we did advanced distribution, right? So in a normal quarter, if we didn't do advanced distribution, this gearing would have been lower. So when we were comparing it to like, say, a few quarters ago, it does look a bit higher. But we must bear in mind that we have advanced distribution. Other quarters, we normally don't have advanced distribution, right? So without -- if you remove that effect of the advanced distribution, the gearing would probably have been 38% plus. But I guess the underlying message in your question is that should we be comfortable with 39-plus percent gearing? I think we would like it to be a bit lower.
Brandon Lee: Okay. And just one last one, right, for the potential inorganic, right, would you be keen to look at some of these GOS mixed use with a retail component like something like -- along Central Mall -- because in the past, we did see like CSE going for Bedok site, right?
Choon-Siang Tan: I think we will evaluate all opportunities. So it all depends on how it affects our numbers in terms of whether we have the capacity to do it and whether it's overall accretive or makes sense for us from a portfolio perspective. Yes. So I think to answer your question is, yes, we will look at all opportunities as long as the -- it's relevant to our portfolio.
Brandon Lee: Okay. Sorry, just one quick one. Is [indiscernible] considered your sponsor?
Choon-Siang Tan: No.
Brandon Lee: No, okay.
Choon-Siang Tan: What do you mean by sponsor? I guess when we say sponsor, we mean we have a ROFR to their pipeline, right? Then, the answer is no.
Allison Chen: Derek, please go ahead.
Derek Tan: Just a few questions, right? Firstly, on acquisitions, right, I'm just looking at some of your peers, I'm not sure whether they're peer, but gone into suburban Australia. I'm just wondering whether is that part of the world interesting for you? Or you still want to focus on Singapore for now?
Choon-Siang Tan: I think we want to focus on Singapore for now. We still see opportunities in Singapore, so until such time where we think that we run out -- I think -- but for now, I think we still see some pipeline in Singapore. So we -- I think our investors would rather want us focus on Singapore for now as well, I think.
Derek Tan: Certainly. Okay. Got it. Got it. And just to also reconfirm, I think previously -- I mean, we hear from a great buyer that this Bukit Panjang Plaza was on the market, right? So that is off the market already. Just any thoughts on that?
Choon-Siang Tan: I mean, was it in the market?
Derek Tan: Don't know. So not in the market?
Choon-Siang Tan: I just want to make sure because maybe it was there in the market before I joined, so I need to clarify. So, I cannot answer for those. Well, I think I'm just checking with my colleague whether it was in the market, right? No, right. We never said that was in the market.
Mei Lian Wong: Normally, it wasn't.
Choon-Siang Tan: Yes, I saw the newspaper article, so I wasn't sure whether it was from us.
Derek Tan: Okay. No problem, no problem. Sorry, my last question, I mean, just a quick one. I mean results are really good and straightforward. Could you give us the guidance for your reversions and maybe going to next year? I think my thinking behind it is that this year, you had the consumption vouchers, right, and boosted spending a little. I'm just wondering whether at this moment, are you still okay to push reversions to the same level? Do you think you can maintain?
Choon-Siang Tan: No, I think we have always said that high single, probably not so sustainable. We're probably going to target between mid to -- yes, about 2% per annum sounds more reasonable, right? I mean, Inflation is also not that high.
Derek Tan: Got it. Got it. Got it. Sorry, just last one. If you think about the ION, the LLP potential, right, is that still something you're working on? Is there a time line that you can look forward to, to convert -- sorry, convert to LLP?
Choon-Siang Tan: Yes. So I think we have -- I think at the last briefing, we have also said, you already are in the long time, not to be -- probably not something that you want to work into your numbers in the short term. But of course, rest assured, at the back end, we are running at 100%, but doesn't -- even when you run 100% to try to get it, it will still take a very long time because yes -- so yes, I will not assume it in the short term, but you have to get it done.
Derek Tan: I'll leave that as a surprise.
Allison Chen: Next, can we hear from [indiscernible], please?
Unknown Analyst: Can I follow up on the reversion, I guess you were guiding for reversion to moderate for some time, but it seems that things are actually improving. So what's actually driving this positive surprise here?
Choon-Siang Tan: I think -- I guess, overall, Singapore economy is doing quite well. If you look at GDP growth, it's always -- it's been surprising on the upside every single quarter as well. So I guess -- yes, I think generally, equity market is doing well, CDC vouchers does seem like people are prepared to -- I mean, when people are prepared to spend -- continue to spend when the market moved, it's general market is doing well. What is driving it? I guess, while we have always said CDC vouchers is driving part of it. Some of it was probably due to -- like I mentioned, I think Q2 was a slightly lower base, right? So improving from Q2. Q2 was probably muted because of Liberation Day. I think we probably felt it most in April and May in terms of tenant sales. And some of the bounce back is not as surprising actually. And then you probably have some savings, right, because people spend less in the last quarter. But I think overall, market and economy is doing well. So we do expect sales momentum to improve.
Unknown Analyst: Second question on tax transparency, right? So our forecast is usually 3 years forward. So by saying that we should not factor this in, does it mean we shouldn't expect it to happen within the next 3 years?
Choon-Siang Tan: No, I wasn't thinking from your point of view. I was thinking from my point of view. My point of view is 12 months.
Allison Chen: Jonathan, you're up next.
Unknown Analyst: First question, for those of us who missed the first 3 minutes, don't mind, could you run through what's driving the higher occupancy for the office portfolio? And then second question, as we come towards end of the year, do you expect sizable revaluation gain when you do your revaluation for December? Do you expect cap rate compression for retail and office portfolio? Which segment would contribute more divestment gain? Would it be office or retail?
Choon-Siang Tan: Okay. So office occupancy went up largely because we managed to lease out our 2 assets in Germany and Australia quite well. So we -- in Germany, occupancy went up 5%, right, close to 5% because of MAC, which is only a single property. So that was a single tenant, large lease. So we're quite happy with the outcome. Australia, actually, 2 of our office buildings are pretty much fully leased already. It's just 100 Arthur Street. We managed to lease out 100 Arthur Street and also a fairly large long-term lease as well to Flight Centre, which took quite a big space. So that improved our -- and this is a 3 percentage point increase in Australia over 3 buildings, right? But actually, the stand-alone building was more significant. So these 2 contributed to the uptick in office occupancy. So that was your first question. Second question is on valuation, right? We do hope for our Singapore assets to be -- to show improvements in valuation. As to how much, I think it's hard to say. If you look at some of the other REITs that have year-ends in September or June, they have reported a healthy valuation uplift for the Singapore portfolio at least, yes.
Unknown Analyst: Yes. I mean would it come more from retail given like maybe transaction in the market?
Choon-Siang Tan: I think it will be both office and retail. You might look at retail, I guess, because I think office cap rate is already quite tight, right? So the room to move is probably slightly less than retail. And of course, if you look at our performance reversions and in terms of occupancy, it's also slightly higher for retail. So all of those get factored into future cash flows, right? I mean I'm just giving like some of the drivers and what could potentially move. So at the end of day, it depends on how the valuers do their numbers as well. But if you look at broad numbers, of course, retail number seems to be -- have a higher -- better momentum in terms of rents.
Allison Chen: Vijay, you have a question to share?
Vijay Natarajan: Just adding on to this Jonathan's question. In terms of overseas markets, do you think -- see that things have bottomed out over there? Do you expect this occupancy gain to sustain? And probably can give some color in terms of incentives for some of these leases you have signed?
Choon-Siang Tan: Okay. Maybe Yi Zhuan do you want to take some questions. The other questions, I have to defer to my colleagues.
Lee Yi Zhuan: Yes. So I'd say generally, the overseas markets, and I will go into Australia first, right? So for Australia, at this point, we do see a bit of signs of bottoming out in terms of some of the occupancy vacancy that we are seeing, but we are also, at the same time, right, incentive levels are stabilizing, but it's nearing the peak. As for the leases that we signed, I won't go too much into the details, but for the 100 Arthur one it's pretty much in line with what we are seeing some of the newer buildings in the area doing -- so unfortunately, for North Sydney at this point, is on the elevated side of things compared to the main Sydney core CBD area. But the good thing is generally, while we are seeing North Sydney compared to a couple of quarters ago, the Flight to Centre would be right where a lot -- which has been benefiting the core CBD for a while. We are seeing a lot more inquiries now also coming for North Sydney coming from some of the Macquarie Park or Chatswood and some of these other tracings that is further out. So hopefully, some of these translates eventually into more deals in the area. For MBC side, I think it's pretty much in line with what the market is doing. The rent free is a little bit long for the submarket in airport district at this point. But at this, we do not really see something that is odd in that. The good thing about some of these leases is that the commitments are coming quite early like Flight Centre, we are already seeing the tenant taking the space early next year.
Vijay Natarajan: Okay. Would you say the occupancy has bottomed?
Lee Yi Zhuan: Sorry?
Vijay Natarajan: Would you say the occupancy has bottomed out?
Lee Yi Zhuan: We will still see a little bit of volatility in the next few quarters in terms of the occupancy for our assets because there will be some exits. But I think right now, the momentum in getting them back still is essentially quite the key.
Vijay Natarajan: Okay. Got it. My second question is in terms of portfolio, broadly looking at next 3 years, do you have any redevelopment opportunities in your portfolio like CapitaSpring or CapitaGreen, which you see in your portfolio, specifically in your portfolio or even with the sponsor assets combined together like Class assets or CLIs assets, which you can redevelop together in the next 3 to 5 years?
Lee Yi Zhuan: Redevelopment. So for redevelopment is, of course, we do study some of the possibilities in view of some of the things we see in the master plan. But a lot of all these things, we have to actually engage the authorities as well as look at what eventual schemes we are getting because it only makes sense for us. Most of our -- if I say we get a very good GFA uplift. But if you look across most of our properties, right, they are trading pretty well, the kind of occupancy and it is actually also quite strong. So there must be meaningful upside for us to undertake redevelopment.
Vijay Natarajan: Okay. But at this point of time, you don't see any?
Lee Yi Zhuan: We will have to study and see what the market can bring us.
Allison Chen: Can we hear from Terrance, please.
Unknown Analyst: Congrats on the strong results. Can I ask on the office -- what drove the stronger office reversions this quarter? I mean you report on a 9-month basis versus first half basis. So it's actually quite strong, specifically for this quarter. And how is tenant demand trending, especially I understand AST2 had a bit of lower occupancy in the first half of the year. So how is that doing?
Lee Yi Zhuan: I would say that generally, if I look at Singapore office market, right, the key trends -- trends are still pretty much the same, right? The flight to quality, people are paying for quality at this point, limited supply. And of course, we see some of the upgrading demand, even though generally relocation is still something that a lot of companies are a bit careful because of the CapEx commitment. And we also start to see like some of the landlords in the market are starting to look at, especially for the smaller spaces, right, looking at fitted out suites and fitted out options. For this quarter, in particular, we do see pretty strong reversions for 2 properties, mainly Capital Tower as well as Six Battery Road. It's very hard to say why suddenly because actually, like, for example, if I go a quarter before, these are the assets that probably the reversion is on the lower end. And then -- but this quarter is on the slightly higher end of things. So it's really deal specific rather than anything that is jumping out for -- as a key driver.
Unknown Analyst: And for AST2, how is that doing occupancy-wise? And is that something that we have to worry about?
Lee Yi Zhuan: Yes. AST 2, I think generally, that area has a little bit of activities in the past few quarters because we have Marina 1, we also have IOI filling up. So definitely, when it comes to filling spaces, it's a bit more competitive. But we are in talks with some of them to backfill. I think we are in some advanced discussions with some of the tenants. Hopefully, you can convert them soon. But with some of the supply and tightening around the area, those will -- I would say that this will probably give us a bit of opportunity to see a bit of improvement in the occupancy in the coming quarters.
Unknown Analyst: Can you share the occupancy this quarter for AST2?
Lee Yi Zhuan: Just give a second.
Unknown Analyst: Yes. And then I'll just ask a final question. For retail side, any concerns on cinema or tenants? And maybe could you give us a sense of which segments are doing better, which segments are a bit more challenged?
Lee Yi Zhuan: Okay. Maybe AST2 this quarter, our occupancy is actually slightly higher at around 95%. Yes. As for the retail, you were talking about retail, right? Yes. So for retail side, our good thing for cinema trade is that we are not overly exposed within our portfolio. It's less than 5% from NOA perspective. And generally, the rent contribution is even lower. So I think sub-2% from GRI contribution perspective. And -- but so far, at least we don't have a real issue with our cinema. And hopefully, I think we will promise that next year, there's a better lineup of shows. So hopefully, it converts with less cinemas around better shows, hopefully translates to better performance from the cinema side. As for the rest of the trades, I would say, generally, we do still see for F&B, right, the operators generally are still -- quite strong interest coming from there. So dining out has been still quite resilient demand across the board. So actually, a lot of the well-capitalized overseas operators are showing quite a lot of interest coming to Singapore. Having said that, I think generally, manpower limitations, wages, cost of supply also means that a lot of all these operators tend to get a bit more strategic in the way they choose and also in terms of the size. So we also see a little bit of shift from what used to be a lot of traditional fine dining now moving more into experiential kind and affordable food. So -- and I think this trend will probably persist in the coming quarters. You will see a lot more new concepts in terms of food. For fashion side, generally, the fashion retailers are a little bit careful for expansion now. And a lot of them are trying out like the new-to-market brands tend to look for pop-up space. So actually, there's a lot more inquiries for pop-up where they want to come in, take a space, either have these or take up even some of these space for pop-ups, right? And then they will try to do like a short campaign, and they will seek to test the market whether there's acceptance for it and before they look at a more permanent space. But this quarter, one of the standout performance is actually the hobbies. Generally, hobbies are doing quite well this quarter. The hobbies trade. So your [indiscernible], ActionCity, some of those are doing quite well. Last year, for -- if I talk about entertainment, partly because maybe we will have to see how the F1 weekend goes. But generally, if you look at it, last year, there are a lot of recovery for the nightlife, the entertainment. So -- but year-on-year, we see the entertainment coming off a bit this year, yes, for the clubs and the bar.
Allison Chen: Derek.
Derek Tan: Just a quick follow-up on that cinema percentage of GRI, that's for retail, right? So overall, it will be even lower, right, sub 1%...
Allison Chen: You're breaking up. Can you repeat your question?
Derek Tan: No. Just following up on Yi Zhuan's answer on cinema operators accounting for less than 2% of GRI, that's retail GRI, right? So overall be even lower?
Lee Yi Zhuan: This is actually your GRI retail.
Derek Tan: Okay, this is retail?
Lee Yi Zhuan: Correct.
Derek Tan: Okay. Okay. Got it. And just can I also ask on the occupancy costs for retail, given that I see a disconnect between the reversions and the tenant sales, what's the occupancy cost right now? And how does that compare...
Lee Yi Zhuan: Our occupancy cost, if I compared to first half of 2025, actually, it came up a little bit, very marginally. But I would say quite stable around [indiscernible].
Derek Tan: Okay. Okay. Is there a breakdown between downtown and suburban?
Lee Yi Zhuan: Just if we are talking about cost, if you're talking about downtown, suburban generally is around 16.5%, plus/minus. So it will fluctuate around the area. Downtown is about 18%.
Derek Tan: Okay. And just moving to office. I'm not sure if I caught -- was there a reversion outlook for office in Singapore next year?
Lee Yi Zhuan: Probably around the same low to mid-singles, I would say, for those at this point.
Derek Tan: Low to mid-single digit. Okay. Got it. All right. Got it. And just lastly on potential acquisitions right now. I think Choon-Siang did mention a more of a preference for malls for retail. Within that, would suburban or downtown make more sense to you right now?
Choon-Siang Tan: Derek, I think we didn't say that -- we said that retail yields are higher, but I don't think we have a preference for that. It all depends on the relative value. We are open to both -- as evident in our last 2 acquisitions, right? One was office and one was retail. So it depends on what's the pricing for each of them. But of course, to make the numbers work, retail yields are higher. So it's always a bit easier in terms of that, but we have to look at it from a portfolio construct point of view as well. I think your question is whether it's retail -- the thing about Singapore acquisitions and pipeline is -- it always depends on what's the opportunity. So it's hard to -- I don't think we are necessarily try to ring-fence around a specific area. I think it always depends on the specific opportunity. I think we are more concerned about the location advantages and whether there is a great catchment and whether there's a great transport node attached to the asset. So these are more important considerations rather than whether it's retail or whether it's suburban or office or downtown.
Derek Tan: And I guess following on that, what we sensed also is the dominant nature of the mall, right, let's say, if it's 200,000 square feet, that's imminent -- that's far more attractive to you?
Unknown Executive: Yes. Yes. So I think definitely for us, it has to add meaningful scale. I think not so interesting for us if it's a very small asset, it doesn't move the needle for us.
Derek Tan: You spoke about pricing as well. I guess would it -- could we benchmark against on a per square foot basis, maybe the current assets that you have, some of the more better mall -- suburban malls, for example, at 3,003, 2,006 per square foot. So that will be a number that's more comfortable for you, right?
Choon-Siang Tan: Yes. So I think we have to look at a few metrics. One is cost per square foot, as you rightly pointed out, that's relevant. I think the other thing, of course, because also cost per square foot can vary depending on whether it's a more horizontal mall or more vertical mall, whether there's basement or no basement, that kind of stuff. So I think the other more important metric, of course, is yield. I mean, because at the end of the day, that's the income that we'll be getting. And also the third number that we always focus on is accretion and whether how it contributes to our overall portfolio. So these are the few things that we typically focus on and try to be disciplined around it.
Allison Chen: Next, we have Terence from UBS.
Terence Lee: My first question is on tenant sales. Do you mind sharing a bit on the third quarter year-on-year trend for retail because it seems to be flat for 9 months and it appears to lag that of peers. And it's kind of counterintuitive because I would expect that you should have gotten the lift from the SG60 vouchers coming in from July onwards.
Choon-Siang Tan: Yes. So I think these numbers are year-to-date, right? So if you look at it from that perspective, this quarter actually is higher than 1%. As to what it should have been, you sound like you are expecting a much larger number.
Terence Lee: No, your peers are reporting somewhere around, say, 3% to 4% year-on-year increase.
Choon-Siang Tan: Is that for 3 months or is that for 9 months, though?
Terence Lee: It is probably in the third quarter.
Choon-Siang Tan: Yes. So that's a difference. That's why I highlighted that this is the year-to-date numbers. But maybe we can share a bit more color. Yi Zhuan can share a bit more color.
Lee Yi Zhuan: Okay. So for third quarter, if I -- year-on-year, if we exclude just like-for-like properties, excluding ION are also around 3-plus percent for the retail portfolio.
Terence Lee: Okay. And perhaps do you mind sharing perhaps your thoughts next year when SG360 vouchers roll off, like should we then expect sales to flatten out, potentially even decline?
Lee Yi Zhuan: Actually, I wouldn't think so, to be honest, because they were offset with at least some of the growth that we see and the broader economy, how it is doing. So I wouldn't particularly say that, that on its own will actually really -- because actually, right now, we see the SG60 vouchers, probably there's a little bit of transfer effect between people having a bit more disposable income to spend given that some of the other day-to-day things they already use the voucher to offset. But we also see some of them take the money and travel overseas and spend it overseas. So I wouldn't say that actually next year, we would expect this number to really come off.
Terence Lee: Okay. Got it. And on -- I think in Tampines Mall is done to close down in November 2025. Should we expect that there will be some vacancies? Or how is the backfilling progress?
Lee Yi Zhuan: Yes. Definitely, that one on its own space is about, if I'm not mistaken, around 38,000 square feet, right? So as it closes down, there will be a transitional vacancies that we will see. But actually, at this point, we have already been in advanced discussion with a lot of the tenants to -- some names are already very, very close to some of these names to just a choice. It's already kind of like well backfill. Because actually there's -- sorry, maybe I'll just elaborate a bit on this because it's actually sitting on 2 floors, the ground floor and the upper floor. So the ground floor as the first space of some of the works that we are carrying out, right? Those we have actually largely kind of gotten the name kind of filled it up. The second floor is the one that's some of the details we still have to work through to finalize with the different brands because it involves a bit of reconfiguration.
Terence Lee: Is it fair to say that this might involve some degree of cutting up large plate into small plate and there is that effect of like positive reversions coming out thereafter?
Lee Yi Zhuan: Yes, there will be a bit of reconfiguration. Some of the floors will definitely become the smaller ones, especially the ground floor, you probably see a bit more of that. Net-net, we will expect it will generate higher income. So basically, the per square foot rent for some of the spaces will be much higher than what it is getting today.
Allison Chen: Next, Rachel.
Unknown Analyst: Just some follow-up question. In that Isetan, if I look at your numbers, your Tampines Mall ROI is only roughly about 7%. But now you are cutting up space in Isetan, should we expect more ROI?
Lee Yi Zhuan: But we have to offset with a slight loss in NLA also.
Unknown Analyst: Oh, okay.
Unknown Executive: I mean, 7% is taken into account...
Choon-Siang Tan: [indiscernible] contribution. Yes, we have taken into account the effect of reconfiguration.
Lee Yi Zhuan: Sorry, yes, if there's a question, yes, the whole project's ROI includes everything.
Unknown Analyst: Okay. Okay. All right. And then for the retail leases that was signed during COVID, has that all already been mark-to-market already? Or do we still have a few more left?
Lee Yi Zhuan: It is mostly mark-to-market right now, yes.
Unknown Analyst: Okay. And on the office side, you said that the key trends are still there. So I'm just wondering because of the limited supply, are you still able to push rents up or generally, the rents are actually quite stable now as you discuss with tenants?
Lee Yi Zhuan: I would say that at this point, generally as a market, while there's limited supply, we also see that there's actually -- I wouldn't say the new demand coming in is very strong. Even though some of the leases we have seen recently, especially done at IOI and Central -- sorry, Marina One, right? Actually, you see big companies who actually book marginally bigger space than what they had previously. So that kind of reflects also within our portfolio, if we see this year-to-date, right, we actually see a net expansion of space among our existing tenants. So -- but a lot of the movements in the market is actually a bit of musical chairs, right? So I would not say that at least at this point, there will be a lot of -- I would say it's actually flattish and very moderate growth rather than to expect a very -- landlords are really stretching rents a lot. But of course, in some instances where we actually have tenants that moved out and some of these tenants probably have been with us for quite a while, right? And then some of the new tenants that we bring in like what we see in City and what we see in Six Bounty Road, there are those where opportunistically, we are able to get pretty strong reversions.
Unknown Analyst: Okay. Got it. Yes. And the new tenants -- new to Singapore tenants are very, very small now, right, for office.
Lee Yi Zhuan: Yes, I would say new to Singapore tenants demand not really that much. In fact actually, if we see startups, there's actually -- what we hear is that there are a bit of more start-ups coming from Chinese and Indian companies, right? Some of them also coming through for the tech space of things. And usually -- some of these smaller setups, they usually either go for fitted offices or they go for those kind of co-working spaces that we see.
Allison Chen: We'll circle back to Mervin again.
Mervin Song: Yes. I just had a question in terms of the office NPI margins. It fell Q-on-Q and year-on-year. Just wondering what's happening there? Is it the incentives you're having to pay for Germany or Australia? In terms of second question I have is electricity costs. How much you're paying today? And do you still expect further savings ahead? And for 101 Miller in North Sydney, are we getting closer to doing a more substantial AEIs, especially the retail space, which is connected to the train station or at least the forecourt to activate the space, perhaps have a more comfortable clock.
Lee Yi Zhuan: I'll probably take the last 2 questions first. And so for Greenwood Plaza, we are having plans to actually do some of the repositioning works for the Greenwood Plaza sometime next year. Some of the plans we are working through, and we are also talking to some of the brands working with our JV partners definitely. So we do expect to see a little bit -- because earlier this year, we did a bit of work around the lobby for the office side. So I think the whole repositioning exercise for the office was quite well as we can see the uptick in the occupancy. Right now, then the next one to focus on is with Greenwood Plaza. With station completing later part of this year, we also see that there's a bit of a shift in the gravity of where the traffic flows in the center of gravity, right? So definitely, we need those a little bit of things to kind of anchor where and what GWP can bring in terms of footfall, in terms of the sales and stuff. In terms of electricity rate, I will only say that in '26, we probably expect tariff rates to come off what we have currently in '25. And for the occupants -- sorry, the NPI margin for the office side, I think partly came off maybe includes CapitaSpring. We have that little bit -- CapitaSpring's margin on average kind of have a little bit of impact on the overall office portfolio and what is the...
Mervin Song: And this -- the NPI margin hasn't been this low for a while. Should it normalize higher over time or this is the new level? Or the first half was normally higher, and it is only 6.4%?
Lee Yi Zhuan: I would say that normalized should be around [indiscernible] .
Mervin Song: Okay. Sorry, just on electricity costs, would it be in the mid-20s at this point in time, going to low 20s?
Lee Yi Zhuan: Do you mean as in?
Mervin Song: The tariff rate?
Lee Yi Zhuan: It's probably around, it is slightly [indiscernible].
Mervin Song: But it will be going to low 20s next year, I presume?
Lee Yi Zhuan: Oh you are saying 2025 of 2026?
Mervin Song: So, on 2025 going into 2026.
Lee Yi Zhuan: So, it is slightly above, right now we are going slowly below.
Mervin Song: Okay. And your contracts, 1-year contracts or you do more longer term?
Lee Yi Zhuan: The contract is always long...
Mervin Song: Look forward to exciting pipeline in the future.
Allison Chen: Any more questions? No. Okay. So it looks like we've got everything covered for now. If anything else comes to mind, you know how to get to us. And thank you for the time today. Have a good week ahead.
Choon-Siang Tan: Thank you, everyone.