© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, ladies and gentlemen. Welcome to the CapitaLand Retail China Trust Results Briefing for the First Half of 2019. We are delighted to have you with us. I'm Nicole, your MT for today. So we will start today's session with a presentation by the CEO, Mr. Tan Tze Wooi, on the results, after which there will be a question-and-answer session with the panel. Without further ado, I would like to invite Tze Wooi to share more about the results with you. Tze Wooi, please.
Thank you, Nicole. I think the room is small and cozy, so I'll just hang around a little bit. Once again, good morning. Welcome to CRCT's second quarter's results briefing. Let me walk you through the content highlights and I will leave some time for Q&A. Okay, we're pleased to announce our 2Q results. I think against the macro a bit more cautious outlook, we delivered a set of very healthy results. You can see from the second quarter, our portfolio has been resilient, delivering a top line revenue growth of 1.9%. And in terms of net property income, we reached RMB 201 million in RMB terms, that is 11.5% improvement year-on-year, partly also attributed to the IRFS accounting effect in it, I'll talk a little bit later. And amidst weakening RMB reporting period in terms of Sing dollars, we're still delivering a core income available for distribution of SGD 25.4 million, representing a 5% uplift versus a year ago, translating into a DPU cents of 2.54, 2% above year-on-year. Coupled with the fact of -- on the positive 1 quarter results, I think the one half reflect a steady growth profile. In terms of gross revenue, 3.2% up; NPI 11%; and distributable income and also the DPU at a core level representing 5% and 2% uplift year-on-year. At the operating side of things, you can see that in the second quarter, our portfolio continues to be able to churn our rental reversion at a healthy rate of 7%, also underpinned by very strong tenant sales growth, partly because of the active tenancy adjustments that we have carried out, reflecting a 2.8% up and traffic as a portfolio continue to be positive at 0.3%. And the one half picture continues to be strong and rental reversion is 7.5%, tenant sales is 6.7%, shopper traffic also 6.7%. At the portfolio side for June, we did a revaluation -- semi-annual valuation. So our property valuation is uplifted by 2.3%, lending at CNY 16.112 billion in terms of the property value. Our portfolio continued to be strong in terms of this occupancy, resilient, at 97%. At the financial side of things, I think we have also entered 2019 quite good in the sense that we have completed all our term refinancing, and we continue to adopt that active hedging policy, fixing interest rate exposure and 80% fixed, and also continuing our hedging policy to bring the distributable income back to Sing in terms of hedging at 50% level. This is a rundown of the net property income all the way down. I have covered most of them. As you can see, the net property income at the RMB level 11.5%. Slightly when you translate back to Sing, this reporting period, RMB weakened by 3.9%. That's why you can see in Sing terms, that has been translated back at 7.3%. Importantly, you can look at the distributable income from our joint venture, which is Rock Square, growing the DI nicely at 23.6%, translating down into what I have just mentioned. And at the close of yesterday's unit price and also the month end, this translates into attractive distribution yield of 6.5% and 6.4%, respectively. This is a picture for one half, quite similar. You can see our distribution yield also lending at 6.6% and 6.5%, respectively. And the key thing to take note is that we have been guiding all of you that as the organic performance of Rock Square starts to ramp up and starts to contribute the capital top up which was meant to breach that period of time where we lost the Anzhen divestment income before the Rock Square performance starts to contribute. You can see us scaling down in terms of the capital top up, and I think that is exactly what is on plan, and that's how you can see the numbers flowing through. As at June, the balance sheet, our NAV lands at 1.64. And after adjusting for the one half distribution, the NAV per unit is 1.59. We continue to offer very attractive yield relative to all the alternative instruments at 6.6% and at a good spread to all the other alternatives. For this period, we will be distributing for the one half SGD 5.13, and we will be announcing the book closure date in due course. Let me go through the capital management highlights a little bit more. As of June, our gearing is very healthy. We have brought it down to 33.8% relative to the first quarter and kept the cost of debt at an attractive 2.99% and also our interest cover continued to be very strong at 5x. As you know, that MES now is also looking at raising the given limit and also proposing the interest cover at a 2.5x. I think that we save in terms of the headroom and kind of buffer that we have. Our debt maturity has been lengthened slightly to 3.14 years. And our assets, if you exclude those under the JV, continue to be unencumbered. This is the maturity profile. I mentioned, we have actively refinanced ahead of maturity and also to take in very competitive rates to lock in. So we have moved the tower SGD 50 million in the 2020 to 2023, and that has lengthened our debt maturity. We are also working on the remaining SGD 50 million for the 2020 tower ahead of time. Let's take a look at the portfolio side of things from a valuation standpoint. I mentioned as a portfolio, we are up 2.3%, you can see, mainly driven by our core multi-tenant portfolio that has demonstrated very strong NPI growth, in a way the capital value is playing a little bit of catch up. If you look at the 2 Beijing malls at 4.9% and 5.3% in terms of this capital uplift, relative to its NPI growth, I think this is tracking. And if you look at the per square meter on the right-hand column, I would say that our valuation continues to be relatively on the conservative side. And as a portfolio, our NPI yield, very healthy, at overall 6%. This is the occupancy rate. As I would be running through quickly, you can see that the multi-tenant malls continue to be strong at overall 98%. I think this is a consistent trend minus a little bit of the fictional occupancy due to period-end reporting. Sometimes at the end, we have tenancy adjustments, but most of these will have picked up along the way. The only mall that is reflecting a little bit of challenge in terms of occupancy is Minzhongleyuan. I think I've shared with you that we are targeting to bring in a big anchor in terms of RMB. I think that has delayed itself. So I think some of this occupancy meant to attract this has not been leased up. I think we will continue to actively manage this on the operating front. Reversion, strong across the malls. You can see Xizhimen continue, although being the largest and although having already operated it for 11 years, we continue to be able to seize opportunity when spaces are up for renewal through very active lease management. So this quarter, happy to report 12%. Wangjing, steady at single digit of close to 5%. Grand Canyon, 5.6%, very healthy kind of single-digit organic reversion. Minzhongleyuan, I mentioned, due to a bit of retention strategy, we have actually lowered a bit of rental. And Qibao almost flat for this quarter. This is the combined picture. If you recall in first quarter, we did explain to you that each quarter when the lease renewals is up, we actually took a bit of leasing strategic decision on what to bring in new concepts with the overall intent to strengthen the overall mix of the mall. So at times, a little bit of tactical decision-making, but overall, you can see, coupled with the fact that the second quarter projection of what we know we can do, we learned first half still healthy at 7.5%. And we strip out those kind of reconfiguration, those kind of multi-tenant decisions, still a very healthy rate of 4.2%. Lease expiry continues to be quite stable. We have done a fair bit, almost half of them for the first half. This is the remaining half picture that continues to give us the opportunity for us to extract rental growth. And this is by year, I think our WALE has been quite steady and consistent at about 2.8 in terms of income and 5 in terms of area. Traffic-wise, this quarter, happy to report that things are more or less steady and improving. Some of the malls that we have mentioned in the past, I think, they have started to pick up a little bit. And if you look at the first half, the 6.7% is because of the Rock Square's contribution. So if you strip out Rock for additional month, it's still growing at close to 3%. In terms of sales, quite a similar picture. I think things are generally improving because of the active tenancy adjustments, and these have been flowing through this quarter. And for first half, the 6.7% again takes into account the Rock's contribution. If you exclude the additional 1 month, it's also growing at 3.0%. A little color on the operating front, what we have been focusing to do. I think from a leasing perspective, we have been introducing a lot of the mall trendy and popular concepts that resonates with today's younger shoppers. You see us actively bringing in new and fresh offerings to improve the overall experience. Some of the examples is, the first time we are bringing this celebrity food critics, some of you may know, in terms of dim sum coming from southern area. That is first restaurant in Beijing occupying a duplex unit, quite a prominent spot. And I think they are doing the renovation fit-out now, expect to open towards the end of 3 quarter. Over Rock Square, again, we also partner this very celebrity kind of concept, selling discount pastry, creating a lot of new buzz when we add new offerings into the mall. One thing, I think you would know, a little bit of this we also partner a lot of this trending F&B concepts, very young entrepreneur coming out with new ideas. So we are bringing them into our mall, having success and we spread them out as well. On top of the leasing, we also continued to be very active in understanding what our consumer spending preferences and lifestyle are oriented towards. And you can see us really making better use of our retail space to inject a little bit more interactive content. And I think you see more and more hybrid formats coming into play when people will naturally combine certain things and extend to capture people's time in the store. So we went with Sisyphe throughout our Beijing malls, very successful, and that's why we expanded the corporation. Also, nowadays, people are a little bit more into lifestyle and I think some of the malls positioning, we capture a lot of the neighboring office crowd. So you see us packing in a little of this content to capture some of the lunchtime and after-office hours with gym and yoga. And we also have been partnering a little bit on all this newer cultivated brands, who may not be traditionally from the physical space, but have done well in the online space, but we also now partner them and give them a space in our malls so that they can reach out to their different customers for overall -- different channels of reaching them to capture their wallet. And in terms of positioning, I think, we are very targeted customized to each malls. And we are actively looking at this way of who are the people coming into the mall, what feedback have they given us. So in particular for Xinnan, we've realized that a lot of people coming into the mall give us a little bit more feedback to say that there's maybe lack of children content. So I think, throughout this year, you can see us actively weighing down a little bit of the traditional fashion big brands to be a bit more targeted, replacing some of this men's fashion brands to be more targeted at the kids-related at different children age group. And I think this has since given that zone much more vibrancy effect. At Grand Canyon, similarly, we did routine survey to look at what are the cuisines or the F&B that we think are lacking but in demand. So we took opportunity in the last quarter to change a little bit of things on the Level 4 and 5 restaurants, and we brought in something that's more in demand, targeting at the locality, the hotpot, the grilled fish and also some thematic kind of F&B that's very targeted at young children with this kind of IP concepts. And since then, I think the whole level has improved in terms of this tenant sales. We continue to be active on engaging our customer and also to anchor them and create the kind of stickiness. I think these are some of the community events, the very local catchment events that we connect with the community, and we'll continue to do that. And if you look at how we consolidate, the big thing, I think, nowhere more can you see that being demonstrated in Rock Square. I think since the 1 year that we have taken over, you see us exactly doing all of the above, and you can see the trends of the retail offerings, the quality of the new things that we have brought in, resulting in very strong tenant sales overall as a mall and with particularly at the 2 largest trade cats, I think the fashion uplift, 10%; F&B uplift, 30%; and this is looking at the overall malls. So the new concepts, new things that we have brought in has actually uplifted the whole mall's performance. And in terms of rental reversion, we have stayed on track as we guided during the acquisition window. We see that a lot of the rental reversion window is there for us to capture, and we are delivering the double-digit reversion figure. I have been looking ahead. I think at CRCT we will continue to optimize our portfolio for growth. I think for most of you who have followed us in the last 2 to 3 years, you can really see us actively rejuvenating our portfolio. In 2016, we entered Chengdu for the first time, and you can see Xinnan now contributing itself and is a growth catalyst for the portfolio. We divested our oldest mall in the portfolio in Beijing, Anzhen, and recycled the proceeds to acquire Rock Square in Guangzhou, essentially diversifying between Tier 1 cities, but also extending our footprint into Guangzhou, a very promising market for the first time. And these 2 assets, as has been shared earlier, are now growing and contributing. And earlier part of this year, we announced the swap, essentially also to swap Saihan, although doing well currently, but face constraint going forward into a better position, a stronger asset with extension of land tenure. And we gained additional 8-year land tenure for us to do better business to capture the market potential going forward. And we have also completed the divestment of Wuhu, and now we can refocus on our core portfolio that's oriented towards the Tier 1 and the promising Tier 2 provincial capital cities. And it is this context that we are proposing the acquisition for the 3, 2 in Harbin and 1 in Changsha, coming in at steady immediate accretion yield and providing the growth profile and AEI potential. Just a quick recap on the proposed acquisition. We will strengthen our portfolio quite immediately in terms of diversification. I mentioned city footprint deepen ourselves into north and central regions. North is a big cluster of team that has already provided very good services as you can see earlier on in terms of Xizhimen and Wangjing, the same north cluster team would now handle the Harbin assets. Besides that, our exposure has also been improved in terms of the -- to the multi-tenanted malls to now 93.5%, giving us more opportunities to drive and value add. And on top of that, we're very happy to bring on board a larger pool of leases that will be very useful for us when we do the active tenancy remix and also the cost synergy. In terms of percentage contribution, you can see us reducing our exposure to the single property to less than 20%, top 2 now drop to 36%. In terms of the tenant exposure, top 10 group would now reduce to 20.7% and the single largest tenant will reduce to 7.5%. And overall, this proposed acquisition will really strengthen our whole business. You can see in terms of the net property income uplift of 22.8% in terms of size. So it contributes to our improved skill. And with the proposed fund-raising to come, it will also improve our market cap and expected trading liquidity. And this deal is expected to be accretive at a pro forma accretion of 1.7% to 1.9% level. And we're continuing this very active reconstitution strategy and continue to build on the momentum to scale up and also to improve our overall portfolio resilience. You can see us over the last 2, 3 years, our acquisitions size, the kind of size ticket that we can pick on has improved quite significantly. If you look at 2016, we do a deal size of 1.5. We did Rock Square, a deal size of 1.7. We stayed disciplined. Now I think CRCT has reached a scale where we can do a deal size of close to RMB 3 billion. And if you look through that few years, the area that we are managing now has also been improved to almost 908 square meters, 1,000, uplifting above 74%. And we do that by remaining focused on keeping a very disciplined capital management approach and continuing to do deals to deliver steady and growing returns backed by our track record. I think with that, I'll probably end the presentation. The appendices are more factual information for you to take away, and I'll be more than happy to have a little bit of Q&A sessions with all of you. Thank you.
Thank you, Tze. Now I'd like to invite the management to the panel for the Q&A session. We have Joanne, CFO; You Hong, AVP for IAM, who will join us in phone. So if any questions, please raise your hand. As we are doing an audio recording for this briefing, for the benefit of those who will be listening later, would appreciate if you can introduce yourself and then ask your questions on the microphone.
My colleague, Timothy, will be passing the microphones around to those who have questions. I'd like to open the floor to questions right now.
Tze Wooi, your latest operating metrics, tenant sales, footfall and rental reversion, is that an accurate reflection of the undergrowing -- the underlying retail conditions?
It's a reflection of the active tenancy adjustment efforts, but we are reporting it's blend of the whole portfolio. Obviously, within the portfolio, there are some assets that are doing better, there are some assets who are still going through those process of churning. So just to give you an example, I mean you see very strong tenant sales coming through in the case of Xizhimen and Wangjing because of the active efforts that we have done in the last one year. If you recall Wangjing, we actually took back that area that used to be occupied by a department store and we released that whole zone, so that -- now that zone is now starting to contribute both in terms of rent and in terms of sales. Across the trade categories, again, I would say, there is a little bit of mixed effect. Very hard to give a one number that represents across because a lot of this asset specific, but by and large, I would say, F&B continuing to do very good business, tenant sales continue to be very strong across all our malls. Fashion, I would say that it is a little bit weaker. So you can see a little bit of those malls where we have a little bit more exposure to men's fashion. The dip maybe around that 5% to depending maybe 5% to high single-digit. Other trade categories that do well, we see the spending oriented towards a little bit services. You can see the services are trending quite well. Beauty, more or less flat, more the health-related spot trade categories continue to be on the upper trend. So it is really a reflection of where we think the catchment people are spending and we then must make it very specific in the sense that our mall must have all these strong brand concepts to be able to capture that kind of spending. By and large, if you look at retail sales, China continues to grow for first half at 8.0%, June month itself is about 9.0%. So I think the whole market is still, I would say, in a healthy state. But as you know, for retail asset class, very importantly, that is a macro number. But what is very important is also at the micro level what we do to our malls' positioning, are you staying ahead to be able to bring in the brand and concepts that can draw the wallet spending. I think that is really important and those stronger malls that you see us actively already doing this, that we have done in the last 6 to 12 months are now giving us that uplift. So some of these malls, the weaker ones or more challenging ones as we go through this journey of retweaking, we'll have to go through that same process as well, yes.
Okay. And just a follow-up question. Focusing on CapitaMall, Qibao, rental reversion was marginally negative. The valuation came off. So what's going on? And is there something the valuers know that we don't?
No. In fact, it's exactly what you mentioned. If you look at Qibao, over the last 12 months, I think, the rental reversion has not been too strong, primarily because of the active trade category mix that we are trying to achieve. We are retiring or lowering a little bit of exposure to those mass fashion, which is I mentioned the competitive landscape. There are newer malls, they have newer fashion brands of more advanced kind of format and our mall relative to that is a little bit -- a bit dated. So we took opportunity to reposition to remix our mall to be more oriented towards the children and education. Therefore, you see a little bit of dip in terms of its tenant sales and also its rent. So I think the valuers are also valuing it based on the passing rental and the outlook. So I think there's a slight dip from that perspective, yes.
Tze Wooi, I wanted to ask on few questions. Maybe I'll start with capital distributions. In terms of the capital distributions, you said that the impact of Anzhen has come off and so you're stopping the capital distribution. Should we expect this to be permanently stopped? Or is that going to be restarted in the future if there's some variations?
I think the guiding principle that I have always shared with you is, I think the Anzhen divestment gain, it's a reserve for us to more or less smooth out the DPU profile when the manager take that kind of reconstitution efforts to the overall portfolio. And the fact that we pay a little bit more, if you look at -- it started in fourth quarter of 2017, was because of the quarter we did not have Anzhen's income and yet we do not have Rock's contribution. So you can see us topping up a little bit from that perspective to let the DPU have a smoother profile. And if you roll-on to the first quarter of last year, we have dropped down a little bit in terms of its contribution because Rock starts to come in during the quarter, but not a full quarter of contribution yet. And if you let Rock run its own cost of that ramp up, you see us reducing the top up. So I think it's really in line with overall guidance. That if you look at the second quarter this year, the organic performance of all the portfolio, coupled with the fact that Rock has been delivering quite strong contribution growth. And that's why we decided this quarter we do not propose any top up, also in view of the coming acquisition that we are looking into. But to address your question, whether or not we'll continue, I think that's something for us to review as we go along. I think the principle is always that we want to maintain a steady and growing DPU profile to take care of that temporary adjustments as the manager reconstituted portfolio for longer-term growth. So I think that guiding principle is still there, yes.
Can I just check how much of the Rock -- how much of the Anzhen capital gains are left for capital distribution?
We have about SGD 26 million -- SGD 26 million to -- yes, SGD 26 million to SGD 27 million. We -- the divestment gain is about SGD 37 million. So if you look at the top up to date, we have top up close to about SGD 10 million -- sorry, about -- to date, we have top up about -- no, to date, we have top up close to about SGD 10 million, SGD 11 million. That's why our balance is about that SGD 26 million, SGD 27 million level, yes. So still a good balance.
Okay. That's good. I wanted to ask on the occupancies at Rock Square. So it came down slightly Q-on-Q?
Yes. This is like I mentioned. During the June month, there are some tenancies in and out, so we have actually seen big F&Bs going out, but the contract for the new replacements are coming through only in July. So for that period-end reporting, there's a little bit of this fictional vacancy movement. I don't have too much worry about that because I think the bigger space are very good opportunity for us to subdivide and pack in a little bit more offerings, and I think that, that areas would come and deliver growth in the second half, yes.
Okay. Lastly, I just wanted to follow on David's question on footfall. Can you give us, like, maybe some sense of why the footfall is a bit weak -- or the growth is weak this quarter?
I think for most of our malls, I would say that they are operating for long time, they are in a very mature area. And whole basket of malls if you look at this particular quarter, some negative footfall happened in basically, I think, 2 main malls. Obviously, Minzhongleyuan is one. The other one is Xinnan, reflecting a little bit of competition because in the last 3 to 6 months, there are some new supply coming through at a distance of maybe 2, 3 kilometers away. So it's quite natural that when there are new malls entering into the market, the catchment people would have a little bit of migration effect. So these are tools that in a way bring down. The rest, I would say they are still growing or stable, quite steady, yes.
Wai-Fai from UBS. Just a few questions. To follow up on your comment about Wangjing and Xizhimen, what was the tenancy growth for the quarter?
For Wangjing in tenancies about the 1.0% in terms of tenant sales, taking into account always there's a downtime, but overall, 1.0% for this quarter.
So it's lower than the portfolio?
Lower than this portfolio as a average.
Both Wangjing and Xizhimen?
Yes. But if you look at it, both they are already at a relatively higher base. So if you look at the growth momentum for the first quarter, they are growing slightly more. In the second quarter, they are about 1.0%. If you look at the first half, they are around at 3%. If you look at just now, the Rock Square is the main one that drives the portfolio sales up because of the acquisition, right? We come in, we do quite a lot of changes. So you can see Rock Square's tenant sales at double digit. So as a portfolio, it has been shaped up. But if you look at the core portfolio, they are trending above their 3% for first half, I would say, is quite healthy, yes.
Okay. Can you share a bit more color on the reversion at Xizhimen, given its a mature mall, a double-digit kind of reversion is quite strong?
It's because of, again, the expiry of some older space, and these spaces are typicality signed maybe 5 years ago. So we took opportunity then when this space is renewed, we do a little bit of subdivision. At the same time, we are also always looking at how to improve the productivity of our space. So I think in this quarter, we managed to squeeze in a little bit of more net lettable area to the tenant when we do the renewal by cutting out a little bit of the end space and push it to the leasable space. I think these are some of the active measurements on the ground that we are able to generate the value, yes. So I think that has flowed through in Xizhimen's case because of expiry of long leases signed some time ago. We subdivide it. We add a little bit of NLA to it, yes.
For Rock Square, how much more trade remixing can you do? And is the double-digit reversion sustainable?
Yes. I mean we've guided -- between 2018 to 2020, we see quite a good lease expiry profile. I would say that the good reversions we have extracted for this year-to-date gives us a very good foundation for us to plan for the second half of this year and also next year. We want to take the opportunity also to do a little bit of what we anticipated when we wanted to -- when we acquired the mall. I think during this window, we also want to do a bit of enhancement to the circulation area, improving some of the quality of the brand's existing. So I think this journey will continue into the second half of '19 and 2020. But it's hard to give you a fixed number as you can see that at each quarter when the area is up for renewal, we have a lot of strategic decisions to make. Sometimes, we have to bring in a certain brand, a certain concepts that will then have that anchor for us to do adjacent leasing strategies around. So tactically, during each quarter, we may have to decipher all this and review. But overall, I think we are quite confident that Rock Square will deliver growth as expected during the acquisition window that we identified, and we are staying on plan to really execute that part, yes.
And lastly, on your asset revaluation, was there any cap rich compression or was it just income growth?
Essentially, it's just income growth. And basically, the same valuers have more or less kept their assumptions and adopted rates value constant. So there's not much of that movement, yes.
Carmen from DBS. Can I just get a update on Minzhongleyuan, and your expectations over the next 6 to 12 months?
I think Minzhongleyuan is probably an asset that we are facing a little bit more challenge in terms of leasing demand. It's weaker. And I think that reflects in the occupancy. So I don't think that rent is going to be our number one priority for this asset. And if you look at the overall contribution of Minzhongleyuan to CRCT portfolio, it's also not a big number. So it's not going to be very significant. So at the moment, we are having good conversations with the local district government to see how they can better improve the overall environment in terms of the overall planning and see how, as a commercial activity, we can work towards improving the whole state of affairs. I think I've shared with you in the past few times that the center of gravity around there is not a very optimal one because of the constant resettlement of some of the areas. So we lose some of these catchment. And then new center of gravity has been formed. And our mall's heritage building, very small at 20,000 square meters. So from a leasing perspective, we are working very closely with the ground team to find the kind of niche that can position the mall a bit differently against your typical big-size mall. So that's why we have taken some time to really want to find the right kind of tenants that will position the mall the right way. We have -- want to make sure that is small, able to attract the younger people of today. So that's why you see us spending more time to ramp up the cinema. In fact, the cinema in this quarter, I will say they have shown quite an improved performance after that conversation with them. They improved their whole format and with a couple -- with some of the good production films that they brought in, I think the tenant sales for the cinema itself has actually improved. We're also working quite closely with the core working space operator to see how that can also augment the whole kind of new people entering the mall, as we then try to find new good F&B anchors. I think these are the big directions that we are continuing on the operating front. From asset front, I think, it's not going to be a core asset for CRCT given the reasons I just mentioned, small. And over the medium term, we would be also looking at opportunities for us to monetize it in line with our whole reconstitution strategy that I mentioned. Certain malls may not be that suitable in terms of its contribution, certain malls may not be that core. Going ahead, these are the ones that we will actively look at opportunities to monetize, and then recycle the proceeds to pursue more quality assets that will add strength to our overall portfolio. I think that is the general direction that we are embarking, yes.
And also, just now you mentioned briefly that you're looking towards introducing more hybrid concepts. So just wondering how they compare in terms of rents versus your typical sort of tenants?
Well, I mean the hybrid concepts do give us that blend. I mean a little bit of bookstore, a bit of café. So how we typically structure our lease is that we'll pack the café to similar F&B kind of rental structure and for similar, let's say, books and hobbies, stationery, kind of trade cat, what is a typical rent structure and our cost. So I think from that perspective, it is quite consistent how we approach it. Obviously, it's always the case of which area, right, we give it to them. And obviously, we want to always find an opportunity for us to transfer that area into better yield, and this exactly what on the ground we are always doing. Every renewal stitch, we're trying to either [ bandage ] the lease period such that we can have that zone to do a little bit of this rejigging. So I think this is part and parcel of our active tenancy work on the ground that we do. For this, Sisyphe I think they pay, I would say, in the market, I think they are -- I mean fair rent for the kind of space that we are giving them. We are giving them a Level 4, I think, yes. So quite in line with this kind of trade categories, yes.
Geraldine from KGI. So for the new mall that is near Xinnan, is the positioning kind of similar to your asset?
By and large, they are also targeting at the catchment that is further south of us. I would say, they are also working with all the big fashion retailers. So I think, by and large, I would say, the positioning are not too far apart, yes.
Yes. I think the one is a local department store that's traditionally in the city center and then they expand into the southern part. And then they are -- in terms of the brand positioning, I think there was some higher position plus the mass-market as well. So it's a combination of both.
I see. So it's the mix department and multi-tenant that is...
Yes, yes, yes.
Okay. And for the remaining space within Minzhongleyuan is about 40%, so the prospects for this space would be the co-working and F&B?
Co-working is already inside the mall. So I think co-working already is part of that 60-odd percent. So the remaining 40% I think our general direction is to -- we would like to find a very strong destination, able to generate its own footfall kind of F&B concept, and I think we have been working to watch that in the last quarter. We actually thought we are quite close to nailing it, but I think there's some delay. So I think we'll continue to look into the different leasing strategies we have, yes.
I understand that you're going to have your EGM tomorrow, can you remind us again about your capital requirements and, in particular, the equity fund-raising portion given the current capital market conditions?
Yes. So I think in the -- you're right, tomorrow, we're having our EGM. So in the unitholder's circular, I think we have put out a base case of raising fresh equity in the range of 250 to 275. So that will be quite a neutral 50-50 kind of debt and equity funding mix to complete the acquisition costs. So I think this is still within plan. And obviously, the demand is strong, then naturally we'll land on the higher range, yes.
Okay. I think three questions. First off, so are you likely to divest of Minzhongleyuan and maybe keep out at some point? And the second one is with the new -- the 3 new malls, is there any chance to do any AEIs? Or would you be able to sort of raise their NPIs from what you presumed in your circular? And then last one is -- or maybe we should take this offline, could you explain the impact of this FRS 116 on your revenue because I think your sister REIT also had a positive impact?
Yes. I mentioned that we will always review our portfolio and optimize it and reconstitute it. So in line with that principle, things that we think are not core to us to continue to hold over the longer term or it's not generating the kind of growth expectation that we hope, I think these assets that we'll continue to look to monetize them and lock value. So I think that there is something there. In terms of the 3 assets that we are bringing in, they are already coming in at immediate accretion to our current portfolio. If you look at its active tenancy that we have put in place in the last 2 to 3 years already set a very strong foundation for us to grow organically, coupled with the fact that in Changsha's case, Yuhuating, we're really looking at the end 2020 window because more than 60% of some big spaces will be up for renewal. So that window gives us a good opportunity now to come in, plan ahead for the 12 to 15 months out and have a good early conversation with the anchor expiring. I think there's a good scope for us to do as an enhancement, in particular, for that. For FRS 116, I think the key to take note is that the accounting has some reclassification in terms of the land rent expense that we pay to the landlord. This has been now taken out from the land rent expense, but now represented under the financing cost line. So as a result, there will be some reporting variances on that front.
Yes. But notwithstanding that, I think in terms of the distribution that we paid out to the unitholders, we do adjust it as if this is representing the land rental that we have paid, so there isn't any changes to what we have been paying out in terms of distribution as opposed to pre-FRS 116.
Any last questions?
What percentage of your renminbi loans now? You mentioned something about converting some of the Sing loans to renminbi, how has that been going?
Currently, the renminbi loan we have is under the JV onshore. So that constitute maybe about 5%, 6% of our...
It's Rock Square?
It's Rock Square, that's correct. I expect this percent to go up a little bit, maybe to the range of close to 10% after the proposed acquisition of the 3 assets because we would inherit a little bit of the onshore RMB borrowings, both for tax and also for building natural hedge. So post acquisition, the mix will probably land around the 90-10 at this juncture.
The remaining Sing loans, was there any swap into renminbi, no...
Yes. Currently, the offshore loans are all in Sing dollars. So we didn't swap in terms of the loan itself, but what we have done is actually swapping the distributable income. So we actually hedged the incoming income that we will be expecting to receive from -- in renminbi terms, and we translate -- we do a forward swap to Sing loan on that basis, yes.
Again, we fix the interest rate, but not the principal FX, yes.
What's the finance cost difference now, Sing versus renminbi?
I mean if you look at Sing that we disclosed, it's under 3%. So if you look at RMB, it hovers around the mid-4% to 5% level, right?
Okay. Thank you, everyone, for joining us for this results briefing. The management will be here for another 10 minutes, so feel free to just join us in front of the table if you have any further questions. Thank you. Have a pleasant day ahead.