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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Before we start, I'd like to introduce the CICT team for today. We have Tony, our CEO; Mei Lian, our CFO; Jacqueline, Head of Investment; Yi Zhuan, Head of Portfolio Management; Mei Peng, Head of Investor Relations; and I'm Clarisse, Head of the Investor Relations team. Also with us in this call are Allison and Satish.
Now I'd like to invite Tony to share his presentation. Tony, please.
Thanks, Clarisse. Good afternoon, everyone. Thanks for dialing in. I know today is a busy day here. You have a lot of calls to attend to. To be really quick, I hope you had a chance to look into our announcement this morning. I'll just give you a little bit brief overview. And I suggest we can go straight to the Q&A. So I think we reported a first quarter -- essentially it's a little bit of roadshow of activity that we are seeing. Mervin, just hang on; give me some time.
You said, straight to Q&A. So I put my hand up first.
I'll make it very quick. So essentially, the first quarter will be a reflection of a couple of things we have done last year, including the portfolio reconstitution. And obviously and [indiscernible] coming from Singapore reopening progressively, right? And we went all the way to pick in the fourth quarter, enjoyed a little bit more tailwind in the first quarter and where we are now, obviously, we are looking in the mirror towards the rest of the year. Certainly, feeling uncertainty that's creeping in. But hopefully, we're going to navigate through this year well.
And then if you could move to the next slide. That's the list of common questions that we hear about gearing our financial metrics. I think overall, we're still pretty in a healthy stage. Generally, if you look at it, it's gone up slightly. On a total volume basis, it has gone up by about SGD 100 million or so from -- compared to last quarter. That's despite the drawdown that we had to do the bank financing side to do the distribution of about SGD 250 million or so.
So I think overall, it reflects a very disciplined and active capital management and treasury management to ensure that in today's more elevated trusted environment, we may be very prudent in our cash management. Other metrics that reflected here include interest coverage going down a little bit as a result of an overall higher interest rate. We dropped in this quarter at 3.1%, 0.4% higher than -- so I think it's important [indiscernible] for your respective modeling. And hopefully, we can have something meaningful coming off of with your consensus, yes.
On the debt side, if you can see that in this first quarter, we sort of significantly reduced the elementary power by progressively refinancing as the debt came due. So chunk of it came due, SGD 700 million or so came due in the first quarter. And that's been financed. Part of it we kept it on a floating basis. Our floating rate now has gone up by about 23% now vis-à-vis about 20% in 31st December. So we are taking a little bit of a position because we think we are also coming potentially closer to the tail end of the interest rate high environment.
We're really beginning to see some tapering off effect on the -- especially in the [ locker ] channel and we will look at the right opportunity to tap the market or locking a little bit more fixed rate.
So those are again the important takeaway point, then when look at mortgaging. We did one issuance about SGD 100 million of sourcing of 10 year, about 4% thereabout. Today's funding market, there will be opportunity for us to look at such kind of channel given where the yield curve is trading down is quite steeper than now, especially on the 1 year to 5 year and from 5 years to 10 years onward is pretty much quite flat line compared to a situation that was slightly steeper in December 31st last year.
So these are again the important takeaway point. I don't take the whole point of [indiscernible]. And the occupancy has crept up virtually. I think we have managed to secure more lease. Critically important to us to lock in the business in an environment where a little bit more stringent. Today, we think we have secured 5% of maturity yield this year.
For example, for the office side, we have already locked in about 65% -- so 70% of our maturing -- maturity this year -- sorry, 66%. Sorry. In retail, we're talking 66% and office side we're talking about almost 76% of maturity already locked in. So we only have the remaining leases for the rest of the year that we are working actively on.
So important to make sure we secure the tenancy, get the occupancy up as much as possible as we navigate through in a little bit more choppy waters. So I shall stop here.
[Operator Instructions] Okay. Mervin, you can go ahead with the first question.
Yes. Thanks for the call this morning. And congrats on the very strong rental reversions for the retail segment. Maybe you can touch on parts where you can sustain the strong 6% for the remainder of this year or there's something else we should look out for? My second question is regards to Galileo and Frankfurt, any updates there?
Okay. So I did mention there's [indiscernible] effect, which we are still enjoying now. Whether we want to be able to crop in that 6% or so client overall portfolio additionally just on the lease-to-lease strategy that we looked at. We also come to a point in time where we know that the ability of, especially retail tenant to move up the price. I think it will be a little more challenging.
So having that in mind, we want to be very tactical, which is why we always felt that the average and average kind of a comparison from a reversion perspective, increasingly will become even more meaningful as we look at due structures with the tenant. We may want to take a little bit of tactical positioning. And more importantly, I think if we are able to continue to help tenants drive sales, then I think the rent naturally will come true. You will probably also notice that the turnover rent has a wide range from 6% to 22%. 22% is quite up like in the way it is quite unique to a specific mode.
So can we say it will be mid-single digit? Is it something that you could possibly achieve for the full year, plus or minus 1% or 2%?
Again, we meet?
Yes, we can.
Yes. So [indiscernible]. My sense is that if you look at the situation now in Singapore, where we are seeing a simultaneous model opening where you get 2-way traffic flow. We're increasingly seeing that the knock-out effect is coming more clearly -- coming through more clearly which I think I articulated before something we expect when the reopening of recovery start coming in, we're going to see probably a bit more beneficial if they're coming into the downtown side, more so than the suburban side.
So increasingly, we're also getting a little bit more traction from a leasing perspective. Demand for Downtown space is healthy, and we are seeing that more retailers are more preferred to look at expanding and looking at positioning itself in the Downtown location. We also signed up new names, new to market, at least new to Singapore, substantially in Downtown location. Of course, we secured one also in the Suburban Mall as a package. So foreign retailers are also beginning to look at Singapore entry point. And I think one of the main [indiscernible] would likely to be the Downtown. So I think Downtown, we have seen a bit more traction [indiscernible] going forward. On the other hand, while borders open up, we see a lot of travelers coming in. At the same time, you also witness a lot of residents here also traveling out. My own sensing is that the impact on the Suburban Mall may be more so, especially those a little bit more value-conscious of a consumer, you may see potentially some kind of indication. So we would have to be a little bit careful.
But having said that, wrap everything together. The trend of retailing is also evolving quite rapidly. And it's not something new to you focus I mentioned before. The channel distribution getting more and more interlinked. You get tenants who have different tactical strategy when you look at the [ Spring ] channel whether it's a physical channel or the digital channel. And holistically looking at the total customers value wise no longer just from a pure physical or pure e-commerce perspective. That will mean that going forward, we would be looking at how we should rationalize the occupancy cost ratio. Even though today, we are tracking quite closely, still -- meaningfully still contribute the large part of our business. But if you look at online sales business, you are still probably not [indiscernible]. Large majority of sales still be transacted in the physical space.
But increasingly, different retailer would be opting a different mode of presenting themselves and different mode of capturing all the sales for the similar tenant. And we are already seeing some cases where [indiscernible] offshore using it as a showroom, which means commercially we are looking at occupancy cost ratio, we need to rethink. So that's something we are working and [indiscernible] on how we look at the rent adjustment.
So office side, generally I think we will still be okay. Of course, there's some uncertainty creeping in as a result of the economic climate and they hear all the -- some of the bigger names are looking at downsizing their presence. [ We are ] watching the space, potentially more channel space [indiscernible]. By and large, our own sense is that this year will still be okay. Maybe depends on when your leases are due. So which is why I mentioned we have to quickly make sure that we are able to secure those lease agreements as quickly as possible for this year. And we have done so for the office side, 75% of leases will be done for those that are maturing this year, yes. So we should be able to [indiscernible] positive. But any more rental discussion, I know I didn't thought we're going to get the curve very strong, depending on your baseline is like, like what you have witnessed last year. It's probably tapering down close to maybe between -- I think it could be less than 5% overall.
Tony, Mervin has a question on Galileo.
So Galileo, at this point, we have nothing more to update than what we have mentioned before, the same thing. We're studying different possibility whether we should look at a single occupier or looking at multiple occupier. At this moment, nothing was more than you mentioned.
Rachel, would you like to ask the next question.
Two questions from me. Maybe first question is just on the leases that was coming in, in CapitaSpring, Asia Square, Six Battery Road, other backbilling and New Leases. How much are ready income contributing and how much is still to be true in the rest of the year?
Do you want to ask the second one, or let me answer the question.
Okay, sure. So for my second question is really interest cost. What are your. What are your expectations for FY '23? And are you -- do you see -- are you seeing any potential increase in interest cost further from what you have guided last year?
Thanks, Rachel. We're very happy for these 2 questions because I don't have to answer it. Maybe on the questions about the delta, we will let Mei Lian take that question. Essentially, your question is on whether we are seeing a mismatch on revenue recognition and cash flow along, just to make it clear.
On the -- in terms of the rents free, we have some rent-free authorization that is included in the 1Q numbers, but we will not necessarily go down to [indiscernible] because this is not cash back. But it will flow into subsequent quarters from Q2 onwards, the amount is close to about SGD 3 million. On the second question on borrowing cost, we still have about SGD 430 million that will be refinanced in -- towards the end of second half. So there could be some impact from the refinancing in terms of the overall portfolio interest cost.
So what would be your expected average cost of borrowing for FY 2023?
Depending on where the interest rate levels are. If you're looking at these current levels, it will be in the range of between low 3 or about mid-3.
Okay. And sorry, just to clarify, just so you mentioned SGD 3 million in terms of the rental income contribution, what's the SGD 3 million, again. I didn't catch from you?
It's just the straightlining effect of rents free consensus for the new leases in terms of office residents. Accounting-wise, we have [indiscernible]. But in terms of contribution to actual cash and the distribution income, we will be [indiscernible] will be from second quarter onwards.
Okay. And can I take it that most of the tenants already moved in and started the lease or we still have some more?
Yes. I think most of the tenants that are inside [indiscernible].
Next, we have David.
I just have one question. With regards to CapitaSpring, I think the last quarter, I didn't really get much guidance from you as to what type of distributions will you receive? I mean, will it be 100% passthrough? And I assume that the assets should be close to being stabilized by now. So what would be the policy on the distributions that you'll get from that asset?
Okay. That entity is actually JV, so various considerations, whether the entity will be passing through all the net distributions to JV partners. But we do -- we do have potential distribution coming in for this year. The amount is to be determined yet.
So it seems like there's no progress since the last quarter. There's still -- you're developing this for income, right? So now you're saying you still don't know how much you're going to get from this?
No, David. There will be some pass-through definitely because there are also entity level costs, including financing costs that need to be taken into consideration plus all the financing is taken at the asset level.
Yes. So there's still some uncertainty on those parameters. Okay. Okay, fine. Yes, that's all I had. That's all I had.
Next, can we have Brandon.
Yes, can you hear me?
Yes.
Yes.
Just 2 questions, Brian. First one goes back to gearing of 40.9%. Does it actually prohibit you from doing any incremental CapEx for AEIs, because I guess now in Raffles City [indiscernible], right. So that's my first question. And the second question is do you look at some of these Australian offices that were up for sale over the past 3 to 6 months. I mean there have been a lot of interesting deals that I think could still [indiscernible] Australia as part of the office side, that was [indiscernible]?
Okay. I'll address the first part of the CapEx first. So we do have essentially the completion of 30 major part this year. We are starting a few CapEx of different scales. It could be just regular CapEx relating to the CapEx [indiscernible] of those potential impacts. So some of these we are studying. And I think that investment [indiscernible] all these days. So I think we still have to [indiscernible] how these CapEx looks.
Brandon, I thought I understand your question quite correctly, how is that linked to the gearing and you're trying to model whether how that gearing number will go up. If you look at the last quarter, this quarter, there is a delta of SGD 100 million, maybe [indiscernible] and that includes the distribution that we'll be paying out for the first half -- second half last year.
So there was about SGD 350-plus million or so. So that combined effect only led into a net increase of SGD 100 million of additional loan we take on which translate into a 0.5% increase in the leverage. So your question is whether the sort of funding for the CapEx has been drawn down. I think they are [indiscernible] progressive, but the more important thing is that we are -- we're handling cash business. So each time we get collection, we are actively managing the cash flow so that we are not unnecessarily drawing down loan in an elevated interest rate environment is pretty important. We keep as low a cash balance as possible.
Second question is the -- I don't quite got it because there's a live call here. Can you just repeat your question?
So I was just asking, I think back a year ago when you first bought into the few Aussie acquisitions as part of diversification. Now that there are some interesting transactions that have come up, are you actively looking at them? Or is gearing a big [indiscernible] for you?
No. I think our focus now in Australia is really trying to ramp up our existing 3 assets, right? When we bought in, we bought in with the expectation that we definitely need to upgrade the office, which is what we are doing now. Where the throw becomes available, we are doing that. With the joint venture assets in [indiscernible], we are also working with our partners, and we share similar objective that is really to bring this premium great building at least closer to the latest newly built premium building in terms of specs.
So certain things need to be in place. For example, the lobby effect and other things like crystallizing the interfacing between the office and retail, that's an area that we have to work with [indiscernible] to fully maximize the potential of this integrated project. So that's something that is already planned. We are slowly executing it. I hope it answered your question.
Next, [ Kenny ], would you like to ask the question. [ Kenny ], are you there? Are you able to unmute yourself? [indiscernible], you want to go first?
My first question is on office passing rent. You're saying that it came down quarter-on-quarter. Can you share a bit more color there?
Okay. If you look at [indiscernible] actually we have used a different base. Yes. So last time, we only aggregate the cost [indiscernible] aggregate. Today, we are aggregating the entire office portfolio. If you look at the like-for-like in Footnote 3, it should be at [ 9.66 ]. So it's higher now.
Okay. Okay. Got it. And then secondly, what are your thoughts on divestment?
[indiscernible] has our own capital management strategy, including how we look at capital recycling. Yes. So I think it's something that we do. It's not something that we classify. Divesting is not -- divesting is usually with the view of how we will redeploy that.
So the idea is that even if you divest, you will look to redeploy, is it? Not to bring gearing down?
Yes.
Okay. Okay. Got it. That's all of my questions.
[indiscernible] are you there? [Operator Instructions]
Hello. Yes, it's me, it's not [indiscernible]. I'm sorry. Maybe -- too many results. Maybe some stuff across. Can I ask questions?
Yes, sure. Please go ahead.
Yes. First question, Tony, any indication on where your cap rates will be sitting come in the middle of the year, especially for Australia and Europe right. Are you look -- do you think any indication that there will be big devals coming because as suspected transactions are going to tell you that the devaluations could come?
Okay. So we can't speak on behalf of value. Naturally, we probably may take some reference from where the market is transacted. And perhaps we may also need to differentiate the type of assets getting transacted. So there could be different variables to look at. By and large, you look at the Sydney office, our on-ground sensing is that there seems to be a bit of an upward movement in terms of cap rate, to what extent is still a big question mark. And to what extent you apply to specifical asset is still a question mark.
But important thing is that we did -- when we did the transaction, we have also acquired not a high valuation point. So I think we do have a little bit of calculated analysis when you look at the transaction, whether you will translate into some kind of expansion of cap rate for our kind of assets, we can't speak on behalf of the value. I suspect the trend is moving in that direction. There actually could be something.
Okay. [indiscernible] for Frankfurt?
It is not that. If you recall in December, there was a major move and one of the biggest driver of valuation decline was the adjustment to the lease adjusted discount rate, right? Galileo is certainly heightened because of the impending departure and couple of the situations in Europe saw compound the situation. So I think they will be settling -- eventually, there's a set plan that's been executed. I think that certain part of risk element may be taken away. Potentially, there could be an impact from a valuation perspective.
Okay. So are you suggesting that the bulk of the deval is probably done in Frankfurt?
Yes, I think so. If there's anything probably in my mind, no. Sometimes -- the thing is that this environment now a lot of valuation in the market is very much a private market-driven situation. In the private market space, you don't see a lot, but maybe with the exception in Australia where [indiscernible] is doing some monetization. But by and large, it's really driven by the private sector, yes, and then gearing [indiscernible] obviously.
If you look at the market of [ private ] transaction, yes, so there will be some number. But like I said, the key thing is if you can able to get the leasing up particularly for [indiscernible], then the [indiscernible] potentially can be adjusted, and hence, I think they could get a little bit of uplift in the valuation.
Okay. I understand. My second question is what are you looking -- what indicators are you looking at in assessing deals at this point? Is it rates must come down or cap rates must expand a certain number? Is there a pricing thing? Or what are you be looking at this point to do a deal at least this year and which markets?
I think a lot of this could align, the market condition has to align when the market like our market is. The market confidence is back with a vengeance. Naturally, we're a little bit more confident in assessing the market that could [indiscernible] that we have a knock-on effect in terms of where we are now. I think there's a little bit stalemate in terms of where the transaction can happen, right? There are new flows in the market, it's just that a lot of [indiscernible] going around.
And whether you're sitting on which side of the table, whether you're on the buyer side or the seller side, everyone is posturing on who's taking the first bite. So that's the state of affairs, I would characterize. Very much driven by economic outflow, interest rate outflow, noninflationary, speculation. So those are factors that in a way that's fine, and we are seeing that kind of behavior translating in the marketplace. I think we are no different. We are assessing our situation as well. And if there's an interesting deal in the market and the market [indiscernible], obviously, we'll try to pick up that.
Okay. So I think there is nothing at this moment and focus on operations.
Operation is critically important this year, right? I think definitely, we need to try to drive underlying performance in an environment where the cost is elevated -- operating cost is elevated. The good thing is that one big part of our cost, which is really the utility cost where [indiscernible] and we have seen 1 quarter of it. Second half this year is easing off now. So the tariff rate will be about [ 30% ] lower than what we have in the first half. So there will be a little bit of a moderating effect.
So that will help to buffer a little bit on the second half of the year. But first half of the year, I think we are getting a little bit of tailwind from last year, so that happens as well. Hopefully for the remaining of the year, the combined -- in combination, we want to be able to drive underlying cash flow, able to deliver enough to in fact cover the entire elevated interest rate costs, right? That's real, it's hitting all the REIT sector. And that just really translates to a higher [indiscernible]. I mean they were just trying to aim for that. Yes.
Next, [indiscernible], please unmute yourself.
Tony, you mentioned about locking in most of the renewals in the first half. I can understand that for office very clearly. But for retail, why do you think that the retail environment might actually improve a little bit, given you have incoming visitors, and we are actually heading to renew leases that were signed during COVID. So just your thoughts around leasing strategy on retail?
Yes. So as far as possible, we would like to cover the cost as a result of the energy price into the overall loss rate. As you probably know, the biggest hurdle is split between the rates on bankers' side and the utility side is all in. So we will factor that in the negotiations as much as possible.
We're also quite cognizant of the fact like I mentioned the onset that -- my sensing is that the retailer ability to continue to increase the price, I think, will be quite curtailed in an environment where the economic uncertainties could bring in. Yes. So we will have to factor that into our own calculus, yes. But 6% additional is enough to cover, yes.
So would you say that 6% is as good as it gets to this year?
Depends on where we stand. As mentioned earlier, we potentially can see more interesting -- interest coming in with [indiscernible]. Hopefully, we can able to continue to drive on the momentum. [indiscernible] side is quite stable. It is more or less business as usual. We may maintain at the current level. It's just catching up now, yes.
Okay. Cool. And then my second question on divestment. Have you actively sort of engage in conversations or showing your assets in the market or you are taking a more passive role at the moment?
I mean that is all we get, I'm quite interested. People want to have to assess. We are open to take a look at. And whether it is an interesting deal on the table, then we see from there. Yes.
Okay. But -- so is this particularly to just Singapore assets or across your geography, like Australia and Germany. I'm trying to see whether there is a pricing gap? Or is there actually a question of whether there's a buyer?
I think [indiscernible].
Terence, would you like to ask the next question?
This is Terence from UBS. Just wondering, why is the retail revenue growth a bit soft at 1.5%. Because if I look, I think occupancy is higher year-on-year, reversions is positive. GTO also looks good alongside the higher tenant sales. I think Atrium and [indiscernible] should be better as well. So just wondering why the softness over there?
There's a timing difference. There's a lagging effect. We cropped in positive reversion from fourth quarter last year overall on portfolio. So there will be a bit of timing effect. It's not these deals are signed on a forward basis. So the commencement of this deal may not be immediate, the day we sign. It may be at a date where the deal -- essentially for the renewal. So there'll be a timing difference. Yes.
Okay. So fair to say that the growth rate of retail revenue should accelerate from what we see here?
You can see that, overall, it's a good performance with occupancy going up as well. Yes.
Okay. And just wondering, I think your comments about downtown potentially having new tenants coming in. It sounds like new-to-market tenants. Should that mean some form of tenant remixing efforts. So should we be budgeting for some vacancy downtime as this happens. So this is a long side even if you get the higher rental reversions?
There could be a situation where we need to look at some kind of tactical move. Yes. At the moment, most of this [indiscernible] where we have executed on [indiscernible] the largest one is really Raffles City, right? So we're assessing the other assets, whether we need to do some kind of [indiscernible].
Rachel, you can ask your next question.
Yes. Since there's not many hands up, I thought I'd just ask a few questions. So for -- on the retail side, I just want to get a sense, your downtown recovery, would you be able to quantify how much is it really led by noteworthy spendings? Or is it really still the more domestic spendings that's driving the recovery of Downtown Malls?
The tenants -- okay, the tourist part is still a smaller component. I should probably know that the traffic arrival actually only started really from fourth quarter, in fact, towards the end of third quarter, beginning of fourth quarter. So it's only trickling in. We are not even seeing the China effect yet, hardly any. If you look at the statistics that has been published by the Tourist Promotion Board, you know that the Chinese traveler is by far still quite small compared to what it used to be before. So everybody is anticipating, hopefully, it comes through.
But the other traffic has been getting more now. We've seen higher growth coming from Australia. Usually, these are [indiscernible]. Those are [indiscernible] local travel up, you can see more coming in. Korea, likewise, you've seen more coming in. India, coming in. Southeast Asia, coming in. They are opening up. It is more or less quite coincide with our relaxation in our border. So I think those [indiscernible]. Hopefully, we see more from the Northeast Asia side, yes. At the moment, I know what you see is a quite small component, yes. But the trend may be the beginner.
So you feel that there's still some tailwind in the travel spending upside for the rest of the year?
Yes. So in certain malls, we are quite still towards the tourist. You have [indiscernible] activity. Hopefully, we are able to capture the flow. For instance, you probably heard the latest news regarding some of the Chinese payment apps, right? They are actively engaging our retail folks there, and we are also participating in some of this programs. Hopefully, when you make it a lot easier for them to transact in Singapore. Yes.
Okay. And the next question is really on the downtown retail. I mean, if I look -- I mean, you mentioned something about retailers probably -- may be limited in terms of whether you can push the rents up. So just wondering if you could give us some sense of what your cost?
Combined now first quarter, we are about 17%, downtown slightly higher more in the low [ 30s ], yes. We still got some room, I think, sensing is there. Of course, we need to see what kind of trade that we are going to bring in, but generally, we ended last year, 60.6%. It's in a very healthy rate level, though we have [indiscernible] little from then.
And when I look at your rents now that you compare average versus average, can I understand that for downtown malls especially, are you moving less, I think you're keeping more GTO rents and not pushing out base rent so much for the downtown malls yet in the first few years of their leases or early leases?
We have already moved to the stage whereby before January, we want to have a higher fix. But on a case-by-case basis, we look at whether we could share a little bit higher risk with this retailer, all depends on the account name that we're [indiscernible].
Okay. Moving to higher fixed means -- the proportion is close to pre-COVID levels really in rent structure?
Not yet. Because we go down the rent if you recall back in 2020, '21 for [indiscernible] by a fair bit. So we actually are adjusting up. I think we're just coming to probably end of the first -- for those that still remain [indiscernible], right, for the end of the first lease cycle. So actually, we will try to adjust that we believe. But we would on the total rent basis, if you look at the sales, those have done well in the last 12 months or so. It will be paying quite decent [indiscernible] rent. So on a gross basis, [indiscernible].
Okay. Got it. Yes. Just one last question. Just on the Galileo and Commerzbank. I just want to understand your thoughts. Are you looking at AEI to lease up to a single tenant eventually and take the risk of 18 months vacancy because of the softer thing of the market that you can lease out? Or is it -- what's your thoughts? Why would you want to do AEI rather than to lease out progressives to get some income?
I think the building needs an upgrade, that's for sure. The space really itself is lagging the new one to the market. So I think we need to catch up in that space. So regardless, we're looking at a multi-leg or single-leg scenario. We have to improve the basic fundamental of improving.
It's not that it's a rundown building. It's just that you want to [indiscernible] high-grade premium level of certain fundamentals [ that we ] need to fix them. Then the internal construct is a second matter. That's where I think the strategy whether eventually, we secure one major and then we will take up most of the space or we split into a couple of mini anchor or even smaller anchor. Then, the whole design may need a little bit of retreat because current building is really built for single occupier, yes.
Okay. But it did not also sound quite long for full -- it's really like a full complete rebuilding almost there?
Technically, the situation, the supply chain issue, it is actually quite not unreasonable, 18 months, yes. There's still certain parts that are not easy to move around. And in Europe, particularly, I think they also have the same issue on the labor. So you need -- you can't expect them to fast track their work. Hopefully, we are on now. As things get slowed down and most of the construction would start, especially get a sharp offer, then the ability of resources, maybe 12 months from now. I mean we can start looking at [indiscernible] perspective of construction company or the contractor company that we need to engage in at some point.
Okay. All right.
We have a question coming from online from Krishna, is on whether we have any bad debt provisions for this quarter. And if there's any impact of ForEx movements on the gearing. Krishna, feel free to come in yourself to add on if you have other questions.
Yes, Clarisse. Thank you very much. Yes. Those are the questions, Tony, if you can just quickly address them.
Sure. Maybe Mei Lian can take it.
I think this quarter, there's no significant increase in bad debt provision. So the other question is on impact of ForEx movements on gearing. There is some impact this quarter due to the [indiscernible] based on the 10th of March. So the impact is probably in the range of about 2% or 3% adding on to the gearing.
Mervin, you have your hands raised, would you like to ask another question?
Yes. Just a question in terms of tenant sales. We notice for FCT and Suntec, for March it dipped. Just wondering whether you -- CICT experienced something similar and what's driving that?
Sorry, it this based on year-on-year or month-on-month?
Month-on-month, yes.
Yes. So [indiscernible] leading to our March contract year-on-year, it's -- so we have generally -- that's a March performance year-on-year.
Month-on-month, I don't have a number, but I would imagine it's lower because don't forget we [indiscernible] where we have some flowthrough from [indiscernible].
Okay. So it's more seasonality than anything else. In terms of Clarke Quay AEI, any updates in terms of precommitment levels. Yes.
So including all those that we are still negotiating, we're looking at about 80%.
And how are those signing rents compare to your underwriting assumptions and ROI for this AEI?
So far on track.
On track. The target?
Mid-single digit.
And just to clarify your reply to Rachel's question on occupancy costs. Suburban is around 17% and downtown was higher -- is downtown like close to 20%?
Downtown. What's that, the sales?
No, the occupancy cost.
Yes, in the low 20s.
Low 20s. Okay. Okay. Sounds good. I look forward to stronger performances ahead.
We're [indiscernible].
I also hope to see my mortgage drop.
Okay. Thanks, Mervin. Do we have any last questions? Okay. If there's no other questions, thank you for your time.
Thanks a lot. Bye-bye.
Thank you. Wishing everyone a happy long weekend.