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Good morning, and welcome to Frasers Centrepoint Trust, Third Quarter Financial Year 2023 Business Update Briefing. The business update presentation was uploaded on the SGX net last evening, and it is also available on our website. So, let me introduce the management team today. We have Richard Ng, the CEO; Audrey Tan, the CFO; and Pauline Lim, the Head of Investment and Asset Management. And my name is Fung Leng, I'm the Head of Investor Relations. Let me hand this over to Richard to kick off the presentation. Richard, please?
Thanks, Fung Leng, and good morning to all of you. Nice to have all of you joining us again this morning. As Fung Leng has mentioned, this is our business -- this quarter is our business update. So, a lot more focus within looking at the various operating metrics. So, let me just kick off this morning's presentation and again, happy to share the results from our third quarter. In terms of occupancy, we were at 5.6% up year-on-year at 8.7%. So, if you look at this set of numbers together with the next set of numbers in terms of shopper traffic, 16% of year-on-year, tenants is 5% up year-on-year. And if you look at year-to-date comparison with pre-COVID, we are about 16% higher. So, the trend continues. We had questions during the first quarter whether are we going to see this trend continue? And even in the second quarter, we also had the same question. So, this is again a testament to the strength of the portfolio that we had. Occupancy continued to remain very high. Our shopper traffic is recovering. So, we are probably 10% thereabout compared to pre-COVID, and it continues to strengthen. Sales definitely is a key highlight. The concern we have previously from various quarters were whether the increase in sales is going to continue. And as you can see, I mean, again, these numbers are there for all to see, continue to increase year-on-year and also especially if you compare to pre-COVID at a double digit of 16%. That is a very strong growth number. Financing, slightly higher borrowing cost of 3.7%. I think it's no surprise as we continue to see volatility in the interest rate market. What's good is also we are able to withstand our debt maturity to more than 2.5 years compared to about 1.9 years previously. On our ESG front, I think this is where we strive to continue to make progress, and we recently announced our first collaboration with OCBC on the green load offering. And probably Audrey will be able to share a bit more later on. This is actually one area in which we continue to strive in our ESG front, looking at the various initiatives, including increasing our green loan proportion as well. In the next slide, you can see, again, these are the market environment. Again, if you look at some of our retail mall especially, continues to be seeing very strong numbers coming up from the market as a whole. Suburban prime rents, we are looking at 3.1% year-on-year growth. This, of course, is looking at the broader market where it came off from some of those that were not doing as well, too, right? Even the Orchard Road prime area is also seeing a pickup in terms of rental reversion. And this is on the back of track that we have shared this in our various quarter results as well that the supply continues to remain very limited, and this is a positive information for the landlord in the market. With this, I'm going to pass on to Audrey for the next section. Audrey, please?
Thanks, Richard. On the capital management front, I'm pleased to share that the refinancing for FY 2023 is completed. And with this, we have extended our average debt maturity to 2.5 years. Our green loans now accounts to close to 50% of our total borrowings. . In terms of the metric sales, our aggregate leverage is up from 39.6% to 40.2%, but it's mainly due to the loan that was drawn down during the period for working capital books. Our ICR is at 3.89x. This is slightly lower compared to last quarter due to the higher interest expense. Average cost of debt is about 2.7% and 63% of our loan are hedged to fixed rate. So, we have facilities about $557 million that is available, and we are rated credit, BBB stable by S&P and Baa2 stable by Moody's. So, for the refinancing that is due in FY 2024, we have recently announced in terms of collaborations with OCBC to secure up funding to refinance the $353.5 million loan and loan documentation is currently in progress. And we already had funding in place for the $34 million loan. So, we have really plans in place for FY 2024. Next Slide coming. So, we're also pleased to share that FCT's first in Singapore to collaborate with OCBC on this green loan to offering carbon credits. So, these solutions actually helps companies who want to accelerate towards carbon neutral as part of its plans to decarbonize. So, this is in line with our target to be net zero carbons by year 2050 across our scoops,1,2, and 3. With this, I'll hand over to Pauline for our portfolio updates.
Thank you, Audrey. Good morning, everyone. I'm delighted to state your true, our operating performance for the quarter. I'll start off with committed occupancy. So, like Richard mentioned earlier, it stands at 98.7% as at the end of June. And this is actually an improvement, a year-on-year improvement of 1.6% riding on the tailwinds of the recovery in the retail market. And also could also to our team on the ground for all the hard work that's been put in. So, at this healthy level of occupancy do we stop there? The answer is no. It's actually a good foundation for us to drive the performance of the portfolio further. So, maybe I'll just illustrate a little bit of what we have done in some of our malls. So, say, for example, Changi City Point is a mall whereby we are focused on repositioning. And if you see the vacancy 19%, which appears to be a drop from the last quarter, is largely due to transitionary vacancy. We are actually repositioning the mall. We are strengthening the mall as the outlet mall in the East. And even for Century Square as well, improving the operating fundamentals, bring in exciting brands. So, for example, we are bringing in NTC Finance at the basement. We have, Tampines will be coming onboard as well and also the likes of Starbucks. So, these are some of the improvements that we are doing, notwithstanding the fact that we need to still maintain the occupancy at a healthy level. Yes. We don't have next information on this slide. But next, since our acquisition, we are very happy with the performance of the mall as at June, the committed occupancy stands 100%. Next slide, please. Well, I think this is a very famous like everyone we've shown it over the past few quarters. But in terms of the trending, we do see footfall. It has actually improved with the reopening, and it's actually about 10% compared to pre-COVID level. So, I think there's still some structural shift in our lifestyle coming out from the pandemic, right? But on the other hand, if I may draw your attention to the chart on the right-hand side, we see a story whereby sales has actually substantially surpassed 2019, which is the pre-COVID level. And that outperformance has continued to sustain over the past few quarters or so, right, as we come out from the pandemic situation. So, what's the key takeaway? We do see trading performance of suburban retail malls being resilient, notwithstanding some of the disruption, and it's also continuing to show growth, sustainable growth. Next slide, please. This slide, we see 3 years, the 3-year fee structure, the average fee structure all these tenants for the retail interest actually landed stability to the income stream for this asset class. So, in terms of the will, we are looking at close to 2 years in terms of will by NLA and gross rental income. The other takeaway from here is that the leasing trajectory continues to be very healthy for Singapore suburban retail. We started FY '23 with a leasing stock of close to 30%. As at the last quarter, we are down to 4.2%. So, that is actually a testament to a very healthy take-up in terms of renewals as well as new needs. Next slide, please. Right. Maybe just to share a little bit about a recent flash survey that was done by for CBRE, I think some of the key takeaways from this survey is that retailer sentiments have actually put positive on the back of the waning pandemic impact and also the strengthening of the business momentum in retail across the Asia Pacific Sea. And retailers have expressed that they are still keen to grow, notwithstanding the headwinds of inflation, manpower shortage. But the focus is on prime location. And we also do see overseas retailers actually on overseas expansion mode coming into market, new-to-market retailers in Singapore. And leveraging on this trend, we have continue to focus on refreshing our offering and improving our offering to our shoppers. So, when you see this slide is a coalition of some of the new to portfolio as well as new to market brands that we have brought into our assets over the course of FY '23, okay? So, for example, Coach has actually come into Changi City Point during to enjoy the -- I think it started during the Mother's Day in May and some of the exciting new F&B brands is not limited to F&B. We do see the interest in retailers to grow across the various trade mix. Next slide, please. All right. This slide just a little bit about corporate ethos. Our corporate ethos is inspiring experiences, creating places for good. We intend our malls to be the third place for the community to be a landmark in their respective catchment and to be part of the everyday lifestyle of our community. So, this is the S part of the ESG, the social part, and there's a lot of emphasis on events and programming to activate and drive footfall to the mall, especially with the reopening. So, what you see here is a signature event at a Waterway Point, the picture on the left-hand side, some of the exciting promotions that we brought to our malls as well as a little bit of the CSR element in terms of sustainability, as well as inclusion. So, the painted forward, which we have actually go down at our busiest malls. So, all that helps to draw footfall back to the mall and also to activate the sales of our retailer. Next slide, please. I will talk about the asset enhance for Tampines 1. I think we did share that we have commenced the AEI in April this year. And I'm happy to share that in terms of the progress of the works, we are tracking to our targets in terms of budget, in terms of time line. I think the progress on the leasing front has been exciting. The first phase will be coming up only towards the end of the year. But to date, we have actually achieved pre-commitment exceeding 90%. And what is to note is also that, in terms of our repositioning target, that is progressing well. So, more than half of the retailers that we have brought into the spaces that's affected by AEI are actually new to more. So, this is in line with our goal of refreshing and updating the young and trend positioning of Tampines 1. Next slide, please. All right. So with that, I will hand over to Richard to take us through the summary for this presentation. Thank you.
Yes. Thanks, Pauline. Just to wrap up our presentation for this morning. This is something that we shared before in terms of looking forward, where we see growth coming for the portfolio itself. Firstly, of course, in terms of organic growth, this is where the operations metrics are very important to us. We look at how can we continue to improve rent, continue to improve sales for the retailers in which then we get a proportion of that to GTO and also other revenue, you spoke about this before in terms of the coming back fully reopened. So, that is one of the benefits that we are seeing coming through this year. Something work in progress we continue to drive all this element in terms of improving the top line. Managing cost is, of course, another aspect. We all know that there's an inflationary pressure. But I think, again, this is where we have done a lot of work around looking at the use of technology in terms of managing our manpower dependency. For example, we spoke about security services. We spoke about cleaning services. And the team is underground continuously working towards getting more efficiency out there. Other areas that we are exploring, of course, one key component is looking at how can be more efficient in terms of usage of energy. This is where a lot of effort is being spent in terms of reducing consumption, giving in various ways, for example, we'll be rolling out stalling we call it solar panels across some of our malls progressively. Again, this is a way in which we can continue our journey towards achieving net zero carbon. And also, at the same time, we are looking at also ability to reduce consumption and be more efficient as well. Secondly, growth coming from asset enhancement. We also shared that progressively, we do asset enhancement all the time. But of course, some of those are smaller scale in nature is a bit about some division of units, we're cutting bigger units into smaller units resizing units, for example, or looking at opportunities to make some retailers be more efficient, et cetera. But we also have started commencement at Tampines 1 asset enhancement. This is a bigger one, where we see a lot more upside coming from this asset enhancement. This is one of our growth engine, and we continue to explore other possibilities as we speak. We see that there are opportunities for us to also undertake asset enhancement in some of our other malls. And a third one being inorganic growth, right? That is from additional stake or additional assets that we acquire to the portfolio. Not only are we looking at expanding our sites, but also looking at improving the quality of our portfolio. So, we recent acquisition in terms of our 25.5% acquisition for Nex and as well as the additional 10%, these are excellent malls, I mean, for those of you who are familiar with the malls, you know that the strength of these malls and not only for now, but this is where you see opportunity for growth going forward because these are -- you're talking about very dominant mall in their respective areas. Next is, if you look at in terms of suburban mall, it's probably the second largest in Singapore. In terms of Waterway Point that is the dominant mall in the Northeast of Singapore, and you would have read that there's going to be a lot of development, infrastructure development, business park development, SIT is going to commence their operation probably next year. So, there's going to be a lot more happening in Congo. You're going to see increase in population because a lot of construction of HTV is also going on there. You're going to see student population coming to the area. And of course, the business growth is going to be starting there once all the business part or progressively at the business part completed. So, with that, I'll end my presentation, and let's move on to Q&A. So back to you, Fung Leng.
Thank you, Richard, and thank you, Audrey and Pauline. We're now moving to our Q&A session. [Operator Instructions] So, we have a queue of people who want to ask questions, starting with [ Terence Lee ].
Just 3 questions from my side. Firstly, on gearing. Gearing has reached the 40% level. I wanted to check whether this is comfortable for you and whether you may look to divest assets or maybe raise equity to sort of pay that down? Secondly, on electricity costs. I understand that most of the old hedging contracts have rolled off. Just wanted to get a sense of what's the impact of higher electricity costs coming into the portfolio, you could share a number? And finally, on the vacancies, could you share on the vacancy impact on companies on AEI? And what's the, sort of, like stabilized vacancy after Changi City Point, some of the repositioning?
Yes. Okay. Maybe I can take the first question in terms of gearing. Yes, just marginally crossing the 40%. That's because we just draw down for some working capital. If you ask me, I mean if you look at, from Singapore perspective, right, the REIT sector perspective, we could go up to 50%, if you satisfy a certain ICR based on MEI's guideline, or minimally, you can go to 45%. So today, we are at 40%. Is it the past gearing level? I don't think so. But is it the worst? Similarly, I don't think so, right? I think we are in a position whereby there isn't really for us to say we must take any action at this point in time. But having said that, we are always exploring possibilities in the market. We look at what makes sense at any point in time. There are many variables, right? We look at market conditions. We look at market volatility. We look at where certain headwinds are coming, where we see interest rate, where we see opportunities. And all this has to come into play when we make any decision. So, our options are always open. Do we reconstitute our portfolio? We have done so. And that's something that we can continue to do. I mean we think that, that's the opportunity that we have in that area. In terms of raising equity, when we look at it, we have to evaluate the market as I said, whether is it a time need to do so? And when do we do it? Do we do it because there is an opportunity available, and if there's a good opportunity available, we will definitely take that into consideration. So, I gave you a long answer, but Terence, the reality is at 40 points, just slightly over 40. I don't think there is a real need for us to do any action at this point in time. We continue to monitor the market and do what's right for various stakeholders for investors, for example. So, this is something that we always have to bear in mind whenever we take any course of action. In terms of electricity and also vacancy, maybe I will pass it on to Pauline to respond to that, Pauline?
Okay, I'll try and provide as much numbers as if I can, based on memory. Okay. So, you are right. I think in terms of the some of the hedging contracts, we have been progressively hedging the utilities of our portfolio over the course of FY '23. And also just to kind like set the context, the way we actually manage utilities cost is, I think, 2 key things. We try time as well as we time up, right? So, we have a contract for electricity, but then the timing in terms of the hedging, it actually varies with batched up. So, the good thing about that is that then it protects us against sudden surge in electricity prices. So, I think if you look at the market, there are some rates that are floating out there. Those are fixed rates. There are various formulas for electricity pricing. So, all in all, that causes some flexibility as well as stability in the cost. So, if we're looking at, say, for example, first half of FY '23, these are the second half of FY '23. We are looking at the blended rate, I think it has gone up somewhere in the teens level. Not in a significant way. If you look at -- I mean, if you take reference to some of the rates are out there. FY '22 was when the Ukraine war started, and that's where we started seeing the same in terms of utilities costs. So as a proportion, landlord consumption for utilities as a proportion of our OpEx, that has gone up by perhaps about 2% to 3% on a year-on-year basis. So ,that's utility. Have I answered your question, Terence?
Yes, that's very helpful.
Okay. All right. Your third question was on Changi City Point. So what I forgot to mention is that although you do see the dip in terms of the committed occupancy, it's on actually a cluster whereby we are repositioning. And the key terms have actually been negotiated and agreed. What is holding back the commitment level is actually the documentation process. So, if I take into account some of those leases, which since we -- I mean, as we stand now has been signed. We are looking at the occupancy of actually recovering very close to where it was at the last quarter, so in the high 90% mark.
And also on the Tampines 1 on AEI, what's the occupancy there? What's the impact?
So for Tampines 1 AEI, we are actually progressively recovering the spaces. If you are looking at the passing occupancy, but it's not a good reflection of how the mall is trading because the spaces are recovered to facilitate the physical work.
Maybe I could add, Terence, if you're concerned is whether the vacancy is going to affect the performance, we said before, when we undertake AEI, we will look at utilizing the AM fees, asset management fees, to cover the impact that is caused by our AEI. So, I would say that in terms of performance wise, you'll be neutralized. But of course, during the course of the work, you would see volatility in terms of occupancy because we need to recover space, we need to work on the space before they are ready to be given back to the new retailers coming into, et cetera. So, there's a bit of volatility right now in terms of occupancy.
We move next to Geraldine Wong from DBS.
I have just 2 questions. The first question would be regarding the green loan with OCBC. Are you able to share some of the metrics very secure margins and as well as just some understanding of how the loan works. Say, if you hit certain green milestones, will there be cost savings? So that's the first question. My second question will be with regards to Tampines 1 AEI. Can you remind us if there will be any changes to the mall NLA? Upon completion, will you be asking for higher rent for that particular AEI area as compared to your original passing?
Thanks, Geraldine. I will attend the second question before I pass to Audrey for the first and Pauline you jump in for Tampines 1 AEI as well. Geraldine, when we look at asset enhancement initiative, I think there are usually a couple of objectives. One is perhaps we need to refresh the mall. Some of these assets that we have could be looking slightly higher because not much work has been done over a period of time. So, first objective is to refresh the mall. Secondly is to look at value enhancement. When we do it, we hope that -- or rather where we do it, we expect increase in rental to support the cost that we are putting in. And this will give us 2 things. One is, increase in revenue. And secondly, also, we'll be looking at increase in the valuation because that's a value enhancement to the asset. So, if you ask me, we're definitely going to expect better rental reversion coming from some of this because not forgetting one of the key aspects of this AEI is transferring lower-yielding space into plan space. For those of you who are familiar with Tampines 1, you horded up the space, if you go to Tampines 1 and once you step up on the MRT station, what you would be created by is actually a Sanken Plaza. Maybe perhaps in those days when Sanken Plaza was intent, some developer developed it with Plaza, you come in and then you go down to the basement level. But to us, that is prime speed. That is a space that is facing the MRT station. That is a space on the ground floor. So, what we are doing is, currently we're going to lap over the entire Sanken Plaza, build space on where it used to be, and this will be prime level one space that is facing MRT station. I mean for those of you, even if you're not familiar Tampines 1 is just visualize stepping out of the MRT station and you see that space. So you could imagine the quality space that we are going to create. So, once you step over the level one prime space, we can also then expand on the basement level. And Basement 1 level for Tampines 1 is again one of the highest yielding space in the mall. So, we're going to be able to bring in more offerings, more options. And then at the same time, enjoying an upside in terms of revenue from the basement 1 performance. And when we built the level 1, we could then also expand Level 2. So again, if you go, I mean, from the retail center or shopping center perspective, basement 1, level 1, level 2 are your key client areas. So, we're also going to expand Level 2. So, from that perspective, you can appreciate this AEI itself is going to give you moving spaces from a higher level, those may not have a good visibility back-end spaces. We are giving that to a CSFS or a child care in terms of the community service side of things. We can that space, put it on to Level 1, Basement 1 and Level 2. So from there, we can appreciate that that's firstly, our ability then to increase the revenue for Tampines 1 and improve the valuation for Tampines 1 as well. Okay. It's I think to hear from Pauline, maybe or Audrey, you can take the question on OCBC.
Yes. So, Tampines 1 is currently Green Mark plus assets. And with these collaborations with OCBC, they will help us with regards to the carbon credits. So, Tampines 1 itself as a mall is working on various initiatives like the DTC, the cooling district and also the likes of solar panels to reduce its carbon emissions. The residual carbon emissions that cannot be neutralized or reduced. We look into the possibility of using carbon credits to reduce the carbon emissions for Scope 1, Scope 2 and energy-related for Scope 3. . So, this is the collaborations that we have with OCBC to reduce our carbon emission for T1. As regards to margin size, it is very competitive. It's competitive. And on an onset, we do get competitive margins from OCBC.
Okay. We shared the rate for this loan that you have secured as it looks like it's around 4.25% to 4.5%?
So, currently the loans has not been drawn down yet. So, we are unable to advise in terms of the total pricing.
Okay. Moving on to the chart in the queue, Joy from HSBC.
2 questions from me. First of all, could you share a little bit on the color in terms of the sales growth? What are the trade sectors that are doing well? Yes, what sort of happens do you observe from there? Second question, in terms of demand for space. I think you mentioned about new-to-market tenant. If you look at where you're seeing a lot more interest coming through from your discussion with your tenants?
Okay. I'm going to just jump in first and then Pauline, you could come in some other colors. So, in terms of sales growth, we continue to see improvements coming from the F&B sector. I think that's 1 sector that has continued to perform very strongly. Again, that's a function of probably, in our lifestyle in which we do it a lot. And also, we continue to improve our offerings across the mall. So, there's an attempt by the various centers to make sure that we bring in the offerings that residents around the area are looking for. We bring in freshness. We bring in new brands. We bring brands that maybe started off initially at the City Center and then we bring it to several malls as well. So, that is one sector that continues to perform very well. That again, similarly, if you ask me in terms of demand, we don't see any short demand from F&B. Whenever we have a space coming up for F&B in any of our bonds, we do have options to look at, whether it be kiosks, whether it be fast food, sit-down restaurant, casual dining or even food. So, the demand for F&B is very strong and the performance for F&B is also very strong. The other component that we are also seeing growth is from the fashion and accessories. I guess this is also a function where going back to work now that you need to probably reach in refresh your work as well. So again, that has proven to be very strong from a demand perspective. And also similarly, I think what we have done and what our malls have done very well. We have again refreshed our offerings. If you look at, for example, we want a good point. We used to have a fast fashion retailer. I'm not going to mention the name, but probably you guys may know, was there from the day one occupying 2 levels, big spaces, they were not doing well. But they took on prime space. So, what we did is when the lease expired, we took back the unit, we subdivided the unit. We brought in offerings like -- and a few other specialty retailers. And they are doing very well now. And I think, again, this is about ability to bring in freshness, bringing what is relevant to the mall and what works for the mall. So, we did that, we did it very well. So again, even on our other malls, we continue to get opportunity to refresh opportunities to bring in relevant friends. So, it's a case of both a demand from the shoppers, our effort in terms of changing out. And of course, in terms of retailers themselves, they're also helping themselves. A lot of them are also looking at increasing their channels of marketing. They are no longer just dependent on say, for example, brick-and-mortar, a lot of them are now on omnichannel. So, that helps them in order to reach a wider audience in order to also increase sales. So, these are all the various efforts collectively from different sources, Pauline?
So, Richard, maybe I'll just add on. I just want to make a point that we do see very positive retailer sentiment across the board. So, it's not just limited to specific trades. And if you take reference to where occupancy is at, you get a sensing that I think in the Singapore we still see is generally still very healthy. Now, some of the trades, aside from what Richard had mentioned earlier, we do see good improvements for electronics and also beauty as well. I think increasingly, people are going back to work. So, some of the beauty services, some of the beauty retail, the sales have actually picked up in terms of momentum. Now, also not to forget some of the trades which were actually performing of a higher base during the pandemic period, the more it drill trades like, say, for example, supermarket and health care although the growth trajectory, there's still growth. The growth is not as big as some of the earlier trades that we spoke about. But it's actually performing still at a very, very healthy level and still above pre-COVID, right? So, I hope I provided more color to your question, Joy.
If I can just do a quick follow-up. So basically, we're seeing very broad-based recovery in retail sales. And maybe just specifically to fashion and all that, do you see any trend of down trading at all?
Not at the moment. In fact, one classic example as Pauline shared, is the Tampines 1 leasing out. I mean, we are more than 90% committed on the spaces that we are creating or spaces that we are reaching. So again, we see very strong demand. Some of those brands are expanding across the board. If you look at some of the these brands, you can see them now coming into Waterway Point, they're going to come in to Tampines 1. They are looking at spaces in other malls as well. I mean just to share recently, we have what we call it tenant engagement day in which we invited more than 100 of the retailers, different brands across Singapore, and we had a very good turnout more than 100 retailers actually came for that function. I mean, I'm talking about the CEOs or the brand, MD or the brand and all the decision maker of the brand, and the conversations we had is we see like what was mentioned earlier on that the positivity. And especially, I think there's a lot of positive vibe coming from, especially the prime suburban mall. And again, in the conversations, we understand these guys are looking at expansion, of course, in terms of space, whether do we have space today. If you look at occupancy that's 99% or even above 99%. And there's sometimes a challenge. We don't really have space when some of these retailers are looking at, but we are hoping that when we do have space, we could give it to them. Just also to continue on that point even on beauty. Again, that is where we see a lot of demand coming back to the market. And the beauty about the beauty trade is because there are many different things that is happening today, right? Perhaps the usual beauty service regime will continue to grow, but we also see various new type of beauty treatment that is coming up. And then this, again, getting very strong demand. They are looking for space, which we can't offer them at this point in time. I hope that will give you a perception about how the retail market is generally doing.
Moving on to our next in line, David from Daiwa.
With regard to the Tampines 1 AEI, you mentioned it's already 90% pre-committed. Given the very like upbeat picture you presented of how the space will look after the AEI. Do you think you may have pre-committed a little too early?
David, this is something always a balancing act. So, what we try to do typically is to secure a certain level of pre-commitment before we embark on AEI, because that provides you with a solid foundation, the base and in which then you can then try to stretch and get whatever that you want subsequently. So, it's a case of a bit of both. I wouldn't say it was too early or too late because we've really gotten the brands that we want to come in. So, that is the priority, getting the right mix at the rental that we target to achieve. So, I wouldn't say that it's too early. We still have another 10% to go we still can continue to make sure that we get those brands that we want to come in.
Okay. And a follow-up question is, one, when you say something is under documentation, is it just a matter of getting the signatures? Or are there other issues? I mean, is there like a due diligence? Or I mean, I'm just curious why documentation seems to be taking so long?
Okay. I suppose that is a process that we have improved significantly. But nonetheless, there's still a process that we go through. So for example, when a retailer comes in, we need certain documentation, we need to get the ACRA information and so to make it compete so that when we signed the documents all everything that's required from them is already in there. So, sometimes it takes a little bit longer because the signatory of those documents may not be in Singapore. So certain brands, the signatory could be overseas, could be in Europe, could be in other parts of Asia. And that is where it takes some time. That's one. Secondly, is sometimes there could be certain clauses within the documentation that may need a bit of time for us to agree on both sides. So, when we say documentation, meaning that it's really all the paid-up terms would have been settled, meaning that their brand is settled, the tenure is settled, is a case of some fine lines, especially international brands. They are very particular on how the clauses are being structured, because they want to have certain control across the board, and that is the one that usually hold up in terms of documentation. But when we say documentation, meaning that the head of terms are all clear.
Moving on quickly to Derek Tan from DBS.
Can you hear me?
Yes, we can hear you loud and clear.
I just want to ask a simple question. I'm just trying to triangulate around your tenant sales, your reversions and your all costs. And I'm just wondering whether is tenants operating in a high inflation environment? Do they need to see sales really convincingly cross 20-over percent for example, above pre-COVID before we start to see your reversions inching a little bit higher? I'm just wondering how we can get comfort around how you can really push your revenues going forward?
Derek, your question has never been simple. Yes. Anyway, I think we need to again look at the overall perspective. Firstly, we understand that core inflation in Singapore is over 4.5%, 5% and the sales that we are achieving is year-to-date pre-COVID is 16%. So, the delta between what we are getting and the core inflation, maybe core inflation is average. Some may be slightly higher, some may be slightly lower depending on the cost of their produce, the cost of business, et cetera. But there's still a pretty decent margin beyond the basic cost. So, we reduce, in other words, we believe our retailers are doing well at our malls, and this is where we have already turned positive in terms of our rental reversion. We did a negative 0.6% in 2021, then we are now hitting close to 2% when we announced our results first half. And again, this is an average number. If you look at the average in, average out, it's a lot more significant because that takes into account the step-up rent because that is something that we always need to bear in mind because it goes forward. And going forward, I think we will be using more the average number because that is again to compare with the market benchmark because some people you all confused because they look at another week announcing 3%, 4% reversion. And why are we getting less than 2%? But because the measurement, the methodology is different. So, maybe one way is to align that so that we can have simple basis of comparison. And coming back to reversion. I mean, we definitely want to make sure that we get the best that we could. But at the same time, we also mentioned that we are continuously looking at opportunity to refresh, opportunity to also bring in some tenants that we want. And we do have -- we acknowledge that we do have some malls that we're facing a little bit of challenges, Century Square being one, Changi City Point also being one. So, we are doing a bit of work in some of those malls. And that could have been a result of why on the average rental reversion, we are not stronger than what we were because some of our dominant malls are definitely getting higher reversion than what you are seeing on the headline numbers. And this is where, again, the triangulation that you're looking at is right because sales have gone up, occupancy cost has come down significantly. That's where we see opportunity for us to continue to push on in terms of rental reversion. But at the same time, we want a balance. We want to best support we're on a positive reversion. We also want good brands that is sustainable over a longer period. So, it's not a case of getting the best rent and these guys are out in 6 months' time, So again, this is where we will calibrate to give us a good growth and at the same time, a good trade mix to go forward with. I hope I give you the answer that you're looking for.
Okay. Can I think we are looking for a win-win relationship, essentially?
Yes.
Moving on next to Tan Xuan from Goldman.
2 questions from me. First is, can you share your latest thoughts on acquisition in fundraising environment?
Okay. Acquisition, as Audrey mentioned, is always opportunistic. I mean we want to buy the case whether the seller is ready, whether the seller could be sponsored, the seller could be third party. So, there's always a case of do we see opportunities in the market? And do you want to be able to assess the opportunity whenever it comes to us? So this is, again, something that's opportunistic. When it comes, we have to look at it and see whether it's something that we could acquire at that point in time with the market condition that we have with the accessibility to funds that we can have. To answer you that question, it depends at any point in time and in the market is right for us to make that acquisition and if the opportunity is available to us.
I think last quarter, you talked about Sponsor stay index. Is that still on the table?
I mean the stake beyond all rent responsible is about 24.5%. It's always there. But again, it's when the sponsor is ready to divest this asset, that's something perhaps you guys could check in with FPL next update. Sponsor also have South wing has been there for quite a while. So again, like what I'll say, acquisition is opportunistic, much as we think that we like to have access to those assets, but the seller also has to decide when they want to sell.
Got it. And second question is FY '24, the secured bank borrowing. Can you share roughly what rates are they on?
Audrey, do you want to take that?
Yes. So Tan Xuan, for FY '24, isn't?
Yes.
Okay. So, we have really secured the facilities with OCBC, now it currently is in loan documentations. I'm not able to advise the rates now because they're not drawn down on something to be in the next quarter announcement, we can actually share more.
Sorry, so is Vs already factored in the 3.7% all in?
No. So currently on the facilities that we are -- the green loan facilities is actually used to refinance the loan in FY 2024, the $353 million that you are seeing. So, soon currently is in loan documentation, and we are not drawn down to repay the debt.
Okay. Got it. Can you share -- is there a very big difference between the refinancing rates of roughly, what's the level?
So, if you were to refinance in the current environment, if it's based on the current footing rate, you'll be at the high force. But if you based on the 5-year IRS, it will be at the low 4%.
And that versus the loan that is expiring?
No. In the current environment, if you were to, yes, it's not versus the old loan. Just to give you implications and how the cost of borrowings is like in today's environment.
Are you able to share the expiring loan past interest level?
I'm not able to advise you now that should maybe something that I can get back, yes.
I recognize we are running out of time because some of you need to leave at 10:30. So, we need to proceed a bit faster. You can please go ahead with the question.
Yes. I'll just keep it to one. Tenant sales has been trending up sustainably 20% higher than pre-COVID, but it has been hovering there for this level. So, do you think this is as best as we can get for the next one to 2 years? And then secondly, can you give some color on next as sales for next? Or is it similar to the 5% that we are seeing?
Okay. I think if I look at Nex, the metrics are pretty similar to what we are seeing in our portfolio. Some of them are, in fact, even better level Pauline mentioned.
Actually, we should be comparing against the bigger malls, right?
Yes, correct. I mean, for example, the occupancy is at 100%. So, if you compare with our dominant malls, I see a similar trend, similar pattern. So, coming back to your sales numbers, I think a growth of double digit, 14%, 15%, that has been sustained pretty long period of time. That proves the fact that the retailers are doing well in our malls, and this is something that we want to continue to ensure that they can do well in our malls. Again, doing things upgrading of malls getting a lot of events coming back to the malls so that we bring in the crowd, bring in the community. We look at trade remixing. So, we look at opportunities to trade out or to exchange out of those tenants that are not doing as well, then we bring in better-performing tenants. So, to make sure that overall, we don't have a situation whereby we have certain growth tenants that are doing very, very badly and certain tenants are doing exceptional well. So, we want to make sure that this is something that we continue to focus on our retailers, our tenants can continue to do good sales and at an occupancy cost that is sustainable. I think that's fair mark. You don't want a situation whereby you have to change the tenants every 6 months, 9 months, so on. So, that for us is paramount.
So, if I may add to that, so you can, basically, what we are saying is that we are not just writing on the tailwinds of the market recovery, improving retailer sectors. There's a lot of proactive asset management as well as property management that's going on. Maybe in the form of large-scale AEI like Tampines 1. This is when you get that injection to actually move your sales, your mall performance to a higher level, a step up in the performance. But also across our malls, I think we do recognize there are some that are actually performing more optimally than others. And then how do we then optimize the performance of some of other malls. There are still areas of improvement that goes beyond just that organic increase.
Can you share the cost for this quarter?
Occupancy costs? It's still a very healthy, I think, in the quite close to the mid-teens kind of level.
It's below 16%. I think we can share it for -- last year, in our annual report, we announced that it was 16.2 where we can share with you at this point in time is below 16% averaging cost.
Moving on to Joel from DBS.
Maybe we can move on.
Yes. We move on to Movine before we come back to Joel.
I got a question for Nex. I mean, you guys probably know that Tampines 1 do like the acquisition is a great one. But market clearly is not excited about it, and we had 3 broker downgrades. I appreciate you can't -- there are restrictions we can talk about Nex, but is there anything you can review in terms of AEIs to get people a bit more excited on this property itself? And then the second question I have -- yes.
Yes, sorry, maybe the first one on Nex. I think that's a challenge that we are trying to overcome talking to our partners to convince them to allow us to share a little bit more. And we believe that we could be able to do so at some point in time. In terms of AEI, same thing, we are currently working very closely with PGIM Real Estate, who's asset manager and also with our partners on developing the AEI plant. There is opportunity for AEI. So, what we wanted to do is to be able to identify this work on this to get the consultants on board, get the numbers to a level whereby we are comfortable to share with the market. So, what I can say at this point in time is, we do see opportunities. We do see a lot of opportunities coming from Nex, but is to be able to packaged it together that we can articulate to the market. I think you're right. We were a bit disappointed that the market has not responded as well post acquisition. But of course, then again, it could be also a function of the current market volatility we look at beyond what you have acquired, but we certainly have very high expectation on this mall. We think is an excellent addition to the portfolio, something that doesn't come by in the market. And what I mentioned earlier on, this is the second largest suburban mall you have very well connected, good location, strong dominant mall, and this is where we believe we can harness the opportunity within this particular mall. The only thing that we are doing right now, perhaps is to ask for a little bit more time so that we can come out with the plan collectively with the partner and the asset manager and something that we can then share with the market.
Yes. And just on second question in terms of rental reversions, first half was about 4.2% average on average. Can we assume the second half will be stronger given that tenant sales are actually higher compared to COVID obviously, costs below 16%. So, does Pauline need to be a bit more aggressive or not as friendly for your tenants?
Don't worry, she's been stressed out enough. I mean all I could say is that we looking at around that of numbers, probably a little bit better. But again, it's a function of what was the double leases renew in the first half versus the second half. Sometimes you may have some anchor tenants coming up depending on the timing, depending on the duration and so on. But definitely, the kind of numbers is what we're going to be at least expecting to come in for the full year. And that's something that we continue to on. And as mentioned, Movine, we are also looking at improving some of the retail mix in some of the other malls. So that kind of average of the whole thing, right?
And just a final question for me to Audrey. In terms of the proportion of FX debt has fallen 63%. Just wondering your thoughts going forward? Should we expect this to maintain around 63% or even fall further towards 50%, which you used to have because we thought that the banks were charging too much for hedging costs?
Yes. Audrey?
Thanks, Movine for the questions. Okay. So, the lower hedge percentage of 63% was because of the maturing our loans and the refinancing of the ENTN that was on fixed rates. So, as whether we have further hedge, I think the market currently is doing very volatile. And as you can see in Q3, we did see the rates coming high. And as we refinance our loan, the way has actually moved up significantly. So, I think we will continue to monitor this market and see opportunity movements to hedge. And our hedging policy is what you have highlighted is at 50%, but we will look at right opportunity moments to catch more.
Moving back to Joel, are you able to connect? Joel?
Fung Leng, Yes. Can you hear me?
Yes.
I have 2 questions. The first is based on your tenant mix. Are you happy with the current makeup? And if not, which sector we would like to increase exposure to and perhaps others to reduce? And my second question is regarding the tenant sales, Slide 11. I understand probably there are some more that are actually strong performance performing above the average. Could you share maybe what are these malls and what is driving their advantage? Those are my 2 questions.
Right. Joel, in terms of trade mix, what I would say is that managing the portfolio of retail assets trade mix is something that you need to evaluate. You need to change. It's not a constant. So today, a certain trade mix may be relevant. But then again, over time, change in taste, maybe some of the younger population growing or some of the mid-age population and getting also. Again, the trade mix will have to evolve as the residents, the catchment population evolve. So, that's something we are very cognizant. I mean, what we are saying is that we are not going to say today, the makeup of the trade mix that you're seeing is going to be something you're going to keep for the next 5, ten years. We have to evolve or we have to change. But one thing is clear is that because we are still predominantly servicing the suburban market, that is a bit more grown. So essential services will still be a basic foundation, a key for our portfolio. And that is something that we will continue to develop and also maintain. The other components in terms of fashion, what is reasonable today may not be fashionable in 3 years' time. So, we have to be relevant, get the cognizant of what's happening in the market and we start bringing what our shoppers one. That is the fundamental. If you bring in trade that is not suitable for the catchment, you see it very soon because the retailers are not going to do well. So, there's something evolving, something will change, something that we would have to do.
And your second question is in terms of sales performance across the portfolio. Of course, what we are seeing is definitely the dominant malls, the leader in this space. Again, that's the whole fundamental of certain dominance in the market. So, this is where you can then expect them to be the leader in terms of the overall performance. Some of the malls like Century Square, we are remixing Changi City Point we remixing. So this will be the amounts that are probably lagging a little bit behind, but we are doing we're making efforts to make sure that they catch up. So, you had a dominant asset. So, those are the ones that I would say that is continue to lead the pack, Joel?
So, could you share like which are the malls they are doing very well?
I mean, dominant was and looking at the likes of our consent City, Waterway Point and so on. So those are the dominant, I mean Tampine 1 was also one of those, but of course, now it's disrupted because of the AEI.
Moving on to the last question today, Derek from Morgan Stanley.
Just a quick question on the all-in borrowing costs. What is it for the quarter? And what is your outlook for that, taking into account the FY '24 refinancing?
So, Derek, on the average cost of debt, we are looking at today's market, we estimate is forecast about high 3%, but this market continues to be volatile. As to FY 2024 as what I've shared, we have not refinanced the debt for the Tampines 1, and then once we have refinanced it, we have more details or share.
Okay, sure. And what is the all-in for the quarter? Because you shared the year-to-date that will the quarter be?
So, we don't share for the quarter, but as a whole portfolio, we will share in terms of the all-in cost today is 3.7%.
We have come to the end of this briefing session, and we thank you for your participation this morning. You may lock out now. Thank you.