U.S. Markets closed

Edited Transcript of C38U.SI earnings conference call or presentation 23-Jan-19 2:00am GMT

Full Year 2018 Capitaland Mall Trust Earnings Presentation

Singapore Jan 25, 2019 (Thomson StreetEvents) -- Edited Transcript of Capitaland Mall Trust earnings conference call or presentation Wednesday, January 23, 2019 at 2:00:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Audrey Tan

CapitaLand Mall Trust - Former VP of IR - CapitaLand Mall Trust Management Limited

* Jacqueline Lee

CapitaLand Mall Trust - Head of Investment & Asset Management - Capitaland Mall Trust Management Limited

* Lei Keng Tan

CapitaLand Mall Trust - Head of Finance-CapitaLand Mall Trust Management Limited

* Lo Mun Wah

CapitaLand Mall Trust - VP of IR - CapitaLand Mall Trust Management Limited

* Tee Hieong Tan

CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited

================================================================================

Conference Call Participants

================================================================================

* Brandon I. Lee

Citigroup Inc, Research Division - Analyst

* Derek Tan

DBS Bank Ltd., Research Division - VP

* Donald Chua

BofA Merrill Lynch, Research Division - Head of ASEAN Real Estate Research and Director

* Teck Ching Wong

OCBC Investment Research Pte Ltd. - Investment Analyst

* Wilson W. Ng

Morgan Stanley, Research Division - VP

* Goola Warden

================================================================================

Presentation

--------------------------------------------------------------------------------

Audrey Tan, CapitaLand Mall Trust - Former VP of IR - CapitaLand Mall Trust Management Limited [1]

--------------------------------------------------------------------------------

Good morning, ladies and gentlemen. I'm Mun Wah, VP of Investor Relations from CapitaLand Mall Trust. To those present here at the picture and those of you who have joined us on the live webcast, a warm welcome to CMT's full year 2018 financial results briefing. CMT released its results this morning before market opened. We will commence the briefing with a presentation by the CEO of the manager of CMT, Mr. Tony Tan, followed by Q&A session. (Operator Instructions) Without further ado, I'd like to invite Tony to share CMT's performance for the financial year 2018.

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [2]

--------------------------------------------------------------------------------

Thanks, Mun Wah. Good morning. It's very strange to stand up here. Such a big hall for a small audience. Nevertheless, I think, thanks for coming today. I know there are a few concurrent briefings going on, and I must thank you for choosing to attend this session. I know there is also another big REIT out there that announced their result and some of the analysts, I think, are quite keen to hear from the new CEO. Anyway, I'll keep this session pretty brief. I will run through some key things that we have done for the year and then open a little bit more time for Q&A. I think a lot of information has been posted this morning and quite self-explanatory. And perhaps if there are some clarifications during Q&A, we'll address it.

So as usual, the disclaimer, just big note. So this is the overall view, for the full financial year, the performance. Starting from the rental reversion, a lot of people are very -- always look at this number. So we put it on the left column, is increased by 0.7% for the full year, a slight improvement from our 9 months result reported in third Q from 0.6%. So in the fourth quarter, we have further improvement in the operation side. Occupancy ended at a year high matching last year, 99.2%. Again, it's an improvement from the 3Q, 98.5%. Shopper traffic for the full year we registered a negative 0.9% year-on-year, which also has shown improvement from our 3-quarter reported earlier at minus 1.8%, so we have gained a little bit more traffic back to our mall. And in fact, the trend has been improving since the second quarter, right.

Overall, tenant sales has remained flat against the third quarter, 0.5% for the full year, and I'll elaborate a little bit more later on, okay. So this is overall review and you can see it's been quite a busy year. We did quite a couple of things, including the -- beginning of the year, we did some plan to rejuvenate the Raffles City, which was completed in March this year. We also completed our divestment as part of our review in our portfolio. We sold Sembawang in June. And we completed the rejuvenation work at Tampines Mall. Later on, in some pictures you can see. At the same time, we also completed the acquisition. So we got some capital back from our divestment and reinvested in Westgate, it was completed in November. And in December, we completed more or less all the enhancement work in Westgate.

It has also been a very active year from capital market front. We raised a total of more than $1 billion of money, of which about $800 million in the form of the debt and 200 -- close to $278 million in equity. So it has been quite a busy year. Obviously, this include our -- together Raffles City and CCT, we also did some capital market issuance.

Some financial highlights. The distributable income actually increased by 5.1%. So we are distributing $108.1 million in total for this fourth quarter, which is improvement from third quarter. So on a year-on-year, it is increased by 5.1%. DPU of $0.0299 and on a year-on-year it's about 3.1%. And that obviously include a advanced distribution that we did in November as part of the private placement we did in the equity market side. So you would annualize this fourth quarter, I think we end up with about $0.1186, which is 3.1% on a year-on-year, right?

For the full year, we achieved a DI, distributable income of $410 million, $411 million rounded, which is 3.8% improvement on year-on-year. Again, it's an improvement from our third quarter results. We came in at 3.3% for the 9 months. So full year, I think, we'll see contribution from the Westgate coming in.

DPU, we end at $0.115, which is 3% improvement from last year. So it doesn't -- from annualized, I don't think it makes a lot of sense because it's not comparable, even though you look at 5.07%.

I'll skip this, I think, this is not so critical. This is just a little bit of things that you know of. Looking at the fourth quarter revenue, I mentioned earlier, came in at $180.4 million. This include 2 months of contribution from Westgate. And obviously, if you compare to year-on-year, you have excluded Sembawang Shopping Centre. So we achieved a 4.7% improvement on the top line, right. NPI, $124.4 million, it's a 4.3% year-on-year improvement, again for the same reason, right. And for the full year, I think, it's for the same reason, so I won't repeat myself.

So if you look at the breakdown across the portfolio, although we achieved a gross revenue improvement of 2.2%, again, from Westgate inclusion and exclude the -- from Westgate inclusion, if you were to strip out some of the noncomparable -- on a comparable basis, actually revenue went up by 1.7%.

OpEx, quite similar thing, [under] the same reason. It's down by 0.1%. If you look at on a comparable basis, actually it's gone up a little bit more, 0.7%, right.

NPI improved by 3.2%. Again, on a comparable basis, it's up by 2.1%, right. So this time now, we did a little bit different from our last presentation because from November onward, Westgate became a wholly-owned subsidiary of CMT and that's why, when we presented the number, we present 2 months in this portion, and remaining 10 months in the joint venture portion. So this number you see in the Westgate side represents a 2 months contribution.

On the joint venture slide, NPI is down 1.1%, I think, for the same reason I mentioned, substantially because Westgate we only include the 10 months. So I think you can do your simple extrapolation -- the full year results for in fact Westgate, the 10 months contribution, and the 2 months from the other slides earlier.

Debt maturity profile. Straightforward, we have [a tower] to deal with this year. [All that ends --] maturing around October, not a big problem. I think we have sufficient facility line deal with it. And I think given the movement in the capital market, what's going on in the interest rates swap side, I think we do see opportunity for us to tap that market in a competitive way.

Other financial indicators, look at the balance sheet. On unencumbered basis, for gearing, today it is about 89.8%, it's really contribution from the Westgate acquisition because we took over the debt at the joint venture earlier, which was encumbered, right. Otherwise, the rest of the assets are all still unencumbered. So leverage has gone up a little bit more as a result of the acquisition and net debt-to-EBITDA went up slightly from 5.7x to 6.8x substantially because of further drawdown of our loan to make progressive payment for Funan. So the debt has gone up, but contribution from Funan is not in yet, therefore explains the higher net debt-to-EBITDA. Interest coverage is still very healthy, 5.2x. Average debt to maturity went down slightly to 4.4 years. Overall, average cost of debt remained quite stable at 3.1%.

For the second half of the year, I think we registered a value gain -- valuation gain of about $23.7 million, that's at the CMT level. If you include our share in the Raffles City, 40% share and then we are looking about $26.8 million, including the $3.1 million listed here.

NAV end of year at $2.02. If I exclude the distribution, there will be about $2 NAV. So we're trading at healthy premium today. So these are some logistic things to take note. Books closure date, 31st Jan, for those who are investors here, remember payment will be 28th February, right.

So let me do a portfolio update. Earlier, I mentioned the traffic in fact has improved from third quarter from minus 1.8% to 0.9%. I think we have seen a little bit of good healthy traffic numbers in the fourth quarter, predominantly in the urban region. Downtown a little bit more subdued, so the number is really being put out by the urban properties.

The sales increased by 0.5% for the full year, remain the same versus third quarter. We've seen, just like what I mentioned earlier, the shopper traffic. We have also seen a quite similar trend, healthy in terms of sales number in both -- in both our necessity shopping mall versus discretionary. I think there is a little bit of cautiousness, in my view, in the market now, right.

For the -- on an absolute dollar point of view, we managed to increase the sales by about 1.3%. So this is measured on a per square foot basis, right. This is a little bit breakdown on the trade category, fairly similar to what you see in the third quarter. We have 13 of 17 category that are registering positive growth, very strong growth we've seen in sporting goods. Somehow the (inaudible) is trading on -- I think, we we'll soon have quite -- very interesting offering, particularly in our outlet malls. So they are doing very well. Electrical & Electronics also featuring strong -- featured here strongly. I think I mentioned the last time I briefed you. It's in my view, it is a little bit of -- quite interesting with what you see in the residential property market when you see new pick up tendencies that people may want to furnish a place and buy up some of the goods. Home furnishing, however, has turned a little bit negative from third quarter, but actually is still quite healthy. So it's a bit more mixed. We notice perhaps people may flock more to the -- our outlet mall, which has got a wider offering of the home furnishing offerings. So places like IMM is doing pretty well, but some other malls with pockets of home furnishing offering may not do as well. But overall, I think we are -- it's sort of in a way confirmed some of my observation earlier. I think consumer perhaps towards the end of the year may stay a little bit more cautious. I think if you look at last year, this time it was quite different. I think we ended up the year very, very high and the momentum carried forward into 2018. I mean, I'm talking about 2017, end of the year was -- put you in a high mood. This year overall, I think this is a bit more crowded. Hopefully it would not translate into very significant change in consumer pattern, yes.

Occupancy ratio came down slightly from last year to 18.4%, so it's still within healthy range. Rental reversion, slight improvement. It's a mixed bag, some up, some down. Overall, I think it's 0.7% higher than third quarter of 0.6%. It will be interesting to see also, I think Westgate has turned from a negative reversion. So I think, a few things we did over the 12 to 18 months, I think we are seeing a little bit of positive flow back. We have seen more interest from retailer who wanted to come to the Westgate. And with the increased footfall, we are also in a better position now to look at more interesting retail offering, especially in a real way. We feel we need to work on a lot more, like the basement one for example, and maybe level 3 level. I think we've done some work. Hopefully, we can carry the momentum forward as well. In fact, what I did not mention on the sales side, the Westgate achieved -- in fact, within a portfolio from a sales growth perspective, Westgate came out top in our portfolio. So again, this all confirmed our -- my earlier -- things that I have mentioned. We felt that Westgate has bottomed, and the decision to acquire I think was the right call. We felt that we have reached a point where it will not go significantly lower. If anything, likely it would be quite stable at the bottom, but actually Westgate has performed better than we have expected. So it came out top in our portfolio of 15 properties.

Leases expiry, nothing much to really talk about, almost 900 leases representing about 28.4% of our income, money income of which you can say about 138 are non-retail. So we have warehouse and offices as well, right. So this is a little bit of breakdown. The big one you can see IMM, but more than 100 represents the -- I mean, the space in the warehouse side -- sorry, with the remaining in the retail, which is quite healthy. So this is something I don't think I want to touch on too much.

Occupancy achieved a high 99.2% matching last year. In fact, if you trace back the last time we ever hit above 99% was back in 2010. So I think we have been very focused in our initiative to ensure that we are able to capture as much occupancy as possible. Sometimes we do a little bit of trade-off, but better to occupy more is -- I mean, given everything else, we always face this struggle. You want to achieve good rent or you want to have good occupancy. This is always a trade-off we have to measure. So I think we have a little bit of conscious effort to drive up some of the occupancy. And I think we are seeing results, yes.

So enhancement work, earlier I mentioned -- for Westgate, I think we are done. We have completed in 4Q. So I'm not sure if you all have visited the mall. It looks very beautiful now. This is the enclosure we have been talking about. It's a lot more comfortable now for shopper to be in air-con area. All right, you can see from here. We also opened up entry-exit through the taxi area. Again, I mentioned before the circulation here has been very weak. So this will allow a quicker access. Otherwise, you have to actually take a look to come in, not very natural. So this is -- to me, makes a lot of sense. We also put in a new escalator leading this entrance from the taxi, you can go up to level 2 now. So without that entrance/exit, it's a long corridor, not very welcoming. So with that, I think we will improve both level 1, level 2 circulation as well as increase the visibility of the shops here. We also built a vestibule at the open corridor area. Previously it was just escalator. So with this enclosure, first of all, we enhanced the entire view. We can actually draw people in with known good design signage, you can actually bring shopper down, the basement 1. Second thing is actually, it helps us to remove the glass barrier at the basement 1, which itself was creating a real problem because some shops are blocked by this enclosure. So we bring the enclosure up, you achieve 2 factors, you allow customers to walk into air-con quite quickly, improve the visual impact, you also improve the visibility of basement 1. And that helps from a leasing point of view, right. We also finished our work in Tampines Mall. This is how it looked like, including the duplex and also some facade as well as improving the walkway. So it looks very, very beautiful now. Again, please do pay a visit to Tampines Mall, right.

Some new offerings. NomadX I think has been announced before, it's in partnership with CapitaLand. We created this space alongside to try out new ideas. We brought in Spotlight to Westgate. It was an area we felt underserved. This will serve some of the home furnishing needs, home decor, home furnishing needs. Some new tenants in Clarke Quay. This is also Westgate now, so it's actually authorized Apple retailer who are trying out a new format, so they're operating both as a service center as well as a lifestyle cafe. Again proved to be very popular, just next to the new entrance/exit that we created. So the vibrancy around this area has improved quite a lot. So I won't touch on this. This is what we do on a regular basis.

I think looking forward, we will continue to look out for opportunity I think we end up the year in good shape. Our numbers should be all right in 2019. And we -- obviously, we'll continue to look at opportunity within the portfolio as well to see what other area we can unlock value. It could be enhancement, it could also be redevelopment, depends. We obviously have a strong balance sheet at end of the year. Today, our gearing [outdoor] is about 34%, we have a good more than $1 billion of you can say firepower, so when there is a right opportunity I think we are in a good position to seize it. So I shall end here. And I'd like to open the floor for questions with my colleagues as well.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Lo Mun Wah, CapitaLand Mall Trust - VP of IR - CapitaLand Mall Trust Management Limited [1]

--------------------------------------------------------------------------------

Just like to introduce the other members on the panel. To Tony's right is Ms. Tan Lei Keng, Head of Finance; and to his left is Ms. Jacqueline Lee, Head of Investment and Asset Management. If you have a question, please raise your hand. Our colleagues on the left and right will be able to hand you a microphone. Please identify yourself and the organization you represent. (Operator Instructions) Any questions?

--------------------------------------------------------------------------------

Teck Ching Wong, OCBC Investment Research Pte Ltd. - Investment Analyst [2]

--------------------------------------------------------------------------------

Andy from OCBC. Do you mind giving us the breakdown for the precommitment for Funan? And we can see the 80% of the malls that you pre-committed on active negotiation basis. Can you elaborate a bit more? Usually how many of these active negotiations actually materialize into actual signings?

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [3]

--------------------------------------------------------------------------------

So for both retail, office component is about -- in fact about 80%, about the same, in fact more than 80%. When we talk about active, means -- it can mean managing. It can mean we send out the [IO] to them, waiting for them to sign, [they must] negotiate the terms. It can also mean we are in active discussions with the final terms of the condition. Finally, whether it come to conclusion, obviously nobody can guess, because it is a turnout event. I mean, obviously things will happen. Likewise, in new estate, new estate have around -- even though we have committed leases, they went to financial trouble. We have no choice but to rescind the contract. So that will include essentially these 2 components, yes.

--------------------------------------------------------------------------------

Teck Ching Wong, OCBC Investment Research Pte Ltd. - Investment Analyst [4]

--------------------------------------------------------------------------------

And how many percent of your debt has been hedged?

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [5]

--------------------------------------------------------------------------------

Maybe you want, Lei Keng, the debt hedging?

--------------------------------------------------------------------------------

Lei Keng Tan, CapitaLand Mall Trust - Head of Finance-CapitaLand Mall Trust Management Limited [6]

--------------------------------------------------------------------------------

Basically, 91% of our debt are fixed. That means it's 9% that are floating.

--------------------------------------------------------------------------------

Teck Ching Wong, OCBC Investment Research Pte Ltd. - Investment Analyst [7]

--------------------------------------------------------------------------------

Okay, last from me, I mean, previously in terms of acquisitions overseas, you said that at that point in time you were not quite ready. Now Westgate is actually ramping up very nicely, so do you think 2019 will be a much better time to look overseas for acquisitions?

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [8]

--------------------------------------------------------------------------------

I also said that we are not shutting off ourselves. So -- and sometimes it's very opportunistic. Sometimes good market opportunity comes when you least expect it. So we are not shutting our door. So when the leases flow, deals flow, we will access it based on the merits of those flows. At the same time, we are also looking at -- within Singapore. So within Singapore, earlier I mentioned, it could be within our portfolio, what else can we do, unlocking, now we're reinvesting, now we are looking at debt. Historically, you have seen that we have been very active asset manager both in divesting, redeveloping and also do different scale of enhancement. So that will continue. There are also potential -- the opportunity in Singapore market, if we look at assets that are interesting to us, we are prepared to monetize. I think we will be keen to look at these as well. In fact, some of the deals you hear, recent deal, we have looked at it, it was not as interesting. Therefore, we did not really actively pursue, yes. You also wanted to ask out from basically co-investing the capital, I mean, we have done that before as well for Westgate. In fact, it started as a joint venture. We've integrated development in both the office and retail component. So I don't think we rule that out as well. So there are many avenues for us to look at. So we wouldn't shut our door to overseas. The market offers, obviously to consider, it takes a lot more deliberation. For sure, it takes a lot more deliberation because it depends on which market you look at, the condition may be different, the risk profile may significantly be different, whether there's a presence of our sponsor, who order more (inaudible) are they very keen to invest in that market where they have no presence. That also may be -- will be a major consideration, yes. So a lot more consideration. But we should not shut ourselves this opportunity, yes. At the end of the day, there's a finite market in Singapore. Finite obviously depends on policy. There are many policies. I think today we talk about the domestic market not growing much because of population. In a way, population growth are not really as strong as it used to be. You never know. 5-year, 10-year down the road, that may change, we do not know. From my point of view, I think the Singapore market can accompany more people because the infrastructure I think now has been a lot more robust and more steady. If you look at the year since in fact 2011, 2012, the most investment into infrastructure, whether talking about new roads, new bridges, new highway, new subway stations, new lines, all these are all coming. New hospitals, new schools, new residential precincts, all created. Technically we have space for more people, but it's a policy matter, that's something that we can't control. So assuming the policy change, then -- and the market becomes so attractive -- Singapore -- because the whole landscape will change, yes. That will also affect the way we want to look at our capital allocation, yes.

--------------------------------------------------------------------------------

Brandon I. Lee, Citigroup Inc, Research Division - Analyst [9]

--------------------------------------------------------------------------------

Brandon from Citi. Just a couple of questions is -- can you share with us the existing performance of JCube? I think, they're looking at close to half the mall that's expiring for next year. What are the plans for it?

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [10]

--------------------------------------------------------------------------------

Okay, sure. So JCube is one of those that are a little bit more challenging. We ended the year about 91% occupancy. 91%, so obviously in the 90s, but not satisfactory. We are looking at some potential repositioning. We've not made announcement yet, but certainly we are seriously looking at how we can reposition JCube. So JCube is one of the smaller component within the portfolio. We'll see what we can do, so it's still under assessment at the same time, yes.

--------------------------------------------------------------------------------

Brandon I. Lee, Citigroup Inc, Research Division - Analyst [11]

--------------------------------------------------------------------------------

My second question is -- I know there's not a lot of synergies between you guys and the Ascendas portfolio, but I just want to hear your thoughts on that transaction?

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [12]

--------------------------------------------------------------------------------

To me, it's business as usual, nothing has changed. You mentioned there's no overlap. So I don't think they're going to have a pipeline for me if the deal goes through. So it's very much business as usual, yes.

--------------------------------------------------------------------------------

Donald Chua, BofA Merrill Lynch, Research Division - Head of ASEAN Real Estate Research and Director [13]

--------------------------------------------------------------------------------

This is Donald from Merrill. Couple of questions. First is on Raffles City. Do you think operating metrics are a little bit weak for last few quarters? Could you comment on what's going on there? Where do you expect this thing to turn around? That's the first question. Second, you mentioned opportunities in redevelopment and enhancement. Is there any specific themes or specific assets that we should be -- we should know about that has this potential? And lastly, very quickly there on the Funan redevelopment, now we are pre-committed, or active precommitment 80%. What sort of revenue occupancy should we be expecting for this 2019? And are we looking at keeping that ROI target or above at this point?

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [14]

--------------------------------------------------------------------------------

So Raffles City, first I touch on Raffles City, I think the -- a few things are moving in Raffles City. So while we are upgrading the Raffles City, the hotels also has gone, in fact embarked on the upgrading program. As you know, they are our master anchor, anchor tenant. The -- last year they spend -- last one whole year they spend considerable time looking at the Swissôtel. So Swissôtel is done. So this year they start looking at Fairmont, so based on the plan that we know of. That means that any one time, we're looking at 400, 500 rooms of service. So that is one reason. The other reason, which I wouldn't rule out, is really a -- a bit more dilution of the offering, you have Suntec, you have CityLink which has come out okay, quite nicely. Now you also have the Southbridge. So potentially a little bit of dilution from a traffic point of view. So we have done our part and I think we will continue to watch the space. Another development over there, it's just not related to us. It's more my view I think, Capitol Piazza and Raffles Hotel, they are not at the optimal level at the moment. Once Raffles Hotel opened, I think may still be interesting dynamics happening over there. Hopefully Capitol Piazza site will also shape out nicely. In fact, the entire cluster came, I think, I mentioned many times, the entire cluster can be very, very interesting if every component shape up well. So we are watching the space. So it's no longer just Raffles City standing alone. We can fill up the mall. We can do whatever we want. We can beautify the ambiance. By end of day, we need the vibrancy surrounding there. Today with all these different pockets of things happening, we're still not at the most optimal level yet, yes. When we will see that complete -- at least, as far as we are aware, Raffles Hotel would open, at least the retail component that they partially open their hotel booking around maybe second half this year. Hopefully that may have a little bit of movement there. Capitol Piazza, also we are watching. I think they have recently announced a conversion part of space in retail into co-working. In our view it's very positive because it's a strong operator, sort of fit into that setting over there. So we are also watching that space carefully, yes.

--------------------------------------------------------------------------------

Lo Mun Wah, CapitaLand Mall Trust - VP of IR - CapitaLand Mall Trust Management Limited [15]

--------------------------------------------------------------------------------

Sorry, this is related question on the webcast about the -- is Funan on track to achieve the 6.5%? The ROI?

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [16]

--------------------------------------------------------------------------------

So we are working towards it. As you know, we only have -- (inaudible) about 80%. We are working towards it. I would say the retail market no doubt has sort of bottomed towards the end of the year. It's still a very competitive market. Again, it's always about occupancy, about return, right? So -- I mean the cash return. So we have to make that -- strike the right balance, but we are certainly striving towards that, yes. The office side shaped up quite well. I think if you will look, I mean, you all have been tracking the office market, especially the other major player. I think, they've also been seeing similar kind of trend. I think the office site is -- seems healthy, yes.

--------------------------------------------------------------------------------

Wilson W. Ng, Morgan Stanley, Research Division - VP [17]

--------------------------------------------------------------------------------

It's Wilson from Morgan Stanley. Just 2 questions. Firstly you said that the retail market has bottomed towards the end of last year. How are you looking at renovations going into 2019? That's one. And the other one is on e-commerce. Do you notice the competitive environment between your retailers versus the e-commerce platforms? Any significant changes in trends recently?

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [18]

--------------------------------------------------------------------------------

Okay. I don't think when the market, when we mentioned bottom, we are going to be very aggressive in our rent. I don't think the posturing is still right -- it's still going to be very competitive market despite that comment I made earlier. So we would be very selective, I mean, for the good tenant, good operator that make a difference for a mall, I think we must be prepared to be very competitive. That's one. I'm not sure how the other landlords are posturing. Obviously, we posture according to what we deem is right, right. E-commerce side, if you look at the total online share actually has been creeping up. In November it crept about [60%] beginning of the year it was around [30%] so almost double.

The -- our retailer themselves are also embarking on that journey. So they are also trying very hard to ensure they don't miss out on the online market, right. And we are seeing that potentially it will also be an area that we will watch closely. It doesn't mean that when the retailer themselves are embarking on online journey, traditional land lot role is over. There are many ways you can tap into it, whether we look at click, collect or mortar. I mean, there are many ways you can look at collaboration. So e-commerce space is a given. You'll continue to grow. What we hope to achieve is to ensure that our -- we stay very, very relevant with our retailer and we'll always be the port of call whenever they need expansion. So I don't think we can wish away. It will be there. We just have to make best of the situation, yes.

--------------------------------------------------------------------------------

Derek Tan, DBS Bank Ltd., Research Division - VP [19]

--------------------------------------------------------------------------------

Derek from DBS. Yes, just 2 questions. Just 1 question on Westgate, I think you mentioned that's outperforming your initial expectations. Maybe you could give us a sense on what's happening there. I know there is some area that's been done. But are you thinking of remix for the next leg of growth for them?

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [20]

--------------------------------------------------------------------------------

Okay, so many things happening. I mean, these are all things that were planned for quite a while. So when -- obviously the number is coming up nicely. So last year, at the end of the year, they actually achieved the best sales growth. Westgate, I think if you remember, at the beginning of the year, we know, we all had this challenge. We are facing a very strong competition next door, obviously, which has all the desired tenant that we want. But because they were a year ahead, unfortunately, it doesn't pay out that well. So we had to find a way to recreate. The design of the mall also has got the issue, whether you look at the corridor area, which is humid and warm, and the fact that some area exposed from a trading point of view, an area that is not very helpful from a circulation aspect. So we addressed that over the last 12 months. So with that, we see some traction because the traffic start coming in. When the traffic starts coming in, you see tenant get a little bit keen. And one of the thing that sort of tipped the needle was we decided to bring one strong operator in and this all capitalized some changes, so that helps. So now that we've -- things are -- seems to be in the positive momentum, it -- the other big area that we were not be able to work on, we will focus on this year like basement 1. So access to basement 1 is L-shaped, it's not very natural. It's L-shaped kind of design. We can't change that unfortunately, but we can still help improve on the circulation both up and down. So we have done that. And now, our focus is really to ensure our offering, our basement 1 would be something that would be really appealing to the shoppers now. Because when we look at our benchmark against our neighbor, basement 1 is sort of one stop fits everything. Your basic stuff, you can buy everything basically in basement 1 next door. What can you offer in basement 1 Westgate? So we have to think differently. There are still areas or pockets of difference that we can -- differentiation that we can make. So we'll focus a little bit on that. We have done other area of changes that we felt. And because in the course of analyzing, it will be underserved, so we brought in Spotlight. We have home -- DIY Selffix home decor, really it's not well served. So I thought this is an area we could strengthen it, yes. So Westgate, a little bit more positive in our favor because we had a hard time to turn the dynamic. Once you get that turnaround in the perception, then the changes will make it a lot easier, yes.

--------------------------------------------------------------------------------

Derek Tan, DBS Bank Ltd., Research Division - VP [21]

--------------------------------------------------------------------------------

Sorry, and another question on your thoughts on your malls in the east cluster, I think in view that now Jewel is opening. I know it's managed by the group, but just wondering whether are you ramping up marketing efforts or what are your team saying, when that opens?

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [22]

--------------------------------------------------------------------------------

So we are just as nervous. I think our teams on the ground are quite nervous as well. There's no denying Jewel will be a strong attraction and architecturally a novelty. So I foresee some short-term impact from visitor-ship, but the cluster in Tampines has shaped out very nicely now. So it's very defensive. We have ourselves, the Century Square, Tampines 1. Again, it's like a one-stop location. So Tampines residents are very fortunate that they have this -- all this offering coming to them. And then on top of that, Jewel is just a few stops away. But I think as a very start, the defensive nature of that cluster itself perhaps would show off some of the dilution. But I think there will be a bit of dilution in my view. Hopefully not too much, yes.

--------------------------------------------------------------------------------

Unidentified Analyst, [23]

--------------------------------------------------------------------------------

[Mitchell] from [Nomura]. I just want to go back to a question that Donald posed earlier, which is basically, within your portfolio, when we talk about potential redevelopment, are there any assets that right now we're seeing that they are potential extra GFA or whatever that you can tap or suboptimal use that you can optimize within a portfolio? So that's the first question. Second question is, Tony, you just now talked about certain policies that you hope to see in terms of changes that could potentially catalyze the retail market in Singapore. So what are some of these policies that you are specifically thinking about that or maybe is on your wish list that you hope to see that you can share?

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [24]

--------------------------------------------------------------------------------

I think generally the market size, the market size is a function of the population base. This is as simple as that. So if you look at the growth trajectory, the population, last 10-year versus 10-year before, obviously [this came] to quite a significant decline. So there's a little bit of policy issues. If that relaxes a little bit perhaps, I think things may change a bit because then your market size potential will grow, and hence when you talk about a retail space per capital, I mean the number, statistics, everything will turn upside down, right. So that's the starting point. The other thing that we can't really change much is the fact that Singaporeans generally are quite wealthy overall. We are a wealthy state, so we shop a lot overseas. That's something we can't change. But we know that it also has been mentioned by the government that they're looking at enforcing or implementing tax for example that perhaps would level a little bit of the imbalance today. So I think that may help a little bit. They are going to start with the e-commerce tax on the -- at least the digital side, not the physical goods yet, that could help a little bit, yes. I said -- forgot -- keep forgetting, sorry, Donald, I forgot about this. The few -- I mean, including JCube, we're looking at this as well. So we are not ruling out, while we're looking at repositioning. We are potentially looking at Lot One AEI, we are quite advanced stage. So we potentially may do some work over there, yes. And Lot One is selective because of few reasons, I think it's aging. It also has something coming along in 2025, the new interchange will come with the Jurong -- new Jurong line. So I think it's opportune time for us to look at -- it's not -- and it's not going to be a shutdown. We're probably looking at a -- perhaps a -- potentially a few places, yes.

--------------------------------------------------------------------------------

Goola Warden, [25]

--------------------------------------------------------------------------------

Goola from The Edge. Just one, so is there any extra GFAs that you have unutilized at Lot One and JCube and some of the smaller ones, maybe Bukit Panjang Plaza, just wanted to know?

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [26]

--------------------------------------------------------------------------------

No -- not -- nothing very meaningful. So obviously, redevelopment will require a lot more work, a lot more engagement. You need to talk to authority. There is a lot of process to go through. But whether we have any access already unutilized, not very significant, yes. Not meaningful.

--------------------------------------------------------------------------------

Goola Warden, [27]

--------------------------------------------------------------------------------

And then for the valuation, there wasn't much change in the cap rates. So what was the rental assumptions, is there any growth? It doesn't look like very much growth...

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [28]

--------------------------------------------------------------------------------

Yes, there's some growth going on. Jack, can you elaborate a little bit?

--------------------------------------------------------------------------------

Goola Warden, [29]

--------------------------------------------------------------------------------

And also...

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [30]

--------------------------------------------------------------------------------

Across the portfolio?

--------------------------------------------------------------------------------

Goola Warden, [31]

--------------------------------------------------------------------------------

Yes, across the portfolio. And also a big portion of IMM is coming up for renewal -- leases in IMM are coming up for renewal.

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [32]

--------------------------------------------------------------------------------

Oh, yes. Okay.

--------------------------------------------------------------------------------

Goola Warden, [33]

--------------------------------------------------------------------------------

And so what's the outlook like? Are tenants renewing or other...

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [34]

--------------------------------------------------------------------------------

So leases, we have 180. I think mentioned was 180 of which more than 100 already on the warehouse side. So IMM, IMM is very interesting because IMM has got very positive traction now. In fact, the last 2 years we're seeing very nice uplift in term of sales, in visitorship. More and more outlet shops are prepared to expand, so we are creating more space. In fact, in December we just reopened a huge Adidas outlet. It was an expansion, almost doubled from level 1 to level 2. So we will do that continuously. This year, I think we will look at (inaudible) a couple of spaces in level 1 and level 2. Some expansions from new names coming in. IMM, as you know, we are into the 30-year. So we also will start to engage with the authority regarding the lease. And with that obviously, we would -- we have been stumbling a little bit on new ideas on what we could do, yes, at the same time.

--------------------------------------------------------------------------------

Goola Warden, [35]

--------------------------------------------------------------------------------

So when do you have to start writing down the valuation of IMM then? If it's...

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [36]

--------------------------------------------------------------------------------

No, we don't have to write down the valuation, no, we don't think so, yes. Still at 30 years lease, and I think we will engage authority for extension, 30 years, yes.

--------------------------------------------------------------------------------

Jacqueline Lee, CapitaLand Mall Trust - Head of Investment & Asset Management - Capitaland Mall Trust Management Limited [37]

--------------------------------------------------------------------------------

So for cap rates, I think, following the 10 to 15 basis points compression in June, there was no further compression. Because these compressions are driven by of course deals in the market and of course expectations from investors and that's what the valuer takes into account. So there was no change in cap rate in December. In terms of other things, like if you look at like discount rates and all that, they also remain largely unchanged. And for market rental growth assumptions, they were also largely in line with those that were adopted in June. So of course, you see a slight increase in valuation generally due to organic growth -- due to growth.

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [38]

--------------------------------------------------------------------------------

And I'll point to -- forgot to mention in my presentation is to west -- I mean, Westgate number you were to -- there are one-sum and one-off item so when you do your own modeling, you have to strip that out. There's a one-off item because of the acquisition, you have to clean up the books between the 2 joint venture partner, so they have a few million of one-off from the expense side so you have to take it over, yes. I think overall, I think we're -- compared to last year for the Westgate specific, we are showing a growth of I think about around 2%, yes.

--------------------------------------------------------------------------------

Jacqueline Lee, CapitaLand Mall Trust - Head of Investment & Asset Management - Capitaland Mall Trust Management Limited [39]

--------------------------------------------------------------------------------

Last year, the cap rate compression was 25 to 50 basis points, so -- which is why last year's growth of course might have been higher.

--------------------------------------------------------------------------------

Lo Mun Wah, CapitaLand Mall Trust - VP of IR - CapitaLand Mall Trust Management Limited [40]

--------------------------------------------------------------------------------

We will take one question from the webcast. Is it possible to talk a bit on the diverging sales performance between downtown malls and suburban malls? I mean, how much of growth or decline in terms of sales growth? Remember you mentioned the downtown properties are still subdued, while suburban malls are doing better.

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [41]

--------------------------------------------------------------------------------

Yes, so a big portion came down from a drag in (inaudible) Clarke Quay because we have Shanghai Dolly there, actually. So this will be a drag over there. So one component coming from Clarke Quay downtown. The rest are quite marginal. Raffles City, a little bit marginal. Bugis Junction, quite marginal. Yes, I think that's about it. The big part really, I think, obviously is Clarke Quay. Well, Clarke Quay seems -- I mean, of course, we hope we stabilize. Now the occupancy has gone up, we have pre-committed Shanghai Dolly exited, VLV has exited, so we have some quit -- interesting -- we have pre-committed, the Shanghai Dolly in fact is open now, Holey Moley. VLV, well, in quite advanced stage of looking at a new operator to come in, yes. So we will rejuvenate Clarke Quay as well, yes.

--------------------------------------------------------------------------------

Jacqueline Lee, CapitaLand Mall Trust - Head of Investment & Asset Management - Capitaland Mall Trust Management Limited [42]

--------------------------------------------------------------------------------

Sorry, Goola just wanted to clarify. When I said last year the 25 to 50 basis -- I meant 2017 as opposed to 2018 when we had 10 to 15 basis points, yes.

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [43]

--------------------------------------------------------------------------------

The -- if you look at the retail landscape that has changed over the last decade, the decentralization of the retail activity, pockets of different business centers I think are outside the main core. I think that will have a little impact on the flow to downtown. Of course, you have -- they can simply be supplemented with tourist traffic, right. Tourist traffic, whether they continue to be attracted to downtown, I mean, that's something everyone is looking at, including ourselves and the government is also looking at it. Our downtown nature will be quite -- slightly different, Plaza Singapura is downtown at the tail end of Orchard Road. We call it downtown because it's ready location. But site wise, it's actually at the end of Orchard Road. It's closed to some residential area, [there's a bit of] catchment of schools as well. So very, very different kind of a mall altogether. So that's really downtown. I mean the other one is Bugis Junction, Bugis+ has been -- always been popular, so tourists still will be visiting there, very popular among the very young crowd. So that I think has got a different dynamic altogether. The Raffles City, I touched upon it. Raffles City, we see a drop in traffic, yes.

--------------------------------------------------------------------------------

Unidentified Analyst, [44]

--------------------------------------------------------------------------------

I'm [Kevin] from Nikkei. Can you give some color on this NomadX at Plaza Singapura, how it's doing, and in general, how do you track your performance in terms of what you call the offshore on -- the online, off-line shopping, for example, in terms of the proportion of tenants who use their stalls as either showrooms or collection points? Do you have any way of tracking? So what does it show?

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [45]

--------------------------------------------------------------------------------

First of all, it's a partnership in a way, with CapitaLand because the operator is CapitaLand. So we actually let CapitaLand curate the space. But idea, I mean, of course, at the end the content is -- to some extent is a bit discussed and cocreated. The idea is really to try out new ideas on the retail format, including tapping into some of the online guys. So you have Taobao coming in, purely a show rooming, but they have to report sales. So sales, the lease -- contractual lease between the operator and for example, Taobao will be between them. What we want is the content. We want the content to create buzz and the format allows that to have a continuous renewal. So CapitaLand run on NomadX space, the thinking is every 3, 6 months you have new concept coming in. So you'll be always rigid. Some of them are show rooming, like you say. Some of them are for really to test market and whether they transact on the ground or off-line is up to the operator. But again, the operator and the subtenant that they deal with, the commercial team they will discuss among themselves. So technically we don't have to track the sales because for us more important is content. Like we want the content, we want especially in the Plaza Singapura area which is an isolated area away from the mainstream shopping mall. So we want it to be something different, is level 1 and level 3 link up. What we hope to see is vibrancy level 1 can translate to level 3 at that little corner there that used to be occupied by Hamleys. And with that, we can perhaps rejuvenate the level 3 area. So to me, more important is the content, yes. And CapitaLand takes the risk, the operational risk, yes. I hope that explains.

So if you have the chance to visit, the [preaching] of NomadX is really towards the -- in their word, a new category of consumer, they categorize them by [tribes]. You are certain [tribe] based on your certain profile and your spending pattern, your likes, your dislikes, your hobbies, so they have certain profiling. So CapitaLand is also quite interested to ensure they are able to look in detail into this kind of profile of customers and what they're interested in. Similarly, the partner that they partnered with, the retailer operator, they are also very keen to look at all this detail. So it's not -- to some extent it will be a experiment to gather some insights into interesting group of consumers who potentially may be mainstream in future, yes.

So don't be surprised the content will change after 6 months with NomadX.

--------------------------------------------------------------------------------

Lo Mun Wah, CapitaLand Mall Trust - VP of IR - CapitaLand Mall Trust Management Limited [46]

--------------------------------------------------------------------------------

Any further questions?

Right, then we can end the session. Thank you very much for coming.

--------------------------------------------------------------------------------

Tee Hieong Tan, CapitaLand Mall Trust - CEO & Executive Non-Independent Director of Capitaland Mall Trust Management Limited [47]

--------------------------------------------------------------------------------

Thank you. Thanks for coming.

Thanks.

--------------------------------------------------------------------------------

Lo Mun Wah, CapitaLand Mall Trust - VP of IR - CapitaLand Mall Trust Management Limited [48]

--------------------------------------------------------------------------------

Have a pleasant day.