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Edited Transcript of M44U.SI earnings conference call or presentation 23-Oct-18 3:00am GMT

Q2 2019 Mapletree Logistics Trust Earnings Call

HarbourFront Centre Nov 6, 2018 (Thomson StreetEvents) -- Edited Transcript of Mapletree Logistics Trust earnings conference call or presentation Tuesday, October 23, 2018 at 3:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Jean Kam

Mapletree Logistics Trust - General Manager of Singapore - Mapletree Logistics Trust Management Ltd

* Kiat Ng

Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd.

* Ming Rean Lim

Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd.

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Conference Call Participants

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* Chien-Fie Man

Deutsche Bank AG, Research Division - Research Analyst

* David Lum

Daiwa Securities Co. Ltd., Research Division - Regional Head of Banking and Finance

* Derek Tan

DBS Bank Ltd., Research Division - VP

* Donald Chua

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

* Michael Lim

UBS Investment Bank, Research Division - Director and Research Analyst

* Si Xian Goh

Citigroup Inc, Research Division - Senior Associate

* Teck Ching Wong

OCBC Investment Research Pte Ltd. - Investment Analyst

* Xuan Tan

CLSA Limited, Research Division - Research Analyst

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Presentation

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [1]

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Hello. Hi, good morning, everyone. Thank you for coming. If it's okay with you, we'll start the presentation. Ivan will do the financials and then I like to introduce Jean. Jean is our General Manager for Singapore, but also looking after the overall asset management of MLT portfolio. Okay. So maybe Ivan, you can start.

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [2]

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Okay. Hello. Good morning. I'll run through the -- first, the key highlights, then followed by the financial review and the capital management. Just a very brief one, key summary. The key highlights for the second quarter, we actually recorded a DPU growth of about 3.8% year-on-year. That brings us the second Q DPU to $0.01958. The strong robust growth of the DPU was anchored by the same-store growth and also contribution from our Hong Kong acquisitions last year, partly offset by absence of contribution from the divestment we have completed last year -- last financial year and first quarter FY '18/'19. We maintained a very stable portfolio. Occupancy rate increased to 97.6% compared to last quarter, 95.7%. Average rental reversion of 1.3%, mainly from Hong Kong and Vietnam. And we have a very well-staggered lease expiry of 3.8 years. We continue our active portfolio rejuvenation. We completed the acquisition of 5 model ramp-up logistic properties in Singapore not too long ago, in September. And we have also divested 531 Bukit Batok.

On the capital management, we remain proactive, and we have successfully raised $375 million equity via private placement to partly fund the acquisition of the 5 logistic properties in Singapore. Aggregate leverage healthy at 38% with average debt duration of 4.3 years. We have hedged about 80% to fix and about 84% of our income stream for FY '18/'19 has been hedged or derived into Sing dollar. I'll share with you more -- I'll give you more color on the hedging when we -- when I go to the capital management slides.

So on the financial review. Year-on-year, second Q FY '18 comparing second Q FY '17/'18. On the revenue, increased by about $13 million, largely due to the better performance of same-store asset and the acquisition, partly offset by the divestment that we have divested last year. And also on the expenses side, higher by about $1.5 million, largely due to the acquisitions and also the completion of 76 Pioneer in Singapore. It's a 100% occupancy at the moment.

NPI grew by 14.6% on the borrowing cost, higher by $4.3 million, mainly due to the additional borrowings to fund acquisition. The correspondingly amount distributed higher by 23.9% and DPU, 3.8%.

So in the first half this year comparing the first half last year. On the revenue side, we recorded a $32.6 million growth, largely due to the better performance of our same-store assets and also the contribution from the acquisition, partly offset by the divestment that we have divested last year and also first quarter of FY '18/'19. On the expenses side, we have a higher -- $2.2 million higher, largely due to the acquisition, and also the completion of 76 Pioneer.

Borrowing costs, if you look at it, higher by $6.9 million, mainly due to the additional borrowing to fund acquisition, and also the completed redevelopment the 76 Pioneer, and partly offset by repayments on the divested proceed that we have received for the Japan to pay down the Japanese loan.

So in terms of the DPU, grew by 3.7% compared to last year. We recorded a $0.03915 compared to $0.03774 last year.

Move on to 2Q this year comparing to first Q this year. In terms of revenue, we recorded a growth of $1.2 million, largely due to the same store and also better performance same store and acquisition contribution. This is from the 5A house that we acquired in Singapore. So the contribution about JPY 0.4 million, partly offset by also the divestment -- the divested property. On the expenses side, higher by $0.8 million mainly due to the increase due to the higher expenses in Hong Kong. Borrowing costs increased by $1.2 million due to the incremental borrowings to fund the Singapore acquisition in second Q.

So on the balance sheet side, the investment property has increased because we have completed the acquisition of the CWT. Correspondingly, total assets increased. Total liability also increased by about $499 million, largely due to the additional debt that we have drawn out to acquire the CWT.

In terms of NAV or the NTA per unit, increased slightly, $1.13 compared to last quarter, $1.12.

So on the capital management, the total debt around $3 billion right now, largely due to the drawdown for the completion of the acquisition in Singapore. Aggregate leverage ratio remained healthy, 38%. Weighted average annualized interest rate about 2.5%. Debt duration of 4.3. Interest cover ratio of 5.1. So on the interest rate, we see a fairly flat year, quarter-on-quarter. Next quarter, because we have just completed the acquisition of CWT, late end of September, thereabout, the average interest rate will increase slightly to about 10 basis points because of the Singapore (inaudible) borrowings about -- average of about 3%, right.

So we have seen the base rate of the SOR is actually going up, but correspondingly, also what we are getting from the bank, the spread -- the margin from the bank, we have seen some lowering margin, especially the latest acquisition, some of the loans that we have gotten from the banks, the margin lot -- slightly lower than what we have gotten previously. So I think, over time, where we will see a very stable, about 2.6% moving forward right now, on our trust provided that the base rate for the rest of the borrowings remain where it is now.

So on the staggered -- the debt maturity profile. We don't have anything to refinance for FY '18/'19, all has been done. FY '19/'20, we are talking to some lenders and see whether we can extend or refinance some of these borrowings and turn it up. The debt maturity profile still remains very healthy. We have 4.3 years. Some of the loans that we have taken to fund the CWT acquisition, ranging from 5 years to 6 years at a very attractive margin.

And then on the hedging profile. We have hedged close to about 80% of debt to fix. Then we have bullet point number two, if every increase of about 35 basis point at the base rate, the DPU impact is about 0.01 cents per quarter.

On the next slide, the forex risk management. We have 84% hedged to or derived into Sing dollar. We have increased quite substantially the hedging in some of these currencies that -- of concern of to investors, especially Aussie dollar. For the next 12 months, we have hedged almost close to about 77% or 80% of the revenue coming from Australia to -- we have sold the Aussie dollar in advance. So for renminbi also, we have actually increased the hedging for renminbi. For the next 12 months, we have actually hedged about close to 70% of our revenue from China. We are looking at the 24 months and see whether we can do more. At the moment, it's about 34% to 40% has been hedged. Japan remain fairly well hedged. Australian dollar, because of the fluctuation, we are looking at the -- also to add on the 24 months hedging, all the way to 24 to 36 months.

Just to give you a very rough indication, we actually natural hedge, that means we borrow in Aussie dollar and some other currency to form a natural hedge. So even to move the NAV by 0.01 cents, you need the Australian dollar to depreciate about 20%, which is quite unlikely. So in terms of NAV, we are quite robust here because of the natural hedge.

So I will pass on to Jean to take you through the portfolio review for the second quarter.

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Jean Kam, Mapletree Logistics Trust - General Manager of Singapore - Mapletree Logistics Trust Management Ltd [3]

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Thank you, Ivan. Okay. I just like to give a quick overview on the portfolio statistics as of 30 September.

For this quarter, the improvement in the occupancy from last quarter 95.7% to 97.6%, came mainly from 4 countries, from Singapore, South Korea, China and Vietnam, offset by lower occupancy in Hong Kong and with Japan, Australia and Malaysia maintained at 100% occupancy. For Singapore, the improvement came about mainly from the recent acquisition of the CWT portfolio at 100% occupancy as well as replacement of SUA lease in Changi property. For Hong Kong, the transitional downtime for this quarter, mainly coming from Shatin 4 in Grandtech Centre. And for South Korea, improvement came about from a Yeoju property and Baekam 1. In China, the improvement mainly came from the Jadeite portfolio, the recent acquisition of the 50% insurance of the 11 properties in China. So for this portfolio, the occupancy has improved from the last quarter of 85% to this quarter of 99%. For Vietnam, the improvement came about from property in MLPP 2 giving 100% occupancy for the Vietnam portfolio.

Next slide. In terms of the lease expiry profile, it remains well staggered, with the average weighted lease expiry of 3.8 years, an improvement from 3.3 years from the last quarter. For the remaining FY '18, we started the year with about 20% leases due. So as at this quarter, we have about 12.8% with 11.5% coming from the MTB leases, mainly from Singapore, China. And for the SUA lease expiry, we are left with 1.3% for the year. We started with 5.3%, with 14 SUA properties due. So to date, we have already renewed about 11 of the SUA properties and the remaining 3 is still in talks with the tenant. In terms of the tenant trade sector, with the recent acquisition of the CWT portfolio, you would have seen an increase in the multi-sector percentage to 18% and increase in F&B trade from last quarter of 20% to this quarter, 22%, and some slight increase in the chemical trade sector of 3%.

Next slide. Again, arising from the recent acquisition of the CWT portfolio, in terms of the top 10 customer expiry, CWT became our -- one of our top 10 customers with the acquisition of the 5 ramp-up properties in Singapore. In terms of the tenant base, we remain diversified across 618 customer base and for the top 10 tenants, it accounts for about 28% of the total revenue.

Similarly with the acquisition of the Singapore portfolio this quarter, there's increase in the SUA profile slightly to 40% weightage from SUA and 60% from MTB.

In terms of the -- next slide, geographical diversification. With the acquisition of the $800 million portfolio in Singapore, Singapore remains the largest market in terms of the asset revenue and the asset property value, followed by Hong Kong and Japan.

On the investment overview, with the acquisition of this 5 ramp-up properties in Singapore, MLT remains the -- became the leading largest space provider of ramp-up space in Singapore with market share about 15% to date. And just a quick update, you have noticed that from the last announcement, in terms of the weighted average lease expiry profile, last announcement it was announced 8.7 years. This time, it's about 11.9 years, primarily because of some stipulated conditions from JTC requiring a longer leaseback from the master tenant.

Next on the portfolio rejuvenation. In terms of the Ouluo AI, we have completed Phase I in September, and it's 100% leased with international 3PLs like DHL and some other local 3PL players. For Phase 2, we have commenced the demolition work in October this month and expected completion date will be March 20. For divestment, to date, we have divested 7 Tai Seng in June and, just last week, we have announced the completion of the divestment of 531 Bukit Batok in Singapore with a sale consideration of $22.4 million.

So last slide. On the portfolio, just a quick glance. So as of 30 September, AUM increased from last quarter of $6.8 million to this quarter of $7.6 million, primarily due to the Singapore acquisition. WALE improved from 3.3 to 3.8 years. Similarly, in terms of NLA increase of 4.1 million square meter to 4.4 million square meter and number of tenants were 612 to 619 and total number of properties from last quarter of 134 to this quarter of 139. But to note that, since we have divested 531 just last week, so as of to date, the number of properties will be 138 for the MLT portfolio, with Singapore properties reduced by one to 52 properties.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [4]

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For the outlook, we honor the volatility that we are facing in the midst of the trade tensions. The good part is a lot of our assets are focused on domestic consumption. So -- meaning that people are not, mind you, as good so -- and then they can buy some goods from some other places. And then the other part that we are noticing is, for example, Vietnam, we are seeing some of the more inquiries from Chinese companies who are keen to move their large-stage manufacturing out from China into Vietnam, so that they can be exported out from Vietnam instead of China. So we are seeing a slight uptick from that. Will that momentum continue? We think so, but the question is, of course, what's the significant contribution? We are watching China very closely. The -- so far, the e-commerce guys that we are in, for example, Alibaba, Cainiao, JD.com and then, of course, we have the 3PLs supporting them such as XPO, the (inaudible) and all that. (inaudible) and all that. So the -- we have noticed the stronger ones are still very stable. In fact, the inquiries for expansion are still there. I met the Taeun L guys, they are still very confident about their local markets. They are looking for alternative sources of products if that particular area is affected by the trade tension, but they are very confident they can fill the gap because the urbanization and the domestic consumption growth is still fairly robust. So that's where we are seeing, but we are watching China quite a bit. And as far as Singapore is concerned, we are not seeing a sharp decline. In fact, we are not seeing any decline in demand. So I think, you will notice from the last round there is actually some slight positive rental reversion that we're able to garner on our portfolio.

So the story remains the same. We'll see a dichotomy, those ramp up more than specs. We don't see a let up in demand, in fact, it's still very strong. The challenge will be the older (inaudible) specification ones. So these are the ones that we are watching. So I think in a nutshell, that's where we stand. You have seen us pick up some divestment momentum. We think that for the next 6 months, the momentum will increase like what we said when we did the acquisition. So now that CWT is in the Jadeite portfolio from the sponsor is more or less stabilizing. I think now the Jadeite occupancy is...

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Jean Kam, Mapletree Logistics Trust - General Manager of Singapore - Mapletree Logistics Trust Management Ltd [5]

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99%.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [6]

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99%. Actual occupancy because when we bought it was committed occupancy. So now it's actual occupancy. So with that stabilization, Tsing Yi is still growing strong. I think we all know Hong Kong market. So from that perspective, we think that the next 6 to 12 months, we should be quite stable, in fact, hopefully, we are seeing some CAGR in the growth. The challenge will be what's next after that. So the volatilities of the trade tension is something that we are watching closely. Yes. So we will constantly balance the type of tenants that we bring in. I think, it's not merely about chasing rental growth. It is a case of chasing good-quality tenants who have the power to ride through any uncertainties. So that's where our network is. I'm not sure whether I'm supposed to talk about this, but our e-commerce tenant in Singapore has just informed us that they want to double their space. And then you know that the property that they are in is 100% full. So that's where we have to come in and do very active management. So we are moving all the tenants around. We are, in fact, going to shift some of our tenants into CWT assets so as to create -- I think, you remember that when we first bought -- when we bought the portfolio, I said that, if given a choice, I would prefer to reduce CWT in the assets that we are buying because these are some of -- as of now, they are some of the best ramp-up assets. So that's where -- what we are doing is, we're not just looking at CWT, we are looking at the underlying tenants and then we are talking to them to shift some of these more robust and longer-term ones like (inaudible) into their portfolio, so to ensure that they continue to be strong in their property performance.

So these are all the steps that we take to ensure or rather to try to keep the stability of the portfolio. The question is always, of course, if you put too much stability, the growth will be muted. So that's the balance that we have to watch out for. So I think, that's where we stand. So divestment, you'll see us picking up quite actively and then we are also on acquisition mode. I think, over the next 6 months or so, we do not see any lumpy, big-size acquisitions, but some of the smaller ones will still come from those markets that we are keen -- that the growth markets that we are keen to expand. Yes.

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [7]

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I think probably, I missed this out on the Jadeite acquisition. In terms of the economic interest, what are the economic interests that we are seeing for the Jadeite. So I refer you to Page 6. If you look at the contribution from joint ventures, that is actually Jadeite, which is the 11 -- 50% of the 11 properties in China that we acquired sometime this year around June -- early June. So if you look at it, total contribution from this part is about $2.3 million so far, consists of the share of result -- the share of interest, also rent reimbursement. What I can tell you is in line to what we have guided the market in our circular, so it is on track. The performance is on track for Jadeite.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [8]

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Yes. I think, we are now open for questions. We have questions. Yes. Why don't you read out the questions? We have got questions.

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Questions and Answers

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [1]

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Yes. I think we have also got a question from [CK Lai]. Have all the properties in China started to -- yes, leases and started contributing to the rental revenue? Yes, the occupancy for the Jadeite is...

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Jean Kam, Mapletree Logistics Trust - General Manager of Singapore - Mapletree Logistics Trust Management Ltd [2]

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99%.

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [3]

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99% and it's on -- has been contributed to the revenue. Then the second question.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [4]

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Yes. I think you have to clarify that it's actually captured not in the revenue line, but in the contribution from joint venture.

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [5]

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Yes, because it's 50%, so we adopted the equity accounting for this. So whatever contribution from these 11 properties from China will be recorded under the contribution joint ventures. Second question from [CK Lai] as well, property at Bukit Batok.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [6]

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What's the cap rate?

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [7]

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Any divestment deals to be distributed?

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [8]

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Yes. Yes, what is the -- can you give (inaudible)

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Jean Kam, Mapletree Logistics Trust - General Manager of Singapore - Mapletree Logistics Trust Management Ltd [9]

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Okay. In terms of the purchase price, it's about SGD 20 million. So the sale price was SGD 22.4 million. After deducting some costs and provision for some tax, we are looking at about SGD 1.5 million of divestment gain, roughly.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [10]

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And the cap rate that we sold at?

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Jean Kam, Mapletree Logistics Trust - General Manager of Singapore - Mapletree Logistics Trust Management Ltd [11]

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Yes. The [IC] cap rate that we are looking at for this deal was about 3%.

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [12]

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Yes, one more question. The estimated redevelopment cost for Ouluo we have paid year-to-date is about SGD 70 million. How much more MLT needs to pay? TEC is SGD 70 million, okay. So I think balance we have left, about SGD 40 million to go for this Ouluo, right. TEC is SGD 70 million.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [13]

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Yes, Derek. yes.

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Derek Tan, DBS Bank Ltd., Research Division - VP [14]

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So just a question from your rental reversion. Do you mind giving us a breakdown by country?

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [15]

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Yes. Jean, you want to give?

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Jean Kam, Mapletree Logistics Trust - General Manager of Singapore - Mapletree Logistics Trust Management Ltd [16]

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Okay, for Singapore, it's about 0.5%; Hong Kong, 4%, South Korea, 2.5%; Malaysia, negative 5.7%; China, 1.5%; Vietnam, 7.8%.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [17]

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Yes. For Malaysia case, it is specific to a area called Shah Alam, which we are very keen. And there was a large supply that came on stream from our sponsor. So as -- so we have about 2 million square feet coming up from this sponsor in March this year. So with that, there was a supply situation, very localized supply-increase situation. So that's why we wanted to readjust some of the rents in our current property. Yes, so that contributes to it. But thereafter, we expect, once this supply get absorbed, currently, I think you will see it in the pipeline later. This is one of the properties. So the sponsor now is at 60% occupancy. Yes, and then Shah Alam property is at 100% occupancy. Yes?

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Derek Tan, DBS Bank Ltd., Research Division - VP [18]

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Can you just repeat the numbers (inaudible)

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Jean Kam, Mapletree Logistics Trust - General Manager of Singapore - Mapletree Logistics Trust Management Ltd [19]

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Okay. So breakdown by country: Singapore, 0.5%; Hong Kong, 4%; South Korea, 2.3%; Malaysia, negative 5.7%; China, 1.5%; Vietnam, 7.8%. Overall portfolio, 1.3%.

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Teck Ching Wong, OCBC Investment Research Pte Ltd. - Investment Analyst [20]

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Andy from OCBC. On your ForEx hedging slide, I noticed that the RMB was essentially not stated in the slide.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [21]

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Can we have the hedging slide?

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Teck Ching Wong, OCBC Investment Research Pte Ltd. - Investment Analyst [22]

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Can I just assume that the hedging was actually done after this quarter or not?

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [23]

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Yes, I think we missed out this renminbi day. It's an oversight on us, but renminbi has been hedged, yes.

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Teck Ching Wong, OCBC Investment Research Pte Ltd. - Investment Analyst [24]

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Okay. And secondly, in terms of divestment, you said that you'll gather pace going forward. But if you look at the CBRE data points, I think warehouses rents in Singapore has really bottomed out. So are you going to maybe take a little bit more steady kind of approach and then maybe wait for rentals to recover further before considering divestments to probably fetch a better price? Or do you still want to just get out in the market?

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [25]

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I think you -- that's maybe I didn't clarify earlier. The divestments that we are looking at over the next 6 months is more overseas, so countries like maybe Japan, Malaysia, Korea. So these are the ones that we are looking at. And the -- those in Singapore, your point is very valid. So we are looking at the properties that has got the lowest potential or 0 potential for reversion. So for example, 531 Bukit Batok. I don't know whether you have visited. It's small, it's not going to be attractive. So it's really going to be the end user. I think we sold it to VICOM [related], right?

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Jean Kam, Mapletree Logistics Trust - General Manager of Singapore - Mapletree Logistics Trust Management Ltd [26]

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Correct.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [27]

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So (inaudible) inspection is not really for storage. So I think the -- that's why for Singapore, we don't think we will see a lump, a big-sized divestment. It'll be smaller ones, very opportunistic when we find a good end user. But on the point of divestment, it's really -- we're looking at overseas. Yes. So I think we did some last year. We did Japan, Malaysia last year. So moving ahead, we think there may be some more coming up from Japan, from Malaysia, maybe from Korea.

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Teck Ching Wong, OCBC Investment Research Pte Ltd. - Investment Analyst [28]

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Last question. In terms of potential acquisitions, let's say, in China, just looking at it from another perspective, of course, there's all these concerns about trade war. But because the RMB has so depreciated quite a fair bit, do you think actually -- and also if a good sponsor pipeline, do you think it's actually a good time to actually increase exposure in China now, especially just to take advantage of the relatively weak RMB?

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [29]

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Yes, I fully agree with what you said, because we don't take a short-term view on China. We take a very long-term view. The question is always, do we take a 3-year -- a 1-year, a 3-year, or a 5-year view? So look, I mean, and also with the feedback that we get through our network, you know that we are linked to markets. We know the government very well. So based on what we're hearing, our interactions with the Chinese officials as well, we think they are still very focused on maintaining stability in the country. So with that, then we think that making acquisition in China will be attractive for us. So the 50% from sponsor, we are still keen. The question is when, right. So I think, like I mentioned the last time, the reason why we did the 50% is because those assets are very new, they have not reached maturity. The first round of rental reversions are coming up this year -- next year. So once that rental reversions come up, the sponsor gets a bit more benefit up from there. So then the 11 assets for us to acquire will be there. Yes, we'll continue to be very keen on China. Yes?

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Donald Chua, BofA Merrill Lynch, Research Division - Head of ASEAN Real Estate Research and Director [30]

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Donald from Merrill Lynch. I got couple of questions, so please bear with me. The first is on the CWT acquisition. How much of the asset has contributed for this quarter? And if you can guide what sort of interest cost you're getting for this acquisition. This is the first question. Second is on the trade tension that we're all talking about. Will this shape your acquisition strategy going forward in terms of looking at emerging markets, ex China, things in Vietnam and Malaysia, since there is ongoing trend or inquiries of tenants moving -- looking to move to outside China? Is this something that you guys are looking at in the real sense? And then very last one is just what's the -- where is discrepancy on the joint venture income in the financials? Because now it's under interest income, right? And would this go into JV income in the financials going forward? And is the SGD 2.3 million representative of a full quarter of operational income?

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [31]

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Okay. We'll answer the first and the third question first. CWT assets, right, we completed around 28 of September, so it's about 3 days' contribution. So 3 days' contribution looks up to be about SGD 0.4 million on the revenue side. So on the interest, the interest that we are getting all-in, including of -- some of them being hedged, you're looking about 3% to 3.1%. So on the JV income, from presentation on Page 6, we have actually combined a few things, because it's equity accounting. So you need to comb through the P&L to find out those numbers. For ease of reference, we have combined the share results and also the interest -- shareholders' interest and rent free reimbursement in Page 6. So on the slide, you have this contribution from joint ventures as 1 number. But in our announcement -- the result announcement, you need to look for few place to find it, right. So that's accounting convention, I can't change it. We follow the accounting IFRS. But for -- to guide the analysts and investors, we have this to -- 1 line to lump everything in. Yes.

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Donald Chua, BofA Merrill Lynch, Research Division - Head of ASEAN Real Estate Research and Director [32]

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This is a full quarter?

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [33]

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Yes, this is a full quarter. Yes, full quarter.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [34]

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That's for China. And then you asked about the contribution from CWT for this quarter?

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [35]

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Yes. 3-day (inaudible), yes.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [36]

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Okay. I think to answer your question on where we are looking in terms of acquisitions. So the -- what I mentioned earlier, we do see some of this build over coming out from China into Vietnam. So we are looking at acquisitions in Vietnam. So hopefully, the next 6 months, you will hear us doing something in Vietnam, but this is not from sponsor. So then the other thing is -- but the thing is, in Vietnam, the assets are all small. You're not going to see like a [seed of these] coming out. So these are going to be small. And then the other thing is we have seen China companies like -- even Alibabas and all these, China's growth is slowing down for their business. So in order for them to maintain the growth momentum, they're expanding into Asia. So our Malaysia properties, like those 2 properties I mentioned in Shah Alam, is seeing good traction from them. We are seeing them asking us to make some investments for them in certain locations in Malaysia. So yes, all these will take time, and the part that I tend to be a bit more cautious about the Chinese companies is they change their strategies very fast. So the situation is this trade tension is ongoing. We're not sure where it's going to land. So the situation is we're also taking a cautious view with these Chinese companies, because the moment the cost change, they reverse their decisions very quickly. So I think this is where the characteristics of the tenants are playing a more critical role in our selection.

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Donald Chua, BofA Merrill Lynch, Research Division - Head of ASEAN Real Estate Research and Director [37]

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(inaudible)

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [38]

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And we are looking at Indonesia together with the sponsor. The challenge in Indonesia is the restriction on foreign ownership. We need a local partner. So these are -- so we are in discussion with some local partners together ourselves as well as with the sponsor. But we think in terms of immediate horizon, more likely you may see us making some acquisitions in Vietnam, maybe Malaysia coming up, but I think Indonesia will be further out, yes. Yes, David?

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David Lum, Daiwa Securities Co. Ltd., Research Division - Regional Head of Banking and Finance [39]

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Just another question on the CWT portfolio acquisition. Can you give us an idea of what's like the NPI margin? Is it a triple-net lease or are there expenses?

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Jean Kam, Mapletree Logistics Trust - General Manager of Singapore - Mapletree Logistics Trust Management Ltd [40]

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Okay. So this portfolio, it's mainly we call a double net because we already paid the land premium upfront to JTC. So in terms of the cost, it's actually very low. Yes. So we're looking at less than 5% cost ratio.

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David Lum, Daiwa Securities Co. Ltd., Research Division - Regional Head of Banking and Finance [41]

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So that's like 95% margin.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [42]

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Margin, yes.

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David Lum, Daiwa Securities Co. Ltd., Research Division - Regional Head of Banking and Finance [43]

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And what was it -- you mentioned that (inaudible) was extended? What's the reason for that?

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [44]

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Okay. I think the situation is we all know the owners -- I mean, the ownership of CWT. So I think JTC is, of course, expressing concern. So they wanted to have greater certainty from the tenant. They want a greater commitment from CWT. So certain leases, instead of the 5 years or the 10 years, some of them have actually been extended by 20 years -- I mean, being increased from 10 to 20 years -- 20-odd years. So the background is -- I think JTC was not very happy with the constant change that they have seen in the CWT ownership structure. So what they are -- what they would like is for CWT's commitment in Singapore as a logistic provider. Yes.

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David Lum, Daiwa Securities Co. Ltd., Research Division - Regional Head of Banking and Finance [45]

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It is -- that's negative for you, right? Because you want to take it over sooner than later, right?

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [46]

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I think that is -- you're right. So that's why we have negotiated with JTC. So on some of these properties, we are able to take out 30% instead of the full 100% of CWT upon certain timing. So our famous JTC has 70% anchor tenancy. So previously, it's 100%. Right now, certain properties has -- we are allowed to have 30% for third party. So these are some of the things that we have negotiated with JTC. Yes. I think Ivan just reminded me, also in -- although we extended the lease, but there are rent reviews at the 5, 10 years. So it's not necessarily just flat. So it's 1.5%, but thereafter, there are rent reviews upon the extension of that lease. Yes.

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Chien-Fie Man, Deutsche Bank AG, Research Division - Research Analyst [47]

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Chien-Fie, Deutsche. Quick question on the land premiums. Have they fully been paid for the CWT portfolio? Because I saw in the circular that it's partially paid, so I'm not sure if there's any kind of additional top-up that's required.

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [48]

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No, this has been fully paid upon acquisition.

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Chien-Fie Man, Deutsche Bank AG, Research Division - Research Analyst [49]

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Okay. And then, I guess, for 76 Pioneer, what is the physical occupancy versus committed?

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Jean Kam, Mapletree Logistics Trust - General Manager of Singapore - Mapletree Logistics Trust Management Ltd [50]

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For 76 Pioneer, since August, we have achieved 100%. So we have leased that to various parties, from 3PLs to end users.

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Chien-Fie Man, Deutsche Bank AG, Research Division - Research Analyst [51]

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And they're all fully rent-paying? So that 100% is all...

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Jean Kam, Mapletree Logistics Trust - General Manager of Singapore - Mapletree Logistics Trust Management Ltd [52]

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Yes.

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Si Xian Goh, Citigroup Inc, Research Division - Senior Associate [53]

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Si Xian, Citi. Could I ask on the Singapore portfolio what the occupancy is if we exclude the recent acquisition?

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [54]

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Exclude CWT.

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [55]

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It's 95.7% if we exclude the CWT acquisition.

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Si Xian Goh, Citigroup Inc, Research Division - Senior Associate [56]

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And then would you be able to give more commentary on Hong Kong about the departure of the tenant? Or did they downsize? And where did they move to?

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [57]

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Hong Kong.

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Jean Kam, Mapletree Logistics Trust - General Manager of Singapore - Mapletree Logistics Trust Management Ltd [58]

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Okay. I think for Grandtech Centre, typically, I mean, the leases over there, the space over there are very short, like 1,000, 2,000 square feet per leases. So traditionally, for Grandtech Centre, the occupancy hovers about 99% to 100%. So I think last quarter was an exception, we saw 100% from Grandtech Centre. But this quarter, it's kind of like back to normal state, which is about 99% for Grandtech Centre. As for Shatin 4, it's a transitional downtime, so there was a nonrenewal by a tenant, but the team is looking at replacement tenant. So I think, by -- and increase rental. So I think by the coming quarter 3, Shatin 4 occupancy should see an improvement.

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Xuan Tan, CLSA Limited, Research Division - Research Analyst [59]

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Tan Xuan from CLSA. I just have one question on your China portfolio tenants. Do you have a rough sense what's the percentage of tenants that's more skewed towards domestic trade and more -- and those that are more skewed towards international trade?

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [60]

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I think it's about 80%, skewed towards the domestic consumption.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [61]

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Yes. The exact percentage, we'll get back to you, but it's about 80% domestic consumption.

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [62]

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88%, sorry. [Yao Mi] just remind us, it's 88% skewed towards the domestic.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [63]

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Yes, Michael?

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Michael Lim, UBS Investment Bank, Research Division - Director and Research Analyst [64]

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I've got a question on the fees that was taken in units. This quarter, it doubled. And any reason for that? And are you planning to reverse that next quarter?

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [65]

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The fees in units are from the CWT acquisition, right. And so acquisition fees, we tend to take it in units. So the -- there is -- so acquisition is a onetime fee. So we don't reverse that, yes.

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Michael Lim, UBS Investment Bank, Research Division - Director and Research Analyst [66]

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And a followup on Korea. If I look at the NPI, it's been going down for 2 quarters. So what's driving that?

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [67]

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I think the -- for this, Korea, we had to do some repositioning. There was the Pyeongtaek Port asset that we talked about. So the -- so that asset has more or less starting to stabilize, we're starting to see that. The other thing is recently, in Baekam 1, which is very good location, we see some consolidation by some of the smaller e-commerce players. So we are replacing it with better quality tenants, more stable quality tenants. So one of them is actually CJ Logistics, dealing with Korean cosmetics. So we took this opportunity of a fairly strong quarter numbers coming out from the other countries and then -- we then allow Korea time to take out some of these tenants and reposition it. Yes.

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Michael Lim, UBS Investment Bank, Research Division - Director and Research Analyst [68]

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Just going back to the fees. I was referring to the management fees that you pay out per quarter. So if I look at it on this quarter versus last quarter, the number of units increased.

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [69]

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So it's the fees in units that we have taken is actually for the Jadeite, the 11 properties in China, that is fees in units. So some of the acquisition done, I think, last year also, some of the acquisition we have taken -- decided to take fees in units actually...

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [70]

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But the big increase is actually due to Jadeite, right.

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [71]

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Tsing Yi and Jadeite, yes.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [72]

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I think this is where I was hesitating is -- I was deciding whether I share this with you. I think you know that, with the recent fundraising, the sponsor stake has come down to 30.9%, right. So it's a large decrease from their stake holding in the REIT. So therefore, they have become more willing or more receptive to taking some of these fees in units. I think you know that if they drop below 30%, any -- in future, if they have any movement or the moment they across 30% again, they have to do a G-O, yes. So that's why I was contemplating whether I should share with this you, but basically that is -- the sponsor has come down to 30.9%. It's very close to that threshold imposed. So with that, there is opportunity for the sponsor to be more aggressive in taking management fees in units. Yes?

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Unidentified Analyst, [73]

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I'm just looking at the segment results in the financial statements, just looking at Hong Kong. I think for both revenue and NPI, if you compare it against last year, it has more or less doubled. Just wanted to understand the movement, the flux. From my understanding, like I think it was -- was it 38% of the remaining balance of the Shatin that was acquired earlier this year? So to be...

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [74]

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Largely due to Tsing Yi.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [75]

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Yes.

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [76]

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We completed Tsing Yi around October last year. So you see the full contribution of Tsing Yi this financial year.

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Kiat Ng, Mapletree Logistics Trust - CEO & Executive Director of Mapletree Logistics Trust Management Ltd. [77]

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The project (inaudible) that you mentioned, which is the acquisition that we did at the beginning part of January, the contribution, we'll start to see it more the next quarter. Yes. We have fully committed the space, and we should be hitting about 5.2% NPI yield next year, and then 6% yield thereafter. And the reason why we can confidently say that is because the lease that we signed is about 10 years, 10 plus 10. So the ability for us to take over the whole building, there was obviously no rent for a few months, because we were going to the authorities to reconfigure the power supply, increase it so that we can bring higher-value tenants, and then for the tenant to come in to reconfigure some of the space and put in their CapEx, which is quite substantial. So with that, they signed a longer lease with us. In fact, they wanted a much longer, but we said we prefer it -- for it to be reviewed because it hasn't got the restriction like Singapore with CWT's case. So we wanted that flexibility to review it. Yes. So the increase is because of Tsing Yi, yes. The (inaudible) one, we'll see it more in the next quarter. Yes. I think (inaudible) we bought it at 4.2%, 4.5%, thereabouts, and then next year, we're doing about 5.2%, and then following, we'll be doing 6%. So we thought it quite good growth for Hong Kong market.

Any more questions? Any more questions from the web? No. Okay. So thank you very much for your time. If you have any more questions, please feel free to contact anyone of us. Yes.

Thank you.

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Ming Rean Lim, Mapletree Logistics Trust - CFO of Mapletree Logistics Trust Management Ltd. [78]

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Thank you.

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Jean Kam, Mapletree Logistics Trust - General Manager of Singapore - Mapletree Logistics Trust Management Ltd [79]

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Thank you.