Geng Foong Khoo: Thank you, Mui Lian. Good morning, everyone. Thank you for joining our financial results briefing. I will bring you through MIT Q2 FY 2026/2027 financial performance and give you some update on our capital management position. Thereafter, Anand will go through the portfolio update color on MIT's outlook. This slide shows the year-on-year comparison for Q2 FY 2026/2027 against last year. Net property income has reduced by 3.5% to SGD 119.8 million. This happened the past 12 months.
Geng Foong Khoo: We do have some non-renewal leases in our North American portfolio, and we also divested the three Singapore industrial properties in August 2025. These non-renewals and Singapore divestment has caused our net property income to decrease year on year, but partially offset by renewals as well as new leases in our Singapore portfolio. We have used the divestment proceeds to pay down loans, so with the interest savings, lower interest on unhedged floating rate, our loan cost has decreased. The effects of this were partially offset by higher borrowing costs from replacement hedges. Cash distribution from joint venture increased year on year due to utility credits received and higher rental.
Geng Foong Khoo: Net against higher borrowing costs from repricing of matured interest rate swaps. Overall, MIT DPU for Q2 2026/2027 at 2.97 cents, which is about 6.6% lower than prior year. Moving on to quarter on quarter. Net property income decreased mainly due to non-renewal of lease at San Diego. Higher Singapore property operating expense, partially offset by higher contribution from renewals and new leases from Singapore portfolio. Borrowing costs increased mainly due to effects of higher interest costs from replacement hedges and absence of interest savings from temporary repayment of loans with proceeds from the new perpetual securities in Q1. The distribution for perpetual securities holders is lower this quarter as we have in part overlap of new and previous perpetual securities in Q1 at 52.67. Overall, the DPU for Q2 of 2.6% is lower than prior quarter by 4.5%.
Geng Foong Khoo: On capital management front, overall, our financial position still remains strong at aggregate leverage ratio of around 37.7%. This still provides us with ample debt headroom to capture growth opportunities. Our hedge ratio remains at relatively lower, close to 73%, as compared to prior years of above 80%, to provide us the flexibility to pay down loans with divestment proceeds when divestment materialize. Average borrowing costs for the quarter stands at about 3.3%. We do have about SGD 600 million of interest rate swaps due in each of our FY26/27 and FY27/28. These were locked in when interest rates were lower. If we were to reprice these maturing interest rate swaps with current interest rate today, we expect our borrowing costs to increase to around 3.5% to 3.6% for FY26/27, and slightly below 4% for FY27/28. Our team continue to monitor the market and be nimble.
Geng Foong Khoo: We will continue to enter into replacement hedges in smaller tranches when there is a slight dip in the market. For example, we do monitor the market. If you look at the 5-year USD rates 2 weeks ago, it is about 4.8%, but it came down slightly, so maybe about 4.5% to 4.6% level. We will continue to monitor the market and be nimble on that front. For some of the hedges, we will also lock in on staggered basis with some at slightly shorter tenure. Of course, if we are able to divest some of the properties and we can use the proceeds to pay down loans, this will help to mitigate the impact of the higher interest rate. Next slide, please. Our debt maturity profile remains well staggered with weighted average debt duration at a healthy 3.5 years. Small issue. Slide 12.
Geng Foong Khoo: The debt profile. Sorry, we had some technical issue there. Our debt maturity profile remains well staggered, with debt duration at a healthy 3.5 years. On the FX front, as much as feasible, we try to borrow local currency loans to provide natural hedge for our overseas investments. This helps to protect FX fluctuation to our net asset value and DPU. For example, about 52% of our US portfolio are funded with US dollar loans. While our exposure to the US by AUM is about 46%, if you were to net off the onshore borrowing, our distributable income exposure to USD is about 18%. For sensitivity, if you look at for every 5% depreciation in US dollars, the impact to our distributable income is only about 1% to 1.2%.
Geng Foong Khoo: For the remaining distribution in foreign currency, we enter into FX forwards to hedge the income into Sing Dollar. Currently, close to 91% of our distributable income for the next 12 months are hedged or derived in Sing Dollar.
Anand Chandran: Morning, everyone. Thanks for joining this call. I will really only spend time talking about six slides in the portfolio update and outlook section so that we can save more time for the Q&A. We will start with the occupancy. The overall portfolio occupancy in this quarter has dipped from 90.7% to 89.7%. It was primarily driven by the data center occupancy segment, which has dipped from 85% to 82.1%. This in turn was driven by the dip in the North American portfolio, where the occupancy has dropped to 79.1%. This is largely due to the full quarter effect of the lease in our San Diego asset expiring in May 2026. Nevertheless, as we have shared, the post-quarter activities to relet Alpharetta and to lease up San Jose will go some way towards improving North American portfolio. We should mention that the Singapore portfolio remains strong and resilient.
Anand Chandran: I think it often gets lost about the amount of work that has to go into maintaining the strong figure. So behind this are 184 renewals and 65 new leases that allow us to retain occupancy level in Singapore. Also of note, Kallang Way asset as of now has a committed occupancy of 72.4%, and we are tracking confidently towards 75% by the end of the FY. With the lease expiring profile, the portfolio WALE stands at 4.4 years, and within that, there is strong geographic diversification that speaks to the stability and the growth of our organic income. If you look at the long-duration components of that WALE, the 13.3 years in Japan offer us the stability. The short-duration WALE of the Singapore portfolio of 2.6 years offers the opportunity to find growth, which we will speak about a bit in the next slide.
Anand Chandran: The mid-duration occupancy and WALE, beg your pardon, where we are working on to improve visibility. If you go down to, I am sorry. Go back a slide, please. So it is really the mid-duration WALE that we are focused on. As we have said in the last quarter, we had identified in FY 2026/2027, 1.4% of GRI of the leases that were coming due. With the Alpharetta reletting, 1.1% of that has been addressed. So it speaks to the point of us trying to improve the visibility of the income profile in that mid-duration WALE. So there has been good traction there. Can we go to the reversion slide? Slide 21. Following on from what I was saying about the short-duration WALE part of our portfolio in Singapore, allowing us to capture that growth.
Anand Chandran: In the last quarter, speaking to the quality of the earnings, the Singapore portfolio achieved a reversion rate of 6.9%. This was an increase over the 5.3% from the quarter prior. As mentioned earlier, this involved a significant number of renewals. So 184 lease renewals for a total of about 640,000 square feet. I think we can expect, we have got good visibility for the next H2 for Singapore reversions to remain at the mid-single digits. There were no reversions or renewals in the North American portfolio in the last quarter to speak of, and that is why you see that NA figure there. Can we go to the divestment slide on Eagan, please? I believe everyone is good with the disclosure, but spend a bit of time just covering the details again of the notable divestment activity in the last quarter.
Anand Chandran: The Eagan asset was divested at a sale price of SGD 9.81 million, which was 9% above the purchase price and 10% below valuation. The genesis of this divestment was largely triggered by the embedded purchase mechanism in the lease that was acquired with the portfolio. In my estimation, this was the best outcome that could have been achieved for this asset, given the circumstances, and have redeployed those proceeds to pay down debt while working capital. Can we shift now to the proactive asset management slide, please? As the slide is moving there, the proactive asset management slide, as you may have seen, in this quarter, it is very US-centric in terms of what we are sharing, but really we are speaking to three themes. One being the reletting, two being the repositioning, and three being the rebalancing.
Anand Chandran: We have spoken about the reletting primarily to do with the good work that has been done to relet Alpharetta and lease up San Jose. I will not spend too much time there. On the repositioning piece, our diversified presence across both primary and secondary North American data center markets, while admittedly have presented us with a challenge in recent years, given how fast the US data center market has evolved. They have also presented us with opportunities which have been demonstrated in the Alpharetta and San Jose lease-ups. What we are seeing here, and we can spend more time talking about this during the Q&A, some of the early signs of AI inference in what is, as I mentioned, the fastest growing and evolving US data center market. You could say that they have come from either the AI enterprise or AI colocation market.
Anand Chandran: While we are actively addressing any of the challenges presented to us in the North American market, we are also equally focused now on going forward on the opportunities that this diversified presence across North America presents for us. Our portfolio allows us to observe and capture some of this evolving demand where it works for us in the portfolio. On rebalancing, as we have mentioned in several quarters before, we are focused on the quantum that we have mentioned about the SGD 500 to SGD 600 million of divestment targets. The team and I are extremely focused on executing on this before the end of the FY, and we can share more color during the Q&A session. I will not spend too much time on the details in the box below. That is information that has been covered either in the last quarter or this quarter.
Anand Chandran: I would summarize it by saying that you can take away from this, that we are focused on executing the defense as well as we can across the portfolio. So not just in North America, which you see here, but seeing the active asset management in the Singapore portfolio with the reversions and the occupancy. I would say also that as relates to utility exposure, we are also doing our best to increase the utility hedging in the Singapore portfolio. We can share also more in the Q&A if there are questions. What about the offense? The offensive actions that we want to take in the existing portfolio will include US re-leasing, as we have shared, will include us scanning the portfolio in North America as demand evolves for us to identify in conjunction with industry partners where we can find redevelopment opportunities.
Anand Chandran: Also, let's not forget the Japan portfolio where it is a steady, long WALE portfolio. But in 2024, we had acquired that asset where we stated that there was redevelopment potential. So the teams are working in the background to work through those pre-development work streams to ensure that we have a path and a plan towards that redevelopment asset to capture that upside. We are focused on the defense and the offense on the as-is portfolio and our income profile today. Maybe lastly, I just wanted to speak to a slide in the outlook section, and if we go there, please, on the strategic direction. I think after this we will segue. On this slide, I think there were really three main messages that we wanted to speak to. One is the combination of the existing portfolio.
Anand Chandran: Being very active as portfolio managers and asset managers where we are today in Singapore, US, and Japan. Within that, it is the top business lever on the execution of divestments in the North American portfolio. We will, at the same time, equal weight the growth initiatives that are embedded in the portfolio. We will focus and have been spending time widening the aperture to look at growth avenues in the broader industrial segments, as well as the data center sectors. Where will we focus? We are spending our time naturally in our existing markets in Singapore, US, and Japan first. These are already advanced, resilient economies with deep advanced manufacturing and high-tech bases, including those in digital infrastructure. What's more, we see durable occupier demand where the tenants are, of course, of top priority for us, and we will spend time looking at opportunities across those sectors.
Anand Chandran: In that process, it's very important for us to be clear internally, but also externally about what Mapletree Industrial Trust's identity is. We will remain a general industrial REIT with the ability to go down deep into specific verticals where we have strong conviction, as we have evidenced over the last five or so years in the data center space. This will continue to give us the opportunity across the portfolio and the optionality, but we must and always will form strong points of view that we will ensure we communicate to the external environment as we identify and execute on these growth opportunities. Under capital management, I think the main message is that we will be disciplined in terms of our capital recycling and reallocation.
Anand Chandran: We are all aware that we are already in and moving into a high-interest rate environment, certainly across our three advanced economies where we are present. So where it makes sense for us, we will redeploy capital into growth. But of course, where it makes sense for us to shelter from the macro environment, we will do so as well. Lastly, speaking about strategic growth, I am fairly new in this seat, and I won't be on this call spending too much time fleshing out a detailed growth strategy because I do want to spend time with the leadership team and the business to identify this. But suffice to say that we are being active in identifying how we can unlock, but will have to be inorganic growth. The organic growth as spoken so far, we will definitely try to maximize.
Anand Chandran: But it is really inorganic growth that we will look for going forward. The question is how we will access this identified inorganic growth. We can broadly split this into channels down which we will be going to have proactive discussions with business owners, capital owners, to find these growth opportunities. These will generally lead into what look like sale and leaseback transactions, redevelopment opportunities, leasing opportunities in our existing portfolio, or straight acquisitions of assets in locations where we have a high conviction. I would just summarize this before moving into the Q&A by emphasizing that when it comes to growth, we will very much be equal weighted on the defense as well as the offense. If you think about this in terms of investment terminology, we will look at both the beta and the alpha. The beta is what we have to face in the microenvironment.
Anand Chandran: We will make sure that we manage this prudently without giving up strategic upside where we don't have to. But it's really the alpha where we will focus on being proactive to position ourselves proactively to find growth opportunities. We will take a tenant-led focus when we're doing this. The tenant is ultimately the most important feature for us in our portfolio. That leads to us being able to develop long-term relationships. The real estate solutions that we can try and solve together with these tenants will be something that we try and solve thereafter. But the identification, the communication, the engagement with existing and prospective long-term tenants is really what we're focused on in terms of our proactive conversations for now.
Anand Chandran: In my assessment in this short time, I think there's great potential in the people, the presence, and the platform of MIT, let alone if we can extract stronger advantages through our sponsor relationships. We will be focused on spending our time trying to leverage as much of this potential as possible. I'll end there, and maybe we can segue into the Q&A.
Mui Lian Cheng: We will now move on to Q&A. We ask each analyst to limit himself to three questions. Bill, would you like to ask the first question?
[Analyst 1]: Okay. Yeah. Thank you. Hi. Morning, Anand. Welcome, and thanks for sharing your strategic direction for the REIT. On my two questions, the first one I wanted to ask is, with regards to this target divestments. How are we coming along as at the H1 of this year? Also, I think earlier in the slide also you had mentioned of potential redevelopment of some older assets. Could you also give more details on that?
Anand Chandran: Thanks, Bill. I will speak to it and then my colleagues, feel free to jump in if you wanted to. So the first part of your question on the divestment. Everybody would have read in the news, I guess, most recently about the 22 asset portfolio. That forms part of the funnel for us to achieve the divestment quantum that we have spoken about. While we cannot divulge specifics at this stage, we are, and I am also directly involved with Sara, who is here today, and our US team in trying to be certain about the parties we are talking to, the parts of the identified divestment portfolio that we are speaking about, and the timelines that we are holding ourselves to.
Anand Chandran: So I am confident, and we are in specific discussions with a handful of parties on different parts of the divestment portfolio that we have put up for identification. We are holding ourselves to a target of executing on these divestments, a good amount of these divestments, by the end of the FY. I am sorry that I cannot be more specific about that. We would all like to have certainty in the divestment quantum. We will try to control what we can in terms of dealing with parties that we believe can close doing our best to preserve the divestment valuation targets that we are trying to target. Having these timelines, things to do with the parties needing time to assess the sites and us needing time to negotiate the documents.
Anand Chandran: We are trying our best to make sure that it goes within the 31 March timeframe. So we are working in that quantum to try and close that amount in this FY. On the second point on redevelopment, I would say line of sight for us in US where we have not yet identified specific redevelopment opportunities. But as I said, part of having that diverse geographically and by asset type and by deployment type data center portfolio across North America, from the West Coast to the East Coast, in what is the biggest data center market in the world, will allow us over time, as the market evolves, to identify redevelopment opportunities.
Anand Chandran: While we have been pressed to be in a defensive posture, divest because of the change in the market, I really want to stress with the team, and we are doing this, for us to create the conversations with the ecosystem, because that is what you have to do to identify redevelopment opportunities. Are we speaking to the end users?
Anand Chandran: Are we speaking to the operators within our portfolio or in the market about what they see in our portfolios? As real estate owners and landlords, we will have limited visibility ourselves to identify these opportunities, and that is why we have to have an ecosystem conversation to identify that. If this ends up in a screening exercise of some sort with a handful of identified potential partners, identifying that redevelopment potential, that is what we will strive for. But at this stage, it is still early days. The other is in Japan, right? As I mentioned, the asset that we bought in West Tokyo, when we transacted in September or October 2024, it was a stated intent for us to work on the redevelopment this into a data center. It is a highly desirable tier 1 market constraint.
Anand Chandran: The fact that we have a foothold in this asset with some of the early critical success factors is a good sign for us. It is not something that we will reap rewards from in the next FY or so, but the planning has to go into it. The teams are actively involved in the planning, and this is a holistic team that is working on this. So MIT team, working with our country teams, working with the external environment for the demand conviction of this site, working with local authorities and regulators to make sure that we line up redevelopment work streams to extract that potential. Your second question is really those two pathways that we spend more time create more clarity on, and we will make sure that we communicate this when the right time.
[Analyst 1]: Okay. Got it. Okay. Can I move to my second question on the interest rate swap? I just wanted to check how much of the interest rate swaps remains to expire for the rest of this year? For the next financial year, what is the cost of this interest rate swap that expires? I just wanted to get a color or some guidance on your financing cost.
Geng Foong Khoo: Okay. I mentioned earlier that when we look at the average borrowing cost for FY 2026, 2027, expected to increase to about 3.5% to 3.6%. This would have taken in the SGD 600 million of IRS due this year. To date, about SGD 260 million has expired, some of it which we have could say, so extended. The remaining will be over the next 2 quarters equally. For next FY, the other SGD 600 million, in terms of the increase in the differentiation in the interest, it is slightly lower than this year, but it is still quite a big gap compared to today's, I fear, USD rate. We are looking at maybe about 150 bps or so. For FY 2027, 2028, we are looking at average interest rate of about 3.94% level, slightly below 4%.
Geng Foong Khoo: But if we are able to divest some of the properties that we have identified and pay down loans, we are looking at average about 3.6%, FY 2027 to 2028.
[Analyst 1]: Okay, got it. Just to confirm the guidance for end of this year, that 20 to 30 bps increase already includes that IRS expiry?
Geng Foong Khoo: Yes.
[Analyst 1]: Okay, got it. That is all from me for now. Thank you.
Mui Lian Cheng: Can we have Mervin to ask the next question?
Mervin Song: Yeah. Hi, Mervin from JPMorgan. Congrats, Anand, on the backfilling. I am just wondering on Alpharetta and San Jose, just wondering whether you can share, reverse the amount of rent free that you may need to provide, and how does the signing rents compare to prior leases before expiry? Second question I have is in terms of updates for some of your properties which are vacant or low occupancy for the likes of San Diego, 250 Williams, sorry, 7337 Trade Street, as well as Rancho Cordova. Then final question would be, the DPU has been on a downward trajectory over the last 5 years. Share price is now at 2017 levels. There has been an enormous amount of wealth destruction.
Mervin Song: For upcoming divestments, including the 22 US data centers, would MINT consider waiving its divestment fees until DPU stabilizes to better allow the unitholders and restore confidence in the management of the REIT? Thanks.
Anand Chandran: Thanks. I think there were three buckets to your questions. Just remind me in case I miss out on any of them. On your first question on Alpharetta and San Jose, the rent-free period. Alpharetta is a longer lease, it is about 15.5-year lease. San Jose is a shorter lease, about 5.3 years. There will be some rent-free periods because as we mentioned, lease start to speak to AI inference demands that we are seeing in the market. You can expect that those tenants will require some retrofitting to the asset. For the longer 15.5-year lease, there is effectively about a 9-month rent-free period. For the shorter 5.3-year lease, there is about a 3-month rent-free period. These leases all come with escalations, low single-digit escalation, which is good for us. The reversions, without going to specific figures, were lower than their previous rental rates.
Anand Chandran: But honestly, we have to look at it from the perspective of what is the highest, best use that we can get out of the asset. We are better off sitting on vacant, non-let assets, or we be better off securing leases from emerging demand that we see in those locations. It was the decision that it was better for us to have those assets occupied, the ability to observe this new forming demand type in the market. I think your second question was speaking about the other assets in the North American portfolio that are either vacant or of low occupancy. I think you mentioned San Diego and then 250 Williams, Rancho Cordova. Naturally, those will have already formed part of our consideration in terms of divestments.
Anand Chandran: We take a very clear view. That doesn't mean that the teams, Sara Wayson and team in the US are not actively trying to find income-producing solutions for those assets. But we will have to take very clear-eyed views about whether or not based on what we see, we are the higher and best user of that asset, or whether or not there is another owner in the market that is positioned to get higher and best use out of it. So what I can say to that is that they definitely form part of the consideration on the divestment portfolio, but that doesn't mean that we've taken the foot off the gas in terms of trying to lease up or improve the income profile of these assets while they sit on the portfolio. Your last question is a little bit harder to answer, to be honest.
Anand Chandran: You've spoken about the decline, the share price decline. We acknowledge that. I acknowledge that coming to the seat. I know it is something that we will work with the team to try and turn around as soon as we can, and we'll be proactive about that. On the specific question of whether or not the divestments, when they happen, will waive the divestment fee. I don't think we can say specifically at this stage. It'd be premature for me to say so. But how we look to preserve and optimize income to unitholders in the form of DPU and the share price is certainly top of mind for us. But I won't say right now that it's something that we can commit to in relation to the divestment.
Mervin Song: And just sorry, back on the leases, that you signed for the two properties. It's lower. How much lower would it be?
Anand Chandran: I'm just checking with Steve.
Mervin Song: Yeah. Just a range would be enough. I do not need specific, like, 2-point detail here.
Anand Chandran: I think in those instances, they were between 10% to 30% lower. So double digit lower than the previous existing leases and noting San Diego had been vacant for and San Jose, sorry, I keep mixing the two up. My apologies. San Jose had been vacant for some time, 2025.
Mervin Song: Okay. Thanks, Anand. Based on your previous track record, I think you should be able to turn that around, sometime in the future.
Mui Lian Cheng: Maybe Sara can give-
Anand Chandran: Just give Sara a chance since she is here to give more color on the North American piece.
Sara Wayson: Well, specifically for the Alpharetta site, that space makes up approximately 55% office space, then the remaining part data center. As this is a data center tenant, they are leasing the entirety of the building but do not have much use for that office space, which is really what caused that much lower rental rate from the previous user who was an enterprise tenant and was using both the DC and the office space.
Mui Lian Cheng: Sara, do we have Rachel from Macquarie for the next question?
Rachel Tan: Hey. Hi. Good morning. Can you hear me?
Anand Chandran: Yeah.
Rachel Tan: Yeah. Okay. Congrats on the appointment, Anand, on your promotion. Maybe firstly, first question on divestments, just to follow up. I think San Diego is one of the assets that you probably look to divest. I noticed that there has been a markdown in the valuations. So, I am just wondering whether in divestments, would you be able to divest above the valuations for the San Diego asset? Maybe just to follow up also, you talk about a lot of things that you have acquisitions, you have divestments. How do you stack. Will you divest first before you acquire? In terms of ranking all your priorities, how would you rank your priorities? Lastly, I think, just color on WALE, would you be able to give us a sense in terms of where the demand is coming from?
Rachel Tan: I mean, the occupancy, leasing up the space has been quite a drag in the past quarters. Suddenly we are seeing that the leasing is coming up. Could you give us some color? Where is it coming from and is demand recovering?
Anand Chandran: Thanks, Rachel. Maybe I should just say, I think I appreciate the congratulations, but really more meaningful after a year, let us reassess. I hope to be able to have brought the team and the business to a better place. After that, more than willing to accept congratulations. So now may be a bit premature. Just on the three questions. First, San Diego, yes, I think the valuation markdown was something that was not a this-quarter issue. I will say that we have been for some time, and continue to be, in one specific discussion with a large established end user for what is probably going to be the highest and best use outcome for this asset. So we will commit time to make sure that we can try our best to extract this option value.
Anand Chandran: It may require some time because the counterpart genuinely requires some time to assess the highest and best use they can get out of the asset. You can imagine this has to do with local diligence, regulatory discussions. But we will commit the time to make sure that we can try to extract this option value. If that outcome pans out, then I am less concerned about having to divest beating valuation benchmarks on divestment. So that is what I can share there, that there is a specific discussion that we have been involved in and are still committed to for some time. Your second question, I think it speaks to whether or not we can sequence in an ideal way, recycling and reallocating our capital. You spoke about divestments and acquisitions and what my priorities are. I will separate the two things.
Anand Chandran: My business priorities, as I said earlier, top priority is executing on the divestments in the US. If we have to take clear-eyed decisions about executing to get certainty, we will do it. Because a lot of the portfolio pivot performance depends on the execution of the divestments. It will speak to everything to do with not just income replacement and acquisitions. It will speak to our ability to manage shelter from high interest rate environment. It will speak to our ability to manage the hedge profile in a more optimal way. That remains the top business priority, certainly between now and the end of the FY. But conceptually, yes, if we can time the divestments, primarily in the US, with suitable investment opportunities to recycle, reallocate that capital in higher-yielding assets, certainly we will do that.
Anand Chandran: We, of course, have had discussions about how we can try to time that, certainly. But none of those are at a state where they are concrete enough for us to share right now in terms of matching recycling with reallocation. The hinge is really the divestment execution, which remains the top business priority. I do not know whether that gives you enough clarity. But all that is not to say, and that is why I wanted to make sure I emphasize the message of equal weighting, defense, and offense. Just because we are preoccupied with the defense does not mean we are not spending any time on the offense.
Anand Chandran: What you cannot see is the amount of activity that I am spending with the investment team, but also the asset management team, the leasing teams, to go into the markets to have the discussions about inorganic growth, with prospective long-term tenants down the channels that we have identified, in the three markets that we are in. That is, to me, an equal-weighted business priority to identify the growth so that as soon as we execute on the divestments, which are clear and present, we try to match that with income replacement and growth. Your third point on Kallang Way, I will just maybe give a bit of color, and then maybe if Serene feels like she can add more color, I would welcome her to.
Anand Chandran: But the leasing of activity that has been executed and that we are seeing down the pipe, if you ask about trade sectors, where they are coming from, I think we are seeing that come from the semiconductor, biomedical manufacturing sectors. One significant prospect was from the optical solutions. Very hard to define this specifically, but optical solutions that feed into the digital infrastructure supply chain in Singapore, of which Singapore is a crucial part of that supply chain. We are seeing that come, and we are getting confident. As I mentioned, I think we are tracking well towards that 75% target. And those three subsector buckets are maybe the best way that I can describe how we are seeing the demand.
Rachel Tan: Okay. Thanks for the color, Ivan.
Mui Lian Cheng: Can we have Derek from Morgan Stanley?
Derek Chang: Hi. Morning. I guess I'll start my first question on, this is a follow-up really on Alpharetta. The rent-free period of 9 months, is that all taken up front, or is that spread across the duration of the lease? Does that mean there's for the next 9 months, what kind of impact on DPU would that really represent? My second question is, on defense, given all that's going to happen, divestments, high interest rates, how would you ensure DPU stability? It's been sliding to the point, I think we are now back towards 2019 levels. It's kind of unwound all of that growth from acquisitions in the US. How would you at least bring it to more stable levels? Financial levers you can pull, like taking more MFU, for example. Would that be one of them, or how would you basically go about that?
Derek Chang: The last one would be on the offensive strategy. I think early in the path has undertaken power studies of the US portfolio to see where more power capacity can be eked out. Is that still on the table, and where are we right now on that power study exercise? Thanks.
Anand Chandran: Thanks, Derek. Three questions. Let me take the first one. On Alpharetta, you asked about the rent-free period. Effectively, those 9 months come from across the first year, 6 months at 100%, and then the next 6 months at 50%. Effectively, it is 9 months, if that gives you clarity on how that is spread out. On your second question on defense, you talked about the investment activity and how we are going to shield ourselves from the higher interest rate environment and what those imply for DPU stability. DPU stability is about protecting and trying to enhance the existing organic income of the existing portfolio. The material that we shared, what you regularly see in these slides speaks to occupancy, speaks to WALE for the stability and growth of the income, speaks to the quality of reversions.
Anand Chandran: I think on the occupancy front, I would say that is where a lot of the defensive actions have taken place to protect that organic income. Divesting full occupancy or vacant assets where we do not believe we are best placed to re-tenant them is another way of creating, flushing out and creating that clarity and putting that flow more visibly on the DPU stability. We continue to do that. On the interest rate side, we will certainly, I think Hong has shared, look to optimize the interest rate exposure, our hedging profile. We will certainly not veer into any sort of speculative behavior when it comes to our hedging, because that would defeat the purpose of providing stability in the long term. But we will do what we can within reason to shield ourselves from the capital management perspective, from interest rates and FX exposure.
Anand Chandran: On your question about management fees and units, I believe that is what you are referring to by MFU. Yes. This probably relates more to growth, right? To growth, not so much on defense. To growth, those are obviously considerations that we will take into account, insofar as the much accretion as possible that we can show DPU try to evidence. Yes, we from time to time, as part of regular considerations, we look at that on the acquisitive front. On offense, I think you asked specifically about power feasibility studies in the US, and those predate me. I am still getting up to speed as to what we are doing.
Anand Chandran: My own assessment is that in any data center market, especially in the US, especially with that diversified profile, and especially with the constraints that you are seeing, the news about ability to green light new capacity in any market, primary or secondary in the US, we will have to constantly be in the markets, not just with the regulators, with the authorities, but also with the demand side of things. Having those regular conversations about the demand side, not just the supply side, which in my view is really what you see most about in the market. What you constantly see in the news is supply-side information. How much power is available here, which sites can come to market within what horizon. But you really have to spend time talking about the demand side, because you may have supply.
Anand Chandran: Even if you can eke out supply, if the demand is not there, you still do not have a commercially viable asset. We are spending time on both. I would say we will continue to spend time assessing based on demand conviction, where we should be looking to optimize power and then where we can optimize power so far as the data center portfolio is concerned.
Derek Chang: Okay, thanks, Anand. Just on that DPU stability question, I guess coming along the lines of is that number, the SGD 0.0390 number of SGD 0.12, SGD 0.1215, is that kind of a line in the sand for you in anchoring DPU? Because right now we are trending towards more of that level. Or are you prepared to see it come down as a consequence of all the recycling divestment activities that is ongoing? Because there is a lag effect, right, for your initiatives compared to what would happen to DPU. Longer term, it may be the right direction, but shorter term, there will be financial consequences on the DPU.
Anand Chandran: Maybe I will let Geng Foong answer this.
Geng Foong Khoo: Yeah, Derek. I think like you rightly pointed out, there could be some near-term effects. As what we have mentioned earlier, we do have renewals, for example, the San Diego effect and all, right? All these, the full year effect will be next year. Then of course, the IRS replacement hedges that will cost more. So there will be impact this year and potentially next year. When we talk about divestments and acquisitions, there will be timing gap to replace the income if we are able to divest some of the properties that we have identified. As a REIT, we are not allowed to give any forecast, but from that, you will be able to digest that info a bit to see what was the number.
Anand Chandran: Yeah, Derek, I will just add to that. Again, easiest way to think about this is defense and offense, right? We will definitely do everything we can on the defensive front to protect the DPU. That is our top priority. We will definitely do whatever we can on the organic offensive front to also protect and potentially enhance DPU. But I am clear that the only meaningful action is really inorganic growth. So we are really focused on being in the markets to identify inorganic growth where it makes sense for us in our markets, because that is the only way we can try to control our fate on the DPU.
Anand Chandran: We will do what we can on managing the downside, but the upside really has to come from inorganic DPU growth, which when you roll it up, has to come from identifying a pipeline that we can execute on together with the tenants that we want to partner with going forward.
Derek Chang: Okay, thanks. I will let others have a chance. Thank you.
Mui Lian Cheng: Brendan from Citi to ask the next question.
Brandon Lee: Hey, morning, Anand. Just three questions, right? Just going back to the US divestments, could you share with us what is the floor and ceiling in terms of your divestment premium or loss that you are willing to take, especially with the more hawkish rate hike outlook? Also to confirm what you said is that you expect SGD 500 million, SGD 600 million to be done by end of FY27. Is that right? So that is my first question. The second question relates to the occupancy and the NPI margin for US. I think if you look at both numbers, they are trending at a record low. Could you share with us whether that could go down further or whether we could see some improvement over the next three to six months or thereabout?
Brandon Lee: The last one is probably more on your target split on contribution going forward as a new CEO. Where should we see DC and general industrial contributing on an AUM basis? Yep. Thanks.
Anand Chandran: Thanks, Brandon. I was just jotting down your questions. I think, again, remind me if I miss out anything, but I think your first question was on US divestments floors. Do we have a set floor or ceiling in relation to divestments vis-à-vis valuation? Has the interest rate environment affected buyer sentiment and indirectly the outcome of those divestments? Are we setting ourselves the target of achieving that SGD 500 million, SGD 600 million divestment quantum by the end of the FY? It is not the easiest one. The last one, the target, yes. I am holding myself, and we will jointly hold the teams accountable to achieving those divestment targets at the end of the FY. We will try to get as much certainty as we can about that.
Anand Chandran: If we set that target, then you roll back to what are the actions that you can control to try and create that certainty, which speaks to your point about the floor and the ceiling. I would very much like to be able to go to the market and say, "Look, this is my divestment floor." At the same time, I offer you a divestment ceiling as a buyer to buy this asset from me. It doesn't work that way. We will definitely try to always be in positions of earning power strength where we can. That means how we position these divestment portfolios with a mix of assets that we believe can entice demand, and how active we are with the brokers, ourselves directly with potential buyers. That's what we can try to control.
Anand Chandran: I can't guarantee that we will achieve all the divestments at or above valuation. In the instances where we have to take the firm view that it must happen, even if it's at a number below valuation, because in the broader picture, we have to recycle and reallocate this capital to higher and better use, then we will take those decisions. We will communicate them, as well as we can, regards to the intent. No, I can't identify a floor and a ceiling. Has the interest rate environment affected buying sentiment? Not that we have seen so far very overtly. I mean, the LOIs that we have in flight with potential buyers, none of them have been scrubbed in ongoing discussions because of the macro environment changing. That's all I can share there.
Anand Chandran: Your second question, correct me if I'm wrong, I think you were talking about occupancy levels in the US being at periodic lows, and your question was whether we see them dropping further. I think, as I was trying to say earlier about the US occupancy being below the 80% handle. The post-quarter leasing activity definitely helps improve that. We are, of course, concerned as well, right? When we see that number going down. But if you look at the lease profile, the identified pockets of worry, which were in FY26 to 2027, that 1.4% of leases that we're renewing, of which 1.2% had been identified as firm non-renewals. We've addressed 1.1% of that with Alpharetta, and we continue to work on the remaining delta for this FY. I don't think we have due concerns of anything else popping up this FY.
Anand Chandran: Going forward then, as far as the US portfolio is concerned, there is a run rate of about 2% to 3% GRI coming from the North American DC portfolio. The teams are actively in discussions with those tenants as to renewal intent, but also scouring the markets for proactive and preemptive tenanting discussions, which will also allow us to be in the markets to catch evolving demand, whether that leads to new demand types, the likes of which we're seeing in Alpharetta and San Jose, whether that leads to us being able to jointly figure out redevelopment potential with demand end users. It's something that we'll have to look forward to going into the next FY and after. But I can't say with certainty now that there's that positive upside, but at the same time, there is no undue concern for occupancy downside.
Brandon Lee: Can we say the same for the NPI margin as well? It does look quite subdued, I think, at the current 61% to 62%.
Anand Chandran: Brandon, I'm just pausing just to go by emails.
Geng Foong Khoo: Maybe I'll just clarify. For US, the NPI margin is a bit tricky because we do gross up the revenue and the expenses from tenants. Mathematically that will be affected whenever there is a bigger chunk of flat fee electricity recoveries. For this quarter, when you look at the NPI margin, it's affected by two things. Firstly, of course, I always say, let's say for example, San Diego, right? Previously the NPI margin for San Diego was higher than the average. Then in Q2, we'll need to bear some of the expenses. So the NPI margin was affected because of that. On top of that, there's also quite high electricity recoveries during summer months. That impact is around 4%. If you add that back 64%. You have to add about 4%. So about 66% NPI margin.
Brandon Lee: That's a good number to model. Yeah.
Geng Foong Khoo: Because actually, most of our properties are triple net. Yeah, it would still true.
Brandon Lee: Okay. Sure. Thanks.
Geng Foong Khoo: Margin may not be very meaningful for our US portfolio.
Anand Chandran: Yeah. Brendan, I will just say two things. There is, of course, the mechanics that have to do with timing that Khoo Geng Foong has mentioned. Of course, if we divest vacant assets for which there are some ongoing expenses that we have to bear anyway, of course, that improves organically the NPI. But to the broader point about do we see the quality of the earnings of the existing NPI in the US diminishing going forward? I do not think we have undue concerns about the quality of the existing earnings diminishing going forward. As far as that high-level thing is concerned, I do not see quality of earnings deteriorating in the existing NPI.
Brandon Lee: Okay.
Anand Chandran: You have one more question, Brendan, I do not want to forget. Your third question was on the split of contribution between DC and industrial. It was one reason why I wanted to make sure I emphasized in that last slide earlier that what is our identity, right? We remain a general industrial REIT. Just on a high conviction, the point of the portfolio. Going down a specific industrial subsector, which has been the highest growth, highest opportunity subsector in the world for the last 5 years or more. We will always default to the identity of being a general industrial REIT because that gives us the optionality of-
Anand Chandran: on the basis of lookout of conviction of say a 3-to-5-year period. We will have the optionality to do that, but every time we do, we will have to be prepared to manage the portfolio of that subsector that we go down. So it will be a cadence of us over a long duration, forming high conviction of certain industrial subsectors, investing heavily, managing that portfolio well, and at the right time optimizing that portfolio if we have to. So I would say, I can tell you at a high level, I want the business to increase the diversification out of the data center industrial vertical. That is not to say we diminish it.
Anand Chandran: We increase the diversification by putting more effort in being proactive in identifying broader industrial sector themes, broader industrial real estate tenant relationships that we can form, and therefore, broader industrial real estate acquisition pipeline build for ourselves. So, the question really is how we are going to intend to spend our time. How that will translate into portfolio split contribution over time. I do want to try to make sure that we specify and we rebalance the portfolio with a good emphasis on broader industrial sectors.
Brandon Lee: Okay. Hey, thank you much, Anand. That's it. Thank you. We've gone a world of time. Thank you.
Mui Lian Cheng: Donald to ask the next question.
Donald Chua: Hi, can you hear me? Hello, can you hear me?
Mui Lian Cheng: Donald, yes, we can hear you.
Donald Chua: Yeah. Couple of questions from me. High-level ones in extension to our previous question. Anand, in your new seat as CEO, just now you mentioned that you want to remain as a general industrial REIT, and also increase diversification across industrial. Could you broaden that out, please, on what do you mean by increasing the diversification across industrial? Different industrial asset types, or is it geographical regions? I guess my question is what is your vision for Mapletree Industrial in the next three to five years? Where do you want to be?
Anand Chandran: Okay. You mentioned two questions. Was there going to be another one, or can I start on that?
Donald Chua: The other one is related. Maybe I will just ask all the questions I have.
Anand Chandran: Sure.
Donald Chua: The related question is: Do you think Mapletree Industrial is still best placed to remain in the US, given the trials and tribulations over the last couple of years, and also being predominantly a Singapore REIT? Will the team spend too much time going too many places and stretch the resources? Also the last one, I guess the more philosophical question is, in your role now, and you are looking with the lens of a CEO on Mapletree Industrial, what do you think is the biggest issue for the valuation discount that the stock is trading at right now?
Anand Chandran: Okay. Let me take those in order. You wanted more color about how I and the team think so far about diversification across industrial. I think it really stems from the fact that any business, whether you are a REIT or otherwise, any business needs to have strategic diversification in some form. You either do that geographically or in business and asset sector exposure. Let me deal with the geographic one first. I think there is a lot of potential that we can identify where we already are. Singapore, the US, and Japan. As I said, these are already large Industrial advanced economies, of course, the difference in scale of opportunity. Singapore will never have the scale of opportunity that the US or Japan have.
Anand Chandran: Conversely, the US and Japan will have significant amounts of opportunity in various industrial subsectors, and we have to be active in the markets to identify those in direct discussions with business owners and capital owners. Because if you think about this, the macro environment, the beta, the strains in the interest rate environment are affecting every business. Any business that has leverage is going to be affected by these things. We are identifying where we believe there is potential and being in the markets to speak to the business owners, capital owners in various industrial subsectors to identify where that growth will be. To check off that question on geography, I am primarily focused on our existing markets. I think it will take us a lot of conviction to see if there are other geographies that permit us, because that is not trivial.
Anand Chandran: Opening up a new geography is a nontrivial exercise. It speaks to a broader market entry strategy. It takes more than one quarter, a half a year, or one year worth of planning to decide to enter the market and scale up over long term in a new geography. Geographically, we are focused on Singapore, Japan, and US. Can I identify today the specific focus subsectors? I cannot do that. We need time to be in the market to speak about. Of course, we have some view as to where we think we may want to go and fish for these conversations. But that is different from saying that today I am prepared to back subsector A, B, or C for the next three to five years. That would be a little bit vacuous of me to say right now.
Anand Chandran: But certainly in due course, as we develop the conviction, we will come to the market to communicate this ideally in the form of acquiring acquisitions. But if not, we flesh out our thinking about how we are spending our time. That is how I would say I would address the first question. The second is, it is quite an existential question that you are asking us. Are we best placed to stay in the US or not? Today we are. There are two parts to your question. One, are we best placed to stay in the US given all the travails? Secondly, reading into your question, is the business too scattered in terms of focus, and would it pay to be more focused geographically or subsector?
Anand Chandran: The way I think about that, in the US today, we are in the data center space, right? Let us segment the thought process. In the data center space, I can tell you that most data center developers and owners would give an arm and a leg to have a presence in the US market. But most people give up because there is no chance to get a foothold in the world's biggest data center market. While we have entered the market through acquisitions as opposed to development, we have had to deal with the natural issues that come with the fast-changing market cycle in the US. That cannot cloud our vision entirely as to the fact that there will be strategic opportunities for us to work with the right partners to either find new growth or find higher growth in the existing portfolio.
Anand Chandran: I do not think it is the right decision strategically to give up, nor will we give up North American data center presence. We will work through the difficulties and try our best to find offense in the data center market in North America. It is a question of segment. Are we going to be in the huge hyperscale, turnkey AI-related segments in North America DC? I do not think so. But we can still be meaningful as landlords serving a specific segment of digital infrastructure in North America, which provides you with the broadest spectrum to invest in. But that is only DC, right? Will we spend time trying to find conviction on non-DC industrial growth sectors in the US?
Anand Chandran: Yes, we will. We are trying to have conversations to figure out whether we have conviction there. As an ecosystem, if you start talking about whether we are too scattered, look, we have good organizational development infrastructure in US. Certainly, we are set up best in Singapore. We are probably next best set up in the US within the MIT team. But do not forget, we are a sponsored REIT, so we also benefit from the sponsor's infrastructure, in terms of organizational development in the US, which will allow us to extract opportunities if we are meaningful about being proactive in the market.
Anand Chandran: I would sort of bookmark that discussion by saying I do not think it is wise strategically for us to say we are decanting or vacating from the US. It will remain, despite its travails, the world's largest economy for some time, which will present us with opportunities if we are focused. Your last question was what is the biggest issue in my mind that has suppressed or depressed the share price. Again, there are so many things, right?
Anand Chandran: There is the macro environment, REITs as corporate vehicles will always be susceptible to interest rate and FX volatility depending on how the portfolio is exposed. There is an element of that. There is an element of the portfolio difficulties in North America primarily. It is not a secret to anybody, and we are doing our best to be proactive about it. We will continue to be. And rightly, the share price reflects the difficulties that we face, right? It is our job to take the actions that will turn that around. But I also think the main reason is ultimately growth. REIT or any other business, if any business is able to clearly identify and execute on growth, that just creates momentum. That creates positivity off the basis of demonstrable results and communication. That is probably the key to me. The differentiator will be the growth.
Anand Chandran: And as far as the REIT is concerned, all affected by the beta. The difference is really, can you get your people and processes lined up to find the alpha? If you can find the alpha, execute on it, then that growth story is really the only thing you have in your control to drive the share price upwards. That is my view. It is admittedly premature. I have only been in this seat for several weeks, but it is something that we have already had discussions about within the leadership team about the importance of finding inorganic growth and the collaborations required across the platform to extract that growth. Because in actual people and presence and the platform being MIT, but also sponsor advantages that we can leverage, there is great potential.
Anand Chandran: We just have to make sure that we are being proactive enough, aware of where we are in the market cycles, being in the markets to have the right conversations, and then being collaborative enough, certainly, to find that growth. That sounds a bit long-winded, I am sorry, but it is some of what is top of mind for me.
Donald Chua: Alrighty. Thank you.
Mui Lian Cheng: Mindful of the time to ask our many analysts to ask one question each. Can we have Yew Kiang from CLSA to ask the next question?
Yew Kiang Wong: Hi, Anand. I will just ask a very top-level question. You mentioned that you are only in this role for a couple of weeks, and we are just a few months away from your financial year-end. Does it not make sense for you to revalue your assets, wait for March, mark it down, and then do the divestments? I mean, it is only beneficial for you in terms of, maybe for KPI purposes and probably in this couple of months because of rate hikes, it is going to be tougher to negotiate on divestments. Is it not? I just want to have a sense, why don't you kitchen sink this year and then wait for a better year ahead?
Anand Chandran: Okay. So it is Yew Kiang, is it?
Yew Kiang Wong: Yes.
Anand Chandran: Well, how to respond to your question. So you are essentially asking whether I think that it is actually better to wait and revalue and mark down. This is going to be more conveying how I think about things, right? I don't think about Anand Chandran being in the CEO seat and what is best for posturing in terms of KPIs. We have to have all of us in the leadership team are front and center what is best for the business first, because what is best for the business is what is best for unitholders, ultimately. We can't control the revaluations. We can't control that. It is beyond our control. The best thing that we can do is to have really solid assets in really solid markets with really great tenants, and the valuation will sort itself out.
Anand Chandran: I am focused on the things that we can control. The things that we can control also are use of our time. I don't think we are in a position to give up time. So I am very much about being proactive about the time that we have. That is why I am jumping in, sometimes annoyingly, in US divestment conversations with Sara Wayson and team. But it is because we don't have time. We don't have the luxury of time to sit on our hands and wait for things to happen for us when it comes to divestment. Because so much, as I said earlier, so much hinges on us being able to execute divestment, not because of messaging or posturing reasons, but because it unlocks a lot of strategic levers for us if we can deliver on the capital recycling and then the capital reallocation going forward.
Anand Chandran: I guess in answer to your, at the end of the day, the share price is the most important barometer, and all of us are held to share price KPIs. That does not drive our behavior. We are focused on what is best for the business long term, dealing best with the short-term issues to position us well for long-term health of the business. We will not wait. We will not wait to try and strategically posture for whatever revaluation or markdown outcomes will come. I do not think that is the wise thing to do.
Yew Kiang Wong: Okay. Thanks. I will leave for others to jump in.
Mui Lian Cheng: Do we have Derek from DBS?
Derek Tan: Hi. Morning. Can you hear me?
Mui Lian Cheng: Yes.
Derek Tan: Hey. Hi, Anand and team. Maybe just one question. Could you give us a bit more color on the target portfolio that you have put up to the market, the US portfolio, the exit yields that you are hoping to achieve? I am just thinking aloud that some of the assets there are non-income producing, some are. So if you sell the non-income producing one from current point onwards is accretive. If you redeploy and there will be a bit of dilution also, I would expect, given where cap rates are. So maybe some further color on that would be helpful.
Anand Chandran: Yeah. Hi, Derek. Thanks. So the question is really about what kind of exit yield for the divestment portfolio. Again, I wish I had the luxury of being able to say with certainty I am going to sell assets 1 to 10, which I know 1 to 4 are vacant and 5 to 10 are income-yielding, so that I can pin down the exit yield. Unfortunately, it very much depends on what the buyers want to buy and where we come out in negotiations in terms of which assets we end up selling, which of those are vacant, which of those are income-yielding, the prices at which we transact. So I cannot pin down a number. I do not think it is wise for us
Derek Tan: Okay
Anand Chandran: to miscommunicate a number at this stage. But definitely we are always trying to. We are mindful of what you said, right? Obviously, we can divest of the vacant assets, great. That forms part of our divestment portfolio composition strategy. Obviously, if we can get as tight a divestment cap revaluation as possible, the better. So those remain business goals. The reality is how those negotiations pan out and the actual compositions are. So I do not want to misguide a number because the reality may pan out to be different, and I would want
Derek Tan: Okay. Sorry. Thanks for the color. Sorry. Just one very quick one. But in terms of redeploying your first port of call, can I say that it will not be the sponsor 50% stake that they have, JV with you? You want to do something else, right?
Anand Chandran: Definitely think about sponsor portfolio, right? That is not secret.
Derek Tan: Okay. Yeah.
Anand Chandran: It must be a suitable metric for us to trigger that line of sight. Reallocation must be a willing buyer, willing seller situation where we can demonstrate sensible level of accretion to unitholders, right? That will not be a forced reallocation. For us, is there anything else that we can line up to do? That is why we have already been extremely proactive in the markets to line up a reallocation from replacement discussion. I cannot identify that to you today. Hopefully, we will in due course, but definitely the matching of the recycling and the reallocation. If you get an ideal outcome, we are trying to line up the reallocation part of it as we can.
Derek Tan: Okay, got it. Thank you. That is all from me.
Anand Chandran: Thanks, Eric.
Mui Lian Cheng: We have Andy from OCBC to ask.
Andy Wong: Yeah. Hi, Anand. Just a quick one. So in terms of your 21% of leases expiring in FY27, 28, based on your current visibility, any proportion that is unlikely to renew?
Anand Chandran: No. As I was saying earlier, there is nothing that is of undue concern for us here. We are talking about the 20.8% in FY27, 28. I think you can see from the historical and even in this quarter, the amount of work and the positive results that the Singapore portfolio continues to generate. So those two wedges there that you see in the slide, the yellow and the green, we have no undue concerns. That will be, we will continue to leverage the strong performance that we can generate there. No red flags. As we mentioned, for a time it has been the watch out of the North American portfolio, so that blue slice. The main focus was this year we flushed out a lot of the renewal concerns.
Anand Chandran: Going forward, the cadence was say, 2% to 3% of GRI North America. We do not see any watch outs at this moment. But of course, that doesn't mean that we're not proactively trying to preempt renewals or potential renewals. But there's nothing that we have undue concern about to date.
Andy Wong: Okay. So that blue portion for 2027, 2028 for the US DCs, you are fairly confident about the renewals.
Anand Chandran: Yeah. We have no undue concerns.
Andy Wong: Okay
Anand Chandran: That's holding a white flag saying that they want to vacate the asset, no. But we will
Andy Wong: Understand
Anand Chandran: we'll definitely have preemptive discussions about renewals including
Andy Wong: Okay. Yeah. Yeah, that's all from me. Thanks.
Anand Chandran: Thanks.
Mui Lian Cheng: Terrence. Jonathan.
[Analyst 2]: Hello. Can you hear me? Sorry. Yes. Hi, Anand. Congrats on your appointment. Just one question from me. You've actually emphasized inorganic growth as a key driver of DPU growth or stabilization. Given the rising borrowing costs globally, where either by sector and/or geography, do you actually see attractive spreads between acquisition cap rates and borrowing costs? Perhaps if you could share some of these numbers, or is it likely that we should expect MINT to fund some of these overseas acquisitions with Sing Dollar debt? Thanks.
Anand Chandran: Thanks, Terrence. I am just finishing jotting down your question. You are asking about inorganic growth. You are asking about, look, does this make, how are we going to find positive yield spread,
[Analyst 2]: Positive spreads. Yeah.
Anand Chandran: spreads in a macro environment where, look, if you just take Singapore or Japan, conventionally rates are rising everywhere, so theoretically, yield spreads should be compressing everywhere, right? Yeah, I mean, I agree with that macro statement. But does that mean that no transactions happen, that there are accretive? No. I refuse to believe that. But what is required is for us to be extremely proactive and preemptive in terms of pitching ideas to find the alpha first to counterparts as opposed to analyzing real estate that comes to the market. That is not behavior that we will prioritize. We will prioritize being much more active in terms of pitching ideas that we identify to business owners, capital owners, who similarly will be facing the same considerations that we are facing.
Anand Chandran: Everybody with leverage is facing high interest rates, worrying about how to optimize their EBITDA, worrying about how to recycle any trapped low-yielding capital on their balance sheets to reallocate that capital into higher-yielding parts of their business. So those are the kinds of conversations that we are trying to identify with business owners and capital owners where we think we can be meaningful as a long-term, stable landlord that can be involved in recycling any trapped capital. So we spend a lot of time doing that. I cannot give you specific projects XYZ today because we have just started out on this, I do not know what the best way to describe it is. This new behavior, us being in the markets much more. So I cannot identify specific opportunities to you, but definitely we will not be investing where spreads do not make sense.
Anand Chandran: But I also, at the same time, refuse to believe that there are no opportunities where the spreads make sense. We just have to go and find them, and the only way to do it is to be preemptive on deals before they become deals. So we will spend time there. I really hope that in time we can identify and communicate more of this pipeline. Your second question, which was really, are we going to borrow in Sing to fund overseas acquisitions? There are broader implications there, right? It may seem like the easy conversation because relatively speaking, the Sing Dollar debt environment is better than, A, North America for sure, but maybe also Japan. It may be a simple solution to say, look, why don't I just borrow and maximize borrowing in Sing to invest overseas. We have to think beyond that, right?
Anand Chandran: That this common statement of prudent capital management is extremely important in an environment like this. We do not want to put the business into a position where we are overstretching and sheltering from interest rate exposure exposes you to FX exposure. We will not make decisions like that. We will not drastically change our hedging posture just veil of a short-term carry trade situation. So we will not do that. But where it is meaningful for us at the corporate level to think about whether we can slightly rebalance Singapore dollar exposure to fund in order to generate or support that positive yield spread in our market, yeah, we will think about that, but it will not drastically change hedging behavior. I don't think that's a wise thing to do in the long term. It will be too opportunistic as opposed to long-term value using.
[Analyst 2]: Okay. That's great. Thank you very much.
Mui Lian Cheng: Joining us on this call, if you have more questions, feel free to reach out to the IR team.
