2017-01-20 03:39:38.

930 GMT
Event Date: 01/19/2017
Company Name: CapitaLand Mall Trust
Event Description:Y 2016 Earnings Call
Source: CapitaLand Mall Trust
Version: Final
For more event information and transcripts,
visit <a href="bloomberg:EVTS%20%2FD%3AF%2D5613320%3CGO%3E">EVTS</a>
Y 2016 Earnings Call
Presentation
Operator:
Good morning, ladies and gentlemen and those who are tuning in through the
webcast, welcome to CapitaLand Mall Trust Results Briefing for Full Year
2016. First, we are commenced with a short presentation by our CEO, Mr.
Wilson Tan and followed by a question-and-answer session.
May we now invite Wilson for his short presentation.
Wilson Tan, Chief Executive Officer:
Good morning. Good morning to every one of you. Thank you very much for
coming this morning, and also for those who are on the webcast, I appreciate
the time and attention, especially for those who are dialing in and hearing
also from different countries. We are in very exciting times I would say, as
we are all familiar and we all know that there will be a new President of the
US, that will be going -- coming in literally in a couple of hours' time. So
I'm sure that we will see lots of trump cards being thrown out and we would
certainly look forward to managing through the different trump cards.
Having said that, I would like now to welcome you to the full year results
for 2016 itself. This page is the disclaimer. I would take it that everybody
was hearing this presentation and also being here, I hope you have considered
all of this. Allow me to very quickly go through the contents itself. Again,
it will be a review of 2016, recognize that there are many challenges,
economic malaise that we've seen in 2016, I'm happy to report to you that
even as we go through 2016, we do provide a satisfactory set of results and
we are pleased with that. I will give you the key financial highlights and
also some of the information with regards to the portfolio.
In terms of highlights, allow me to go through it. 2016 itself, we have
secured 704 renewals and also new leases and we have achieved a positive
rental reversion of 1%. CMT's shopper traffic and the tenants' sales per
square foot has increased by 2.3% and 0.9% year-on-year respectively. And
this is actually on the back of a very strong 2015, especially for these two
sets of numbers. The portfolio occupancy rate remains very, very high, 98.5%
at the end of 2016 itself.
In the third quarter of 2016, CMT broke ground at -- in Funan itself and this
is to allow us to reshape a new generation of integrated development on that
site itself and we will change and literally change the paradigm of live,
work and play. At Raffles City itself, we'll continue to go about doing the
refurbishment work, the asset enhancement work. It is a prime shopping
landmark in the city center itself. And we'll continue to enhance it, we'll

continue to ensure that the shopping experience, they will allow us to

position it as the number one shopping center, shopping experience within the
city center itself.
As an ongoing effort, we will also refresh the tenant mix that we have seen.
We have introduced significant numbers of new to market and also popular
tenants and we have done that throughout all the different malls. But what's
more significant is that we have done that especially in a place called
Clarke Quay. And at Clarke Quay itself, if you have not done so, I would
encourage you commercial break, if you have not done so, to visit Zouk, Zouk
is a fantastic and wonderful evening. I had a chance to be there on last
Friday, to check out the place and it is amazing. So I would urge you to go
down to Zouk.
We are also pleased to inform the completion of all the interior rejuvenation
work at Plaza Singapura and also at Tampines Mall. Another key balance and
you will hear me talk about this a little bit more as we look at the balance
that we have on the CMT platform, one of the key balance that we have to
ensure that the ship, the CMT ship remains very, very stable moving forward
is really in the area of the capital management -- fund management itself.
We continue to be proactive in issuing notes with long tenure and we also
have gone ahead to stretch the debt maturity profile. In 2016 itself, we were
able to see issuance of 10 years to 15 years fixed-rate notes and at interest
rates, which is excellent, I would say, at 2.928% to 3.5%. And this is
something perhaps we have been able to do in 2016 itself, however, we
recognize as we enter into 2017, with what the fact has mentioned with
regards to the interest rates, as we go through the presentation, I will be
able to show you why this strong balance within the CMT ship and you would
see that over the next 12 to even 24 months, we are well-positioned to look
at interest rate hikes.
We have also refinanced the RCS Trust, borrowings of slightly more than SGD1
billion and CMT's 40% interest stands at about 428 million. We have done this
by having unsecured loan facilities from various banks, and in the process as
unencumbered Raffles City. I'm happy to note that all CMT assets have been
unencumbered and in this particular case, even for this joint venture, we
have been able to unencumber it.
Allow me to jump straight in to give you some financial highlights and I'll
do this very quickly. From a -- CMT distributable income for fourth quarter
2016, it is up by 0.6 -- 0.2% year-on-year to 102 million. Unit holders will
receive a distribution unit of SGD0.0288 for the quarter itself.
For FY 2016 full-year itself, the distributable income is up 0.6%
year-on-year to 394 million. The distribution per unit stands at SGD0.1113
and it is 1.1% lower than the full year of 2015.
The DPU was impacted by the closure as we all are familiar with of Funan on
1st July, 2016 and also the divestment of Rivervale Mall at the end of 2015.
Bearing all that, we continue to see CMT at the closing unit price of about
SGD1.89 at the end of 2016. We have a DPU of SGD0.1113, this works out to
have a yield of about 5.9%, which we know is higher than many other
alternative investment instruments. And key and core to this, this is
something that we have been able to sustain, this is something that we've
been able to deliver on the back of economic uncertainties in 2016.
CMT's distributable income has increased from about 65 million in 2003 to 394
million in 2016. The compounded annual growth rate is approximately 15% over
the years. The gross revenue and net property income for fourth quarter 2016

was 169 million and 116 million respectively, a decline of 6.1% and 7.6% over
the same period last year. This, as I mentioned was due primarily to the
closure of Funan DigitaLife Mall and the divestment of Rivervale Mall.
Overall, the distributable income grew by 0.2% to 102 million in the fourth
quarter.
Gross revenue for the full year stands at approximately 670 million (sic 689.7 million), an increase of 3.1% over full-year 2015. Net operating income
margin remain a healthy 69.5%. The distributable income was up 0.6% compared
to the same period last year.
We spoke about gross revenue and I'll just reiterate it in this slide. For
full year 2016, up by 3.1% year-on-year. This was mainly due to the
acquisition of Bedok Mall and higher rental achieved from IMM, Tampines Mall,
Bukit Panjang Plaza, after we have completed the asset enhancement work.
Note, asset enhancement work continues to be a primary and very strong
balance within the CMT ship. This was offset by lower gross revenue due to
the closure of Funan and also sale of Rivervale Mall. On a comparable mall
basis, the gross revenue was up by 0.4%.
From the OpEx standpoint, the same period, our OpEx increased by 3.6%
year-on-year, mainly due to the acquisition of Bedok Mall. On a comparable
mall basis, it increased by 1.3% year-on-year. Regards to NPI, the NPI
increased by 2.9% over the preceding year.
Our joint ventures, which is Raffles City Singapore, where we have 40% and
Westgate, where we have 30% interest, we were able to deliver a 0.6% increase
in net property income for the full year of 2016.
This is the debt maturity profile as at 31st December. The borrowings that
are due in 2017 relates to the notes that were issued under an MTN program
and we have plans in place for the 100 million that's due in March. There is
also an additional 150 million that's due in September. The interest rates
are predominantly fixed in our portfolio and this is fixed at 97% for the CMT
platform. We have no foreign exchange exposure as all our foreign currency
denominated debts have open [ph] swapped to Singapore dollars. 100% of the
CMT -- at CMT level itself are unencumbered. This give us CMT the maximum
financial flexibility. As we go into the Q&A time, I will be very happy, my
colleague Lei Keng will also be very happy to elaborate more on this
particular chart.
On the slide 17 itself, key financial indicators. The aggregate leverage of
34.8% at the end of December was lower than the 35.4% that was reported in Q3
of last year. This is mainly due to lower borrowings with the partial
repayment of the term loans by CMT. The average term to maturity stands at
5.3 years and the average cost of debt itself remains at 3.2%. Comparing
31st, December 2016 and the previous year's valuations, we saw a net increase
in valuation of approximately 61 million and cap rates were relatively
unchanged.
At the end of last year, CMT's adjusted net asset value per unit excluding
the distributable income registered at SGD1.86, which is unchanged from the
previous quarter. I've also noted that we continue to trade above this NAV.
For housekeeping, CMT's units will start trading ex-dividend on 26th January
2017, payment date for the distribution period 1st October to 31st December
2016 is on the 28th February 2017.
Very quickly, allow me to go through the portfolio updates. Shopper traffic
continue to increase by 2.3% year-on-year for the full year 2016, mainly
attributed to our portfolio of necessity malls and these are located very

well at distribution, at transportation hubs and also large population

catchment area. We continue to embark on many marketing and promotional
campaigns. We continue to innovate in that department and also enhance the
CAPITASTAR loyalty program. We are building many strategic alliances with
partners to attract visitors to our malls.
The tenants' sales per square foot for 2016 continue to increase and for the
full year, we're able to see a 0.9% year-on-year improvement. The better
sales performance is attributed to the promotional events during the year and
also the robustness from a necessity shopping standpoint. This is further
enhanced by the changes in tenant mix that we have put into our malls. I
would like to add that the Atrium@Orchard and Bugis+ have also registered
robust sales performance after the tenants' remixing.
Under slide 24, we see tenants' sales by trade categories itself. We've seen
growth in all our major trade categories compared to last year. The decline
from music and video, toys and hobbies are not unexpected, which accounts by
the way for less than 1% of our portfolio's gross revenue. The highest growth
is really in the area of sporting goods, and this is due to the robust
performance of the sporting goods outlets in IMM and the rising popularity of
the athleisure clothing, again at commercial break, please go to IMM, if you
have not gone to IMM, you have not done your Chinese New Year shopping. So I
know that many of you will be celebrating the Lunar New Year. I take this
opportunity also to wish everybody a Happy Lunar New Year.
I'm sure that this will capture lots of attention from many of the members
here, who are listening in and also to those on the webcast itself. The
average occupancy cost for the CMT's portfolio, excluding Funan stands at
19%. I know you see on this chart that 2015 shows 18.5%.
I would like to bring to your attention that if we will -- comparing
like-for-like excluding Funan itself, you would see that the FY 2015 number
would actually stand at 19.2%. So, there is a drop of about 0.2% from an
occupancy cost standpoint and this is comparing like-for-like.
Under the rental reversions chart, for the full year of 2016, CMT's portfolio
registered a positive rental reversion of 1% for all retail leases. Rental
reversion is dependent on the size and the trade of the tenants renewed or
the new tenants. I want to assure you that the rental reversion, the way that
we have computed rental reversion remains the same, did not change and will
not change for the foreseeable future. So, we did not change the way that we
computed rental reversion in 2015, for example, and the way that we computed
in 2016.
The rental -- the negative rental rates that you would see for Atrium@Orchard
and Bugis+ are due to the change in trade mix as we rejuvenate and refresh
the tenant profiles and the tenant mix. Some of you may be missing, for
example, the very happening camera that tenants that we have in Funan and you
may wonder, where are those cameras shops gone to. I just want you to know
that they can be found at Atrium@Orchard and if you go down to
Atrium@Orchard, you would see all the brand names that you're very familiar
with from a cinema standpoint, sorry, from a camera standpoint, please go
there. I know many of the ladies here are into photography, that's a great
place to spend some ang pao money.
For Westgate, it is in the first-term of renewal period and we are fine
tuning the optimal tenant mix there to strengthen the mall's positioning as a
premier lifestyle and family mall in the West itself. Under other assets, we
have brought in new education and entertainment tenants into JCube to

strengthen its position as a leisure and a edutainment mall itself. This just
very quickly show you at the end of 2016, we have 2,913 leases and the WALE
for that is 2.0 years.
We have 922 leases that we have to do and these include non-retail leases
that is up for renewal in 2017 and of which, 799 of these are retail leases.
Again, this is something that we are very, very happy with and this is
something that the team has put in lots of effort and this is to ensure that
the occupancy rate remains at a very high 98.5%.
At Clarke Quay, we are also exploring new options with many new industry
players coming in, to reinforce and to strengthen Clarke Quay into a premier
night sport and F&B destination. Asset enhancement, just to give you a very
quick update, we have very quickly gone down and pulled down Funan itself. If
you visit the site, it's now an empty site and I'm happy to inform you that
everything is on schedule, on target and we are -- we have handed the site
over to the main contractor this month for construction itself.
We have gone now to express how this Funan would be different and we actually
had a street art -- artist Ceno2 to transform some of the hoardings and if
you have not been there, take a look at it. It is interesting that we have
seen actually quite a number of tourists actually going to the site to take
pictures with it. You would see that the site from a hoarding standpoint,
which show that the new Funan would look at things like tech, fitness, being
chic in the area of fashion, that would be a high play component there, there
would be art and craft and going about customizing your own wears and last
but not least, the taste part, the F&B is something that we are looking at
also creating there.
Again, something that we will invite you to attend and this is the Funan
Showsuite. This would give you a very, very small glimpse and catch what is
going to be possible from a Funan standpoint. So, I urge you, many of you
gone to the Funan party when we first announced it. That's the flavor, that's
the kind of things that we will be doing in Funan itself. So, stay tuned to
the Showsuite.
The update on Clarke Quay. I'm very excited by what's happening in Clarke
Quay. I spoke about Zouk. It is not only about Zouk that you'll see. Zouk is
fantastic, I cannot tell you how excited I am about the concepts that they
have. They have -- there are four new concepts -- they are four concepts
there. Of the four concepts, three are open and the other would be opening up
soon.
I do not do a good job to describe, I urge you to go there and you would not
be surprised. What's more important is that, we are also taking this
opportunity to really restructure, if I may say, some of the tenant mix
itself. We recognize that F&B is important. If you are not familiar with
something called Red House, that's fine because everybody in this room is
very, very young. For the older folks, Red House would be something that is
almost a legacy and a legend in the East. You need to go there for their
chili crabs [ph].
If you are very happy with peranakan food, Violet Oon is actually setting up
a new kitchen there and it is just very convenient right upfront at Clarke
Quay and this is something that we are doing. There are many other names that
I have for you, but I'll just leave it for you to explore. I cannot resist to
tell you that the River House which is a wonderful building that's out there.
We have a concept called VLV and in VLV itself, it's a wonderful interesting
innovative concept that they put in place. You've got great Dim Sum on the

first floor -- on the second floor and you have a dance hall on the ground
floor -- on the first floor. Again cannot describe, go, experience and you
will be very, very pleased. Good value for money.
The other part is Plaza Singapura, our great game [ph]. We have gone out and
done very extensive renovation within the place itself. My colleagues and I
including the Board just visited it yesterday, just to go through it and I
just want you to know that it is also now refreshed. It is certainly like a
beautiful lady and they are all beautiful, all ladies are beautiful, I have
to get it correct. But this -- in this particular case for the case of Plaza
Singapura, we have increased the botox for them and it is really wrinkle
free, I may say.
This mall really boasts wonderful lighting, great escalators, great interiors
and you would see also in the next slide, great toilets and remember that in
Singapore, we are trying to promote more babies. So, the nursing rooms there
are wonderful place to nurse the next-generation of shoppers.
Last but not least, I wanted to share with you on Tampines Mall itself and
again, I'm happy to inform you that in Tampines Mall, we have completed all
the interior works at Tampines Mall and we have also upgraded the Garden
Plaza there.
I started by saying that today we would see the inauguration of a new
president in the US and I think that there will be perhaps certain changes,
certain areas that we are not going to be very familiar with.
Having said that, if I reflect and look back on 2016, we recognized in 2016
there were major ebbs and flows in our economy. There was major uncertainties
in our economy. Some of it, within Singapore were the restructuring that we
have been seeing, some of it that is outside Singapore.
I have to say that given that environment, the CMT vehicle remains strongly
anchored due to the balance that we have. And the three balance that I've
spoken about, first we continue to invest in our investment properties, two,
asset enhancement and you have heard last year in 2016 itself, the likes of
Plaza Sing, the likes of Tampines Mall, the likes of Clarke, BPP, Raffles
City and the list continues. Over the last two years, in fact, over the last
five years, we have continuously spent significant amount of money on asset
enhancement, because this is in preparation for any turn in times [ph] of the
economy. And that's something that we have done, I'm happy to report to you
that we are ready for the economy itself. So for an asset enhancement, we
have invested in times that were difficult and we have rode the storm and got
the CMT vehicle ready, that is the first balance.
The second balance that you will hear us speaking and talking about is the
capital management, the debt management area. I alluded to earlier on, that
in 2017 we have already have a house in place with regards to the debt. I
don't have aligned to the fact President Janet Yellen, and I know that she
has said that you can expect also interest to be moving forward. I want you
to know that it's not because of a call that I made to her, because, I did
not make a call to her, but whatever it is, we have already prepared the
vehicle and I alluded to that this year's 250 million, we do have the
resources already to manage that.
And we have also done so for Funan and we are also looking at already doing
the same for 2018, where we have a $400 refinancing to do which is converted
to about 505. So basically, I'm saying that the second balance where we try
to remove the external factor, which is capital management, that is something
that we have also put in place.

The third balance, which I wanted to share with you again, to show the
stability of the ship itself, is over the last two years, we recognized that
there was increases that the government has been doing with regards to
restructuring the economy, with respect to cleaning, security, landscaping
and I want you to be aware that we have actually gone up to improve the
productivity in this area and this is operational excellence that we are
looking at. How do we continue to be able to be a hit of it from a cost
standpoint and a productivity standpoint? And I'm happy to report to you that
we have gone out and done extensive areas in debt department in that area of
operations and that is why we continue to see stability in our margins,
despite the cost increases and we continue to see productivity gains in that
part. And we are now extending that productivity gains to our tenants and
that is the dollars that we have.
So given all that, we will continue to re-imagine, reinforce, refresh and
also redefine the shopping experience, and I'm confident that as we enter
into 2017, we are more ready for any eventualities that may come out from the
economy.
So with that, thank you very much. And I would like now to invite Lei Keng
and Jacq to joint me too, if you have any questions that you may have.
Questions And Answers
Operator:
So, before we start allow me to introduce to you the management team. With us
right is Mr. Lei Keng, the Head of Finance and on his left is Ms. Jacqueline
Lee, the Head of Investment and Asset Management.
So before you ask your questions, may we request that you state your name and
the organizations that you are representing. For webcast participants, please
press the pose the question tab. So, can we have the first question please?
Wai Fai, yes.
Wai Fai, Analyst:
Hi, this is Wai Fai from UBS. So, I have two questions. Firstly, excluding
the payout of 12 million retail income, distribution was down about 8 million
Q-on-Q, about 3 million out of this is coming from net property income, and
the rest is actually coming from temporary difference and other adjustment.
May I know what is causing this?
And secondly, there was a 17 million capital distribution from Infinity
Office Trust, that was retained. Would you be looking to pay this up, and can
I also check what is the total balance of retail income you have now, which
can be utilized to smoothen the distribution in future?
Wilson Tan, Chief Executive Officer:
I will answer the second question, and I will leave Lei Keng to answer the
first question. In the case of the IOT it was very, very clear for us that we
would retain that, given all the economic uncertainties that's out there. And
this will again provide a buffer for us. And that's where and why we retained
it.
With regards to what we would do, moving forward from a DPU standpoint, I
believe that as the year pans out, we will be able to see what's necessary to
do. So, I'll not be able to give you any forward-looking statement with
respect to this area. However, we have always -- already mentioned that we

are looking at sustaining the DPU and that's something that we have said even
in our announcements itself.
Tan Lei Keng, Head, Finance:
Okay. On the temporary difference, basically in regards to the demolition of
Funan, their southern capital allows us that we have claimed because that is
relating to the plant and equipment for the Funan, that's the thing from tax
point of view.
Wong Yew Kiang, Analyst:
Hi, Yew Kiang from CLSA. Just a follow-up question on the payout. Can we
assume that the payout ratio will be at this kind of level going forward? And
secondly is on the rental reversion guidance, it seems like this year you do
not have any quarter of negative rental reversions. Can we expect any for
this year?
Wilson Tan, Chief Executive Officer:
I'm not able to give you any guidance with regards to the DPU portion of it.
However, I would want to go back to the point that we are looking at
sustaining DPU and that's something that we would try to achieve with this
particular vehicle. I'd like to reinforce the fact that this year, we did see
SGD0.1113 for DPU itself. Sorry, but this year I'm referring to FY 2016 and I
think that also shows in good faith, what we've been able to do with this
particular CMT Vehicle.
With regards to rental reversion, as you can also observe and see that our
rental reversion has been coming down and we are actually managing it to
ensure that we provide more stability to the vehicle itself. At the end of
this year, we have seen a rental reversion of 0.9% and we -- 1% sorry, I'm
sorry 1%, and we have seen that in the earlier part of this year, it was at
1.4%, 1.7% and then in Q3 1.3%. So you could see the environment update [ph].
I would think that over the next 6 months or so, you will continue to see
from a Singapore standpoint pressure in this particular area. And that's why
we spend lots of time and effort to look at operational excellence to ensure
that there is further pressure on revenue itself, we are ready for it. So, I
do think that in the first half of 2017 at least, the rental reversion will
continue to come under pressure.
Winsie Chen, Analyst:
Good morning. This is Winsie from DBS. I have a question on -- in particular
on Tampines Mall, that we have seen a 0.8% drop in occupancy, which is the
first decline in two years, despite a 2% increase in the operating expense at
the mall. And coincidentally we also see a slight dip in the rental reversion
at Bedok Mall. So, I want to understand some color behind that. Do you see,
is it standalone cases, or do you see more competition from the malls you
leased? Thanks.
Wilson Tan, Chief Executive Officer:
Thank you for the question. In Tampines Mall, it has been a situation, a case
whereby we have been able to do well and we continue to do well there. We
were aware that there is going to be competition out there. Waterway Point
was a case, where it came out and then subsequent to that, you have
(inaudible) itself. And because we were aware of what's happening, we've gone

out and do asset enhancement work. And in the asset enhancement work, we
created a new floor, which is the fifth storey and we moved all the education
tenants to the area and we increased the number of education tenants on to
the fifth floor itself.
It does contribute perhaps to -- because education, they command a different
rental, that also shows why you may see certain psf drop in the area, on a
per square foot basis. So, there is competition, we acknowledge the
competition, but we are prepared for the competition. We moved the tenants to
that area to bring in a different or to continue to bring in the traffic. So,
traffic remains something that we want to attract into Tampines Mall, even
though there is competition.
With regards to Bedok Mall, we are in the process of the first renewal cycle.
I think Bedok Mall in itself is a great mall, is a good mall and what we have
been able to do now in this first cycle is to tweak the tenancy mix and to
optimize again the retail experience there. So yes, there are some tenants
that we have moved, we have changed. But at the end of the day, we think that
Bedok Mall will come up in the current phase of rental renewals to be
stronger and better.
Derek Chang, Analyst:
Hi, this is Derek from UOB Kay Hian. I just wanted to ask a question on the
Clarke Quay, I noticed that in the quarter, there was a drop in occupancy of
about 4.6% and I noticed that still [ph] a revaluation loss of about SGD3 on
a psf basis, so I was just wondering if you could shed some light on that.
Thank you.
Tan Lei Keng, Head, Finance:
These -- the information that we give is always (inaudible). So of course,
for -- at September -- as of end September and then this occupancy you see,
is at December 31st. So it's always a single point in time. So obviously,
during the course of the year, there will be periods where sometimes we bring
in new tenants or we're doing tenant remixing. So there could be periods of
appoints, but it represents (inaudible) bit, but the info that you see, not
in average for occupancy.
Derek Chang, Analyst:
Thank you.
Tan Lei Keng, Head, Finance:
So some of it is -- is a little bit misleading sometimes. So you can't always
have 100% exactly as at the end of the year. So some of it is due to that -you'll find that when we have tenant remixing and all that, there will be
some voids.
Wilson Tan, Chief Executive Officer:
And part of it is also as I mentioned earlier on, where we are changing the
tenants' mix. We have got great anchors that has come in and with those great
anchors, it has also allowed us to use this opportunity to do the remixing
plan. You may see on the psf again for Clarke Quay, why it seems to have dip,
if you want to do your maths and all, a part of it is also due to the fact
that Zouk came on board.
They needed some time to get themself ready. So they were not going up to use

all the space that they had. So it's a progressive usage of space and so far
that couple of months and weeks, they do not have revenue and that's where
you also see a decline. But I'm very, very comfortable and very certain that
with Zouk and Clarke Quay, we would see significant improvement in GTO.
Andy Wong, Analyst:
Hi, Andy from OCBC. First question on the valuations. Your credits [ph] are
stable by valuation of most of the properties that you rent up. So, can you
give us some color, it seems like the values are fairly optimistic on your
rental outlook.
Secondly, a follow-up question on the competition. Have you seen the impact
on tenant sales with opening of the Tampines Hall and with Hillion Mall also
opening next month, do you expect to see some pressure on occupancies and
rents in BPP?
Lastly, in terms of Bedok Mall again, quite a big chunk of the mall is
actually up for renewal this year. You mentioned earlier there we have a
tenant remixing to do, so just wanted some color in terms of, would it be
very massive and in terms of the trade mix that you're looking at would this
result in more rental reversions on the negative side of it for this mall in
2017?
Tan Lei Keng, Head, Finance:
Okay, for the December valuation, I think the cap rates have remain largely
unchanged and actually, we've spoken to the valuers about their view. If
you're trying to ask about that going forward in the light of what's
happening. So, I think the feedback that we've gotten from the valuers is on
balance, they still think that the cap rates -- there's no upward pressure on
cap rates, if that's what you're asking, because while we might see interest
rates going up, there's also transactions going on, which are at very low
yields.
So they are the two opposing forces, so based on what it is they are seeing
at the moment, they don't think there's any upward pressure on cap rates.
Andy Wong, Analyst:
How about occupancy rent because, is that what has been driving increase in
that division?
Tan Lei Keng, Head, Finance:
Generally, I think the -- yes, that they will look at what our rents are and
what the market rents are. So, they will take into account what's happening
so, I don't think our increase in valuations have been a lot.
So, they are just taking general market conditions and cap rates usually, are
expecting. I don't think they have been like very optimistic on the
valuations like we are and numbers haven't been going up by a lot.
Wilson Tan, Chief Executive Officer:
So, for those of you who are living in the east itself, it is important for
us to recognize that we are a great believer in that as the government look
at some of the older estates and as they refreshed it itself. That's where we
think it will bring perhaps more business and longevity into our assets
itself.
Tampines hub is something that have just come out. If you visit Tampines hub,

you'll recognize the majority part of it, yes, you have other shops in order,
but the majority emphasis is on F&B. We do not believe that would be actually
a competition, in fact our CMO team, which is our center management team as
in certain ways also provide certain assistance to companies hop itself. And
because we really see some synergies there, bringing people into the central
part of companies itself. So that's something that we don't deem as having
competition.
With regards to Hillion opening, I think it's appropriate for us to remind
ourselves that earlier on, I mentioned about BPP, Bukit Panjang Plaza, where
we talk of the asset enhancement work we have done. We built up an annex
building which is strictly for F&B.
We reposition with our tenant supermarket, NTUC to reposition their opening,
so in terms of the entrance into the supermarket. And this is really in
preparation for the opening of competition. As I said, this was -- asset
enhancement is one of the balance that we've built into CMT itself and this
is in preparation. If you want me to go out and say, would Hillion have an
impact, my simple and straight answer to you will be yes, it will be. Did we
anticipate it? And I will also answer, yes, we anticipated it. What did you
do? The asset enhancement exercise was what we did. The repositioning of the
NTUC entrance was what we have done.
The expansion of the library that would be hopefully completed by third
quarter of this year is something that we've done. We've increased the
library itself from about 1,600 square meters to 2,300 square meters. We
added a new childcare of 700 square meters into BPP itself. And that are the
steps that started -- forward-looking activities and actions we have taken.
Will a new competitor have an impact? Certainly, because if there's a new
toilet people want to visit the new toilet and we cannot prevent it, right?
When in Junction 8, when Nick's [ph] opened, we saw for one year a dip and we
actually went ahead to finish the renovation work. We recognized that there
will be a dip, but we are not worried about it. The key is, we focus on the
actions taken. And to your question, would there be a dip in terms of
traffic? I would say, yes, perhaps. But then we cannot lose sleep on it. It
is something that we have prepared for and we recognize it to be the case.
And we are also very confident that after they visit the new toilets they
will come back to the most comfortable toilets and that's something that we
are happy with.
In the case of Bedok Mall itself, I think in Bedok Mall, yes we will re-tweak
it, whether there is going to be rental reversions that would be negative, I
cannot give you a forward-looking statement, but I would only say that the
rentals would reflect the current economic climate. And if the current
economic climate were to improve significantly, then clearly, the pressure
will be less. If the economic climate continue to hit south, that's where we
also need to do the necessary adjustments.
Often above all that, I maintain that we are looking at sustaining DPU,
making -- we have made sure that the balances are in place to stabilize CMT
and we are actually ready for the economy in 2017, more ready than ever.
Tan Lei Keng, Head, Finance:
I just want to add something on the question on valuation, just now if you're
concerned if the valuers have been aggressive, so I've just looked at the
increase in valuation in 2015 versus 2014 and then compared to what we see
2016 versus 2015, the increases that we are seeing now are much lower than

the increases that we saw before. So yeah, so they have factored into account
the current trading environment.
Pratik Burman Ray, Analyst:
Hi, Pratik from HSBC. Wilson, couple of questions. The first one is, I know
you shared the rent reversion and the shopper traffic number for the full
year. Can you give us some color for the fourth quarter itself on rent
reversion, shopper traffic and tenant sales?
The second one is, we understand there are a couple of assets, retail assets
in the market. Would you be on the lookout for third-party acquisitions and
the last one is, we also understand that the likes of Amazon et cetera are on
the lookout for large scale developments here in Singapore. From a medium
term perspective, how do you see that impacting the retail scene here and
what are you doing to fortify your business?
Wilson Tan, Chief Executive Officer:
From the fourth quarter, although we continue to see also a positive rental
reversion in the fourth quarter, we have seen a noticeable slow down in terms
of rental reversion. And that slowdown partly is also due to us finding new
tenant mix -- remixing some of the tenancies that we have. For example in
areas like Atrium@Orchard, areas like Clarke Quay, areas like JCube. So we
have seen actually that rental reversion changes. We mentioned about Bedok
Mall, we talked about Westgate, so that's some of the things that we've seen.
I've also mentioned that as we go into the first half of 2017, rental
reversion will continue to come under some pressure and that's where we need
to manage the rental reversion side.
Having said that, I maintain that sustaining DPU is what we are looking at,
and where we will also continue to look on the operational excellence itself.
From a property acquisition we have and we will continue to look at
properties that's available out there, clearly, if the market continue to hit
southwards and there are more uncertainties there, perhaps it will make it
more attractive for us to look at properties itself.
However, any acquisition must be one that is accretive to our DPU. If you
want to sustain DPU, you cannot have something that you acquire, and it is
not accretive and that's something that we are very, very mindful of. So
again, a simple answer, yes, we will look at it, at the appropriate cap
rates, at the appropriate price.
Amazon has announced its intent, we are very excited by that and honestly
this is also an opportune time for us to learn from them with regards to what
they bring from an experience standpoint onto the table. So, this is
something that we are looking at and we are also seeing, where there are
exchanges, where there are opportunities to learn.
One of the things that we have been doing and we've been talking about it is
also in the area of Tampines, sorry Funan itself. And we are putting in quite
a fair bit of technology in Funan, with Amazon Go that they've announced in
Seattle, that's a great place for us to learn. And I think as an
organization, we want to learn and we will be very happy to learn and work
with the likes of Amazon.
David Lum, Analyst:
Hi, I'm David Lum from Daiwa. I have a question on the dividend retention
policy. Again all along, I had thought that the income that you retained in

the past has always gone to AEI and CapEx because you have to, like you
mentioned refresh your platform and keep it relevant. But you mentioned
earlier that you might leave it, save some for a rainy day for distribution,
is that your purpose or is it, I would think that it should be just for your
budgeted CapEx and what you need.
Wilson Tan, Chief Executive Officer:
No, I did not mention at this point in time that any of the retention will be
used for DPU nor did I mention otherwise, so I did not state anything on that
area. Clearly in the past, we did use all the asset, sorry, we did use the
retained non-taxable income that we received for CapEx or working capital and
that's something that we have done in the past and that's something that
we'll continue to do. Having said that, I did mention that we would try and
look at ways to make sure that we sustain our DPU.
Sai Min Chow, Analyst:
Yes, good morning Wilson. I'm Min Chow from Nomura. Happy New Year to you. I
have three questions that I would like to ask. The first is, with regards to
Bedok Mall, so I understand that there will be some re-tweaking of the
tenants mix. So as you look into the lease expiry -- leases expiring in 2017,
how many of these leases are you looking at, that may not necessarily fit the
new Bedok Mall concept going forward that you may be thinking about
replacing? That's the first question.
Second is, with regards to the leases expiring in Lot One and Westgate, also
in terms of the leases that are expiring in 2017, are you able to give a
guidance into what you're seeing right now, especially in terms of Westgate
because the 2016 tenant retention is just about 76% [ph], right? So, just a
little bit update on that.
The third is on Funan. The last update was that there is a cinema that has
already committed to the space. So I was just wondering if there's any
further update on that? Thank you.
Wilson Tan, Chief Executive Officer:
I'll answer the easier ones and maybe Jacq can answer the first and second
one, yeah? Funan itself we do have a cinema that has already signed. We have
also mentioned in the past that approximately 15% of the leased spaces has
already been committed in Funan itself.
At some appropriate point in time, I will be able to update you and share
with you regards to how that has actually increased. I'm not able to tell you
and talk to you more about the cinema itself, the tenants, simply because I
think that's something that we want to do with the tenant stuff, but
certainly it's something that's committed to it.
With regards to Bedok Mall and also to Lot One and Westgate, Jacq, do you
want to touch through it?
Jacqueline Lee, Head, Investment & Asset Management:
For Bedok Mall and Westgate, we definitely will be doing tenant remixing and
tweaking, but I don't have the figure on like how many percent -- forecast of
how many percent, but we will look at the individual unit on a case-by-case
basis because sometimes you need to change it, for example, from retail to
F&B, is not so straightforward. So, it has to do with exhaust [ph] and things
like that.

So, it's where the opportunity arises we will do it, but we can't just change
it that easily. So, it depends on the location of the shop, and we also need
to look at adjacencies. So yeah, I suppose when we report the next quarter
and half figures, you'll see how much we have retained and we'll be able to
give more color on that. But it's made up of a few considerations. So right
now, I think we're still in the midst of doing the planning for that.
Wilson Tan, Chief Executive Officer:
Perhaps I'd just add on to reinforce also what's shared. The rental
reversions that you have seen from -- for last year 2016 itself, from a
retention standpoint, we retained about 80.1% and that's the retention that
we are seeing itself for the entire portfolio.
I'd draw your attention to, and I think that something then perhaps, I want
to share with you is, if you look at Atrium@Orchard itself, the retention
there is about 59%, 60%. And that's also because we have gone out to change
the mix at Atrium@Orchard. This is by the way on slide 26 itself.
This is to reinforce, what we have just mentioned earlier on. For certain
malls, where we see that there is a need for us to tweak it, to change it and
to allow for more differences to be seen. And to change the profile, that's
the case that we have in Atrium@Orchard and what we did was we revamped one
whole area, where we bring in many of the Funan cameras and electronic
tenants, that means that we had to reconfigure the trade mix there. We have
also changed a major restaurant there and the restaurant was Chef Wan, we
have changed it into Nanjing Impressions, that's again an opportunity for us
to refresh renewed space. So, that's some of the things that we do.
So, specifically in terms of Bedok Mall, Westgate and Lot One, we are not in
a hurry to go out and change the customer base, the tenant base there.
However, we also use this as an opportunity to refresh and to ensure that it
reflects the catchment area that we are in.
Earlier on, I mentioned that in Westgate, it is lifestyle and family. We
recognized also that there is going to be some changes in Jurong East itself,
with the various government initiatives. It would take a while for all this
government initiatives comes through to fruition. So during the interim, what
do we do, how do we go out and ensure that we reflect the profile of the
catchment area better. So, that may mean a little bit more changes in
Westgate.
For Lot One, it is fairly stable. Yes, certain bus routes would change,
certain new downtown lines were added in BPP MRT, it does change and shift
some of the traffic, given that do we then tweak a little bit more about Lot
One, so that there would be tweaks there, but perhaps the proportion of
tweaks there would be less. So, I don't think we are able to give you a
blanket answer that how many percent will be tweaked and changed.
Jacqueline Lee, Head, Investment & Asset Management:
The general one is about like 80% plus or minus, that's the normal kind of
tweaking. But of course, when we do something more substantial, then you will
see like the 50% plus, which Wilson mentioned like at Atrium, when we bought
in like the Funan camera tenants to replace some of the tenants there. So,
those will be the more active kind of tenant mixing, I'd say them.
And the other one, of course was Bugis+ where we also did more -- much more
active tenant remixing. But usually even when renew tenants and all that
then, the 80% average is the normal; plus, minus.

Operator:
In the interest of time, maybe we can have the last question, Adrian.
Adrian Chua, Analyst:
Good morning Wilson. Happy New Year. Just two questions from me. One is that
your 1% rental reversion is calculated based on the 80% retained tenants that
you have. Well, would be for the non-retained and re-leased space?
Second question is on basically going back to the point about sustaining DPU,
would you be looking to sustain it in relation to the directional trends of
your NPI/NDI, or would you be sustaining it in relation to 11.13? Thanks.
Tan Lei Keng, Head, Finance:
Okay. On the rental reversion slide, if we go to the slide, I think we -- we
have mentioned that it excludes newly created and reconfigured units. So,
those are excluded from the rental reversion. So, it is the same unit, does
not mean reconfigured, whether you bring in another tenant, or whether it's
the same tenant that's renewing is counted in the rental reversion. Yeah.
Wilson Tan, Chief Executive Officer:
So, I want to reemphasize that because I know that this is going to come
true. Rental reversion is computed based on the same physical unit itself,
where we did not reconfigure it, meaning we did not change the boundaries of
that particular shop. So whether it's the same tenant that comes through or
the different tenants that comes through, it is computed, whether it's the
same trade or a different trade, we will also consider it.
So, that's how we do it and we have been doing it in the past, so that's no
change, we are not changing that at all, right? So, that's the same physical
lot. However, if we shift the lines, we shift the boundary, what do you mean
by shifting? We expand the store, we reduce the store, we cut the store into
two other shops, two shops itself, then that's where our rental reversion is
not computed, okay?
Again, I want to stress that something that we have done in the past, we
continue to maintain the same way as we compute rental reversion, no change.
Unidentified Participant:
So with Atrium, where you have a lot of new tenants and (inaudible microphone inaccessible)
Wilson Tan, Chief Executive Officer:
So, the question here for those, who can't hear is that, in Atrium and Bugis+
and Clarke Quay, how do we compute the rental reversion?
Tan Lei Keng, Head, Finance:
Okay. In Atrium and Bugis+, most of the new tenants that came in, I think
they took existing units. We didn't reconfigure the units. So, when we didn't
reconfigure the units, is taken into the numbers. But in cases, where you
split one huge unit into like five or six units, then that will be excluded
from the computation.
Wilson Tan, Chief Executive Officer:
So, very specifically in Clarke Quay, we had a tenant previously and we

actually split up the space in Clarke Quay itself. In that particular

instance, the rental reversion is not computed the way that we understood it,
okay. So, that's a very clear example.
The last question is DPU direction. That's a very specific question that has
been asked. I feel that I'm painted into a corner, so I would try and get out
of the corner. I think it's important to recognize that the business
environment continues to be challenging and because it is challenging and we
want to make sure that we give a fair return to all our unit holders.
We also recognized that there are other vehicles out there that is providing
that return. So, the key here is really, how do we give an appropriate return
to unit holders and that's where I talk about sustaining. I'm not able to
tell you with regards to the direction of the gross revenue, with regards to
the direction of the NPI, and I cannot give you guidance at this point in
time, with regards to the SGD0.1113 that you talk about.
But we want to recognize that we are looking for unit holders, who have been
with us in the past, they continue to be with us, they continue to be
long-term unit holders. That's a profile that we are working with. That's the
profile that we continue to keep within our investment portfolio clienteles
that we have. So that's something that we want to sustain.
So with that, thank you very much for being with us, especially those, who
are not able to join us, but you joined us on the webcast. We thank you very
much for being with us. I'd like to take this opportunity to (Foreign
Language). Thank you very much.
Tan Lei Keng, Head, Finance:
Thank you.
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