Mapletree Industrial Trust

SGX:ME8U

Earnings Call Transcript 2019-Q2

[Hwei Leng Tan, executive]

Good morning, everyone. Thanks for joining us today. [Audio Gap] 30A Kallang Place, where we have just completed the enhancement initiatives. This morning, we have the management team: Kuo Wei, CEO; Lily, CFO; we have Peter, the Head of Investments; Khim, the Head of Marketing; and myself, Melissa, covering Investor Relations. Let me pass on the mic to Kuo Wei who will give a short update of the results of 2Q and first half.

[Kuo Wei Tham, executive]

Okay. Good morning. Thanks very much for joining us this morning and I hope you like this new place we have completed earlier this year. And if you have read our release, you would probably be happy to know that we have precommitment for 75% of the space in this building. And let's start with the briefing for our first half and second quarter's results. The presentation pack that you have was released last evening. The key highlights, starting on Page 5, we have new contributions from our Phase 2 of the build-to-suit project for Hewlett-Packard. We have also started lease for our data center at Sunview, and we -- so then we have the contributions from our data centers in the U.S., the -- when we do our comparison year-on-year basis, we didn't have this...

[Audio Gap] So with all these contributions, we are seeing a 4.9% increase in the distributable income to $56.7 million. And on the DPU level, 0.3% increase year-on-year basis, $0.0301. And of course, I think if you read some of our notes for financials, you would have noticed that we had an early termination compensation from Johnson & Johnson last year, $3.1 million. That had increased the distribution in the same period last year. So that resulted in a very marginal kind of increased tender you see registered this quarter.

Now, the asset enhancement initiative as I mentioned earlier at 30A Kallang Place, we are now 75% committed. We are seeing very encouraging kind of demand for the space down here at very decent rates, and we hope the momentum will continue. Maybe within 3 to 6 months, we would get it up to steady state of 90% precommitment. And as I've outlined earlier, our data center completed at Sunview Drive. The lease revenue has also started coming in from 1st of August 2018. And from this quarter on, we are also resuming our distribution reinvestment plan. As you may remember, 2 years back, we stopped that and we had that running for 13 quarters. And now, we think it's a good time for us to restart it. We have ongoing development projects and this would help us fund the progressive needs, fund the development kind of requirements. Going on to Page 6, where we outline the DPU and the distributable income profile. We're still seeing a slight increase in the DPU $0.0301 from previous quarter and a marginal reduction in the distributable income, $56.7 million. And going on to the financials, where you can see a little bit more details on Page 8. Gross revenue down by 0.4%. And some of this, of course, we're going through the portfolio kind of details, you will find that we see some weakness in occupancy levels for our clusters. Flatted factories and business parks continue to bring a bit of a drag to the portfolio, and that has resulted in a slightly lower revenue for us. For operating expenses, we have been able to keep it fairly well under control, negative 1.1%. So on the net property income level, very marginal difference, $70.6 million compared to $70.7 million the previous year. So going down to the distribution level, you can see a $56.7 million compared to $54 million, which is a 4.9% increase. And you might have noted, we had a $4 million contribution from the joint venture that had invested into the U.S. Data Centre portfolio. So the DPU, as I've outlined earlier, $0.0301 compared to $0.03 1 year back. And I think if you look at specifics, maybe I can highlight footnote #3. The effect of the compensation that we received one year back is $0.0017. So if we had not received that compensation, the increase in DPU would have been roughly about 6.4%. So if you look at the first half figures, that's on Page 9, that's a year-on-year comparison as well. Revenue, of course, you'd see a slightly higher uptick, 1.3% increase, around $181.4 million to $183.7 million. Property expenses, of course, had gone up a little, partly because of the additional expenses that we incur on a cyclical basis and also for completion of the new assets that we started operating them. And the more significant kind of increase is borrowing cost, 20.1%. Because as you complete a project, as we stop the capitalizing interest cost that projects under development would put -- be entitled to, you have this interest expense going into the P&L directly. And of course, at the same time, we're seeing interest rates rising from last year. So that has driven up our borrowing cost. We see this interest increase creeping up -- continuing to creep up over the next few quarters, mainly driven by interest rate hikes coming from the U.S. and Singapore interest rates falling through as well. On the amount available for distribution, we're seeing a slightly larger increase compared to the quarter. So for the first half, we are looking at a 6.2% increase, $106.9 million to $113.6 million. So the DPU, you can see a slightly higher increase, 1.5% from $0.0592 to $0.0601 for the first half. And on Page 10, we look at the quarter-to-quarter comparison. Very little shift. We are talking about a slight positive of 0.8% from $91.5 million to $92.2 million from first quarter to second quarter. Operating expenses, we have been able to continue a little, and partly because we have more cyclical expenses in the first quarter. So as a result of that, our net property income 1.6% better, from $69.5 million to $70.6 million. The share of the profit share on the returns, we're seeing a slightly better figure, 6.1%. But I think the figures should be on a -- overall on an annual basis, fairly constant. Some of this depends on how we distribute the capital and timing of the cash flows coming back. But on a quarter-to-quarter basis, you are still seeing the same kind of increase, 0.3% from $0.03 to $0.0301. And going on to the balance sheet, very stable. NAV per unit, same at $1.48. The balance sheet, that's on Page 12. We had, of course, a slight decline in the weighted tenor -- with a weighted average tenor of debt, 3 years to 2.9 years. The aggregate average ratio crept up a little, 0.1%, so from 35% to 35.1%. So a very strong balance sheet.

And on 13 -- Page 13, you see the debt maturity profile. Of course, they're well spread over the next 7 years or 8 years if you include that gap in financial year '24, '25. So we are very confident on being able to find funding to do refinancing. And for the rest of the financial year, only $125 million that we need to look at, that's the bond that we issued about 7 years ago. And on Page 14 on the kind of hedged positions that we have. It's still fairly strong, 78.3% of our interest has been hedged. So the weighted average tenor had come down because of natural time ingressions from 2.7 years to 2.4 years. Our all-in funding cost, about the same, 3%, partly because of hedge that we have placed that cushioned us from the interest rate increase. And of course, interest coverage ratio remains fairly strong at 6.4x. The other thing, of course, we want to highlight is the cash flow that is coming back from U.S. There's a bullet point on the right there at the bottom. About 76% for the second half of the U.S. dollar income stream, we have already hedged. So that reduces quite a lot of the volatility. Now going into the next segment, which is the portfolio, starting from Page 16. This is, of course, a fairly static representation. We still have the same split, Singapore-U.S., 90-10. U.S. has gone up from 90 -- or from 9.5% to 9.7%, 5.5% in previous quarter, mainly because of U.S. dollar so-called exchange rate shifts. So these are just adjustments that you see on a quarterly basis. But on the rest, fairly stable. For the portfolio, that's on Page 17, the main shift, of course, in the average passing rent, they have both gone up. Singapore portfolio $2.05 from $2.02 and the U.S. portfolio, $2.01 to $2.02. The occupancy level however for the Singapore portfolio, you are seeing a dip from 87.8% to 86.2%. The U.S. portfolio, of course, all on long lease basis remains the same at a strong 97.4%. So in aggregate, you are seeing a reduction from 88.3% in the previous quarter to 86.7% for this quarter. And as far as lease expiry is concerned on Page 18, we think there's very little risk that we see in renewals and then -- of our tenants, just 7.7%, balanced for the rest of the financial year, the balance half year. And we don't think we have any large significant kind of exits that we anticipate. It's a very small quantum anyway. So the weighted average lease expiry now, 3.7 years. Of course, that is made up of Singapore portfolio, 3.5 years; and U.S. portfolio, 5.5 years. And most of the data center assets in the U.S. portfolio have very long lease basis, so most of them you can see in the right column financial year '22/'23 and beyond. And on Page 19, our top 10 tenants remain very stable. #1 remains Hewlett-Packard, 10%. Of course, that's upon the completion of the Phase 2 and them starting to pay full rent. We have a new entrant for this quarter, #8. You can see Data Centre tenant, 1.3%. So this is at Sunview Drive. We are not able to say who it is first, so I mean, until they are not that shy in revealing its name, then we will indicate. But for the time being, they'll be Data Centre tenant on this chart. And on Page 20, tenant trade sectors still remains very diversified. The segment that has been growing over time as you would have noticed, InfoComm. Because as we take on more data centers, the blue sector will continue to enlarge. And next, we go on to Page 21, the portfolio performance for the Singapore portfolio. And on the right, you see the most recent quarter's figures. We are seeing a continuous downward drag to 86.2% for occupancy. But rents, I think we're continuing to see that support from $2.02 in the quarter to $2.05 this coming quarter.

Let's take a closer look at the occupancy levels for the different property segments. On Page 22, you can see the 2 of the weaker property types. Flatted factories, you can see that dipped, 87.1% to 85.9%. That's because of the full quarter effect of the exit of SGX-ST. As what we have outlined earlier, they've moved out a lot of the activities from our Kaki Bukit cluster, 214,000 square feet that had relocated out. So that has resulted in this dip in occupancy.

Now, Hi-Tech Buildings, you will see that dip but this is more of the effect of us completing Sunview Drive a little bit ahead before the lease starts. And also, the 7 Tai Seng Drive, if you remember, we completed the acquisition, I think, in June. So that building is undergoing upgrading and improvements now. And of course, naturally, we have to move the tenants out. So there is that kind of effect of emptying building for that particular asset. So excluding the effect, we are looking at an 89.3% figure instead of 84.4% for Hi-Tech Buildings. So this is, I will say, a temporary mathematical effect of this kind of transition. So we are certainly not worried about Hi-Tech Buildings. It continues to be a very strong and attractive segment for us.

The stress continues to be in the Business Park Buildings. We are showing 96.6% occupancy level. And as you would know, the space vacated by Johnson & Johnson is relatively significant. So it's taking us quite a bit of time to find a replacement tenant. As of now, we have replacement tenants for about 41% of the space vacated by Johnson & Johnson. So the amount of space vacated as well, we have outlined earlier of 160,000 square feet of space. So because of this kind of a shift in occupancy levels, you see in aggregate, the portfolio is doing 86.2%, down 1.6% from 87.8% in the previous quarter. Now going into the rent revision profile, that's on Page 23. Generally, you're seeing lower renewal rates and slightly lower new rates for Flatted Factories. It is a technical kind of approach that we're taking in bringing new tenants in. We adjust our rents down, where necessary, to protect our occupancy. So the passing rents has remained fairly stable. For Hi-Tech Buildings, the passing rent actually had gone up if you do a comparison on a quarter-to-quarter basis because of the HP effect, the rent free effect, the one-off. But you may notice that we have a fairly low number for new rents, the $1.75 figure. That one, I think is because of the commencement of our Sunview Drive asset. If you look at the new leases at the bottom -- in the table at the bottom, 9 leases about 261,000 square feet, so a big part contributed by the new tenant at the recently completed facility. So that has, of course, resulted in a lower average figure.

Business Park Buildings, as far as renewals are concerned, we are still seeing fairly good support $3.86 per square foot. The passing, very stable at $3.80. But selectively, we would offer more competitive rates bringing new tenants, so you're seeing a $3.39 figure for new leases.

Stack-up/Ramp-up, I think, is fairly stable. And selectively, we are also offering lower rates to entice new prospects to take up space with us. So you see a $1.15 for Stack-up facility. And on Page 24, our tenant retention profile. And I think as you have seen over the quarters, we have more and more tenants who stay with us for longer periods of time as of now, closer to 70%. About 68.2% stay with us more than 4 years and more than a quarter, more than 10 years. So our tenants are reasonably sticky. It's about us managing the profile of our portfolio to make sure that we retain the stronger and better tenants. So the retention rate for this quarter, 73.2%, is a fairly reasonable retention number that we have seen. Though Business Park Buildings, you're still seeing a slightly higher so-called non-renewal rate, so we get 64.7% retention rate. Now on the investment update, going on to Page 26. For 30A Kallang Place, there is an enhancement initiative project, which we are in now. We're 75% committed. Most of the leases would have commenced by the first quarter of 2019. So we might not be able to see actual revenue contributions, say, in the next few months. But I think the leases will progressively commence from early '19. So we are confident that the profile would improve over time. So it's more of an initial set up transition issue for us. Many of our tenants are in the high value-add segments like info communication, technology, production, precision engineering. So, very good quality tenants that we have in this building. And actually, you can see who they are in the panel we have at our lobby.

And the other project, the Data Centre facility, as I mentioned earlier, completed that in July. We started the lease 1st of August. So this one, I think, is particularly maintenance-free for us. So as long as they continue paying rent, we'll be happy and we don't need to be too worried about it.

Now the other project that is ongoing, 7 Tai Seng Drive, that's on Page 28. We have already started the building upgrading works and this is, of course, the reason for the low occupancy for the high-tech space. Because until last tenant lease, we will still need to account for the low occupancy. But we are looking at completion of the works maybe about a year from now, then we would start recognizing the revenue contributions about a year from now. And next, I think on the outlook and strategy. On Page 30, the economic growth for Singapore, positive but not terribly exciting, just 2.6%. So there's still a bit of uncertainty globally and trade tensions, I think, is still very evident. There's still a lot of supply out there that we are competing with. So if you look at the rents for industrial space, based on the latest set of numbers that we could extract, marginal decline 0.6% for multiuser space to $1.78; and for Business Park space, negative 0.5% of $4.08. So as far as we're concerned, our key focus is keeping our occupancy stable, and we would want to get our tenant retention rate as high as possible in this fairly challenging environment. But for the United States Data Centre space, we are still seeing very strong growth. The take-up rate has been fairly good. If you look at the reports that we have outlined, the first half globally, the absorption rate for the 2.1 -- no, 421 megawatts. And that one, I think, compare with North America. If you compare that with 2017, it's 32% higher. And North America market continues to be very strong, 292 megawatts. So I think we continue to be very positive about the Data Centre segment and in the more developed markets.

And I think finally, on our strategy, they remain the same. The three-pronged strategy, keeping the portfolio stable. Our capital structure is very sound. We have sufficient financial flexibility. Certainly, for growth, we continue to look at asset enhancement initiatives and development projects, which we have been doing over the last few years. So it is us continuing to be focused on these few areas to drive growth and deliver stability as well for the portfolio.

So I think that ends the presentation. I'll be happy to take questions.

[Hwei Leng Tan, executive]

We have a mic that can be passed around. If I can ask you to please state your firm and your name, please.

[Unknown Analyst]

Morning Glory. I've got a few questions so I'll just ask everything at once. So firstly, if we look at your occupancy, right, do you think that it is something more transitional for now based on what you have just mentioned? Secondly, on reversions. If you look at this quarter, it's a bit weak. Where should we see things start to bottom out or light at the end of the tunnel? Third question is on the J&J space. Could give us a sense of the backfilling of that particular property? And last question on this particular property, 75% take committed rate. How has rent been? Has there been a positive momentum in terms of signing rents over time?

[Kuo Wei Tham, executive]

I guess, a lot of questions. Okay. I think occupancy is certainly, as you have seen in the last few quarters, has been on decline. And while the market is still seeing the downtrend in occupancy levels, we have a bit more impact coming from the exits of the 2 larger tenants. So they just come at a time where the market occupancies are declining. So we see that effect in Johnson & Johnson, and we see that effect in HGST. So if you look at the combined effect, almost 100,000 square feet of space, it's like 1 entire building. So we find that backfilling of the space is not easy, it's challenged, but we have considerable successes in leasing out some of the space. So as far as the outlook is concerned, would the occupancy continue to go down? I think probably we'll be stabilizing at this level. Even if not this quarter, probably next quarter, that's probably as well as we can anticipate. Because I think looking at the kind of interest and stock that is coming into the market next year. This year, we're talking about 10.5 million square feet, next year about 7 million square feet. So we don't think there will be additional stress on the supply side. So the economic outlook is still reasonably positive. There's all these transitions ongoing. Industries, businesses are transforming their kind of business model and improving the profitability, so -- and also, the productivity. So we think during this period of time, some of our tenants may be under a bit more stress. And some of our space users are not in a high value-add sectors, so they tend to be a bit more of the kind of strained around these tenant types and then product types. So in the medium term, we think this is going to blow over, and this is probably a transitional stage for us. Of course, at the same time, we have other products that we are bringing into the portfolio. Bigger facilities for very large, stable tenants, very long leases, entirely new products like the one that we are in now, high-tech facility, 30A Kallang Place, where we get a new type of space users that you know have very strong, long-term growth plans in Singapore. They invested very significantly. They are able to commit long leases with us as well. And occupancy cost for them, relatively low because of the type of businesses they're in. And this is the kind of stability that we are seeing being introduced into the portfolio. And over time as we adjust the profile of our portfolio, I think we would be more resilient as we do the shift, so this is more transitional. On the rent revision kind of observation, yes, I think they are the kind of gaps between our old rent and renewal rents. Part of the reason is because some of our rents that were signed 3 years back when the market was still a little bit more conducive were higher than the market rates that we're seeing now. In the last few quarters, every now and then, you see market rent, seeing it now shift. So it's a case of our rent recalibrating back to market. So we're seeing that small adjustment downwards in terms of rent revision. But I think we probably would have found the floor already for most of our rent levels. We don't think we will be seeing very significant additional downward adjustments for rent levels. But for some of our own clusters, if you do see, say, new rents or some of the renewal rents being a little lower compared to the previous rents in the next 1 or 2 quarters, those are mainly -- those would mainly be technical kind of responses that we have in improving our occupancy levels, and then maybe going after certain good quality tenants that would give us a longer-term stability. So we are prepared to trade off rental levels for longer-term stability and better occupancy for the portfolio. So in the next 2 or 3 quarters, we anticipate some of these kind of adjustments that we would make, especially for the existing portfolio. Because realistically, if you look at the kind of profile we have for the existing assets we have in the portfolio, they're very well located. Specifications, probably not comparable to the newer products down here, I think, being developed or completed now. So tenants and prospects, when they are looking at facilities like this, they do look a little harder and they bargain a little harder. So while we take on initiatives, building improvement projects to make sure our buildings remain current and relevant, they still get between older facilities and newer facilities. So we would be realistic in pricing and calibrating our rates. And of course, we will make sure that we give them some level of stability and growth in the lease adjustments or lease packages we have with our tenants. And on the medium-term basis, we are always on the lookout for possible building rejuvenation, redevelopment or significant asset enhancement initiatives. Because at the end of the day, if you are talking about a quantum leap for -- of a product offering, product quality and significant rent increases, you will need to offer almost entirely new products. And for most cases, that would mean redevelopment. Certain classes, maybe you can look at very significant enhancement, but those are not easy to execute. So I think we are always on the lookout for these kinds of opportunities that would allow us to rejuvenate the portfolio and then make it a little bit more future-proof. Of course, your other question on 30A Kallang Place facility we have down here, the rents that we have secured, I think we have outlined before, fall nicely between the $3.50 to $3.80 per square foot per month level, which I think is reasonably high for business 1 zone space or industrial space, even our Business Park facility. So rents are a little higher than what we have anticipated at the time of commencement of the project. So the momentum continues to be strong. That's the reason why I was talking about hopefully when we first started this between -- in the next 3 to 6 months, we can get up to 90% precommitment. That is a target, I think, I've asked our leasing team to watch. The momentum has been fairly good, especially in the last few months, a few of the larger tenants had committed to the leases. So we hope to be able to build on the momentum and then continue to lease the space well. And our observations in the last couple of quarters, looking at the kind of rent or kind of space demand is that the market is becoming almost like a two-tier market. Good quality, centrally located products, you'll be able to find prospects and tenants and they're willing to pay. But for some of the older facilities, you'll be competing with many other that are not -- sometimes just playing the discount game. So that becomes a little bit more challenging for us. So at the end of the day, it's about us repositioning and improving the portfolio and then making it a little bit more resilient as well.

[Qianqiao Wang, analyst]

Joy from Deutsche. A couple of questions for me. First, on trade wars, have you seen this affecting your tenants' behavior in any way in their decision-making process? Secondly, I guess you mentioned the two-tier market. Do you think rents are -- for the lower tier, are to the point where it gives you more incentive to redevelop? And do you see more opportunity of redevelopment in your portfolio? And then last one on interest rate. I do notice there's a hedge coming due. What are we looking at in terms of interest rate trends for the next 6, 12 months?

[Kuo Wei Tham, executive]

Okay. For the trade tensions, I think between the 2 giants, we have not seen the first order effect yet in our tenants, but kind of decisions that they make. But the -- quite a lot of the tenants are concerned because we do have a lot of tenants who export to this few large trading partners of ours. And of course, if you read the -- or if you look at our statistics, China is actually the largest trading partner for Singapore now. So the uncertainty is, of course, unnerving a lot of tenants. But that being said, some of the engagements that -- through some of the engagements we have, we found that there might be a short-term positive kind of outcome that the industrialists or the businesses may see. When you have less trade between U.S. and China, for example, you probably have a little bit more trade between the bystanders like us and maybe China and other parts of the world. So maybe there's a short-term positive impact but in the longer term, we're still looking at a channel decline in the outlook for global GDP. So tenants and businesses are fairly weary of the longer-term effect. Short term, they're not so worried. So we have not seen any other tenants taking preemptive -- a lot of significant preemptive steps in, say, consolidating or downsizing in anticipation of this kind of the so-called issues. That being said, some of the larger MNCs that we are engaging with in our portfolio told us they have contingency plans in place. And for some of the larger MNCs that have operations globally, they already have very robust supply chain so-called infrastructure. So if certain parts of the world had issues because of tariffs, because of, say, protectionist measures, they would be able to rework the production plans, readjust the supply chain such that they could shift the emphasis quite easily. Of course, not overnight but probably we're talking about a kind of a time frame of say, a couple of months. So they are fairly nimble because they have learned over time that they need to have this in place. These are what they deem as contingency plans. Because it might not be trade issues, it could be operational issues, it could be supplier issues that they would be faced with, that would prompt them to activate some of these contingency plans. So some of the larger MNCs are fairly well prepared in this current situation. Now the other question you had on redevelopment kind of possibilities. Certainly, it is something that we evaluate all the time because we want to be realistic. It is not possible to keep increasing rents all the time, unless you are in such a prime spot that everybody wants to be here and there's nowhere else to go, and you can just increase rents indefinitely. I don't think it works for the economy here, it doesn't work for the portfolio down here. So certainly, when say, we see rents stagnating or maybe rents declining to a level which is not economically meaningful for some of the older clusters, we look at alternative possibilities, including redevelopment. But what we have done at, say, Telok Blangah where we did the facility for Hewlett-Packard. So we are not emotional about the assets, as in these are not, what do you call that? What's the term that you use? Vintage. Those are preservation buildings, yes, conservation buildings. So we are not -- we don't need to preserve and conserve the buildings for the sake of maintaining them in their original condition to show posterity. Because historically, I mean, these are not the very significant facilities. So we would look at the redevelopment of significant asset enhancement initiatives. And you're right, with the rents staying at the fairly flat levels, there will probably be more motivation to look at significant redevelopment. At the end of the day, it's about the balance rent tenor for the site, how much more space that we are able to build and the kind of rents that we can get, and of course, the tenants and activities that we can bring into the facility there. So it didn't cost us that -- I mean, check off quite a few of the boxes in terms of additional area, in terms of long enough unexpired rent tenor. But at the end of day, we will still need the other ingredient in the soup. We need the demand to be there and we hopefully, we can get some early commitment to allow us to activate some of these things. Because as you know, most of these facilities while the occupancies may not be very high, we are still looking at 80%, 90%. For some of the older facilities, let's say, 90% occupancy, still giving us significant -- and it's quite painful to relocate existing tenants out of the premises, especially for some of these spaces that have been there for decades, but we look at that all the time. And the other thing on interest rate, I think probably Lily can help address.

[Lily Ler, executive]

The question is actually on the hedges, right? We have about $225 million of hedges that will fall due in this financial year, of which $125 million is actually the MTN notes which we have issued 7 years ago. So that one will be due in September -- sorry, that one will be due in March 2019. So that one was a 7-year paper which carries a coupon of about 3.75%. If today, we were to do a similar MTN paper, you'll probably be looking at about the same rates that we're talking. So in terms of rate increase, that might not be that much. As for the other balance of $100 million, these are interest rate swaps which is expiring in the next quarter or in this quarter, in the third and fourth quarter of the year, right? And if you look at in terms of the differential, you're probably talking about a difference of between 20 to 40 bps. Hopefully, that answered your question. I think we can take one more question before we begin the tour. Anyone have any questions?

[David Lum, analyst]

David Lum from Daiwa. Just a question on the rental revision slide. You mentioned for the high-tech segment, the new lease. That's dominated by the Data Centre, right? Just to clarify, so the new leases are only for leases that have commenced during the quarter, because this building is 75% pre-leased and it's on-site?

[Kuo Wei Tham, executive]

Yes, yes, that is correct. Because I think we will only register the figure in the quarter when the lease starts.

[David Lum, analyst]

Okay. So for the last quarter, there was no leases that commenced in this building, right?

[Kuo Wei Tham, executive]

Last quarter, there was...

[Lily Ler, executive]

So effectively, the rent for...

[Kuo Wei Tham, executive]

Very small.

[Lily Ler, executive]

Occupancy for this building is 10% at the end of the quarter, and last quarter was 5%. So about 5% of the leases commenced this quarter.

[Kuo Wei Tham, executive]

So the impact is very small relative to the 5 of the other tenants.

[Wai-Fai Kok, analyst]

Sorry, just one last question. This is Wai-Fai from UBS. Can you check what is the new line cost for Sunview and your NPI margin for this one?

[Kuo Wei Tham, executive]

At this stage, we are not able to say but I can tell you, it's more than 6%.

[Wai-Fai Kok, analyst]

But margin, is it triple-net leased?

[Kuo Wei Tham, executive]

Yes, it is. But it is actually double-net, not triple-net.

[Hwei Leng Tan, executive]

I think -- thank you for listening to today's update. If you have any questions, you can e-mail us separately. For the attendees here, we would like to bring you on a tour to show you the new building. Thank you very much.

[Kuo Wei Tham, executive]

Okay. Thank you.