CapitaLand Investment Stock

A very good morning, ladies and gentlemen, and welcome to CapitaLand Investments First Half 2026 Results Briefing. You can hear a lot of noise here because we have a lot of friends who are joining us here in person. So before we begin, just please note that this session is actually being recorded. So with that, once again, thank you so much for joining us this morning, both in person as well as friends who are joining us online. My name is Grace, and I'll be moderating this morning's session.

As you have seen from our results this morning, CLI has delivered a strong set of results for the first half, and this was driven primarily by strong momentum in our listed as well as our private funds. Paul will have the pleasure of sharing with you details of our results after this.

And what's important is that building on this momentum, we are now sharpening our focus to accelerate growth and value creation. And for that, Chee Koon will share with you what are some of our strategic priorities and plans ahead, and we look to share more details with you in the coming months. Thereafter, we will open the floor for Q&A. And with that, Paul, over to you.

Thanks, Grace. Good morning, everyone. It's lovely to see all of you today. I've been asked a couple of times about why I'm wearing a tie today. This is my lucky tie for those of you who don't know. We've had the best operating profit improvement in the last five years for us. And if you had seen us in '24, '25 was a pivot year, right? In '24 and '25, profitability started to go up. And we like to think that this year is an indication that, that growth is going to continue and that we should see this going -- continuing in the going years. So I'm wearing my lucky tie to make sure I don't jinx anything today by being too positive.

So I'm going to go through our results fairly quickly. It's a fairly straightforward set of results, and then I will pass it over to Chee Koon. So let me just jump straight into the numbers. So revenue for us is about flat. This is directionally exactly how we are trying to grow the business. On the left-hand side, you see our fee revenue up 20%. This is the part of the business that eventually is supposed to be -- to form effectively what is CLI. 20% growth, particularly what you'll see is 50% of that growth or the growth rate of about 50% came from our private and listed funds, which is the part of the business, which is really our two main engines, which we're trying to grow.

On the right-hand side, where you can see our real estate investment business, you would see that drop of 24%. This is partly due to deconsolidations and divestments. Actually, the main driver was some of you may remember from our last results, we divested or deconsolidated a U.S. corporate housing platform called Synergy out of our Ascott lodging platform. The profit contribution from that entity was actually slightly negative. But from a revenue contribution, it contributed $134 million in the first half of last year. And that's really the bulk of the big drop.

So actually, things are moving directionally exactly how we are hoping for on the revenue side. And similarly, on the profit side, what you can see on the left-hand side is profit for the operating side is up 13%, driven with the big uplift coming from the fee business, and I'll spend a little bit more time talking through the fee business on the next slide. But it's been very good growth for us there. The real estate investment business held steady. This was slightly better than we had expected. We expect the real estate business to come down over time as we divest assets. But we did actually -- we reduced our stakes in the REITs, and we divested some assets. But the profitability held largely steady, largely from the fact that interest cost is down for us. So we took some savings there, which helped uplift that. And we had a little bit of gains from some of the divestments or operating divestments.

On the portfolio gains, largely flat year-on-year. We expect this number to be generally, as always, around 0, given that we have divested a fair bit of properties over the years. Going forward, we would expect this to be really slightly above or slightly below on a general run rate basis. And then you can see total PATMI for us first half of the year, up 14%.

So on the fee income side, this was a large part of the driver for us. As you can see going from left to right, particularly our two main engines of listed and private. For the listed side, as most of you know, had a very good first half, very high transaction volume, more than $10 billion worth of transactions, and this was across multiple REITs and equity fundraisings. So we had four of our eight REITs raise equity, and we had 5five of the REITs active on transactions in the first half, which was why there was so much flow.

To be fair, this is not fully a repeatable number half-on-half, but we do expect that transaction activity in general, we've seen this pick up for both the private funds and the listed funds. We expect that, that will continue. So we would expect a lot of that $66 million you see from the listed funds, a fair bit of that will convert into recurring income. So that will give us a little bit of an uplift going forward. But we do have announced transactions and more expected that will impact the second half of this year.

Private funds had excellent revenue growth for us. A lot of that came from the acquisition of Wingate last year. So private credit is now contributing quite materially to our revenue pickup. So we are quite encouraged to see that together with our other funds also starting to perform. So the second funds in multiple series that we've had, whether it is living or the Asia Pac Credit Fund are also starting to contribute higher revenues, which is what's part of what has been driving that growth.

And then similarly, you'll see a little bit of one-off transaction performance fees. Part of that came from the fact that one of our India funds generated some significant carry for us. We are very proud of that team, and that contributed to the P&L for this half. We would expect that there will be a little bit more in terms of performance fees and one-offs in the second half, but it's a nice uplift. And some of that fees now includes from a Wingate perspective, when we originate and structure deals similar to the REITs, it forms a little bit of what we would consider an acquisition fee or a structuring fee.

Commercial management, up 6%. Commercial management had some of their gains from improvement in leasing over the quarter and also improving property performance, which drove their management fees up. 6%, quite honestly, is a little bit faster than we expect them to grow. So it was a very good first half, might moderate slightly, but good performance. And also, notably, our margins actually ticked up quite a fair bit from operational improvement and efficiency from the commercial management team.

Lodging numbers here look a little bit stable. But if you exclude the one-offs, a year ago this time, we had some termination fees, some sale of franchises and actually some write-backs. Without that, we're actually up about 4%. So lodging continues to grow. More importantly, and as we talk through lodging is we are really building for the future on the lodging side. As a profit contributor, currently, it is less impactful than the overall value of the platform as it continues to invest for growth.

So overall, a strong first half for us, up 20% on the fee side. On the real estate investment earnings, as mentioned, it held steady. If you look at the chart, what you'll notice maybe just a few things to highlight. Listed funds, almost completely stable, a little bit of movement because of accounting treatment on how we handle FX. But we think as long as we bring down our stakes, this contribution may come down slightly, but we are expecting from most of our REITs to see organic growth in their performance to help offset some of that stake dilution.

Private funds contribution has increased, is expected to also increase going forward as we've been divesting some of our lower-yielding assets and reinvesting into credit, into value-add opportunities and those generate a higher return. So for instance, if we sell -- we sold a Singapore logistics asset or an industrial asset, we also sold some stakes down in China. Those may have been contributing between 2% to 4% yields, so 2% to 5% yields. For the new reinvested investments for us for the funds, generally, we would be targeting between an 8% to 12%. So because of that, we expect we'll continue to see an uplift in this portion.

And then for the non-fund investments, a lot of this is actually due to a single transaction where we sold One iPark in China, which is our -- one of our last strata commercial assets, which was a legacy asset that we had previously. It looks like a big movement on an EBITDA basis. But actually, as you saw from the last slide on a profit basis, there's actually no change. The reason is part of this is accounting treatment for us. We had to take some of the foreign exchange currency losses in the EBITDA performance. But when we show PATMI for the sector, we offset all of the deferred tax or the land appreciation tax provisions. So oddly enough, while it looks like a big decline, it was actually a slight increase for us in contribution from that asset divestment.

Finally, just on our gearing and debt levels, we still continue to have a fair bit of headroom. Most importantly for us, I think as interest cost has come down. We re expected to stay at this level or actually go down slightly further. So hopefully, that continues to improve for us.

And then just very quickly, four slides on the business update before handing the time to Chee Koon. On our four verticals, just to give you a little bit more qualitative update on what has been going on. On the private fund side, with Andrew and Kishore and the team, we've actually had a good first half on multiple fronts. We've seen good fundraising momentum. So we're up $1.4 billion in fundraising, combine it with what was raised for the public funds. We've raised $3.7 billion in the first half, which is 50% higher than where we were at this time last year. There's been strong engagement, I would say, particularly in the areas which we are building more and more credibility on.

Obviously, we've had the second raise in the living fund, CLARA II. We've had a second raise in our Asia Pacific Credit Fund. We believe we will be able to raise a third fund off the back of that later this year. So the fundraising momentum has been there. The key for us really has been actually making sure that we can do the last bullet point, which is the deployment and looking for opportunities. And so as you can see, a number of the private funds have been active in living, in India, in logistics. So deals are starting to move. While there has been fluctuations, I think, in near-term uncertainty, from what we've seen in the market, there is a little bit more confidence or a little bit more certainty on the long-term view, which has allowed a number of these transactions to move.

And then the last bullet point in the middle, we announced just three days ago -- two days ago -- two days ago about our China private REIT, our China PREIT, which where we raised CNY 3 billion, and this is important for us in two fronts. One is this grows our platform in China, where we're very focused on still building a renminbi for renminbi business, tapping domestic capital to grow. But also this gives us also another avenue to recycle out of some of our legacy assets. And as for this one particular mall, CapitaMall LuOne in Shanghai, you'll see that start to show up in our second half numbers, but this will start contributing meaningfully for us for divestments. And we're still excited that Tsang and the China team have more divestments planned for the second half.

On the listed funds, I won't spend too much time. A lot of this is public information on the deal flow. What I would say is what we have been trying to do is going forward, we would like to see the growth rate of our listed funds platform be faster than historically it has been. So historically, we've grown at about 3% to 4%. This has been a core anchor for us.

Obviously, first half of this year was very strong, but our expectations is that we should be able to uplift that growth a little bit through multiple avenues. Obviously, our couple of big REITs are growing very well. But even our Ascott Trust, our India Trust have been active in the market as well. And so together with Japan Hotel REIT, which came together when we did the SC Capital acquisition, we expect that we'll continue to see across the portfolio more transaction activity and growth there. Together with efforts to launch new REITs, hopefully, the first one this year being the second C-REIT that will go out, we expect that this platform will be able to grow as well.

Commercial management, as mentioned, had a very good first half. I would say, as we look at our business going forward of our listed and private funds, commercial management is one of our strongest advantages, particularly here in Singapore, but also in Malaysia, in China and India. And something that we -- as we've been reviewing the business, we thought worth highlighting is if you look on the left-hand side table, this is the -- we pick just the Singapore selection of assets that are managed under CapitaLand's commercial management team.

If you look at the margins versus the market average, you can see that across every asset class, generally, we would have improved performance. This is actually very important for us as a fund manager. This is one of our operating capabilities that we leverage and we share with investors, and it's one of the reasons they invest behind our funds and our REITs.

So we think of commercial management really as a strategic contributor to the funds business for us. So while the growth, obviously, it's got a big base -- while the growth this first half was good, if it moderates or picks up depending on leasing activity, which can be a little bit lumpy for us, this is a very important part of the business that we expect will continue to grow and contribute.

And then finally, on lodging. So lodging had a very good signings first half. As you can see, we signed 8,400 new units. This is a pickup from the previous year. And this is added together with the pipeline of openings. And why this is important for us is while they don't immediately contribute to revenue, which is why you have seen a little bit of a slower growth than usual from our lodging side, this builds our pipeline for future revenue growth. So it is one of the things that as an organization, we are able to underwrite that growth a lot more, knowing that the signings have happened and will come online over a 1- to 3-year period, depending on whether they are conversions or greenfields. So we're quite excited for the future on the growth on the lodging platform. Eventually, we believe we'll start seeing those numbers flow in much more nicely into the P&L.

So that is the quick update on our performance for the first half, and I'm going to pass this to Chee Koon to talk about how we are looking ahead.

Thank you, everyone, for joining us this morning. Thank you, Paul, for, I hope, a pretty concise but clear presentation. I think the results are encouraging, at least for the team shows that the efforts last few years in laying the foundation and transforming the business into an asset manager paying off. Last year, we have a good fundraising momentum. This year, it continues. Really, we want to position the company for growth.

And again, the large part of our growth today is driven by the REITs business. We have eight REITs today. Obviously, the big REITs, CICT, CLAR, always at a-- running at the front, driving a lot of transaction, and we believe that, that will continue to be the case. And we have a handful of smaller REITs, and we want to take a more active approach as a sponsor to work more closely with the various REIT CEOs to see how we can help to improve the returns to all unitholders and see how we can narrow the gap if they are trading below NAV.

And this is something that Paul has explained about in terms of the possibility and the potential. And we spent some time talking and in fact, haven't even had a chance to brief my REIT CEO, I have conveniently asked Paul to help me look after the REITs to drive the REIT's growth in a very concerted and dedicated fashion going forward. Paul, thank you. I mean he has to be accountable for what he says, right?

So then moving on, on the private fund side of the business. Most of you who track in terms of the asset management, fund close to real estate generally has been low. But even then, I think we are doing relatively well. I think what we want to do on the real estate side of the equation is to really focus on strategies that we can scale, make a difference. We can do repeatable strategies, things like living, hospitality, products, our commercial management, office retail, that continues to be something that we are strong at.

Of course, you can't be investing everywhere. You need to be very selective in terms of the locations and also to leverage how to work more closely with the REIT's platform. Actually, a number of GPs and LPs are stuck with a lot of their real estate positions that cannot find liquidity. So the question is how do we -- how do the private funds team work closely with the REITs to offer liquidity for -- of course, for assets that we like for portfolios that we like, provide liquidity and then allowing us to build up the private funds at the same time. So that's how we are thinking about the private funds.

But real estate itself, the flow will continue to not be strong simply because a lot of capital is going to tech, AI and because of interest rates, it's not going to be strong. But what we need to do is to look at the capabilities that we have, the operating platforms that we have built up in the company. For instance, Pat has built up a very interesting self-storage platform. We are one of the leading players in Asia. We are looking to broaden that in other parts of the world in active discussions, both in terms of opportunities and with LP. I think that's one area that we can leverage on operating capabilities together with both assets and operating capabilities to raise AUM. That's one sector.

The other sector will be in terms of data center. Data center, it's all the craze everywhere, especially in the U.S. We have built a distinctive advantage in terms of our data center platform in India. I mean Kishore is helping to look at that ability to get access to land, to get power and building up quite nicely. We are actually wanting to convert that into a platform where we can bring in partners and to raise capital around it as well.

The other platform that we look at could potentially be our India logistics platform, very interesting platform that is supported with a strong JV partner. I think there's an interesting opportunity for us to convert that into a platform and to really scale up very significantly in India.

Of course, we spent some time talking about Ascott. Ascott has been a key pillar of our operating platform for CLI. It helped us to build the sanders sorry -- Ascott REIT, nice platform, allowing us to create private equity funds. And that's a platform that we believe can potentially be created into different products or look for ways to bring in partners to monetize the value and to continue to support its growth. The fee income is growing nicely. I think these are things that we will be looking at in terms of driving the growth of the business.

And of course, the other part that is getting quite interesting is the credit side. We -- when we looked at it, we knew that the real estate side of the business was going to be slow, and that's why we bought the Wingate platform in Australia, have a team and managed to convince Kishore to join us. He has a very exciting growth plan in terms of our credit, our alternative side of the business. I mean we will find a time to share more details in terms of the growth plan for the different business verticals, maybe sometime in -- Grace, when is that going to happen? Oh, you'll let them know. Okay.

Anyway, she is finding the time where we will find a day where we will spend some time to go through all the different growth plans over the next few years, and you can see the growth trajectory. But really, we are positioning the company for growth. We do understand that flow into the real estate will be slow. It's a cyclical issue. But in the meantime, we need to look for different growth platforms and opportunities so that we can continue to drive the fee income for the group and for our investors.

And then just taking a step back, if you look at CLI, we did the transformation in 2021. We still have a pretty big balance sheet because a lot of these are legacy balance sheet assets, joint venture funds, development funds that were created during the time when CapitaLand was still a developer. So the way we are going to organize the business is into a core and the noncore side of the business, where the core side of the business really focuses on the REITs, the private funds and supported by our operating platforms. And then the noncore side or some call it noncore, you can call it legacy will be a lot of our assets fix in the REITs, the private funds and some of our legacy balance sheet assets in markets like China and some other markets that we want to focus to accelerate the divestment of these assets so that we can recycle the proceeds either to -- for growth or to return capital to shareholders.

So that's really how we're going to organize ourselves. And going -- I mean, during the time when we meet all of you during the Investor Day, we'll spend more time to explain to you how things will look like and flesh out a bit more details in terms of the numbers.

So that's really the gist of the key things. In terms of driving the divestment for China, I mean, I think the China team has done well. I think we are probably the only player that has raised a tender bond that has created a C-REIT in the process of launching the second one, a private REIT and dedicated China for China private funds and then creating different channels for us to recycle some of the assets in China while growing the asset management side of the business. That initiative, we will continue.

It's something that we are well positioned to tap the domestic capital. We want to grow the fee income. It's a big market, but there are some older balance sheet assets that we do need to clear, and we will be very disciplined about clearing them, redeploying the proceeds into, I would say, higher yielding and more better returns opportunities for the group. So that's really the -- setting the stage. And then maybe I get the rest of the colleagues to join us just to take questions from the audience.

Thanks Chee Koon. So as Andrew, Kishore and Kevin take their seats upfront, just a reminder, we're now in the Q&A session. For those of us who are here, there are microphones. [Operator Instructions] Mervin, you get to go first.

Congrats, Chee Koon and team on excellent set of results. Good end to your five-year journey or close to five-year journey with the demerger with CLD. So I'm sure a lot of hard work to deliver these very strong results.

Maybe we can go to Slide 15 in terms of the noncore businesses. That $7 billion to $9 billion divestment target. I'm not quite sure whether you can share with us timeframe to deliver on that. And in terms of capital allocation, is there a percentage that you may want to return back to shareholders be via dividends or buybacks, how are you thinking about that?

In terms of the nonstrategic holding in REITs, what does that exactly mean? Is it for some of the REITs where you are not quite sure about the growth or you want to pay down to 15% or even lower? And if you were to pare it down, are we thinking about inter-specie distribution or we'd like to do a block trade via excellent JPMorgan trading team with attractive commissions? So those are my key questions. Thanks.

Okay. I will leave the time frame part to Chee Koon because that makes it -- puts deliverables on all of us. Maybe just to share a little bit on the numbers. The majority of the 7% to 9% that we see as embedded value is largely balance sheet and legacy fund investments for us, which form the majority of that. While obviously, a large part of that is in China, that also includes other assets we have in the portfolio, whether it's Singapore or in India or in Europe, which we would like to divest as well.

It does include some of what we would consider excess REIT holdings. I don't think this part is any new -- new to any of you. We have always talked about holding about 15% in our REITs. For Ascendas Reit, we already are at 16%. So I don't think that's a big change. It's just that if you look at our $8 billion of REIT units, if we were to average about 15%, that would bring us down to $6 billion. So there's a couple of billion there that in theory that can be returned.

I would say we have not quite landed on how we will use that capital. Our expectation is at least half of that would go into reinvestment for growth. We believe there are a lot of opportunities, whether in living or in credit where we can invest the money behind for growth. Obviously, from a CFO perspective, we'd like to pay down some debt as well. But I would imagine at least 1/3 is something that possibly could be a return to shareholders.

I don't expect us to do a distribution in species very much, quite honestly. We find -- it is something that we consider. But generally, there is such a long period where the DIS gets announced and holding period. We have obviously done block trades on several of our REITs, and we only do big blocks. We don't like dripping into the market. So to be fair, if anybody would like to buy $150 million or more of any of our REIT blocks, that's the type of size where we are a little bit more agreeable to.

But we're not looking to do anything that would harm the REIT share prices, right? If we see impact on the REIT share prices, we're not in an urgent need to divest. So I do think that together with the REIT units, but more the bulk of what we have on balance sheet, it does give us a good opportunity to have capital for growth and really for a return to shareholders.

In terms of timing, I think we will share more in the -- during the time when we meet the investors, give us a bit of time. But we're going to set up a dedicated team just to look at selling down our stakes in the funds, the balance sheet, including some of the smaller subscale strategies that will form because we just want to focus on the company on doing the big scalable funds, the strategies where you use fewer headcount, do much bigger transactions.

The encouraging thing that we are having today is we are in conversations with interesting LPs that want us to focus on deploying capital in a meaningful way on dedicated strategies. So we need to make sure that we channel all our resources and to really sunset on the smaller strategies and to focus on things that give us the -- to build repeatable bigger strategies, higher margins that can have better flow through to the bottom line. So give us a bit of time just to come back to you with the details.

Derek?

Derek from DBS. I got two questions. First question is on Ascott. Just your thoughts on the fact that I see Ascott as key to the group now. Just wondering whether as part of your value unlock strategy, do you need to hold 100%? That's one -- my first question. Then my second question is as you pivot to growth and you also want to sell, are you a seller first or a buyer later? So I was just wondering whether in this environment, how do we balance between the two via your new platform?

So your second question, again, just to clarify.

Are you seller first or unlocking value first in your next few steps in your strategy? Or are you concurrently looking at new platforms to buy? And for new platforms, are you more interested in FUM or operating capability? So just two thoughts around that.

So when we look at new investment, it has to make sense. It has to deliver ROE and be accretive to our investors. Today, if you ask me the place that we are most ready to give a lot of capital to is things like on the private credit, it's easy because, I mean, to be honest, the deals that we are looking at, generally, we are very comfortable in terms of the underwriting. The returns are more than 10% to us, it's quite a no-brainer that we can deploy our balance sheet even significantly, even if we cannot raise third-party capital.

The unfortunate thing is every time we have oversubscription. So we have difficulty in deploying more capital to Kishore even if we want to because the returns are good and yes, I mean he can share more with you later. So we are not opposed to getting operating capabilities that can help to drive our FUM growth.

In terms of platforms, today, we will be selective. It has to make sense. It has to be additive. We just do not want to -- today, there are many platforms that -- except for the big, big GPs, there are many platforms that actually, I think, are struggling in terms of fundraising. And do you really -- but multiples for many of these platforms are still high. And the question is, do you want to pay multiples for platforms that are no longer raising capital. So we want to be careful about that, yes.

In terms of divestments, I mean, I think the discipline is as long as we can recycle the capital, I think at a fair price, I think we want to prioritize to get that going because the capital that's unlocked, if we can redeploy it for better investors or even returning the excess capital to shareholders, I think these are good options that we have. We just want to be very disciplined in terms of the use of capital.

And the conversations that we have and the ability we believe to be able to raise bigger funds also means that we need -- we don't need such a big balance sheet. So we can be a lot more capital efficient in the way we run our business because initially, when we first started out trying to -- when we first started in 2021 to do this asset management journey, we were confronted with interest rates that were rising, Ukraine war and a slowdown in China, suddenly making fundraising so difficult. So we really had to work very hard to convince people why they want to work with us. But I think that journey -- that difficulty is over, its behind us. And that's why we're a lot more confident that we can run with a much smaller balance sheet than needed going forward.

You raised a very interesting question, Derek, about acquisition of FUM versus operating capability. For me, I would take the latter in a heartbeat. For the questions -- for the reasons that Chee Koon mentioned on the FUM side, FUM is expensive now. And if you're paying a forward multiple, you have to be confident that the ability to continue to raise FUM is there, and we question that ability. So we're being very circumspect about acquiring FUM. And I think that's the right discipline we should have.

But the question around operating capability is an interesting one. If you look at the sectors that we have chosen to focus on because we believe that there are secular tailwinds, hospitality, living, logistics, self-storage, commercial, all -- I'll defer to Kishore on the off side. But on the real estate side, all five of these sectors require operating capabilities in order to generate alpha for investors, and our LPs are telling us this very clearly.

So if you're heading into an environment where you're increasing your LP capital is increasingly discerning and careful about how they are deploying capital. As a GP, your ability to demonstrate platform alpha to sweat your assets, bringing operational expertise to the sectors that we have chosen to invest into is, to me, a fundamental ingredient in our narrative to LPs and our right to play and right to win.

So if you look across our sectors now, we've got two phenomenal, if I may say so, in-house sector -- in-house groups, lodging management and commercial management. Lodging management is -- ties very neatly to what we are trying to do in hospitality and to a secondary extent in living. Commercial management is hand in glove with everything that we're trying to do on the commercial side of the house. And as Chee Koon mentioned earlier, we've now got investments in interesting logistics platforms. I think we can do more. And we've got interesting platforms in self-storage.

So there is a logic behind what we are investing into. And if you -- to your question, where do you see us looking to deploy some of this capital that we're going to recycle, I would certainly expect us to invest more heavily into platforms that can help us deliver that alpha to LP capital, more so than FUM.

Sorry, I forgot to answer your question around Ascott. Sorry, I forgot Kevin reminded me. I was not trying to avoid that question. So that means Ascott is growing very nicely. We actually have different inquiries from investors, LPs wanting to participate in the growth of the platform. It's asset-light. The fee income is very rich, and we will be open-minded to look at this because there are interesting M&A opportunities that Kevin is looking at.

I mean, from a CLI, if we are an asset manager to -- we need to think about whether we want to fund all the M&A on our own or we bring in LPs that can help to do that and drive the platform growth in a much more efficient manner as well. And some of the LPs that participate in the platform or investors that participate in the platform could be investors in our lodging or hospitality funds as well. So it has to be a win-win when we look at some of these opportunities, yes.

Joy?

Joy from HSBC. If I may just follow up on Derek's question and just this discussion on platform. You have certain platform like Ascott that sits at the group level and you have platforms that sits at the fund level. What is the ideal sort of construct you think from a platform? As a group, do you want to own all the operating capabilities over time and then raise capital below you? Or you do want to monetize your operating capability as you build up?

I think we are -- I don't think there's a one size fits all. It depends on the opportunities. If the operating capability, let's say, for -- I mean, we have a data center operating capability, which I would say that is an advantage in India. Do I -- can I say that our data center capability is one that cuts across to the developed markets, I would say no. But that's an advantage that we have, and we need to focus on how do we organize it to bring in the capital, grow the AUM that makes sense.

So there's no one size fits all. We need to be -- look at where is our strength, what does the market want? Of course, you also have to listen to the LP, and we need to match it with the capabilities that we have. Kishore, do you want to add?

Yes. I was just going to add, Joy, there's a couple of really good examples that bear this to life, right? Chee Koon mentioned AFS in India, which is our industrial logistics platform. By any metric, we're probably #3 in the market. The largest player is probably going to go public or trade any day now. We look at that as very clearly going from assets to a product to a platform to monetizing for our investors, right? Even if we exit that at some point, the IP that has been created and our ability to build and create value and monetize that, that track record is more important to us to redeploy either in the same or a different asset class.

Same thing in data centers, right? It's going from assets to product to platform. And again, it will be very targeted where we can -- where we have real ability to scale and to win. So I think on data centers, you'll see us -- both AFS and data centers, you'll see us in the next couple of months come up with clear pathways to how we're scaling that, but that also sets a longer-term road map to how we're actually then going to monetize that.

And I have two other questions. One on fee, very glad to see the fee growth. Are we at a stage where we can comfortably start to underwrite double-digit fee growth going forward as your carry and event-driven start to be a meaningful contribution? And the second question is on balance sheet. Chee Koon, you say don't need such a big balance sheet. Is share buyback still not a topic that we want to talk about?

I will answer the first question. Chee Koon knows my views on share buyback, so I will let him answer that one. So on the fee growth, I think we're talking about the revenue line, yes, absolutely comfortable on double-digit growth. We are still investing behind a couple of verticals. Private funds, lodging, we are still investing behind for growth. So it may not contribute directly into a P&L double digit, but we certainly hope to be there on that component.

We also need that the fee business to grow faster than historically it has because it's making up for the drop in our real estate investment business. So certainly, from a revenue viewpoint, double digits. Profit contribution, we hope so.

In terms of share buyback, I think the important thing is what we look at it is when we recycle capital, we will have a much smaller balance sheet. If we can find interesting growth opportunities, to me, that's always the priority to deploy. But if there are not enough good opportunities, our preference is to be able to return money to shareholders through dividend. That's -- so we are not saying that we are not prepared to, but it's just a means of -- whether you do a share buyback or you do dividend. Our preference is if we don't invest, we prefer to give more back to shareholders via the dividend route. So it's just giving back to shareholders by in different ways, yes.

Maybe we go to Rachel behind us.

Congrats on the strong results. Maybe first question on me. Could you give us some color in terms of how you envision your geography split to be after all this unlocking value and stuff? And more details on this $7 billion to $9 billion split by geographies, how much is actually from China? How much is actually from your private funds? Yes, just to give us some color on that.

So I would say about 2/3 of the $7 billion to $9 billion comes from China, about slightly less than half, maybe 1/3, sorry, about 30% to 40% comes from our private funds. The remainder is balance sheet and excess holdings in REITs and platforms.

In terms of overall geographical split, I think the longer-term goal for us has not changed. The idea is that we don't want more than 20% exposure to any market. So we would expect -- as we look at the different growth markets, we would look to increase in Australia, in Japan, in India. So for the other markets, generally, the guide for us is about 20% or less with the exception being Singapore, where obviously, we have more exposure and this being our home country, we're more comfortable with that.

So no Europe, U.S.?

So we have about $10 billion of investments in Europe and U.S. right now. I wouldn't say we are excluding growing further there, but our focus is still primarily Asia.

So in Europe, if there are interesting platforms to acquire, we will. It has to make sense and has to make us competitive in subsequently the fundraising and to be able to create more opportunities. U.S., we always like U.S. its a deep market. It's a big market. The issue is it's so competitive. So you need to find the right opportunity and the right entry point. At least when you go in, you're going meaningfully and you can compete with the big boys. Otherwise, you don't get access to the yields, you don't get access to all the capital, then you just have a platform that can't compete. So those are the considerations.

Okay. Then my next question is really looking at divestments. I think you have done the China private REIT, right, potentially a C-REIT 2 in second half. Should we look at the divestments to think about your special dividends at the end of the year, 1/3 from coming out from this? Or are we -- should we expect more divestments in second half of the year?

So we're certainly working towards more divestments over the next few months. I would say, besides China, we are looking at other assets that we have, which hopefully will go out later this year. I think in terms of capital return, it is something that we are still working through. And whenever Grace comes up with that date, which she doesn't want to share, I think we'll be able to share a little bit more on specifics on the plans going forward for growth and also for return of capital.

We hope that during the Investor Day, we can tell you where are the growth sectors, how we're going to be deploying the capital. You have at least a line of sight of what we hope to do. And then what is the -- how we are thinking in terms of the dividends and -- I mean these are all questions I know investors will all be asking. We hope to give clarity by then.

If you don't mind, we'll do Brandon first behind, and we'll come back to Xuan.

Brandon here with Citi. Just three questions. The first one would be for the $7 billion to $9 billion, right, do you -- can you give us a rough estimate in terms of impact to core PATMI and also the NAV on that $12.5 billion and also on your earlier forecast of this mid-single-digit growth. So basically, by doing the 7 bill $9 billion, what kind of impact could we see on that? That's my first question.

The second question relates to the pace of divestment, especially for the 2/3 of the $7.9 billion. I mean, obviously, we've seen CRI being pretty aggressive and forthcoming in guiding us that you guys want to sell China. So by bracketing these China assets into 7 bill $9 billion this time around, does it mean that you're going to be more aggressive? Are you going to be -- like how can we be assured that this time around, you're going to be executing this divestment faster than before?

And my last question would be with regards to the 3% to 4% AUM growth on the REIT. So any guidance on how you're going to achieve that, especially for the REITs outside of CLAR and CICT.

Brandon, maybe I'll clarify. We are -- we want to accelerate the divestment of our China legacy assets. We still want to grow our asset management business in China. There's still a lot of capital, domestic capital, C REITs and PREITs that we can do that can help to drive the fee income for the group. So there are legacy assets in the past from the development funds that we want to accelerate. So it's not that we want to sell China. I just want to clarify that part, okay?

In terms of earnings split, I would say when we look at the $7 billion to $9 billion, and I would just say we still need to refine and come through and we'll share more on the numbers when during Investor Day. But generally, the core platform, I would say, contributes 75% of our earnings. And that 75% of earnings has been growing at a much faster rate, right? Because that's the part that we've been focusing behind the listed and private funds, including the China private funds business. So that growth rate actually is much stronger than our base rate.

I think as you mentioned, the challenge for us, which we want to do is we want to be able to divest the legacy portfolio in the right orderly manner that gets us the right amount of capital to reinvest into growing that core business.

So Brandon, if you look at the -- what happened in China, the real estate market started to slow in the last few years. But at the same time, you see the authorities being constructive in creating a channel for C-REITs and then allowing private REITs. And more recently, I think for some of you who have been following China closely, Shanghai government announcing the preliminary ideas in terms of land tenure extension.

I mean, China is a big country, and they want to make sure that things are organized in an orderly fashion. And all these are, I would say, are positive signals that would allow and allow investors to find ways to properly exit. And it just -- it's just the way the market is. And I think that the team has worked very hard in getting the regulators to approve to first form the C-REIT and now we are trying to get another C-REIT going and then with the PREIT and that creates a different -- now the vehicles are there. It allows us to do things a lot faster.

The difficulty is creating the vehicle because of the conversation with the authorities. They want to make sure that things are orderly, it's fair to all investors. And because things are new, it just takes a longer time.

And for CLI today, we are known -- I would say that our reputation in the REITs market in Singapore has been -- is established because we have been around for the last 20 over years. It takes time, right, to build up the portfolio, constantly doing the right things. And that's why people continue to invest with us. It's the same thing that I think the China -- the capital market is going through for the real estate sector.

Paul, there was the question on how we're going to drive growth in REIT. Do you want to take that?

So we are looking at a few options. Obviously, the REIT team has done a good job, and we've seen the different rates grow, particularly this first half, we've seen a lot of movement. And I wouldn't say it's just the big REITs. Actually, we saw transactions from Ascott Trust. We saw transactions close for CLINT as well and equity fundraisings. So I think across the board, it's been positive.

We are looking from a sponsor viewpoint, how can we strengthen that growth. I think there are a few ideas that we are considering. One is, I think Ervin put it best. We're looking at the idea of short-term warehousing for rebuilding the sponsor pipeline, working with the REITs so that they can find DPU-accretive acquisitions. Some of that potentially we can do in a short-term warehouse to help them with that so that when they go out for their equity fundraising, it's DPU accretive.

We are also looking at coming alongside some of our REITs for larger transactions and both so that it's more workable for them. The size is more manageable, but also so that it creates a pipeline for them and potentially for some of the things in our portfolio that we made less ideal can be exited. So there are a number of opportunities we are looking at. And as Chee Koon mentioned, this is not something that we have yet spent a lot of time working through, but that is certainly the intent over the next few weeks as we will build out that plan and share more.

Just to add to that, Brandon, the third component is having the real asset side, private and public work closely together. We see this model happening in places like Australia, where folks are able to combine products as long as the mandates are consistent and aligned and no investor is disenfranchised, right? So once your interests are aligned, it doesn't really matter where you draw your capital from because you can then discharge your fiduciary duty.

And this is something to us, I think we see this as a unique selling feature for CLI, where we've got REITs lined up with the verticals. Hospitality, we got REIT, living got REIT, logistics got REIT, commercial got REIT. And these are big REITs, strong REITs with capital that they can deploy. But to Paul's point and because we know that DPU accretion is critical, you can find a way to work together where you can deliver DPU accretion in an orderly and predictable way that your unitholders can see it coming even if it doesn't happen on day one. So that's something I think we can do better as a house. And we have, I would say, quite a unique ability to do so because we have REITs and private equity lined up quite neatly under the verticals.

Xuan?

This is Xuan from Goldman. My first question is on the lodging management platform. Is that included in the $7 billion to $9 billion noncore? And can you explain the EBITDA margin decline? Second question is on operating PATMI growth. First half is at 13% versus earlier guidance of mid-single digit. Any change in guidance, if not, what will actually drive a weaker second half?

So in the $7 billion to $9 billion, we have not included Ascott. We have not included any of the operating platforms. I think it is something that potentially we could include, but it is not as -- currently on the balance sheet, the 7% to 9%, we look at it as balance sheet value. As you can imagine, most of our operating platforms actually carried at a pretty low value. So we do see potential upside from stake sales or divestments, but we're currently not including that in the $7 billion to $9 billion.

Ascott is core, by the way. Even if you bring in investors, it's still core because they help us to drive funds and help us to grow the REIT, just to explain in case some of my Ascott colleagues, including Kevin thinks that we are going to think that he's noncore to CLI.

In terms of the EBITDA drop and Kevin would like to share more. A large part of that was really because of the one-offs. We picked up termination fees, franchise fees, and we had bonus provision write-backs in the first half of last year, all of which actually impacted the number. If you strip that out, margin is actually about flat.

Yes. So just to add on to Paul, if you take out the one-offs, actually the recurring part of the business is growing about 16%. But sometimes one-offs are also a bit of a timing, and we do expect to pick up some one-offs in the second half. And this could be like sale of franchise like what Paul mentioned in Australia, could be some compensation fees that we get in different times of the year.

So I think these are all short-term fluctuations, which are a little bit less concerned. What the bigger picture paints is that we closed -- this is an illustration, right, about 1,000 properties right now, 60% are operational, 40% are coming online in the next three years, right? So you do the math, you can see the growth that's coming in, in the next couple of years.

Would you be able to guide us on a normalized EBITDA margin?

I think generally speaking, we want to keep towards closer to about 30%. Right now, we're operating about a 20% level, but that's because really we are still investing a lot in the business. We're building up our loyalty program, our systems capabilities. And if you noticed, we have also opened up our addressable market. We used to be just doing service apartments. Today, we're doing resorts. We are signing up full-service hotels. And doing that gives us a lot more signings. And you see the signings are up, right?

So we want to focus a lot more on the growth of the business. We signed about over 40 hotels and service apartments year-to-date first half, and then we opened about over 20 of them. So if we continue at this pace of adding new properties, opening new properties, that is where the growth is coming for us. And once you have that growth, you gain operating leverage. And when you gain operating leverage, your margins will naturally improve. And that operating leverage will come from the 40% that's not opened yet.

Sometimes the margins when you compare against other players, you need to compare against like-for-like, whether it's net margins, gross margins, whether the players include the reimbursable. So the numbers could look a bit confusing. So yes, so when you compare, you need to compare like-for-like, yes.

Just on the earnings guidance. So we were mid-single-digit guidance for full year at the start of the year. I don't think we've changed guidance. Certainly, we hope to be on the higher end of mid-single digits, but we're still keeping that as guidance.

Mervin again.

May we can go to Slide 7. Obviously, pleasing to see EBITDA margins for the fee business improving. It's about 56% fee as a percentage of FUM also going up. But if you were to strip out those legacy funds, those subscale funds, how high could this number be? Yes, any guidance on that?

So I would say when we look at the two business, even though we've combined it here, we look at the two slightly separately. From our listed funds business, given the scale we have with our REITs, generally, we expect 60%, 60-plus percent margins. For the private funds, when we get to a steady run rate, excluding carry, we would like a 30% to 40% margin. So on a blended basis, actually, if you strip out the one-offs and everything else, we don't expect to move too far from this. We would expect to be about 50%, assuming over time, it stabilizes.

Sure. I appreciate you still forming your strategy for the listed REIT business with the management team there. But like how aggressive do you think you can go? I mean, are we going to do onshore India REITs? Are we going to privatize CICT? What can we do with Malaysia? Legacy funds, are you willing to take those losses? I mean Keppel has been willing to take losses and move on, return capital back to shareholders, which the market has rewarded. So just trying to get your sense in terms of how you're thinking about how quickly you want to move. And obviously, the cost savings, which I think Paul, we've discussed before, when can we see those cost savings come through in terms of hitting the bottom line?

So please come to Investor Day. I'd like to share. I think some of the stuff isn't -- it's not that we haven't necessarily thought it through. I think we've agreed we're not necessarily at the point we want to share. We want to be able to share a complete plan and to be able to answer all the questions that come in. I do think on the REIT side, we are -- certainly, we are looking to do more offshore listings, but even listings in Singapore, we can.

And in terms of timing, when are we willing to take some of the potential adjustments if needed on some of the divestments, I think all of that, we look to share it as a more comprehensive plan.

I'll definitely register for the date when Grace decides when we should have Investor Day.

One question here, Yew Kiang.

Yew Kiang from CLSA. Just two quick questions. The $7 billion to $9 billion, can you give a sense of how much it has been written down year-on-year? And then the second question is on Ascott. I understand that it's a core, but does it give any benefit to hold 100% or its 80%, 50%, 60%? Would it bring any difference to your bottom operating performance?

No, no. Like I said, just now, I say that we are open-minded. We don't mind bringing in investors that can be helpful to what we want to do to help to further the M&A ambitions and to help to strengthen the distribution or the capability. So we are totally open-minded about that.

So you don't have to hold 100%?

Yes, I don't think we need to, but we're still an important part of our business. And I think we still need it to help us to set up our new funds strategies because today, our -- if you look at our CLARA III or CLARA II, it was -- a lot of investors come in because of our operating capabilities, the data, understanding where people are staying, the kind of rates that they are doing. So it does help us in terms of our fundraising.

But it's critical to remain as a majority?

We still want to own it. I mean the question is whether -- how much stakes we need to own. So I think that's the question that you do. We don't need to own 100%, if you ask me.

Okay.

On the other question, Yew Kiang. So of the $7 billion and $9 billion, obviously, some of them have no write-downs. I mean the REIT units actually, if anything, some of that value has actually increased. And then for some of the Singapore or Europe assets, we've had some adjustments. I'd say the bulk obviously is the China portfolio. We've written down about $1.6 billion over the last five years cumulatively, which we shared at full year results. I would say, on average, that means most of the assets in that group being have probably been written down between 20% to 25%, if not 30%.

Any more questions? I don't think we have any questions online. Dexter you have a question?

Dexter from Bloomberg. Can I ask first on the LuOne divestment that you guys did? It's from a development fund that you guys had. Am I right to assume then that the development fund is being winded down?

Do you want to take that question?

Yes, it's part of our Development Fund III. There are five assets. We have divested one, which is Qingdao, CapitaMall Xinduxin to our AIA Master Fund last year. And then this is the second one. I would call it an orderly finish to the fund that has been recapped once already. So there are plans in accordance to the fund's time line to further look at divestments of the final three assets.

Just two more. One is on the tenure extension. So obviously, like you mentioned just now, there has been some plans laid out. So do you all foresee having to pay more obviously premiums to top the tenors, especially in China? That's my first question. And second, on your discussions with LPs right now, you mentioned the fundraising environment. Are more LPs looking for co-investments and more of a kind of equal relationship JVs kind of structure rather than more of a blind pool fund format going forward?

For the land extension policy just came out last week, we are reviewing the details working through the numbers, what it means. I think it's too early for us to give a view at this point in time because first, there's a policy. Then the question is we need to take the asset and then we need to discuss and work out the numbers. So give us a bit of time.

But what I do want to say is that at least there's a mechanism. Once the rules are clear, at least you know how to assess, you can put a pricing to it and whether it makes sense to top up or not depends on what it means for the returns for the asset level and also for the investors, then we will look at it on a case-by-case basis. But having that clarity of rules for all investors, I think it's important.

Can I pick up the LP question? So I think it's -- and Andrew can probably add on the real estate side. On credit and alternatives, Dexter, we're seeing a little bit of both. So in our ACP program, which is our flagship, Fund I needed about nearly 50%, 45% from balance sheet. It was $250 million. Fund II doubled that size and only took 20% from balance sheet. We actually had to scale back LPs. It's a good problem to have.

We've been returning capital on that actually quite quickly. Fund III, we will -- we intend to do a first close, hopefully, before the end of this year. And you'll see that size increase meaningfully. The balance sheet capacity or contribution go down from 20% again. So we're seeing that momentum, and that's from a broader base of LPs.

Separate from that, and specifically with insurance LPs, we have at least three very deep ongoing discussions around large managed accounts. They're not entirely credit, but they're dominantly credit. One is on sort of a programmatic CLI-wide program. The second is specific to a target geography where they're looking for credit deployment and yield. And the third is an aggregation of insurers in a specific market that wants to deploy, again, largely for alternate to fixed income yields. So those will be very deep pools for managed accounts, but we're -- at least on the credit side, we're seeing strong demand even on the co-mingle fund.

So broadly speaking, just to supplement, I think what you can see from Kishore's explanation is that you have a wide spectrum of preferences from different LPs depending on their needs. Some LPs are actually constrained. They cannot be more than a certain percentage of a fund. So when they come in, they require other LPs, which speaks to the more co-mingled nature of it.

And they can -- you can then design a supplemental program for them to deploy what they need to deploy through co-investments or SMA type programs. So the key for us as a house, I think, is to remain nimble and listen to our LPs. And rather than try to force fit what is -- what we think is best for them, we need to listen to them, let them tell us what it is that they need from us as a house.

And wherever we feel that it is right for us to try to accommodate and design products and programs around their needs, I think that's where I think we have an ability to sort of differentiate and distinguish ourselves using different types of products as well. So we talked earlier about private to private, but we can also do private public. Some investors are quite happy to do that.

We already have investors in our system that invest in both our REITs and our private equity products because you can blend a combination of cash-on-cash yields, liquidity as well as thematics that suit different LPs and what they are looking for.

Sorry, Chee Koon I think you want to say something?

I mean, Andrew has covered most of the points I wanted to say. But the point maybe just to highlight is that we really want to focus on the bigger fund strategies. So the smaller size type funds, there's no ability to scale. You will really see us I think we won't even bother to do because it doesn't make sense. We need to focus on building up the big AUM and the repeatable strategies for the group. So that's the discipline that we have and you have to improve margins and negotiate for better, I would say, fairer fees as well.

Thank you. Maybe one last question. We have Rachel then we'll come back to Mervin for the last question.

I just have one quick question. What happens to Ascott's target of that $500 million? Are you thinking of spinning off before it hits the target or after it hits the target? Or when can it still hit the target?

I can answer the $500 million question. The spin-off question, I cannot answer. The -- so if you look at the 40% contracts that are not open, these are signed contracts, we have already exceeded the $500 million. So it's just a matter of time before the $500 million comes in, right? So I think those are embedded revenue that will come in, in the next couple of years.

So the long and short is Ascott the fee income growth, the EBITDA growth is building up very, very nicely, right? And obviously, because it's doing very well, you have a lot of interesting investors, wanting to have conversations about wanting to participate in the growth. We are open-minded, but we want to be sure that we can bring in the investors. It's not just about unlocking the value. We want to help it to drive the growth even better either through M&A or through distribution or bring down the -- how to bring down the cost, it has to make sense.

And then I mentioned, I mean, there's no need for us to own 100%, but it's still a very important part of our business to help us to build new funds. And I mean if you look at our lodging assets that we own as a group, if you include the private funds plus the Japan Hospitality REIT plus the CapitaLand Ascendas Trust, actually lodging is a big part of our business.

And there's a lot of the -- I mean, it started off just doing long stay, but the data now because the Ascott team has done resorts going to hotels, the data, the understanding of where customers are going, how the spending makes a big difference in the way how we talk to fund investors in building up the fund strategies for the hospitality of the leading assets investments.

Yes. And so just to give a sense, I think the Ascott management platform currently still manages about 60% of the class properties so there's quite a large proportion. And also the new, for example, Clara II, we also work with the fund team to actually build up quite a lot of the assets that were brownfield, greenfield. And some of those assets actually give very good returns to investors. I think some of them are in excess of 30% IRR. And some of those things that we achieved would be difficult to achieve if it's just an arm's length third-party type operator who doesn't understand the objectives and what we're trying to get at.

Just one quick follow-up. The 40% contract that you mentioned, how soon can we get to all the 40%?

So varying completion time lines. I think some of them are conversion projects quite in the next 12 months. Some of them are brownfield, maybe 24 months. The greenfield ones are the ones that will take a bit longer. It usually about three years or so, right? So I think the contracts are there. What we want is to make sure that they open on time. To be honest, some of them do slip, but the comforting point is that the project is there. It's just a matter of time when it opens.

So another two, three years.

Okay. Last question.

Maybe I can sneak in two. First question, a big driver of earnings improvement is lower borrowing costs, but maybe you can give some guidance for second half. And as you pay out debt, paying out more expensive debt, how you think the interest cost will stabilize down to? Second question is in terms of wanting to scale up, reduce some legacy funds. Is there a benchmark size for a pilot fund that makes sense for you? Which are your flagship funds you want to scale up today? Maybe you can describe them and perhaps some LPs are dialing into this call, they can send a check in if you're opening a door for them to contribute. So maybe you can just share your thoughts on that.

How much time do we have, Grace? So I'll answer that question by looking at the sizing of the market. As Chee Koon mentioned earlier, we -- capital raising generally for real estate is, I would say, there's some headwinds there. Historically, in the last year or so, we've been raising about -- last year, we did SGD 3.8 billion. I'd say this year, we're on pace to deliver roughly about the same. So let's call it an annual cadence of, say, SGD 3 billion to SGD 5 billion a year, right? That gives us -- allows us to punch at or above our weight if you consider that in the context of what Asia Pacific capital raising generally is able to accomplish in this environment, real estate.

So SGD 3 billion to SGD 5 billion a year, you extrapolate and you net off the funds that we will roll off and sunset. That's your -- that's our, I would say, target organic growth. And then on top of that, we have what we talked about platform acquisitions that allow us to scale FUM in a systematic and disciplined way to support the verticals, hospitality, living, logistics, self-storage, commercial. And then there's the all side of the house, which is on a high-growth trajectory, starting from a low base, but lots of interesting things happening at Kishore's building.

So what that number is, I think sign up for Investor Day, we hopefully be able to share that for you.

Just on the interest rates. So interest rates did come down, I'd say, 40 basis points, which was a nice savings for us. We kind of expect the second half of the year will be above this range, maybe down slightly. Obviously, a part of that mix was because we've paid off some of the other currencies. So we've got our Singapore float, which is still holding at a very low rate. I think if that doesn't move up, then we would see some of the same savings in the second half.

Okay. With that, thank you very much. We now have a lot of work to do so that we can update you on our progress as we look to share more in the coming months. Thank you very much, everyone. Have a pleasant day ahead.

A very good morning, ladies and gentlemen, and welcome to CapitaLand Investment's Full Year 2025 Results Briefing. On behalf of the team at CapitaLand Investment, thank you for joining us today, both in-person as well as online. My name is Grace, Group Head for Investor Relations and Communications, and I'm going to be moderating today's session. I think firstly, please note that this session is being recorded, and we will begin first with management's presentation, followed by a Q&A session.

So with that, let me hand the time over to Paul, who will start the session with financial updates, and then we will follow by business updates from quite a few of us; Andrew, Kishore and Kevin before Chee Koon concludes this outlook.

Good morning, everyone. Thank you all for joining us. It's a pleasure to see so many of you. It's a good turnout. I know there was a lot of anticipation about other announcements, and we've been taking a lot of questions. All I can say is my favorite one so far has been in terms of M&A, has there been anybody that we have decided to swipe right on. So it must be a Valentine's Day thing. My only response to this is please save all your difficult questions for Chee Koon.

Okay. Let me just very quickly go through our full year results for 2025. Maybe just some key highlights to start. First off, I would say it was a very challenging environment last year, and it was very uneven recovery for us across different markets. But we did see quite a number of positive signs, which I think is what we, as a management team, are at least excited over in the coming year of 2026.

Funds under management, up $7 billion or $8 billion, 7%. Fundraising went very well for us last year. We had our best fundraising year, and Andrew is going to share a little bit more about that, almost double from the year before. Fee growth, up 6%. This is where we are relentlessly focused on, particularly on the fund management fees. Result of that was slightly better operating profit, up 6%. We consider up 6%, somewhat steady growth rate for us, and we think this is something that we can keep a rhythm on. I think most importantly is this is somewhat turning a corner from us -- for most of you who have been following us would know that operating profits have come down over the last few years. This year, we're seeing an uplift, which we're very excited on.

We had some capital recycling. We have less assets left on the balance sheet. So this number will continue to slide down, but it's still continued momentum as we move to an asset-light model. And then we did make a lot of effort last year, thanks to [indiscernible] and our IT team on really AI and digital initiatives, and we're starting to see the fruits of that labor come through. And we believe that will help us for the future, both in terms of cost, but more important, in terms of being more forward-footed in how we look at AI and digital initiatives.

Financial performance for the year. So as you know, we look at it in 3 buckets. We look at it as our core operating performance, which is really the core part of the business for us, portfolio gains from sales and divestments and revaluations and impairments. So starting on the left, you can see we are at $539 million this year for our operating performance. This is up 6% year-on-year. I'll go through a little bit more in detail on the specific verticals, but we had strong contribution, particularly from the listed funds last year. We expect that momentum will likely continue going into this year.

Profitability for the fee segment did come down slightly, and that was really us investing for the future. We've made hires and more investments, particularly between -- behind private funds and the lodging business. And because of that, profitability has come down slightly even though revenues are up materially in some of these segments.

The real estate investment business, which is our ownership stakes in the REITs and funds, we saw good performance here, really driven by 2 things. One was lower interest and operating costs as that has come down, but also stronger operating performance from our units. Most of you who follow CICT, Ascendas. Just between those 2 REITs, we have $5.5 billion invested in that -- in them. Those 2 units together with our India Trust and CLINT turned in very good performances, and that helped drive up some of our performance. That was offset by a decline in -- from assets that we had already divested. So as we divest assets, that will come down a little bit. But that number overall improved.

So from an operating PATMI perspective, sort of this mid-single digits is about the right growth rate without any special catalysts. We could keep this as a run rate growth quite easily. Portfolio gains, down 80%. That was expected. Most of you know the year before we divested ION Orchard to CICT. That was clearly very good for CICT, but it was also good for us on that divestment year. Last year, we didn't have any big chunky divestments to make up that difference. We did see good gains from India and from Japan divestments. That was offset by losses from China divestments. So we divested about $1 billion worth of China assets on a gross basis; on an effective basis, about $700 million. That was sold at a discount between 10% to 20% of book value. So on average, about 13% discount to book value, that offset some of the gains that we got from the positive sales out of Japan and India.

And then the last bit is revaluation and impairments. This is the big adjustment for us. This was actually very similar to the year before. We saw valuation drop in China, offset by Singapore and India doing well. In particular, and there is more information in the slide pack. China valuations were down $545 million and Singapore and India up. The rest of our countries largely flat or neutral. So on an overall basis, we are down a fair bit in terms of total PATMI, but really, it's mostly noncash elements, which is why we kept our dividend at $0.12 for the year.

Specifically on where we are most focused on, which is really on our fee business and fee business contributes about 60% of our business -- of our operating profit usually. As you can see, starting on the left-hand side, listed did well, up 8%. This is on the back of transactions across many of our REITs, investments, divestments and also the addition of the contribution from Japan Hotel REIT as part of our SC Capital acquisition. So good growth there and continues to be good margins. Margins down slightly year-on-year. As mentioned, we are investing heavily behind growing our private funds business.

On the private fund side, very good top line growth, up 24%, partly from the contribution of Wingate and SC Capital, as the M&A has added to our growth platform and capabilities, but also very much organic growth as a lot of the second follow-on funds for our private funds business has come. And Andrew and Kishore are going to talk a little bit more about the organic growth potential here. We expect that we'll continue double-digit growth across this segment.

Commercial Management, flat year-on-year, but better operating profits. The team did a good job of optimizing the platform and cutting costs. So we did see a nice uptick in margins for the commercial management. We would expect commercial management to generally grow at a low single-digit range. This is meant to be really a supporting vertical for our private funds and our listed REITs.

And then finally, lodging management, which Kevin is going to talk a little bit more about in terms of where we believe the long-term growth potential is. Clearly, last year was a little bit of a softer RevPAR growth year compared to some of the preceding years we've had, but the team has still done an excellent job in terms of new signings. We hit a record there as well. And I'll leave Kevin to share a little bit more. But overall, as you can see, margins generally about flat on average behind solid performances from listed and commercial and then the investing for growth for private funds and the lodging segment.

So the other part of our earnings, about 40% of our earnings, as mentioned, comes from our real estate ownership business, where we own stakes in REITs and funds and on balance sheet. As you can see, the different portions. On the listed funds, there is some adjustment because as most of you know, we deconsolidated Capital and Ascott Trust the year before. So the numbers move a bit.

I wanted to share a little bit more articulating why our listed funds component has come down, partly because I know a lot of the analysts, a lot of you cover us from a REIT perspective and the REITs are doing well. So the REITs DPU are doing well. And actually, on an operating performance, actually, our REITs did contribute plus $20 million to us in terms of uplift. Where the challenge comes is because from an accounting perspective, and I would blame all the finance and accounting people here, and I include myself in that portion, the challenge is we have to account for a lot of the mark-to-market and FX at the REIT level. So because of that, with the Sing dollar strengthening, we did see some movement in terms of the contribution as we account for it on our books, and that offset a lot of the gains we had from the operating contribution. So this one, we think, will move up and down. But from a cash flow perspective, so from a group, we actually take a lot of those dividends in. From a cash flow perspective, we still had a very strong year.

But that is why on the listed funds, we get a little bit of movement. The other component, obviously, being we have a slightly lower stake in 2 of our REITs year-on-year, Ascott Trust and CICT, we have a lower stake, partly from the distribution in specie and the sale of REIT units down. But overall, we would expect this part of the business, assuming that our REIT stay the same, we expect this part of the business to grow.

On the private funds, slightly positive. The negative drag for us was China performance. A number of our China funds, which make up more than 40% of our fund -- private funds exposure, that came down. But overall, it was positive because it was offset by some of our new funds, [ credit ] India, which have done well and our sponsors stake in those funds are contributing more than some of the preceding funds before that. So similarly, on the private funds, assuming that the year holds out, we would expect this to be flat, if not positive.

Finally, on the balance sheet. On the balance sheet, this is the one that we will expect a continued downtrend on. Actually, the numbers this year kind of surprised the team and myself. This is before interest impact. So as we divest assets, we get a lot of savings from lower debt as we pay down debt. This is an EBITDA number, so this is before debt. But on the balance sheet side, as we sell assets, this is naturally going to come down. And that's the intent. This balance sheet number should eventually move down. The improvement this year was partly because of the deconsolidation of CLAS. So we had some changes on treatment. And actually, the team had a fair bit of operational savings as we've been running a cost program to try and improve operations.

So that's our real estate investment business, overall ownership. I would say the outlook for us in this area is we expect it to be largely flat. Even with divested assets, we don't expect this to necessarily come down.

And then finally, on the balance sheet, where we have investments. So listed funds, a slight decline last year. I'm sure a handful of you will ask us why we didn't do a distribution in specie this year for our listed REITs. We are generally -- we have come down in terms of holdings, we're at about 20% right now generally across our REIT. We're fairly comfortable in this space. We don't necessarily have a need for the proceeds. So we're not divesting down any of these stakes at this current moment. And because of this, we think we are well hold at this level for a while. But in the longer run, we do think it's unnecessary for us to hold at 20%. We expect that will come down over time.

In terms of the private funds, we've gotten slightly more efficient. As you can see, our private funds have grown. Our allocation in terms of capital has come down slightly, about $5.2 billion. This is intentional. We expect we will get more and more efficient for the new funds, we will hold lower and lower stakes. And this for us, improves our overall returns.

And then finally, on the balance sheet, as most of you know, we have about $4 billion worth of assets left remaining. This has come down slightly year-on-year. We've divested from the balance sheet about $400 million of China. So of the $700 million effective, some of that came from funds and about $400 million from China. The intention for us is to accelerate that going forward this year. We did take a little bit. Obviously, we've marked down on a fair value perspective. Our China value is down a fair bit. We also took some losses this last year on divestments. We expect to pick up the pace this year on China divestments as we move to being more asset-light and generating higher recurring fee income.

And this, obviously, some of you may have seen the announcement. Obviously, we did a C-REIT listing last year. And then there was an announcement recently that we have another filing for another C-REIT listing. So we are trying to grow this business. If you have more questions, I think to Shyang who is here, will be happy to take and share a little bit about that later on. But we do think this is part of how we're going to recycle a little bit more efficiently and be able to generate at least a better return for CLI from our China holdings.

And then finally, just on the balance sheet. As you can see, we have a very healthy balance sheet, 0.43x in terms of debt equity ratio. The bottom left, we have a lot of debt headroom for growth. And so this is intended to be for organic and inorganic opportunities. And because of this, we think we're in a strong position for acquisitions and investments.

Maybe the only other thing to -- two things to highlight. One, interest costs came down year-on-year, 4.4% to 3.9%. I think that our Treasury team has been working hard, and we've been very thankful that rates are coming down. We expect slight improvement in terms of interest cost savings this year, not necessarily a big shift because Singapore rates have come down quite a fair bit already. But we do think from a group profitability, interest cost savings will save us a little bit this year. And then on an operating cash flow basis, as you can see, we're still generating -- even though profits are down, we're generating more than $900 million in operating cash flow, and that's why we have the comfort level to continue with the $0.12 dividend distribution this year.

So that's it on our financials. I'll save the time for questions later. Just very quickly to highlight on two of our verticals before I pass the time to Andrew. The first is operationally on our listed funds. Our listed funds had a good run last year. And I would say a good run from sort of 2 areas. One is, obviously, profitability was up. But actually, the most important thing to us is actually on the left-hand side is shareholder return to our REIT investors. As most of the REIT CEOs, we talk very often to them as having the fact that we have $8 billion invested in the REITs, their share price matters to us a lot and so did their dividends. So the REITs, particularly our S-REIT handful, even though we've got REITs now across 8 different listed funds, our Singapore REITs did a fantastic job last year, generating 15% to almost 30% returns. So we're very excited with that. Obviously, it's good for shareholders and us as the sponsor as well.

As you would have seen, there was a lot of transactions last year, almost double the volume the year before. And we think that, that growth this year should continue, particularly given the interest rate outlook looks flat to somewhat downward trending. We think that's positive for our REITs business.

The only other thing I'd like to highlight on our REIT is it's not necessarily just about growth. As I said, it's about shareholder return, and it's also about trying to find a way to improve the DPU. We had some active portfolio reconstitution. Obviously, some of the big REITs did fundraising, but we're actually also very proud of the fact that CLAS and CLINT were very active in managing their portfolio. CLINT's maiden divestments last year. We mean chasing [indiscernible] before he joined in terms of divestments. And we think this is important because we want the underlying portfolios of the REITs to do well. So seeing that churn and improving the quality of the portfolio actually for us is very important. So we're very proud of the REIT's performance last year.

In terms of commercial management, commercial management, as I mentioned, is a strong steady fee income stream for CLI as a group. But more importantly, for our REITs and funds, it is a key driver of the fund and REIT performance. I would say the team last year, particularly if you look at CICT, you look at Ascendas REIT, you look at even our China Trust, we would think that there were very credible operational performances, which drove whether it was occupancy or NPI. And this for us is really one of the key reasons this vertical is so important for us.

Stabilizes values, obviously, drives capital values up for the funds. And then also for us, this fee income stream has been an incredibly valuable, steady, resilient driver for us and contributes more than $100 million in EBITDA for us. So on this front, we expect this will continue slow, steady growth and will be a key value proposition for us in the growth of new REITs and funds.

And with that, I'm going to pass this over to Andrew to talk about our private funds.

Thanks, Paul. Good morning, everyone. Thanks for coming. I'll take a couple of slides to talk through our private funds business. Those of you who were here 6 months ago for our first half results may remember our Northstars. And the Northstars are very important for us as an organization because it charts the course and direction of where we want to go.

Now private funds, I think, occupies two of those, I think, 5 or 6 Northstar points that I raised. The first is always $200 billion in funds under management. That's a big Northstar for us. The second is the growth and evolution of our private funds business to match the success and the strength of our public funds business, right, to get that equal sized bicycle of balance and stability. Now in order to do that, I think private funds is threefold. You need to be able to design and manufacture good products. You need to be able to raise capital in pursuit of those products. And obviously, you need deployment to be able to earn your fees at the end of the day. This is what it's all about. So let me talk about the first two, the product design and the capital raising.

So let's look at capital raising. As Paul mentioned, last year, we had a good year. Overall, the markets for capital raising improved. Sentiment was better, I would say, from 2024, interest rates started to stabilize, most markets passed peak rates, appetite to deploy into real assets returned. In the overall space, I think Asia Pacific raised about $27 billion across all of the GPs. We raised $4.9 billion in total equity. That's about a 15% market share, and it was a substantial improvement from our market share the year before. So on that front, I think we are punching at or above our weight, and we are starting to capture an increasing share of the LPs and what they are looking for, what they are seeking in Asia Pacific.

85% of our investors came from APAC region. We'll talk a little bit about the products they came into at the next slide. We introduced 12 new LPs onto our register. And if you look at the supplemental materials, you'll see that a large part of this is now very balanced, and we had a big growth in our insurance LP base, which is an incredibly sticky, resilient, unique group of capital providers for us. So we're very happy about that.

If I turn over to deployment, we raised $4.9 billion. We deployed $7 billion in total FUM last year. And deployment is important because, as I said, it convinces investors that you are able to find the assets that suit each of these strategies that we are talking about. And obviously, when you deploy, you start to earn your fees. And as Paul mentioned, we rose our FRR from the private funds by 24% year-on-year. That is obviously on the back of deployment, which then translates into fees that we are earning. So all of that, I'm confident will take us down into improved margin, improved EBITDA margin growth and so on and so forth, which you saw earlier. So I think we are well on our way. And I think the private funds business, the Northstar of -- heading towards $200 billion and also achieving a better balance between the public and private funds is well underway.

So let's turn to what is it that we were busy doing in order to raise that capital and deploy that capital. Before I turn it over to Kishore, I'll talk about our lodging and living space and our logistics and self-storage space. As you know, we are investing into 3 key thematics: Demographics, disruption and digitalization. I'll talk a little bit about demographics, which is lodging and living and our disruption, which is logistics and self-storage.

On the lodging and living side, lots of evidence to support thematic growth and interest. Leisure, travel, intra-Asia is at an all-time high. We all see the targets that the Japanese authorities have set in terms of attracting over 40 million tourists a year and so on and so forth. Singapore Tourist Promotion Board equally incentivized to bring tourists here, and we are very well positioned to attract and capture that trend.

We've closed CLARA II last year. This is a USD 600 million fund. And already in a short period of time, just over a year after the fund closed and entered into deployment, we are over 50% deployed. As a result of that, we are planning a second fund this year. This is, again, one of our major regional funds, APAC Living, which we intend to launch in 2026 to continue to build on that momentum. I should add that CLARA II is the second of a successful series of lodging-related funds. So this again speaks to our ability and our confidence in being able to deliver product that suits the thematic that we have identified as key and investable for Asia.

Turn across to logistics and self-storage, highly disruptive thematic. We all know supply chains are being rewired. We all know that folks are pursuing second order, second option, nearshoring, friend shoring, not relying on necessarily the lowest cost option, but options that deliver reliability and options for supply chains.

We have one fund that is doing really well. This is the Southeast Asia Logistics Fund launched just a couple of years ago. That's a $400 million fund. Last year, we deployed 36% of that fund, which Harry was able to do into new geographies, Vietnam, Thailand, of course, Singapore. The logistics fund anchors off a very interesting product, which is what we call an OMEGA. OMEGA is a highly sophisticated automatic self-storage and retrieval logistics asset, highly proprietary, and this is the only fund that has access to that in Asia Pacific. That's again a $400 million fund, 36% deployed last year.

Extra Space Asia, another very interesting thematic, playing on the back of folks who are emerging into middle class, which is fastest-growing demographic segment in Asia. As we expand and we accumulate wealth, urban spaces at the same time are shrinking, right? We all can see evidence of this. And so self-storage becomes an extension of your living space where you are -- you have stuff you can't quite afford or don't want to throw away, but you don't want to have it hanging around your house as well. And that becomes a very sticky product that some of us were customers, myself included, find very difficult to give up once you sign up. And so that's a very fast-growing, highly fragmented, highly operationally intensive business. We have a $570 million fund. Last year, Pat and her team triggered the 85% deployment release mechanism, which essentially means if we deploy 85% of that fund, we get to raise more capital. And that again is on the cards this year, another regional fund product that we are targeting to use to raise more capital into a very interesting thematic. We also have a regional APAC logistics fund planned, building on that momentum that Harry has earned with the SEA Logistics Fund.

Before I turn it over to Kishore, I want to just take a note to highlight the operating platforms that sit under each of these products. The fact that CLARA II can rely on our in-house 100% owned world-class lodging platform, the fact that Harry's Fund can rely on Ally Logistics Properties to produce a proprietary product in OMEGA and the fact that APAC -- sorry, Extra Space Asia has one of the few operating platforms that has the footprint across most of the Asian markets is no coincidence to us. Because as we've said before, real estate going forward, in our opinion, is going to be increasingly tied to operational excellence.

The ability to invest into assets or I should say, the ability to explain to our investors that we are investing into assets because of our ability to understand how to sweat the asset best, and that's the way to deliver alpha for LPs. You can no longer rely on interest rates and cap rates and interesting financing and engineering solutions to get you to your returns. We would much rather sit in front of our LPs and explain why, ALP, why Ascott, why Extra Space Asia can deliver that 14-plus return for you because we know the asset better than anyone else, and hence, you should leave your money with us and park it with us.

So for us, I think the way forward is very clear, thought leadership, presence on the ground to locate and find the best assets supported by the best-in-class operating platforms in each of these thematics. And we are on the lookout for more such platforms as our LPs have also told us. It's a theme that resonates very strongly. And this is why this product location, theme and platform is a recipe in our opinion, to grow our private funds business.

I'll stop there and turn it over to Kishore to talk about very exciting growth of our alts space.

Thanks, Andrew. Good morning, everyone. Good to be here. So picking up on the platform thematic that Andrew was just talking about, let me touch on credit in 3 things. One, what do we actually have on the credit side? Secondly, how do we define credit because I think that's important. Thirdly, some of the funds and how we're progressing on that. So Credit is not a new initiative at CLI. We've been at this for over 6 years now. Arjun, who runs the credit business for us has been in the seat for 6 years, building this business out.

In the platforms, we have forward invested by acquiring Wingate, LXA and bringing in the IP and the capabilities that we need to scale that business. So we're not expecting LPs or investors to take a bet with us on an adventure we're going on. We have put our capital. We've brought in that capability and that skill set, and we're saying now back us on it. So if I look at our credit team, we have 60-plus people in that team today, right? This is not something new. We have 60-plus people, 25 years of average experience across the senior team. And if I count the experience of what CLI has done and what Wingate has done, we have deployed over $10 billion in credit investing. So this is something that is a team that is experienced, that's established, that is now sort of building that out and scaling that within CLI. So that's -- firstly, it's not a new initiative. It's something that I think we're talking about much more, and we're scaling much more significantly, but we've been at it for a long time.

Secondly, I think it's very important to think about how do we define credit because the headlines around credit and private credit in particular, have not been very flattering recently, right? So for us, credit is defined very simply. We only back -- real estate-backed underlying assets. We're doing asset-backed investing. We're only doing senior lending in that space. We're only doing it in geographies where CLI operates. So we're not going -- we are not going to be -- credit is not going to be the business that takes CLI into a new country. We're going to follow in that because we have the expertise of CLI. We go and participate in a different part of the cap structure. We're only doing it in developed economies where the legal jurisdiction works. So think Australia, Korea, Japan, Singapore. Again, no adventures because we're being a lender here. And most importantly, I've been asked this question a few times, we are not lending to any CLI assets, right? So this is third-party unrelated where we have the expertise.

And why is that important? Because in credit, every once in a while, when you make an investment, things don't work out. When things don't work out, we know exactly what to do because we call our team in Australia, in Korea saying, we need to lease this building. We need to sell this asset. We need to finish the construction, and that expertise lies in-house. When you have that piece in credit where you know what to do if things go wrong, then I think it's a very different skill set.

And so that's where the headlines around private credit are very different than the credit that we're investing in, which is in things that we know where we're an equity investor. And if you've been an equity investor through our REITs or through our private funds or through our balance sheet, we know how to run, operate those assets very differently from someone who's being smart in looking at spreadsheets, but if something bad happens, doesn't know how to operate. So we're very unique from that standpoint.

In terms of on the credit side, what are we doing? So obviously, the Wingate funds continue to build and scale. Our Wingate senior debt fund crossed AUM of AUD 300 million late last year. So we're very excited about that. They've had a flagship Wingate Investment Partners product. They've now got the senior debt product to add to that offering. That's mostly going into the Australian market, and we're selling there because it's an A dollar product.

Our ACP Fund series, our Fund I has now been fully returned to investors with a very, very attractive return. We were above what we had indicated as a target return. ACP Fund II will close imminently, do its final close imminently. That is oversubscribed at this point in time. So we're very excited about that continuing and that scaled significantly from where fund was -- Fund I was. So we're very excited about that and continuing to grow that ACP series on a broader Asia mandate across real estate credit investing. And as we look at how do we now take this origination platform of finding, evaluating and understanding interesting opportunities, we're thinking about what the distribution of that needs to look like. And that distribution is simple.

We've been selling into institutions as LPs for some time through ACP. Wingate has been selling into individuals for some time, and you will see us doing that more across our flagship products and across a Singapore product that we've listed here that we intend to launch. And you will see us doing a lot more with insurance, as both Andrew and Paul touched on. Those are the 3 important segments. And to all 3 of those investor segments in credit, we are offering a fixed income alternative. This is not an alternative asset class with high returns and high volatility. This is largely positioned as a secured underlying asset with low volatility and sleep well at night returns, right? Similar to, in many ways, what we've done so successfully with our REITs, owning marquee high-quality assets. So that's what the credit business is focused on overall.

On the opportunistic side, let me touch on one quick thing on there on the data center side. So again, unbeknown to many people on an aggregate, we have about 800 megawatts of operating and under construction data center capacity. So we sort of kept this, I'd say, we haven't advertised it significantly. But with that comes a lot of operating understanding and capability. So what we're doing with that data center business and some of those assets sit in CLARA, some of those assets sit in CLINT, some sit in our private funds. But on an aggregate basis, we understand those assets really well. And in data centers, you have to follow customers, contracts and power, right? So because of our capability, we understand what those requirements are. So we're taking that, and you'll see us create within data centers going from what is a niche real estate asset class to, again, an operating platform.

As Andrew said, the value in real estate asset classes, the market is clearly telling us this is in the underlying platforms and the value you have the ability to add through that platform and the intellectual capacity and the IP that you get by owning that. So that's exactly where we're going, similar to what Andrew talked about in lodging and in logistics, we're doing the exact same thing across credit, and you'll see us do the exact same thing in the first half with data centers around building that up in a platform that follows our key customers.

So with that, I think I'm turning it over to Kevin to talk about lodging.

Thanks, Kishore, and good morning, everyone. Let me just move the slide. Okay. Maybe just to set the context, whatever I'm talking about here, especially the numbers, they're all asset-light. There's no real estate in here, right? And an asset-light business is generally valued not based on the NAV of the business, but as a multiple of EBITDA, right? So you think about it and you look at the comps, it's anywhere between 15, 20x EBITDA. If you look at the growth of the business we've been signing management contracts, franchise contracts, and this gives us very good headwind or -- tailwinds to really write the earnings.

If you look at the signings that we have done for the year, about 19,000 keys. We acquired -- we did, I think, 2 recent M&As, right, with Oakwood and with Quest. With Oakwood, it was 15,000 keys; with Quest, it was 12,000 keys. So the organic engine that we are building is outgrowing the M&A acquisitions that we have done in the past. And for every 10,000 keys that we signed on a stabilized basis, the latest numbers that we have is actually about $35 million of fees flow in. But depending on the mix of those keys, whether it's in developed markets, developing markets, high ADR, low ADR, resort -- city, it can range anywhere between $20 million to $35 million. Now you do the math and you multiply it by the EBITDA earnings, we're adding a couple of hundred million of value to the enterprise with 19,000 keys of signings. And that is going to recur every year because the engine of growth is already moving and churning that amount of signings every year.

Now the other thing that I want to address is really the growth. Now you look at the 2020 numbers, we're only at $150 million fee income. Today, we're at $350 million. You saw earlier, Paul's like, although we grew only by 2%, but on a look-back basis, 5-year CAGR is about 15%. Now the reason is because a lot of times, the signings and the construction schedules are quite different from project to project. So we get growth spurts, sometimes we grow 20%, 30%; sometimes we grow 2%, 3%. But on a look-back basis, I think on average, we do expect this kind of growth rate going forward.

Now the other good news is we've been talking about a $500 million target. If we look at what we have today in the back, and these are recurring fee income, $350 million, and I add on what we already signed but not open, we have exceeded that $500 million target, right? So when do we cross that $500 million mark, it really depends on how quickly we can get the properties to open. We try our best to support the owners, the properties to open as quickly as possible, but sometimes it's a little bit beyond our control, right? But rest assured that these are backed by signed contracts and they will open.

So those are kind of like the bigger pictures, the valuation, the organic engine of growth, the value creation that we are giving to the business. The other one is really on our operations, right, and how we are thinking about the future. We believe that this business should operate at 30% and above EBITDA margin. Today, we are operating below that. If you look at [ Slide ], we're operating at about 23%, 24%. And that's deliberate because if you look at some of our strategies, we are doing things that we never did before, right? We're doing Resorts, Branded Resi, Social Living, Franchising, F&B, MICE, Wellness. And this segments actually opens the market a lot for us. Many years ago, we used to sign 8,000 to 10,000 keys a year. Now we are signing 19,000, why? Because we have all these opportunities open to us.

And we are operating below where we think the EBITDA margin should be because we are investing in capabilities to build support for franchisees, right, to have people who are able to manage resorts well, to open our distribution channels. We invested in our own loyalty program just in 2019, just a couple -- 6, 7 years ago. We started with 0 members. Today, we have 8 million members, and we're targeting about 10 million members this year. The distribution as a whole, we're distributing about 60% of our business direct to our properties. So you cut off all the middlemen. And I think that's what a lot of owners are looking for. And we're going to strengthen that distribution even more and be able to win deals from our competitors.

So the one last point I want to leave you with is that today, I would say over 90% of our properties are with unrelated third parties, right? So that's actually a good validation of our capabilities to the market. And we have about 30% of our signings from repeated owners, means owners who have 1 project with us, 2 projects with us, they're happy with our performance, and they're giving us more projects, right? So that is helping us actually grow a lot faster in terms of reputation, brand recognition and confidence from the owners to sign more with us, right? So happy to take questions later, but I just want to leave you with these 2 slides.

I'll pass on to Chee Koon.

In the interest of time, why don't we get everybody up here, and then we can do the Q&A. And I'll just give me some time to say a few things. Thank you all for coming. The thing -- I mean, thank you all for all the presentation. We made the decision to go on the asset management journey in 2021. I mean, at that point in time, interest rates was high and then China started to slow. That was the basis of how we wanted to raise our private funds. I mean we were razor focused, and I think you could see the turnaround in terms of our fundraising machine. The key criteria that I set for the team was that the way we can start to see real success is you see re-up for our private funds and oversubscription. And that's coming through. And I must say that I'm quite confident in terms of what we are looking at in terms of the pipeline of deals and the fundraising activities for the private fund side. So I would say that we have built enough capabilities in the team and enough product capabilities to be able to do that.

If you take a step back, I mean, if you think about what are the key strengths for CapitaLand, one is really our -- today, our REITs platform. It's not just the fact that it's there. But if you look around the markets today, our REITs trade quite well, actually offers a platform for many LPs, GPs, investors that have sometimes difficulties in finding liquidity and creates conversations. And if you can find liquidity in a way that makes sense where we can find -- where we can acquire assets, provide them liquidity, and that's a good way to get them to support us in terms of the private funds growth. So that's number one.

The second thing is really the operating platforms that we have built up over the years from Ascott to self-storage to logistics, our understanding of real estate and give us the ability to build up the few verticals that allow us to build the momentum for fundraising. It's not easy as what Andrew said, if you're going to get people to just raise money to just invest in real estate unless you have something more to offer. And it's really because of the investments in the operating platforms that allow us to build that momentum. I mean the private funds journey took some time. It's the same way when -- more than 10 years ago, when we decided to go on the asset-light business for Ascott, early 2010, 2013, we decided to start to grow very aggressively on the management contracts. And you saw what Kevin has presented, asset-light, the fee income growth, the embedded earnings and the multiple that one can apply to the EBITDA that we are creating. So that's the focus that we have as a group in terms of growing our fee income, our asset-light business. That's the reason that why we decided to make the switch. So that's point number one.

Point number two, I think all of you or many people are coming here today expecting some announcements. I had received a number of WhatsApp correspondence from friends, media, analysts. Maybe I'll just summarize. Our ambition is to grow to a $200 billion FUM business. Organically, based on the engines that we have, whether it's the REITs, the private funds and the lodging business, I think we should be able to grow $150 million to $160 million. We do need M&A. And in the last 12 months, you see our names appearing in different news, whether it is a platform in Korea, a listed entity in Australia, a listed entity in Hong Kong, hospitality platform with European origin. And more recently, the name that Shyang mentioned is but all of you are asking. Not all the news are correct, okay? But we are definitely actively looking at deals and M&A will form a big part of what we want to do. We will look at deals that make sense. It must make strategic sense, as I have said. Culturally, things must work. And at the end of the day, we need to be able to pay a fair price that makes sense to all investors. That's what I want to say.

If it's not accretive, it doesn't make sense, it doesn't build long-term capabilities that can allow us to drive new funds capabilities, drive ROE. It's going to be very difficult for us to stand in front of our investors to explain why we want to do a certain transaction. And of course, there are people who are thinking if you're going to do any transaction, are you going to do any fundraising? I think Paul in his capital management slides, have shown you that we do have sufficient headroom to be able to do deals on our own. I think that's the part that I just want to assure you that we are not here to pursue any M&A just for growth, just because we want to hit the $200 billion target. We are careful in the end. If we are happy with the $160 billion target organically that we can do that can deliver very high ROE, we are happy with that. And I'll come and explain to you that I feel to find a good M&A target. But if we can really find a good M&A target that can -- that's highly accretive that all investors will support, I will present that to you.

So I just want to assure you that we are not deal junkies. We want to do good deals that really helps to build the long-term capabilities for the company that can drive share price, okay? So I thought useful to take the elephant out of the room. And I apologize for some of you rushing here to want to hear other announcements. Sorry, I do not have, but I thought I would just want to give clarity in terms of the principles that we look at in terms of the deals that we evaluate. And I can't stop the media or the market from speculating. But it's a good thing, right? I mean we're actively looking at deals and still having the discipline to make sure that we want to do things that make sense for all investors. Thank you.

Thank you very much, Chee Koon. And we obviously, we have the team over here for questions. We have Ervin joining us on the panel as well. So you guys know the drill for those of us who are here in person, I see the hands up already, and I've been -- I got a WhatsApp message to say who's going to go first. So please state your name and the organization you represent and hang on, I'll come to you. And for participants joining us online, likewise, there's actually a Q&A function. Please also state the name and the organization that you represent. So the person who chopped the first question. Mervin, can we have a mic? I must say keep to two questions, keep it brief so that we can accommodate as many questions as possible.

Mervin from JPMorgan. Yes, congrats on the core PATMI performance. I thought it was quite good given the challenges you faced. Maybe we can go to Slide 14, the FUM potential. Maybe you can run through potential FUM that you could raise this year based on the planned funds that you're launching. Second question is in terms of China. Share price is down quite heavily, I presume, mainly due to the write-downs, noncash. Are we past the worst? Or would there be further write-downs in China? And for the $3 billion of on-balance sheet assets, what's the implied NPI yield based on valuation?

I'll take part of the first question on FUM. I'll turn it to Kishore as well to talk about alts. So you saw, Mervin, that we had a couple of regional flagship products in the pipeline. I just want to say, first of all, that it's a reflection of where we are as a GP as a house, right? We wouldn't -- I would say we wouldn't be in the position to talk about a regional living fund, a regional logistics fund. And I say -- I definitely can say we won't be in a position to talk about anything on credit 12, 18 months ago. So we are -- first point I want to make is we are on this journey. Now this is a multiyear journey, and we're confident and we're actually quite pleased with where we are, as Chee Koon alluded to.

So when you talk about regional flagship products, you are looking at minimum third-party raises of roughly $500 million, okay? Eyeball that as a number, that's a number we target. You double that because you add leverage to it. So your FUM, if you will, should be at $1 billion or there or thereabouts. So these are the 2 flagship products that we are comfortable talking about now because we are confident we think we can get this out this year. This is the launch, not necessarily the raise and the close, right? That's also a multiyear journey.

We also have Extra Space Asia, which I talked about. And we're getting more confident by the day that self-storage as an investable asset class in Asia is getting increasing traction just because of the reverse inquiries, the inbound that we would like to think we have helped to generate with the success of Extra Space Asia. People are starting to understand why this is an interesting asset class for Core/Core+, sticky, resilient customer base. And if you know what you're doing on the operations side, you can actually be confident about growing the platform. So those are the two, I think I'm comfortable talking about now maybe turn to Kishore to talk about alt.

Sure. So on credit, similarly, the ACP II fund, that is, I would say, just very high visibility. We're engaged with investors. We're in the process of effectively closing that out. I'd say certainly within Q1, some of the investors may slip into early Q2. So that's very certain, right? We know that's happening. ACP III on the back of that will come out second half of this year, back half of this year. So the pipeline, the originations for that, very strong momentum. So ACP II will close. III likely, I'd like to see us have a first close before the end of this year. So very high visibility.

Wingate continues to grow. The senior debt fund, as I said, is picking up momentum given the world we're going into. I actually anticipate we'll see stronger flows into the Wingate senior debt fund. So again, very high visibility on that. Things where we've invested a lot of time that will bear fruits in the second half of this year. I would put both our SGD product, which we expect to launch in that camp and our data center product in their camp. Again, as I said, those are not new initiatives. That's not a 0 to 1. That's places where we're already operating, where we're already investing. We're now bringing that out in a slightly differentiated, more focused product for investors. So on both of those fronts, very, very good momentum. High visibility to hopefully beat the numbers on fundraising that we had this year -- last year.

Yes. Just to add on, I'm very actively involved in conversations with LPs, family offices. There's actually a lot of demand for some of the products that we are creating and some people are asking us to cocreate products for them. And that's why I am actually quite optimistic. I mean, this time last year, I wasn't quite sure because the fundraising momentum was -- we had big plans, but we are not sure in terms of where things could be. There were still changes in terms of personality. And then we went on the road and spent a lot of time with the investors. But given the feedback, given the products that we are creating and a lot of this and also conversations with our LPs, I'm actually a lot more confident in terms of where our private funds team will be able to achieve over the -- at least -- I mean, early conversations just for the start of the year has been very, very encouraging.

I'll take the other two questions. On the China revals component, so this year, the China revals on average from a portfolio viewpoint was about down 5%. But that was quite a range depending on the asset class. China office was the hardest hit for us, office and business parks, less so in some of the other sectors. So we took a bigger write-down partly because of the vacancy in some of those buildings, which ties to your second question. Because of the vacancy in those buildings has come down as we've had some tenants in the offices and business park move out, it has brought down the NPI numbers for those buildings. So I would say most of the NPI for the assets we're talking about range between 3% to 5%. As we can fill up that occupancy, that should drive the NPI up, hopefully, to get us to, I guess, a stronger, more 4% to 6%, 4% to 7% type level.

We hope the worst is behind us. But I think when we've looked at China over the last several years, obviously, we've taken write-downs over the last 4 years, and this was a bigger write-down than most years. I think it's a little bit hard for us to predict whether there will or will not be anymore. Certainly, the team likes to think that our hope is that the worst is past us. But as we continue to expect negative reversions and occupancy is still weak for some of the asset classes, we do think there could be some movement up or down over the next 12 months.

I just want to add to that before I turn to Chee Koon. It's not all doom and gloom on China. Now as Paul correctly characterized, China is -- there's a lot happening exogenously that we are having to deal with, right? There's little we can influence in terms of geopolitics, consumer sentiment, et cetera, et cetera, and Tze Shyang is well versed in this. But as a senior team and as a group, we need to sort of make do with the cards that we are dealt. So what are we doing? As you all know, again, one of the Northstar destinations is China-for-China. And last year, we launched our first C-REIT. C-REIT is trading really well. It's been well received. And as Paul mentioned, this year, we've registered for a second C-REIT, taking advantage of what the Chinese regulators have acknowledged is something they need to focus on. They need to be able to provide retail investors, savers in China with something that is a proven asset class globally, stable, visible, sleep at night distribution yields rather than speculative real estate in China, which we all know they are completely allergic to right now.

And that plays to the C-REIT market. And that, again, I think, plays to our ability to provide assets for them that are nothing wrong with them intrinsically. They're great assets. We run them well. We just need to find the right price point where the market says, this is great for me. I can get that distribution yield, get that saving in place. And so in the ability to demonstrate to the market that we've launched one C-REIT doing well, sleep at night, here comes another one that is larger in size, more sophisticated, integrated development. You start to see this ability to accelerate our China-for-China play, even in the midst of what is a very difficult political macro environment for China.

China is a huge savings base, in part driven by the fact that sentiment is down. People are not spending because they're worried about the future. When they're not spending, they want to save. They need something to save in. And I think I can think of nothing better in the equity side than a REIT, as we all know, from our own savings here in Singapore. So much of our wealth is tied up in the S-REIT market.

So I think this plays to our strength. And if we execute well, we can turn what is an uncertain environment into something that is positive and part of the growth story for the group, which is China-for-China. So it's not -- yes, it's not great. Yes, I know you guys are waiting for the inflection point and for us to come out and tell you that there's not more bad news. Honestly, as Paul says, we can't tell you that because as you know, events are happening very regularly, and they happen come out and left field very often. What we can do as a team is just to respond as quickly as we can and stay focused on what it is we're trying to pivot towards, which is China-for-China.

Just to add on, the -- we've created a master fund last year and then the C-REITs. You will see us continue to do that. Because of our long history in China, ability to operate, manage reputation-wise, we actually have a lot of inquiries from capital partners to actually give us more capital to grow the asset management business in China. A lot of competitors in the market today in China have exited in one way or other, actually position us quite nicely to grow the China business using a lot of domestic capital, using a very capital-light manner to grow the business.

Yes, I mean, we do have balance sheet exposure to China from the original CapitaLand days. I mean, where we use the developer's mindset to put very heavy balance sheet to grow, which is not the case anymore. And I mean, I don't want to keep revisiting saying that these are all the things that have worked well for CapitaLand, but it is what it is. But the important thing is what do you do? You want to be able to recycle the capital and invest it to grow the fee business, the asset management part of our business, being very capital efficient, raising third-party capital so that the fees that we are earning will be very -- it's like a coupon clipper for investors that invest with CLI.

Perpetual capital save, the fees are there. You don't have to worry about the volatility of the real estate market. And that's what we are transforming the business model into, right? I think the rest of the other parts of the world, we have done that. In China, we are doing the same. We are doing -- raising a lot more third-party capital. And I think that the potential for us to build a big FUM business in China using third-party capital is there. We just don't need to use so much of our own money in China. So that's the guidance. I just want to make sure that the team understands as we execute the strategy is to use less of our own money and to grow the business in China, grow -- make it a fee business.

Sorry, on the -- sorry, on the private credit side of things, $2 billion plus on the property side, private credit, $1 billion plus to be this year is realistic, I presume you hire a big time here to deliver.

I'd like to see us get ahead of that $1 billion, but watch the space.

Xuan?

Xuan from Goldman. First question is on cost savings. The $5 billion seems a bit low versus previous $50 million target. Can you walk us through the initiatives? And secondly, on strategic M&A, if you go do one with a significant overlapping capabilities, how confident are you in realizing cost synergies? And what will you be doing differently? Second question, if I may, on lodging. So if this business is valued on multiple, then EBITDA is actually more important than keys and revenue. So if I look at your revenue target, EBITDA should grow more than that given operating leverage. So my question is really on time line. When can we expect that to come through?

Okay. I will do cost savings. So the cost savings number related just to our AI digital initiatives. So overall, the group target is still to get to $50 million in cost savings. I think we are tracking fairly well. We've made some progress this year in terms of increased efficiency, streamlining some of our operations. We're still moving into that next year as we start outsourcing some parts of our work using a little bit more AI and digital initiatives. I think we'll be able to update a little bit more by midyear in terms of progress as we can see sort of full year savings. But the goal is still to get to $30 million to $50 million savings on a run rate basis by 2027.

Should I take the lodging question? Okay. So...

Okay. So maybe on the cost savings for M&A. So obviously, we've done two M&A in the last year. SC Capital, which was only at 40%, so it's been largely run independently. For Wingate, which was 100%, we have started integrating those operations. And we are starting to see that capability sharing. So Kishore has now got a lot of Australian sourcing capability, not just for the Wingate funds, but also for ACP II and ACP III in the future. And so we're starting to see some synergies there. Given that, that has only been in operation for about 8 months, we have yet to be able to actually count the value of how much there is. But when we look at it, I think it's easy for us to estimate that sort of 10% to 20% is a reasonable saving levels for us in this particular aspect. I think if we were to do a broader M&A, it would depend on how much overlap there is.

And if we look at our corporate costs, which based on the slide there, you can see we're still sort of about that negative $55 million, which is not true corporate cost, but has a mixture of factors there. We would think of that as, in theory, where we would get the most savings from in terms of overlap. So that's what we're driving to. We have done no estimates in terms of overlaps for maybe what you are looking for. But we do think that reasonable cost savings when you look at overlapping operations, if it's -- in the case of, say, something like Wingate, we think 10% to 20% is quite reasonable. Certainly, we hope to do more if there is more overlap.

Just to add on, I have done a number of M&As in my career in CapitaLand from Ascott days buying Quest, buying the hotels platforms and then subsequently, the merger with Ascendas-Singbridge. I would say that so far, all the M&As that we have done, we have been able to grow top line. We have been able to create synergies. And I think that's -- that will be the principles that we take -- whichever M&A that we do, it has to make sense. There is no need for duplication of resources. Of course, we want to make sure that we do things properly. When we did the merger with -- the big merger with Ascendas-Singbridge, it was on the basis of a best person for the job. Some of you may recall when we announced the transaction, very quickly, we talked about the org structure. We want to make sure that things could execute. And for some of you who may remember on the day when we completed the Ascendas-Singbridge transaction, the next day, we talked about how do we put together the Ascendas Hospitality Trust and the Ascott Residence Trust. It's a question of the discipline. I mean you just need to make sure that if you are committed to do a deal, how do you work out your entire plans, how do you put the people in place? How do you create the synergies? How do things make sense? I think we have enough track record to be able to demonstrate that we always maintain the discipline in doing transactions.

So just last part, we are absolutely with you in laser focus in delivering EBITDA. If you look at our total key count, it's 176,000 currently, just over 100,000 is operational. So we have another 60,000-plus in the pipe. So the ratio of pipeline to operations is actually quite high. And that suggests that we have a lot of opportunity to gain operating leverage. Now if we look at the construction schedules of the projects we have signed, we do expect a lot more properties to open in '27. And if you give them a year to ramp up, we should be able to get a good healthy boost in fee income in '28. And we do expect by '28, maybe '29 to be operating at a more stabilized level of about 30%, 30-plus percent.

Can we go to Derek first? Yes, I think his hand was up.

Derek from DBS. I'll just ask two questions. So, if I could go back to China, right? Could you give us a sense how much have you written China since the start? Are you at 10% to 12% down? And maybe to ask the question another way, if you put an asset in the market now, do you think you can transact at book rather than going through the C-REIT route? That's the first question.

Then my second question is on the ACP Fund II. I'm just curious, could you give us a bit more color in terms of returns that we expect? I always thought that for private credit and credit, you'll be playing in the field where you are either junior debt or a bit more risky or you're lending to corporates that could not get traditional funding type of scenarios. So when Kishore mentioned that you're looking at very senior debt kind of investments, very safe. Just wondering whether it's your landscape or competitive landscape to financial institutions and how you stand apart. So I may be totally wrong, but if you can give us more color, right?

So on the China valuations over the last 5 years, we've written down about $1.6 billion on our China values. It works out on average to about a 12% drop in valuations. But that's really an average. Obviously, there's been a wide range. For some of the assets, they have gone down 20% to 30%. Some of them have actually barely moved because they are very strong performing assets.

In terms of would we be able to sell into this market in this price, I think it's very asset specific. If you ask us right now, certainly, there are some assets that would go out at current value. Some may, if we are fortunate, even get a slight gain. But I think depending on how the market outlook goes over the next 3 to 6 months, it will give us a better sense of whether there is an additional discount that we need to take. I think last year, we took -- as I mentioned, we took an average 10% to 20% discount. We are actually quite willing to take some of these discounts if it gives us an ability to do what Andrew was mentioning, and that is really recycle it into a renminbi fund. If you ask us to take an adjustment to the valuation, but it generates long-term recurring income, that's certainly something we would look at and consider. I think for us on the go forward, we know we have a little bit of weak spots in parts of the portfolio, but we are very much focused on making sure that, that operating profit and that fee income stream grows.

So in private credit, we're not coming for DBS' business, just to be clear. But look, it's a good question. Firstly, we're not doing anything on corporate, right? So it's always real estate, always asset-backed. Why does the opportunity exist? There are many cases where for regulatory reasons, a bank struggles to do a certain type of lend. In construction and transition financing, we understand the underlying assets much better. So our ability to provide financing into that is greater. It's faster very often than in financial institutions. We're clearly not cheaper, right? The end return to your questions that we're looking at in our private credit products is going to be between -- net to investors between a 6% to 10%, right?

We hope we can outperform some of that 10% at times, but this is not a 15%, 20% IRR business. It's generally transition, so it's shorter duration, 1, 2, 3 years. We're not doing 5-, 10-year loans because anybody who's taking that cost of capital for a long period of time, it's not sustainable, right? But let me perhaps bring that to life through an example. So we did a transaction late last year, we're about to do our second one in Australia, Sydney specifically in prime Sydney residential neighborhood, financing a developer against completed stock. They got very expensive financing, construction financing, which is a business we understand because of Wingate. And they're now slowly selling out the -- they held on to some stock. They're slowly selling out that stock on a completed basis. On that, they're quite happy to take our capital at probably a 7%, 8%, just to give you directionally where we are. We will lend that on a 60% to 70% loan-to-value. So it's not very high LTV, firstly.

Second, we may selectively use some leverage on that, probably 50% back leverage, but we control the entire loan stack. So you're right that our end participation may be junior, but we control the entire stack. So we're not sitting there at a syndication table with 6 lenders if something goes wrong. If something goes wrong, the senior is actually looking to us saying, you guys go resolve it and work through it, right? So on something like that on a levered -- on an unlevered basis, we may be 7%, 8%. On a levered basis, we get to 10%, 11%. Net of fees, we're comfortably at 8% or 9%. And on ACP, that's sort of the 10% or just over 10% net is kind of what we're looking at. On the Evergreen in SGD, that will probably be safer. That will probably be more like a 6%-odd return.

Let's go to Rachel.

This is Rachel from Macquarie. So a few questions from me. I think, firstly, you spoke about interest cost savings. Could you give us some guidance for interest costs in FY 2026? My second question is on divestments. I think you have done $1 billion. So any outlook on the divestments for this year 2026? One last question on commercial side. Any risks you see in your portfolio? I know it's stable growth, but this year, do you see any risk in your retail portfolio? And there are some office assets out for sale, which is very sizable. That's good for CLI. Any thoughts about whether you will acquire them?

I think we've always been consistent in terms of our retail portfolio, especially in Singapore. It's supported by fairly controlled supply, right? And we've been conscious on the trade mix. So our reversions, we think, is consistent over time. Last year, it's about 7%, just under 7% and this is consistent. And we measure the business, I think you know by now by occupancy costs, and we look at this across different trade categories. So we think that the business this year will continue to be fairly resilient. Now there's going to be RTS opening at the end of the year. Our malls are not at the northern part of Singapore, but we are getting a presence there via the management contracts that we signed in Zoho. So I think the retail business should remain fairly consistent. Our office performance for the assets have also been strong, also supported by relatively managed supply and all this is in contrast to China where the massive oversupply. So I think any opportunities are on the table, we have various vehicles that we are always looking at it. We will be the first part of call. And if it makes sense, it makes sense.

In regards to interest cost savings, so in terms of absolute interest costs, this one might move up or down depending on how divestments and investment goes. The truth is I personally, and I'm sure plenty of our bankers here too, hope that we end up borrowing more as we have more investments to do. So the absolute cost may go up. But I think in terms of basis points, we're at 3.9%. The year before, we had at 4.4%. I think we can see it coming down maybe 10, 15 basis points on average.

In terms of divestment target, certainly, this coming year, we would like to do more than we did last year, particularly for China. So there will be an effort to try and accelerate that. And we hope over the next 6 to 12 months, we will be able to beat that $1 billion quite comfortably.

Thank you. Maybe we go to Joy.

Joy from HSBC. Two questions. First of all, you held back share buyback last year in view of sort of acquisition pipelines. How long do we expect that process to be as you evaluate large-scale sort of acquisitions? And on the same token, as you evaluate this process, what does that mean to your bolt-on strategies and smaller platform acquisitions? Does that go through BAU? Or will that be on hold as well? Second question is more on operating platform. I think Andrew talked about buying more exploring operating platforms. Can I assume that the end game is eventually to exit through an IPO for these type of platforms? And if that's the end game, where are we on your various sort of operating platforms? And when can we expect potential exit?

So on the share buybacks we did, obviously, in 2024. We were quite active in 2025, and I think it holds same for 2026. We believe that there are a number of both organic and inorganic opportunities for us to invest behind and sponsoring new funds organically or sponsoring our REITs as they grow is still priority #1 for our capital allocation. Priority 2 is really growth for inorganic opportunities. I think we look at a range, as Chee Koon mentioned, we've been associated with quite a number of deals in the market. And we continue to look at a number of them. And I would say since there is -- there are opportunities in the market, we are conserving capital to a certain degree for these opportunities. In terms of time line, I think that's hard for us to pin down. We believe that the opportunities are very readily available in the market in the different segments and including bolt-ons that we look at. So I think from that viewpoint, we are still working on the basis that there will be more organic and inorganic opportunities for us to use our capital for.

We are positioning the company for growth. So actually, we are seeing quite interesting opportunities, whether it is organic or inorganic type opportunities, it could be smaller, it could be bigger, but positions us very well and allowing us to grow the fee income on a more sustainable basis. And that's why we are conserving some of this capital to give us that optionality. Janine is extremely busy. We need to prioritize all kinds of deals, what makes sense, what's the -- give us the best bang for the buck -- the different verticals hits are also looking at optionalities as well. So that's what I want to say. We are actually seeing interesting things happening in the market.

Joy, very quickly -- Chee Koon talked about optionality. I think that's the beauty of platforms. If you have platforms that are strategic in nature and are sought after, you can do a lot of things with them. You can keep them to generate more fee income vehicles down the road as you produce vintage 2, vintage 3, vintage 4, vintage 5 or you could put it together with a fee vehicle and then do something with that. And I would say the option spectrum exists with all of our platforms, the ones that we have minority investments in, the ones which are strategic, commercial management, lodging management, which are so intrinsic to our business today. Obviously, the consideration set is different. But to your basic question of whether or not you can use them as part of a securitization package or monetization package, the answer is absolutely yes. But obviously, we take a view as to what is the best cost of outcome for us as a group, right? If it's something that's so intrinsic to our business and we see a much longer horizon and the ability to generate more and more fee income vehicles downstream, then it's something that maybe we decide to keep a little bit -- some of it but not release it. But the obvious -- the reverse is also true.

We are today very much an investment house. So you can be sure that if we grow the platforms, I mean, I think some of you may be alluding to whether it's the Ascott platform, it could be some of our platforms in India. If there's an opportunity for us to consider strategic option to list it independently because some of the values are not best captured being the listed vehicle or we can give you a lease of life that can get better valuation in certain markets listing it one way or other, we will consider it and use it as a chance to unlock capital properly capitalize it so that it can compete in the various markets or in the verticals. So all these are optionalities that we are looking at. At the end of the day, we need to grow the platforms properly, how do we unlock value, how do we create the most value for our shareholders.

Let's come to this...

Sorry, relevant to [indiscernible] point, it's all EBITDA, right? We want to generate multiples on earnings. If the platform is an intrinsic part of that ability, that narrative to generate the maximum earnings multiple, then that's where I think it becomes a key consideration. It was not quite ready yet. It's still a bit subscale, but it's a key part to the thought leadership and the ability to think about how to design products, then I think that's better helped onshore because we won't realize maximum value for that. Sorry...

Yew Kiang, over here.

Yew Kiang from CLSA. Two questions from me. First one is on M&A. How much are you willing to push gearing up to fund M&A going forward? And what kind of IRR targets or targets -- return targets do you have in mind? And also, are you okay with near-term dilution on such M&A? Second question is on China. If you take in all your China assets and you divest it, let's say, we carve out today at book value, how much will this lower your current gearing?

Okay. I guess that's me. Okay. So China assets for us are about $7.5 billion right now. If we were to carve them out, that would bring us down into a net equity position or net cash position because we actually only have debt of about $5 billion, $6 billion on the books. That assumes that it is all sold. I don't think to be fair, it is a likely scenario for us, partly because we look at these -- a lot of these is our sponsor stakes in a number of funds.

I think your first question, though, in terms of how much are we willing to earn. We put this on a slide specifically to show how much debt headroom we're comfortable with. And I think we are comfortable spending additional $6-odd billion gets us up to a 0.9 type gearing. The truth is we are quite comfortable in that range, particularly now as we are divesting assets and as Tze Shyang and the team make efforts to lower our China exposure, we will actually get additional capital back.

In the longer run, the truth is we're quite happy at this 0.4x, 0.5x. It's probably about right for us. But we can afford a spike up if there is a deal worth doing. And obviously, with that type of headroom, as Chee Koon mentioned, it's very unlikely we would need to raise equity. And then we would expect it will come down as we divest our stakes of the balance sheet assets. We are putting more money behind private equity. But because of our efficiency ratio, as we enhance efficiency, the truth is we don't really need much more than the $5 billion that we already have in the private funds. On average, our holdings in the -- because of the legacy assets and the legacy funds, our holdings are more than 30% on average. In the new funds, we hold 10%, 15%. So actually, we could double our private funds and not require more capital there. And then similarly, on the REITs, over time, that stake will come down. So I would say from a debt headroom viewpoint, we're very comfortable doing anything in the $6 billion to $8 billion range even.

Yew Kiang, you remember you were around when we did Ascendas. We took the up to, I think, 0.83x, 0.86x with a commitment to bring it back down again, and we delivered on that without issuing new equity. So I think we understand the playbook, and we know what is important to shareholders.

We're going to take a few more questions because we're nearing the 10:30 mark. Let's start with Terence, right? Sorry, Brandon.

Brandon from Citi. Just two questions. The first one is, if you look at your fourth quarter event fees from private funds, right, there was a very nice $30 million number there. Can you guide us on what that is? And is that what we could see if more private funds were to have an exit over the next couple of years?

Sorry, Brandon, can you direct me to where you're seeing that figure? I don't think -- we didn't have any event fees -- standout event fees for the private funds in the fourth quarter. So if we did that, it's great. But no, so I would just say though in general, on our private funds, our private funds activity, we do have a little bit of fees, but it's very small in terms of event driven. We're not expecting carry from any of our funds in the near term. So we wouldn't expect that. I think actually, the strength of the figures that we have for the funds business is it's been largely recurring income, both from the listed side and from the private side, and that will continue to go at sort of the same growth rate we would expect going forward. But we wouldn't expect very much in terms of event driven from the private funds.

Okay. Maybe I'll check my numbers later. So the follow-up is more on your dividends of $0.12. So would you guide the market using your core operating PATMI on a dividend payout standpoint? Or would it be more useful to use the operating cash flow? Because if you were to look at this $540 million and if you can assume that it can grow at 6%, the payout is actually close to 100%.

Yes. So our payout ratio is high. And actually, enough it ties to the question on share buybacks. There are different ways we can return capital to investors. I think when we look at our operating cash flow, which is the metric that we track more closely in terms of making sure that we have funds, the operating cash flow is more than $900 million because we have a very strong fee business that consistently generates income, and then we have all the REIT dividends that come in. So we look at the operating free cash flow as the more critical measure for our own internal capital management. And then we look at the operating profits as a guide to what we are willing to or what we think is about the right level to return to shareholders. We could have used the money to some degree, some of it for buybacks. We have chosen to keep our dividend stable at this level. We think it is a level that we can comfortably maintain given the trajectory we are on. Certainly, at some point, we hope that we grow faster and we're able to increase the dividends. But at the current payout ratio, we're quite comfortable.

Okay. We'll take a couple more questions because we do have one online question as well. Let me go to Vijay first.

I just have two questions. Firstly, again, on M&A, sorry for harping on it. You have two targets, $200 billion as well as asset allocation to different geography. Suppose if a big M&A acquisition comes, that fits your $200 billion target, but doesn't fit your geography target in terms of exposure to China or U.S. markets. How would you react to that in that kind of a situation? My second question is in terms of your private funds, do you also mark-to-market your private funds on an annual basis? If so, there was there a gain or losses? Was this the reason for your reduction in balance sheet exposure towards private funds to $5.3 billion to $5.2 billion? And also -- sorry, that's my question.

Okay. So I'm not sure if I caught that right on the private funds reduction. Part of the reduction was too. Some of the funds are starting to come back. So for instance, as Kishore mentioned, our ACP I, our first credit fund actually has returned capital. So some of that has come down, and it generated a 15% return, which also helped our earnings. So we have some funds that are returning funds. We also did have a little bit of markdown from the China funds component, which also lowered the stake -- the value there. So actually, there was a fair bit more movement down, but we also invested in new funds as well. So that's how we came out of the balance. I think most importantly for us is just that the capital efficiency on that improved. We were -- we are investing less into the new funds than we were previously.

If we are looking at an asset management platform, we look at the quality of the teams, whether it has a strategic difference to us to be able to raise funds and -- on an ongoing basis, whether we can create new products out of that. So if you ask me, I am less sensitive to where the FUM is from. I mean, even if, let's say, a certain entity has some allocation to China that can help to strengthen our China FUM on a fee basis without us increasing a lot more capital allocation to China, we will look at that. And if -- let's say, there's a fee business that we can buy in the U.S. And the question that we need to ask ourselves is you buy a team in the U.S. today, can the team and together with us actually help to turbocharge the growth in the -- if we are not so sure, then we may not do it.

So I think the issues are complex, but I just want to highlight that we are looking or platform basis, we are looking at platforms that help to generate and drive our fee business. So we are not looking to buy a, for instance, a developer and asset heavy business. That's not our business model anymore. And that's what we are trying to reduce our balance sheet exposure on all the hard assets, and we should have less stakes in the GPs. And over time, as what Paul mentioned, we want to be able to also, in an organized fashion, reduce our stake in the REITs without affecting the share price of all the various REITs that we have strong holdings for. I mean, why we want to do something to affect the returns to our unitholders. So I hope that gives you clarity in terms of how we look at M&A.

Terence?

This is Terence from UBS. I have two big picture questions. First one, so APAC Real estate is an underallocated space. And given that 2025's performance for many asset classes have been positive, especially on public equities. I guess APAC PERE is even more underallocated now so than before, such that the rebalancing itself, I think, should see LPs knocking your door. So I guess, is it fair for us to expect that the organic fundraising for private funds should be better on a year-on-year basis for 2026, i.e., more than $5 billion.

And the second question, I'll just go to it. Andrew, I mean, towards the Northstar, a question on fundraising and distribution. The U.S. is making all assets accessible to people's 401(k)s. For us, I think platforms like Ascendas, [ S-REIT ], they actually have access to our dominant SRS funds, and they're already distributing products from the likes of Blackstone, Hamilton Lane, et cetera. So do you see Singapore's retail wealth channel as a blue ocean market? And Andrew, you already said we already are investing quite a bit of our money into S-REIT so far.

These are great questions. Thanks. So the short answer, and I'm looking at [ Alan ] here, is yes. We want to build on this momentum. The anecdotal evidence for '26 is that allocations to real estate, real assets in general in Asia have gone up 15% to 20% for the reasons you mentioned. So if we are going to continue to punch at or above our weight in capital raising, yes, it stands to reason that if we raised $4.2 billion last year, that number has to go up by -- at least by that percentage amount. Obviously, it's going to be incumbent on the strategies and the strategies need to make sense, which is where the product design, ability to have folks on the ground who are telling us what investors are looking for, what is interesting in terms of real estate, having the underlying platforms to sync all that together, all very intrinsic to being able to successfully do so. So that's question number one.

Question number two is around the wealth channels. So you hit on a very good point. Last year, we made very good strides in insurance. And we've also identified high net worth as a key component of a rounded distribution platform. Institutional, we started off with decently. Insurance, we've identified and we've made some very strategic hires in the capital raising side of the house to be able to speak the very specific language that insurance companies use when they talk about deployment and what their specific requirements are to be able to put out product that makes sense for them.

And we've done a very significant insurance mandate that we hope to share with you in the not-too-distant future, which then leaves high net worth. High net worth is a relatively young channel for us. We took a big step forward last year with Wingate, which is essentially a high net worth shop. And I think with Kishore's help, we can learn from how Wingate has developed that very high-touch channel, as you know, it's a very different way of servicing your client, but it can be very sticky capital and your fee cards are very different in nature. So again, it's a specific language, a specific skill set. We've got Yvonne here who comes from that part of the world, both as a customer as well as a proponent, I guess. So she knows how to reach out to these folks. She knows how to target products and design products that make sense to them, including potentially reaching out to U.S. high net worth. Although I will say that, that's probably a bridge to be crossed at some point in time in the future. I think the lowest hanging fruit for us, and Kishore can add to that is certainly, there's enough wealth in Asia and even here in Singapore, there's plenty of it for us to use the strength of the CapitaLand name, the brand, the comfort it provides, the assurance of integrity, the assurance of governance that these investors look for when they make such investments. There's enough for us to do here without thinking further afield at this point in time.

Yes. I can -- sorry, if I can add to that on the wealth side, it's a really good question, Terence. And with Yvonne inside the tent, I think that gives us the ability to go understand and create the right kind of product. But the thing that I find really interesting is given our REITs, the familiarity with the wealth channel of our brand is very, very high, right? So while every global alternatives or private capital firm is trying to move from institutional investor raises to wealth, for us, that path is, I think, a lot easier because the REITs have done a great job of attracting that wealth capital.

Secondly, in our home market here, the -- this is a big wealth hub. If you look at the numbers over -- from 2018 to 2030, the wealth channel grows from $800 billion of assets to $1.5 trillion of assets in Singapore. What's going on with the SGD strength to be able to offer products in that, I think, is very important. It's something that we're very, very focused on. The second thing is when we do that, it's the question that got asked earlier from Joy, we do that with platforms where unlike a private equity firm, we are not investing in these platforms and then putting them up for sale in 3 or 5 years, right? We're an aligned investor. Even in our REITs, we own 15%, 20%. We might bring that down, but we own a big cornerstone stake for a long period of time. So that in the wealth channel as well as in the insurance channel gives investors a clear alignment, which is very different from a traditional GP, which is putting up 1%.

Okay. Maybe we go to Goola.

Goola from The Edge. I've got only two questions, right, Grace. So the first one is on the next China C-REIT, which you haven't spoken about much. Is it the Raffles City portfolio? And if it is -- I mean it's the same question. And if it is what are the -- what's the occupancy of the office building like the office part of it? That's the first question. Second one is, you don't have a real data center operating platform in the way that may I use the word Keppel has. So would you be interested in one? And would that help -- I mean, you talked about operating platforms that help you design new products. Will that help you be more focused in your data center strategy? Those are just the two questions.

Yes, we are planning to launch our second C-REIT this year, probably late second quarter, early third quarter. We had one infrastructure C-REIT launched to assets, and then we are looking to launch another one. One of the assets that we have filed in our prospectus is a Raffles City at Raffles City Shenzhen. It has a mall. It has an Ascott service apartment, and it has an office. Specifically, the office in terms of occupancy, I think it's a high handle coming to 90%, so it's stabilized.

Goola, just to add, okay, go back to C-REITs and the question on why this is good for us in China. The initial class of C-REIT approvals was restricted to certain asset classes, which excluded office. This batch of C-REITs, the Chinese regulators, the CSRC has now relaxed the requirement to allow for commercial assets, which if you think about our portfolio and our legacy funds and this whole China for China pivot opens up the aperture for us to accelerate that pace of pivoting from our legacy U.S. dollar product to China-for-China, including public, private -- including public vehicles, including private vehicles. So I don't want to put the cart before the horse and get overly excited, but the pieces are in place as you always are on us on how quickly can we pivot this China -- get the momentum going. And to us, this is a very sizable and meaningful development that the regulator has done, which allows us the opportunity to do so.

If I may add, the Chinese regulators...

What is the valuation versus your book?

Also for the first C-REIT, we had an IPO price of CNY 5.7 per unit, and it's now trading at CNY 6.9. Price over NAV is CNY 1.21. I think the first quarterly results, we are 3% above underwriting. So it's doing well. The -- I just wanted to add to Andrew's point, I think the regulators are -- they are aware that liquidity is available in the market. And through a recognized and trusted REIT product, I think a lot of liquidity can flow back into the real estate. As we can tell in the last few years, there has been a departure of, say, foreign buyers from the market that has affected transactions. Transactions are much lower than before. But with the last 3 years and this infra C-REIT becoming more and more known into the market, the ability of CSRC to introduce a commercial C-REIT, which opens up the mandate to include office, hospitality and retail. And by definition, integrated assets really opens up for us, our entire portfolio to be able to see -- to be C-REITated. Given that the trading -- the BUs are also tight or tighter than the private market, it really represents a huge opportunity for us.

And what underpins all these assets are Goola is operations, right? Everyone knows about the office market in China is challenging. I don't think you can find many office assets in China that are REITable. Why Raffles City Shenzhen is able to go in is, one is a mixed development. Second is in Shenzhen is a good location. It has a benefit from Hong Kong tourists. And also because we are a Singapore brand name, there's a bit of added gloss, right? So if we are able to host the HQs of Chinese tech companies and American tech companies, and they're happy to be with us. And Raffles City Shenzhen, ASML is there. They exited SOE building to be there. Previously, one of the Chinese tech companies, HQ was there also and then after the Amazon came in. So it is fairly resilient among other office assets.

Goola, on your data center question, it's a really good question. Thanks for that. So I would say in the few months I've been here, I think data centers is a great example of somewhere that CapitaLand focuses on execution, but does a bad job of promotion, right? So we have 800 megawatts in existing operating or under construction assets, right? We understand customer needs and demands really, really well. We are now looking across that universe as data centers itself has evolved from a niche real estate asset class to a deep operating capability asset class. We're looking at that with customers and with investors. You'll see us in the next few months form that into an operating construct and focus on very specific markets. So if I take India as an example, we are -- we have delivered and are delivering nearly 240 megawatts of capacity. That I think, puts us in the top 5 in the market in India, right?

Small size, but we're also delivering in India the first ever liquid cooling, direct-to-chip cooling asset in the country. If you're going to put an NVIDIA GB300, you can't have air cooling. You need to have direct-to-chip cooling. So we're going very specific in that because the scale with these customers is massive, and we'll pick our spots through an operating platform, and you'll see us grow it in that form. Not -- rather than trying to be all things to all people in data centers, we'll pick specific markets where we have strength and go very, very significant, very large there.

Sorry, Goola, I just wanted to add a couple of points for the commercial C-REIT, just to be complete. There are a couple of things that is going well for the commercial C-REIT side. Number one, it took us 2 years to prepare for the first IPO, for the second one is likely to take 6 months. The regulators are picking up the pace and allowing for a more expedited process. That's number one.

Number two, in the first infra REIT, it was only retail. As I explained, the mandate has opened up. That's really good for us. And the third, the regulators are picking up all the pain points from the first 3 years. And for the commercial C-REIT, one of the key breakthroughs is that there is no more reinvestment obligation. This came up in the past year's analyst questions. So the commercial C-REIT does not require sponsors who inject assets to reinvest back into China. So that's really a big breakup.

And the important thing is we are very focused in making sure that the first C-REIT product is well received, trades well. So the second one will be well received. You want the vehicle to trade well to be of significant size then it can really be a vehicle to take out many of the assets that we have in China at pricing that is attractive. So that's why we are very focused. I mean some of these things requires us to invest time, energy, resources to build up all these platforms and optionality and after that, you can execute. Because if you don't lay out this foundation, then you're always held ransom by the market. So I thought you just to clarify that point.

Let's take a question online from Derek Chang. I think -- yes, the question is, thank you for sharing some guidance on core PATMI growth. MSD, I think it means mid-single digit. Will you formalize such guidance in the form of forward-looking disclosures in view of what MAS or SGX is seeking and today's share price reaction?

So we do have, I think, on the summary slide, sort of the guidance or the expectation that we think this sort of run rate for us is fairly sustainable from -- on two aspects. One is we would expect fund management revenue growth to continue to be double digit, similar to this year. But we are still investing in the future. And for us, that means recruitment. It means in the case of our lodging platform, more marketing, more advertising costs. So because of that, even though the revenue growth may be stronger, particularly for the funds, we do think sort of a mid-single-digit growth for the core operating PATMI is a reasonable way forward, barring any catalyst events, whether it is extremely good fundraising from the team or M&A or other transactions that may skew that number. But otherwise, at least in the near term, that's a realistic growth number. Going forward, we hope to accelerate that. The goal has, as you have most of you know has always been to get to a more double-digit growth rate and a double-digit ROE target. But at least for the near term, we think our current run rate is about right.

Okay. Thank you. I think we've more than crossed the 10:30 mark. I think we'll end today's session. Thank you very much for joining us this morning and for your continued support as we shape the future of CLI. There is actually a refreshment served for friends who are actually here. And if you have got any further questions, please feel free to reach out to the Investor Relations team or better still just speak to them directly, okay?

On behalf of CapitaLand Investment, we wish everyone good health, prosperity and happiness. Thank you, and have a good day.