Can you bring us through CLCT’s operating performance in FY 2023? In FY 2023, CLCT net property income (NPI) grew 5.3% to RMB1,293.7 million. This increase in NPI was boosted by stronger performance in CLCT’s retail portfolio which constitutes 75.9% of assets under management (AUM)1, and partially offset by lower contributions from the new economy portfolio. Notably, in 2H 2023, CLCT registered a year-on-year (YoY) growth of 10.5% in NPI to RMB630.0 million. This growth was primarily due to improved operating conditions and positive momentum in the retail sector driven by higher occupancies and post-asset enhancement initiatives (AEIs). Shopper traffic2 and tenant sales2 for our retail portfolio demonstrated considerable YoY growth of 45.8% and 41.5% respectively. Occupancy for all retail properties reached 98.2%, the highest since December 20193. This recovery can be attributed to the overall improvement of China’s retail environment and to our dedicated efforts in carrying out AEIs across our assets. Through these initiatives, we have successfully introduced new trending concepts and optimised our spaces to meet the evolving demands of consumers while delivering positive rental reversions. This proactive approach not only positions us to take advantage of the consumption recovery but also ensures that we remain relevant to our catchment shoppers. During the year, our portfolio occupancy cost4 trended towards the healthy range of high teens to low 20%. As business and consumer sentiments continue to return on the back of improved sales, we will enter a more constructive lease cycle with brands seeking spaces that resonate with their strategic expansion plans. Given these developments, we are well-positioned to harness the ongoing positive momentum as we move into 2024. Despite the weaker business sentiments, we managed to maintain our business park portfolio occupancy at 91.0%, with a positive rental reversion of 1.6% while our logistics park portfolio occupancy stood at 82.0%. Our focus for our business park assets is to actively pursue leasing opportunities in growth sectors that are in line with China's long-term growth strategy. By strategically aligning ourselves with these growth sectors, we aim to capitalise on emerging trends and secure sustainable growth for our portfolio. For our logistics assets, we remain focused on tenant retention and driving occupancy rates. We are working closely with government agencies and our established tenant community to strengthen the demand pipeline. Through careful tenant selection and the ongoing cultivation of partnerships, we will continue to navigate the current landscape and position ourselves to capture new opportunities. On the sustainability front, what are some of CLCT's notable achievements during the year? In 2023, our commitment to sustainability was recognised with major advancements in key assessments. We achieved a 5 Star rating in the GRESB Real Estate Assessment, a marked improvement from our 2 Star rating in 2022. Additionally, we maintained an A rating in the GRESB Public Disclosure, while our MSCI ESG Ratings improved from B to BBB, and our Sustainalytics ESG Risk Rating advanced from Low Risk to Negligible Risk. In a first for CLCT’s portfolio, we completed the installation of 253 solar panels at Kunshan Bacheng Logistics Park at the end of 2023. This initiative will enable CLCT to generate renewable energy starting in 2024. These rooftop solar panels will allow us to supplement the power needs of our tenants with clean energy. Additionally, we procured offsite renewable energy for the first time with Ascendas Innovation Towers and Ascendas Innovation Hub being the first properties in the portfolio to adopt this initiative. In 2023, the renewable energy from these offsite sources comprised approximately 3.0% of our total portfolio electricity usage. During the year, we established a SustainabilityLinked Finance Framework that comprises key performance indicators (KPIs) linked to green building certifications, renewable energy and energy consumption intensity targets. The framework is applicable to CLCT’s Sustainability-Linked Instruments, including Sustainability-Linked Bonds and Loans. To ensure transparency and credibility, we sought Q Q A A Overview Our Business Our Frameworks Our Financials Other Information 1 Based on effective stake as at 31 December 2023 and post-completion of the divestment of CapitaMall Shuangjing as announced on 23 January 2024. 2 Shopper traffic and tenant sales exclude CapitaMall Qibao as the mall has ceased operations since the end of March 2023. 3 Excludes CapitaMall Minzhongleyuan as its operations were under review. The divestment of the mall was completed on 10 February 2021. 4 Excludes supermarkets. ANNUAL REPORT 2023 21 Financials Framework Portfolio Performance Leadership Overview
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