OPERATIONS REVIEW RETAIL PORTFOLIO FAVOURABLE LEASE STRUCTURE WITH UPSIDE CLCT’s retail leases are structured to generate stable income with growth upside. The retail GRI comprises base rental income, service fee and advertising and promotion fee. Approximately 85.2% of the leases (by GRI) have turnover rent provisions, enabling CLCT to participate in the growth of high performing tenants while providing stable base rent. Additionally, majority of CLCT’s retail leases11 are structured with annual escalations, providing further stable organic growth to the income stream. RETAIL LEASE EXPIRY PROFILE All of CLCT’s properties are multi-tenanted. On top of actively improving the portfolio’s operating performance and tenancy mix, CLCT strives to achieve a balance between the stability of a longer lease tenure and ensuring concepts remain attractive to the target market. CLCT’s leases range from 10 to 15 years for anchor tenants, five to seven years for mini-anchor tenants, and one to three years for specialty tenants. This is in accordance with the market practice in China. To better manage its lease maturities, CLCT engages its tenants proactively ahead of lease expiries. As at 31 December 2023, the WALE of CLCT’s retail leases are 2.0 years by GRI and 3.3 years by NLA. The retail leases due in the next two years in FY 2024 and FY 2025 account for 43.8% and 22.5% of CLCT’s retail portfolio GRI respectively. % OF COMMITTED LEASES WITH TURNOVER RENT PROVISIONS BY GRI (As at 31 December 2023) % OF COMMITTED LEASES WITH TURNOVER RENT PROVISIONS BY NLA (As at 31 December 2023) % of committed leases with turnover rent provisions 81.2% % of committed leases without turnover rent provisions 18.8% % of committed leases with turnover rent provisions 85.2% % of committed leases without turnover rent provisions 14.8% 11 For retail leases that are longer than one year. 58 CAPITALAND CHINA TRUST
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