Stoneweg Europe Stapled Trust (SET) Earnings Call Transcript

Good afternoon, and welcome to the Stoneweg Europe Stapled Trust First Half 2026 Results Briefing. We will begin with remarks from the CEO of the Manager, Simon Garing, followed by a presentation from the management team. We'll then open the floor for Q&A. [Operator Instructions] Now I will hand across to the CEO of the Manager of the Stoneweg Europe Stapled Trust, Simon Garing. Simon, over to you.

Thanks, Kiara, and good morning, and thank you to all of us for joining today at our first half results discussion and a bit of a strategic update as well. So if we turn to Page 2 of the first half results presentation, SET's EUR 2.2 billion portfolio is predominantly freehold logistics and light industrial assets located across Western Europe. The portfolio is highly diversified, supported by nearly 800 tenants and a long weighted average lease to expiry of 4.9 years, providing the resilient and visible income streams. The Netherlands remains our largest country exposure at approximately 30% of the portfolio, reflecting its importance as a key European logistics hub and the strength of its high-tech and export-orientated economy. Our assets are concentrated in major gateway cities and strategic logistic corridors, including Amsterdam, Paris, Milan, Frankfurt and Copenhagen. Overall, SET has built a large-scale, high-quality European logistics platform that continues to deliver the stable cash flows, while our emerging data center development portfolio provides an additional avenue for long-term growth and value creation. So before we get into the results, I'd like to take a step back and summarize SET's transformation over the past 3 years. This is a story of a REIT that has undergone a meaningful reset and emerged in a structurally stronger position. Today, SET is in a materially stronger position. Logistics, light industrial and data centers now represent the majority of the portfolio. Our balance sheet has been strengthened with no material refinancing requirements until 2030 and distributions have stabilized. SET has a new and aligned sponsor based in Europe in the SWI Group or Stoneweg. Looking ahead, we see multiple pathways to future value creation, including rental growth across the logistics portfolio, asset enhancement and redevelopment initiatives and substantial growth from our data center development strategy while continuing the capital recycling that we've been undertaking for the last 3 to 4 years. This morning, we also announced that discussions are underway with our sponsor, SWI Group, regarding various strategic governance and organizational initiatives that will further enhance alignment, simplify the platform, including the potential internalization of the REIT manager and the asset management platform to create long-term value for security holders. I should add that no definitive agreement has yet been reached, and any proposal would remain subject to local laws, regulatory and security holder approvals. Watch this space as they say. Against that backdrop, let me now turn to the first half results. Turning to Page 4. The right-hand chart shows the current portfolio mix designed to capture steady and growing income from logistics and substantial growth potential within our data center options. The left-hand chart shows our medium-term allocation targets, continuing our pivot to logistics and data centers and funded by the steady sell-down of our office portfolio. Logistics and light industrial already represent the largest asset class at 56% of the portfolio, and we target to increase this asset class to around 70% by '28. We remain constructive on this sector, supported by strong structural demand, healthy occupier activity and continued positive rental reversion across our key markets while also leaning heavily on our platform's value-add DNA in this sector. Alongside this, data centers provide an additional growth pillar within the stapled trust structure. Our dual-track approach, combining investments in AiOnX with selected conversion opportunities within the REIT's existing portfolio provides a pathway to increase data center exposure from 7% today to around 15% to 20% over time. At the same time, we continue to reduce office exposure from 45% back 3 years ago to now 35% today with a target range of 15% to 25% by 2028. So overall, the portfolio is becoming increasingly concentrated in sectors where we see the strongest long-term growth opportunities in both income and value and where we feel we have a competitive and scale advantage. So having covered the portfolio strategy, let's talk about the first half results, specifically on Slide 5, which demonstrates the strength of Stoneweg's local teams and the benefits of the strategic actions we've taken. I'm pleased to report that the first half 2026 distribution per security is EUR 0.06642, up 1.4% year-on-year and remains consistent with the Board's DPS guidance for the full year to be broadly in line with that of last year. Operationally, performance remained steady. Like-for-like NPI increased 1.3%, supported by continued strength in our core assets and core portfolio, while distributable income and DPS remained slightly ahead of the prior period. NAV per stapled security remained broadly stable. Leasing activity, as you can see with the key stats here, was healthy during the half, generating positive rent uplift and supporting occupancy increases across the portfolio. And our balance sheet is in very good shape, which enabled a small but accretive buyback. Turning to capital recycling. We continue to execute on our portfolio repositioning. We acquired a $35 million logistics facility in Moerdijk, near Rotterdam, at a meaningful 8% discount to both valuation and 37% below reinstatement cost. We also invested EUR 50 million into AiOnX while providing a mandatory convertible instrument. I'll discuss more of these features later. Importantly, both investments are accretive to DPS. On divestments, we completed the sale of Riverside Park, a Warsaw office asset at a 5% premium to [ val ]. This transaction is consistent with our ongoing efforts to reduce noncore office exposure and further reinforces the pivot towards logistics and light industrial. Turning to Slide 7. SET has now delivered its fifth consecutive period of portfolio valuation growth despite a period marked by geopolitical uncertainty and higher interest rates. The portfolio valuation is up $23 million or 1.1% in the half, driven primarily by growth in passing rents and overall market rent growth across the portfolio. The gains were not surprising led by our logistics assets. Our jewel in the crown, Parc des Docks, in Paris is now our largest asset by valuation at over EUR 180 million, increasing by EUR 9 million during the period, again, as higher passing rents and new leasing activity continue to support the value creation. This asset has almost doubled the value from our original purchase price. Our other very strong performing asset, Veemart, which is a last mile park in Amsterdam, also performed well, contributing a EUR 3 million uplift, again, on the back of record level rents. Within the office portfolio, Haagse Poort in the Hague, now our second largest asset at $177 million, recorded a EUR 3 million valuation gain, again, driven by early indexation of the largest tenant, National Nederlander's new lease, which commences in 2027. Neurosa 21 in Italy also developed -- delivered a $2.2 million uplift, supported by positive indexation and a reduction in leasing incentives. Overall, the valuation results demonstrate the quality of the portfolio and our local Stoneweg team's ability to drive value through their active and experienced asset management. So beyond acquisitions and divestments, we're continuing to create value through targeted asset enhancement and redevelopment initiatives across the portfolio. The slide here shows 3 examples. As mentioned previously, in the Hague, we're working alongside NN on an ESG-led repositioning that will transform this asset into one of the most energy-efficient and employee-focused and friendly buildings, directly supporting the tenant's strategy. Construction is expected to commence in the first quarter of next year with completion targeted by mid-2030. Importantly, this initiative has already supported rent reversion of more than 50% with the new 20-year lease, which commences from the start of construction, not at the end. In the U.K., we're expanding our relationship with Thorn Lighting at Spennymoor through a new 15-year lease running to 2039. The project includes the development of an adjacent new warehouse and rooftop solar installation with an estimated yield on cost of 6.3%. And lastly, at [ Ruijterkade ] in Central Amsterdam, we have secured an irrevocable master plan for a premium office redevelopment adjacent to the Amsterdam Central Station. Construction should be ready to begin in the second quarter of next year, well within the current tenants' demand in this part of the cycle for this type of premium product. Turning to sustainability and governance as my last slide for the opening remarks. I'm pleased to report that we have met or exceeded all 3 sustainability-linked KPIs embedded into our financing framework, covering green lease Scope 3 tenant commitments, BREEAM or LEED certifications and our annual GRESB score. We have almost achieved half of our 2030 greenhouse gas emission reduction targets, although there remains more work to do on reducing energy intensity across the portfolio. These efforts continue to be recognized externally. In the latest Singapore Governance and Transparency Index announced only a few days ago, SET ranked amongst the top 6 REITs and business trusts in Singapore and now has placed in the top 10 for 7 consecutive years, reflecting our long-standing commitment to strong governance, transparency and stakeholder engagement. In addition, MSCI recently upgraded SET's ESG rating from single A to AA with SET recognized as a leader among more than 500 real estate management and service companies globally. Together, these achievements reinforce the progress we are making in strengthening both the sustainability and governance foundations of the platform. So with that, I'll now hand over the presentation to our Head of Finance, Hui Chen, to give you more details on the financial results for the half. Thank you, Hui Chen.

Thank you, Simon. Good afternoon, everyone. I'm pleased to present SET's results for the first half. The figures on this slide are on a consolidated basis and include both the REIT and the business trust. Further details are available in the financial statements released earlier today. First half net property income was EUR 65.4 million, down 2.3% year-on-year, mainly due to the impact of asset divestments. Excluding this effect, the underlying operating performance remained resilient. In particular, when taking into account the EUR 2 million contributions from our investments in AiOnX, NPI was broadly in line with the first half of 2025. On a like-for-like basis, NPI increased by 1.3%, driven by the continued strength of the Logistics and Light Industrial segment. Excluding Perrazzino, which was reclassified from the office sector, NPI from this segment increased by 2.7%. Interest costs were 5.2% higher due to higher borrowings. Our cost of debt remained stable at 3.9% compared to 3.86% a year ago. Distributable income was in line with the first half of 2025. Distribution per stapled security increased by 1.4%, supported by the securities buyback program, which contributed approximately 1% to DPS growth. The waterfall chart on Slide 12 shows the key movements in the distributable income compared with the prior corresponding period. Encouragingly, strategic initiatives increasingly contribute to earnings growth. Contributions from AiOnX, the Netherlands acquisition and stronger logistics operations largely offset the earnings impact of asset sales completed under the portfolio repositioning program. This demonstrates the progress we are making in recycling capital from lower growth and non-core assets into investments that offer stronger income and value creation. At the same time, interest cost has largely stabilized. This slide sets out the key dates for the first half distribution. The distribution reinvestment plan remains suspended because SET continues to trade at a discount to net asset value, although we are encouraged to see this discount narrowing. The business trust will not make a distribution at this stage as its investments have yet to generate positive cash flow. Accordingly, the first half EPS of EUR 0.06642 will be paid entirely from the REIT whose distribution policies remain unchanged with a minimum payout of 90% of distributable income, subject to Board approval. Moving to the balance sheet on Slide 14. Here, you can see the REIT, BT and the staple group combined balance sheet. As at 30th June 2026, such balance sheet remains in a good liquidity position with EUR 45 million of cash and only EUR 30 million drawn against the EUR 200 million revolving credit facility. Total assets increased following new investments in the first half, while NAV per security remained largely stable. Overall, the balance sheet continues to provide flexibility to execute our strategy while maintaining investment-grade credit metrics. I'm pleased to report that SET's credit metrics remain comfortably between all bond lenders and rating agencies requirements, supporting our investment-grade ratings from Fitch and S&P. Gearing increased during the first half as capital was deployed into new investments but remain below board limits and is expected to moderate as capital recycling initiatives continue. Interest coverage ratio on a trailing 12-month basis is 3x, calculated based on SET's EMTM program. This remains well above our covenant requirements, rating agency metrics and MAS limits with 90% of our debt fixed or hedged. The impact of interest rate movements on interest expense and distributions is expected to remain limited. A 100 basis point increase in interest rates would have only a minimal impact on ICR. The key takeaway is that the balance sheet remains appropriately structured for both resilience and growth while preserving access to multiple funding sources. This slide illustrates the strength of our debt maturity profile with no material refinancing requirements until 2030. SET remains well insulated from short-term volatility in debt markets. I will now pass the portfolio highlights to Elena.

Thanks, Hui Chen. Turning to Slide 18. The quality of SET's portfolio is underpinned by a highly diversified tenant base of approximately 750 tenants across 930 leases. More than 90% of our lease -- our tenants and multinational corporations or government-related entities, providing strong credit quality and resilient cash flows. Importantly, tenant concentration remains low with no single tenant contributing more than 4% of headline rent and our top 10 tenants accounting for just 22% of portfolio income. The diversification continues to be a key source of resilience, particularly in the current uncertain geopolitical environment. Moving to Slide 19. Portfolio occupancy in the first half increased to 93.7%, up 110 basis points since December 2025. Western Europe continues to perform strongly with occupancy of 94.7%, while Central Europe stabilized at 84.4%. Logistics and Light industrial continue to perform strongly, supported by healthy leasing demand and positive rent reversion across key markets. Rent reversion remains in the very high single digits at 9.6% of the first half, reflecting the resilience of the underlying leasing markets. During the period, we signed or renewed approximately 96,000 square meters of leases, representing close to more than 8% of the portfolio on the back of continued tenant demand from high-quality, well-located assets. As the chart shows, both occupancy and rent reversion have remained resilient. Rent growth remained within normal historical ranges and with the portfolio still around 4.6% under-rented, we continue to see scope for further income growth. We also remain on track to maintain occupancy at around 95% throughout most of 2026. As you can see from the leasing slide on Slide 21, leasing activity during the quarter was focused on a number of sizable transactions across Denmark, France and the Czech Republic, with long-term new leases contributing to a blended rent reversion of 10%. These transactions highlight disciplined asset management and our continued ability to drive rental growth, reduce vacancy and enhance the quality and security of portfolio cash flows. Staying on this sector, but looking beyond our own portfolio, on Slide 22, you can see that European logistics fundamentals remain supportive. However, manufacturing activity remains resilient and continues to support demand across our markets despite a more uncertain macro backdrop. According to recent data from Cushman & Wakefield, rent growth remains intact, as shown in the chart on the bottom right. Limited new warehouse supply and steady demand from manufacturing and B2B distribution occupiers support this trend. Green Street continues to forecast logistics rental growth of 3.2% per annum over the next 4 years, outperforming both retail and office sector. Overall, market conditions align with our high conviction for the sector over the medium term. Moving to the office sector. As you can see on this slide, we have, for the first time, split performance across our high-quality office assets in the Netherlands and Neurosa 21 in Milan and the remaining non-core office assets. Our office strategy remains focused on retaining high-quality core assets as a store of good value and yield while reducing exposure to non-core properties over time. Leasing activity in the sector was selective during the first half with the management prioritizing occupancy and tenant quality. Occupancy remained above 95% across our core portfolio in the Netherlands and Italy, while WALE increased to 4.9 years following the ABN AMRO lease renewal in Koningskade. Rent reversion was negative 4.1% on a relatively small sample size, largely due to a lease renewal in Poznan in Poland, where rents were reset to market levels, together with occupancy-focused leasing in our Finnish assets. The office portfolio remains approximately 9.8% under-rented, providing opportunities to capture upside through lease events and asset enhancement initiatives over time. And for my last slide for this section, the pan-European market data continues to support our focus on high-quality, well-located office assets. As you can see from the chart on the left, since 2019, European CBD vacancies have increased to just 220 basis points to 4.9%. This compares to the 500 basis points increase across the broader office market to 9.5%. This bifurcation reflects the ongoing flight to quality with occupiers increasingly favoring prime centrally located buildings. The same trend is also evident in rental performance. As evidenced from the chart on the right, prime office rents continued to grow in the second quarter, increasing 1.2% quarter-on-quarter and 4.5% year-on-year, demonstrating that demand for quite quality CBD office space remains resilient despite the broader macroeconomic backdrop. This again reinforces our strategy of concentrating on core office while continuing to reduce exposure to non-core properties over time. Now back to Simon to talk about our growth strategy in data centers.

Thanks, Elena. So we will turn to a couple of pages now on our DC strategy, which represents an additional growth pillar complementing our logistics platform. The objective is straightforward: maintain the income characteristics that investors expect from the REIT portfolio while introducing selected opportunities capable of generating stronger long-term NAV and earnings growth. Importantly, this is designed to enhance the existing strategy, not replace it. Logistics remains the foundation of the portfolio, while data centers provide exposure to some of the most compelling structural growth drivers in Europe. Together, this creates a balanced model, combining income growth and long-term value creation with adjacent asset classes. A key element of our growth strategy is participation in AiOnX, our sponsor, Stoneweg's pan-European data center platform. Through this investment, SET gains exposure to opportunities that are typically unavailable to listed REIT investors who typically have the opportunity only to buy the completed property, not generate the profits on the way through. The platform currently comprises 5 projects across Europe and is progressing through key development milestones, including expanding the amount of power to be connected. We're now over 2 gigawatts of power. The Dublin project is expected to begin generating rental income to one of the U.S. leading hyperscalers during the second half of this year, marking the transition from development phase to now a phase of income generation with more substantial development to occur. And Elena and I visited the site in June as the U.S. hyperscaler tenant was fitting out while the power is being connected. This project is fully leased to a leading U.S. hyperscaler for cloud and will be the largest in the Dublin region, one of the core FLAP-D markets. And to put the project in context on completion will be 4x the power load of a recent data center S-REIT purchase. Our initial investment has already benefited from milestone-driven valuation growth. You can see this in the Business Trust balance sheet that we Chen took you through and provides participation in what we believe is a significant long-term development opportunity. And this really lies in the scale of the sponsor platform and the potential to participate with their support. And in total, this pipeline sitting inside AiOnX has a development value of more than EUR 30 billion with targeted yields on cost of 12% to 15% at stabilization. The slide on 27 outlines the distinct roles within our 2 AiOnX investments and how they both support both DPS and NAV growth. The original EUR 50 million equity investment that we made last year is primarily focused on long-term value creation through participation in the equity returns of the data center projects. Based on the latest independent valuation assumptions, the investment continues to target a pretax pre-fee IRR of above 25% over the life of the projects. The second EUR 50 million investment, which we contributed earlier on this year, was structured differently and is designed to balance income and growth It generates an already fixed 7.25% annual cash coupon, supporting immediate distributions while also providing future participation in the upside of the AiOnX investment through conversion into ordinary equity at a material discount to the NAV at that time. Based on current assumptions, the investment is targeting a pretax pre-fee IRR of approximately 12% to 17%. These 2 investments sit at different points on the risk return spectrum with the same underlying assets. And together, they provide certain investors with exposure to large-scale European data center development pipeline. So looking ahead, our focus is execution. The portfolio repositioning undertaken over the past 3 years has created a clearer strategic direction. The next phase is about translating that positioning into sustained income growth, value creation and improved market recognition. So in conclusion, our strategy remains straightforward. We continue to allocate capital towards sectors where we have the highest conviction and strongest competitive advantages, namely Western European logistics and pan-European DCs. Logistics remains the core income engine of the portfolio, supported by the high occupancy, the positive rent reversion and the long lease duration. And adjacent to this, our DC initiatives provide the additional growth engine. We also continue to progress AEI and redevelopment initiatives within the portfolio designed to improve asset quality, support the rental and NAV growth as we have a track record of doing so. One of the pillars of our operating model is our experienced local teams on the ground in each country where we have been operating for over 30 years. From a balance sheet perspective, we remain well capitalized with no material refinancing requirements until 2030 and the flexibility to continue executing our strategy. Our margins continue to shrink as our lenders and the bond markets continue to see the progress we're making. In parallel, the Board and sponsor are evaluating a range of strategic and organizational initiatives. These discussions may include changes to lowering management fee arrangements, ownership structures, incentive frameworks and a potential internalization of the REIT manager and the asset management platform. While discussions remain ongoing and no definitive agreement has been reached and would, in any case, be subject to customary approvals, the objective of any proposal would be to improve margins, be accretive to distributions and generate additional long-term value for security holders. And based on current market conditions and barring unforeseen circumstances, the Board reiterates its distribution guidance that FY '26 EPS should be broadly in line with FY '25. Thank you for your attention, and we'll now be pleased to take your any questions. So Kiara, please open the lines up. Thank you.

[Operator Instructions] Our first question comes from Vijay.

Congrats on a pretty strong set of numbers actually. I mean, pretty healthy numbers. I have 3 sets of questions. Maybe I'll take it one by one. My first question is in terms of portfolio metrics. Quite a good improvement in terms of portfolio metrics, both in occupancy and rent reversion. What can we expect for second half? And especially what drove the big occupancy jump in office markets in Finland and France?

Yes. Thanks, Vijay. And a lot of the credit obviously goes to the local teams on the ground. In terms of the office portfolio in Central Europe, that's really on the basis of leasing activities as per Elena's remarks. And in Paris, where we only have 2 smaller assets, again, a few leases move the needle there. The second question -- sorry, the first question was guidance. So the guidance is -- so firstly, our result is above our expectation in the first half. So that would not be in our guidance for the second half. But that's not to say we couldn't again surprise on the upside. We've had a history of having quite strong rent reversion that comes in above our own expectations each time. I think one of the key charts here on the office side, in particular, is the low vacancies in European prime office. We're still below 5%. We're generating very good rent growth. Now while this half, we only leased 10,000 square meters, it's a very small sample size. But generally across the board, like-for-like NPI growth in office is stable. From a logistics perspective, we're getting almost double GDP growth in rent and in line with inflation. So still there is good demand. I wouldn't say as strong as it was coming out of COVID where there was a big rush by the large 3PLs to get set, but it's still very pleasing.

Got it. So you can still expect some growth.

Yes. And as a reminder, all of our leases have some form of CPI indexation. So we are running at slightly elevated inflation numbers around 3%, coming down a little bit to 2.6%. That will drive rent growth as well, not just the good fundamentals, supply down, vacancy down, but there's also the indexation for all of our leases.

Second, in terms of your portfolio rebalancing plans, I mean, I noticed that you're planning to rebalance your portfolio, doubling your data center exposure from here to or potentially tripling it. Will this all come via AiOnX? Or are you looking at third-party acquisitions of data centers at this point of time? And maybe can you also guide us in terms of what's your divestments targets? I mean this rebalancing would also include divestments, right? I mean what's your divestments targets for what's possibly office and logistics segment?

Yes. So firstly, in one of our charts, you will see -- and we spoke about this in the March quarter, we've identified up to sort of 10, 11 assets that lend themselves to conversion to data centers on our own balance sheet. So out of our 96 assets with the help and cooperation of our sponsor who's very well equipped on the data center development side, given their own portfolio in AiOnX. They're certainly lending a lot of support to help us with our own feasibility within our own portfolio. So we don't actually have to invest a lot of capital other than blood, sweat and tears and a little bit of planning to convert a number of these opportunities into much higher valued assets even before doing any development. So just simply getting power supplied, contracted, permitted, getting the zoning in one particular property. We're going -- this is now our third year of trying to change the zoning. So we're getting closer to approvals there. Just allowing to do developments. We've put up sort of a graphic here on Page 38 that shows what an old last mile asset can be turned into one of the most modern and exciting data center opportunities where we're adjacent to a waste-to-energy power plant. And on the other side, an offtake arrangement can be made to sell the heat from our data center into one of the largest central district heating suppliers to this major city. So a lot of the growth in our target from the 7% today to the sort of 15% to 25% is actually in blood, sweat and tears and not having to go out and buy assets. That's not to say we wouldn't look into the sponsor's pipeline. The sponsor is very keen, given they've got a material stake in us as well to see some of these frankly, extraordinarily high returns that is available for data center developments. So we think the office portfolio is a store of value. We've demonstrated we've been able to do this pivot without really elevating gearing levels through the recycling, disciplined recycling to help fund our growth initiatives. Our average asset size is roughly EUR 25 million. I'm not going to say it's easy as taking money out of the ATM that would be giving a disservice to our transaction teams, but certainly a lot more liquid to be able to sell a EUR 5 million building here, a EUR 10 million building there and being able to match as best as we can, the timing of disposals to recycle the capital into the pipeline of opportunities that we see in front of us.

Just one last question. I think on your big news on fee incentive framework as well as internalization plans. Maybe can you guide us in terms of what drove these conversations? And what can unitholders expect in terms of fees? Would it be safe to say they would be better off from wherever we are at this point of time? And what's the time line?

Yes. So Vijay, as one of the diligent analysts, you will recall Page 311 of the 2017 prospectus that says with -- after the first 9 years of listing, the manager is to re-engage on the fees before the next 10-year contract is renewed by the manager. So we have a positive obligation now to enter into discussions in order to perform the responsibilities of the 2017 prospectus. So you can imagine that while we're undertaking that fee discussion, there are other options that are also potentially being explored with the support of the sponsor to see how do we enhance dividends, improve margins, improve alignment and really create a wider universe of investors that can potentially look at the REIT, recognize what we're doing within the REIT and be comfortable on the next 10 years that the structure is appropriate for the next 10 years. It's not to say the structure today wasn't appropriate for 10 years ago. But the world is moving on. We want to continue to future-proof the portfolio and future-proof the structure. The stapling of the business trust last year was a step towards providing value for security holders. We're always contemplating what to do next to continue to enhance returns, drive the share price higher, close the gap to NAV, deliver on the portfolio, but also from a margin perspective, how do we improve the margins. And one aspect of that is really addressing the cost of operating the REIT on behalf of the unitholders. So whatever we do over the coming months will require a lot of diligence work with regulators such as MAS and shareholders, but it's really for the positive outcome of all shareholders.

Our next question comes from Dale.

Can you hear me?

Yes.

Congrats on the good results. Yes, just wanted to echo what you shared with Vijay. Looking forward to more updates on this review. I just wanted to turn my attention to the capital management. In terms of the interest rates inching up slightly in terms of where gearing is currently. Just wanted to follow up, how are we thinking of gearing at this level? And then should we be expecting you to step up on more divestment? And what kind of assets or what kind of markets are we targeting?

Yes. Thanks, Dale. Good question. Yes, I mean as Hui Chen said, our average effective interest rate was effectively the same as a year ago despite the increase in the interest rate market. So the 90% of our debt being fixed and hedged really is a part of having gearing at the top end of the Board policy range is that we've protected both the cost side of the debt, but also really importantly, we have no debt maturing until 2030. So we're not worried about refinancing in the next 3, 4 years. It's not an issue for us. So when you combine the maturity of the debt with the fixed nature of the debt, yes, we're comfortable at the top end of the Board's range of 35% to 40%. Our interest cover is very adequate. And you can see that in the performance of our bonds. Our 2 bonds are a very public indicator of the 180 investors in our 2 bonds as to what they think of our credit, not just Fitch and S&P, who also provide investment-grade credit ratings.

Okay. I was actually looking at I was just comparing the metrics on a Q-on-Q basis rather than year-on-year because I realize versus 1Q, it inched up slightly. So just wanted to understand what was the main contributor there.

Yes. So 10% of the debt is floating and rates are higher across most of the world.

And how should we expect guidance on cost towards the end of the year? Should we be expecting on these levels or [ any different ]?

Yes. Again, this chart on Page 16 highlights that we're 90% fixed and hedged through to October 27. So those percentages on this chart reflect the point in time when the hedges roll off.

Yes. Okay. Got it. Okay. And my second question is on this redevelopment of Ruyterkade. On that, you shared that early next year, we should see some progress on that. Just wondering if you could share a bit more in terms of value in terms of what are we expecting in terms of upside and how soon can we [indiscernible] pricing again?

Yes. So we're really thrilled with the almost final designs, as I said, has been irrevocably approved from a zoning perspective. We've just got one last box to tick. So we would expect to get the full clearance to go ahead from December this year. We had a tenant in place until first quarter next year, so we couldn't start demolition now anyway. So we've got months of buffer here anyway. This is a type of asset that we've mentioned before that could be better served being developed in the business trust. As you know, in Singapore rules in REITs, we're not supposed to develop to sell. We have to develop to own for at least 3 years. Whereas in Netherlands at the moment, there's a substantial tax subsidy, which on this project could be as much as EUR 17 million for us to develop and sell within the 3 years. So this is an asset that's been considered to move into the business trust and therefore, having limited impact on the earnings out of the REIT. And as the business trust is not paying a dividend, then it doesn't impact the dividend of the REIT. Quantum of dollars, we've mentioned before, this is likely to be just over EUR 100 million. And we're highlighting here on the first -- on Page 8, for the first time, a targeted yield on cost of 6.5%. Property like this today would sell for around 5%, 4.75% to 5%.

Our next question comes from Ming who asks, "The EUR 180 million cash is held at the BT with $122 million held in investment assets. Please help us understand what the cash will be used for and what the underlying -- what are the underlying investments, please?"