CapitaLand Investment Limited (9CI.SI) Earnings Call Transcript

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.