Good evening, dear analysts and all participants. Welcome to Mapletree Pan Asia Commercial Trust, or MPACT analyst briefing and live webcast for our second quarter and financial period from April 1st to September 30th 2025. I'm Li Yeng. I'm delighted to host today's results briefing. Allow me to introduce our speakers for today. They are Ms. Sharon Lim, Chief Executive Officer of MPACT, Ms. Janica Tan, our Chief Financial Officer, and Mr. Koh Wee Leong, Head of Investment and Asset Management. Our speakers will take you through our financial results, share key business developments, and market insights. Following the presentation, we will open the floor for Q&A, where we invite you to ask questions. Without further ado, I will hand the floor over to Janica, our CFO.
A very good evening. The performance of MPACT across full quarter, second quarter, and first half was anchored by Singapore's continued strength, strategic portfolio optimization, and proactive debt reduction, further supported by the favorable interest rate conditions cushioning the overseas NPI . For second quarter, DI distributable income was SGD 106.1 million and DPU SGD 0.0201, which was 2.1% and 1.5% higher as compared to second quarter last year. The year-on-year increase was due to interest rate savings from lower interest rates on Hong Kong dollar and Sing dollar borrowing and lower loan outstanding, as we have prepaid the loans with proceeds from divestment from Mapletree Anson last year and the two Japanese property, office properties in this quarter.
The increase was also partly offset by the unfavorable effect impact from depreciating HKD and RMB against SGD, Higher withholding tax relating to the J-GAAP profits on the divestment of the two properties, two Japan properties. The next slide shows the contribution by different markets. NPI for Singapore properties, excluding Mapletree Anson, increased by SGD 6.2 million, mainly due to lower utility, higher rental income, and also compensation income received. This is partly offset by the higher property tax and ARF cost. The year-over-year decrease in the NPI for overseas properties was mainly due to lower occupancies and negative rental reversion. Moving on to first half, distributable income SGD 213 million, DPU SGD 0.0402, were lower by 0.8% and 1.2% year-on-year.
The year-on-year decrease was mainly due to operational contributions from overseas properties and the absence of contribution from Mapletree Anson. This was further dampened by the depreciating HKD and RMB against SGD. Savings from interest expenses mitigated the lower NPI. The interest rates on HKD and SGD borrowings were lower year-on-year, coupled with lower outstanding borrowing. This slide shows that Singapore continued to account for more than 60% of both gross revenue and NPI, with the two core assets accounted for more than half of the portfolio's gross revenue and NPI, moderating the headwinds from overseas. On balance sheet, NAV was SGD 1.75. We have completed the divestment of TSI and ASY in Japan during the quarter, and the net proceed were used to repay onshore borrowings.
Moving on to capital management, gross outstanding borrowings SGD 6 billion, and aggregate leverage ratio improved from 37.9% last quarter to 37.6% as at September 30, 2025. Additionally, the weighted average cost of debt declined 9 basis points to 3.23% per annum. These were driven by proactive debt management efforts, further supported by favorable interest rate conditions. As at September, the ICR improved slightly to approximately 3x on a 12-month trailing basis, and the average term to maturity of debt was 3.5 years by the end of first half FY 2025-2026. By the close of the reporting period, MPACT has a financial flex of approximately SGD 0.9 billion in cash and undrawn committed facilities, ensuring sufficient liquidity for working capital and financial obligations.
We will continue to ensure a natural balance sheet hedge by closely aligning the debt mix with geographical distribution of MPACT's AUM where possible. MPACT's debt profile remain well distributed, with no more than 24% of debt expiring in any single financial year. The outstanding borrowing in FY 2024, 2025, the SGD 120 million, was on a facility in Korea, our joint venture with MIPL. Facility were put in place, and the refinancing will be completed by next week. As you can see, we did a revaluation of our property in Korea, TPG, and that was because the lender required the valuations to be not less than three months old. Hence, we did a valuation in relation to this refinancing. In conjunction with the refinancing, we..
The valuation for TPG was actually about 1.3% above the local currency valuation, and hence we recorded a gain of SGD 2.8 million under the share of profit of joint venture in the balance sheet. Okay, on risk management, to shield against interest rate volatilities, we continue to keep our fixed rate at above 70%. In August, we issue a SGD 200 million seven-year green notes at 2.45% per annum. As of September, the fixed rate executes at 79.5%. FX-wise, remain volatile with Hong Kong dollar, renminbi, Korean won continue to depreciate against Singapore dollar. More than 70% of distributable income more in Singapore dollar and most of the foreign currency distributable income will also fetch into Singapore dollar based on a rolling four-quarter basis.
Last but not least, on the distribution detail, DPU for second quarter was SGD 0.0201, and unitholder can expect to receive distribution on December 4 and the book closure date is on October 30 2025. With that, I will now hand over the time to Leong. Thank you.
Okay. Good evening, everyone. Maybe just go to slide 19, where we can look through the occupancy of the various assets. MBC has maintained its occupancy through the period and closed the quarter at 93%. VivoCity continues to maintain its 100% occupancy. The other SG properties occupancy has improved slightly to 99.1%, while at Festival Walk, occupancy has also increased slightly as we're able to lease out another one of the office units. For the China assets, we have continued to maintain occupancy at a fairly healthy level, but that was at a little bit of expense on rental reversion, as you'll see in the later slide.
For the Japan properties, one of the subtenants at mBAY POINT Makuhari, which was one of the subtenants for MPACT, actually departed the building, so there's obviously an occupancy falling slightly, while The Pinnacle Gangnam managed to maintain occupancy close to 2%, except for one of the small retail units. Moving on to rental reversion. For Mapletree Business City, rental reversion came in slightly negative. That's largely due to the fact that about 40% of the leases we have committed to date were actually at very high average rentals. These leases were signed before COVID. Most of them were north of SGD 7 and our market rentals at Mapletree Business City now are actually closer to the SGD 6.50 number.
Due to the rental reversion of this chunk of leases, the MBC rental reversion is slightly negative. VivoCity continued its good performance, closing the quarter with 14% positive rental reversion, while for the other SG properties came in about 6% and driven by the improvements in performance at ARC as well as in mTower. Festival Walk, the rental reversion came in at -10%, widening slightly from the previous quarter. Retail sentiments remain fairly weak in Hong Kong and can go into a bit more detail on this in later slides. For China, again, the real estate market in both Shanghai for business park as well as office for Beijing remains very weak.
The amount of supply in Shanghai, coupled with the weak economic outlook, has led to tenants pushing down rentals. The competition between landlords in Shanghai and Beijing continues to be very fierce, and rentals are continually being pushed downwards. To retain tenants and to ensure our occupancy remains at a fairly healthy number, we have moved our rentals downwards to match with market in an effort to maintain our occupancy, which you will see the team has done fairly well over the past quarter. For Japan properties, rentals largely flat. And for The Pinnacle Gangnam, that one lease that we signed is just a small retail tenant, even though the rental reversion is positive.
Lease expiry for office and retail remain fairly healthy. Two years for retail and 2.4 years giving our portfolio weighted average lease expiry of 2.2 years. Moving on to slide 23. This just gives a summary of the completion of the divestment of the two office assets in Japan. Two fairly small assets, one in Tokyo in the Ikebukuro area and the other in Yokohama. For this transaction that we had announced it in the towards the end of the previous quarter, and this is completed in August. Moving on to retail. You will see that for VivoCity, shopper traffic and tenant sales remains strong.
This is despite the fact that we had disruptions within the mall due to the AEIs that have been ongoing. This slide shows the Next slide shows the AEI works which were completed at the mall over the last few months. Phase one was completed in first quarter. That's actually the change of layout of the food kiosks as well as increase of the kiosks from 21- 24. The second phase is the expansion of the basement two area by about 14,000 sq ft on net lettable through conversion of car park area and reconfiguration. Okay. If any of you have been to the mall recently, you can take a look at this.
For those that have not, we have got a video to give you a sense of how it looks like.
We have started this planning for over a year, and we completed phase one and phase two. This shows actually phase two, which is a 14,000 sq ft, which is conversion from car park. We do not use car park at all, we decided to join car park or maintain the total number of car park lot. This is a visual of the new area that we've recreated, a total of 14,000 sq ft. It's a total change. We changed all the F&B and all the seating segments and even included. You walk through from the MRT, you will actually see HarbourFront here so that it is just visible. This is the new drop off. We have actually relocated the new drop off to actually enhance the people flow to this area. Okay. Some returning tenants, some existing tenants.
[VivoCity] has done a major revamp, and we have brought in a couple more casual dining tenants. The portion of this that you have seen are majority car parks. It's all trading well today. This is the new toilet, which is actually highly used. Basement two is a very high traffic area. It's only one set of toilet, so we have both a set of that for both the men. Relocated traffic drop off. New toilet. Floor, ceiling finishes improved, added M&E and also widened the exit. We totally spent a total amount of over SGD 40 million, and ROI is in excess of 10%.
This slide just gives you some of the new tenants and some of the tenants that have come back to the mall. Maybe moving on to the next slide. One of the more successful events we had over the last quarter at the mall was a collaboration with Pop Mart with Labubu Mini Market cum Mid-Autumn fair, as well as we have also done the Mid-Autumn fair at the level one of the mall. Moving on. For Festival Walk, while shopper traffic has improved slightly year on year, tenant sales remain weak, largely in line with the.
Tenant sales remain weak, that's largely attributed to higher amount travel by Hong Kong residents due to the continued strength of the Hong Kong dollar, as well as a reduction in consumption due to the continued economic weakness in Hong Kong. The mall has continued to try and rejuvenate its retail offerings, bringing new tenants like Stocklash, as well as number of services like medical center, HOMES and things like Nespresso. If you look at the increased traffic, part of this is attributed to the events that we have done throughout the mall and that has been very popular with being able to draw in a large number of the shopper traffics.
We have also improved amenities. We have also improved offerings to shoppers by doing things like by improving the offerings like car park redemptions and car park offerings there so that we can bring in more traffic in the evening so as to boost the F&B spending. Okay. I think that comes to the end of the presentation.
Thank you, Janica and Leong. We are now ready to take your questions. For analysts, kindly raise your hands on Teams if you'd like to ask any questions. We kindly request that you state your name and your firm before asking. For our online participants, you may submit your questions through the text-based platform. First, shall we hear from the ladies for a change? Geraldine from DBS?
Hello, hello. Good evening. Congrats on the great result. Maybe my first question is on interest costs. Assuming that you do a full reset based on where market rates are, what will it actually bring your interest cost down to? Just a sense if possible.
You're saying that if all my SGD 6 billion loan is due for repricing today at today's rate, what is the prevailing rate that I'll be getting or the cost of debt I'll be having?
Yeah, yeah.
Is it-
Level. Yeah.
We normally do have this information, but as you know, our internal policy is to keep it above 70% fixed. If I follow this way of doing above 70% fixed, 30% float, I think it should be lower than what we have today by at least 50 basis points.
Oh, 2.7%?
Thereabout, but you know, the spot rate change every day. As of today it's this, tomorrow it will change.
Oh, okay. Okay. Yeah, that's very encouraging. Maybe second question, maybe on Festival Walk. I think your previous guidance was that the non-anchor leases should see a flattening of reversions. Is that still the right thinking that we should continue to see that compression in the next one to two years? Maybe some color on the ground retail sentiment now.
Okay. I think sentiment-wise it's not as bright. I think we'll be very upfront about it. In terms of the efforts that we are doing, we are trying to drive more people through the mall. You can see that we have intensified our marketing, in-store event, I would say 3x more than what we used to do. That has actually helped in terms of, at least, pushing people through into the mall and indirectly will translate into a spend. That's what we are doing. If you talk about reversion-wise, I think I've been saying it's ± 10%.
Of it has gone through major rental minus negative rental reversion. I think there are still pockets here and there. Hopefully if, I mean, if the spending gets lesser in overseas and especially, you know, some dilution into centers, then hopefully this will be a better trend for the malls itself. Yeah. Generally, I would say that I think we are on the same page now with most of the other mall operators.
Yes. Okay. Thanks, Sharon. Yeah. Maybe I can just squeeze in a last one. I think, this quarter you did a reval for, inaudible. just, with I think a similar area, I think it's because our mind whether you are, you're looking to, divest that asset.
Oh, no, no.
You know, look at opportunities.
That was, it was a financier's requirement, and it's under the REIT guidelines that any revaluation has to be announced. Yeah. Don't think too much to it. When the time comes, if there is any, we will definitely inform the market. Don't read too much into this one. This is, it was driven by a refinancing need.
Yes. It's a financial condition for me to draw down loan.
Yeah, yeah. It's just administrative. Okay? REIT guidelines expect all valuations to be announced.
Okay. Okay. I see. I see. Okay. We will wait for your further good news. Yeah. Thank you.
Thank you, Geraldine. Terence?
Hey, thanks. Thanks so much. Terence from JP Morgan. Yeah. Hi, Sharon . Congrats on the results. Just wanted to ask on China. Could you give us a better sense of, you know, what you're seeing in China? It seems that occupancy ticked up slightly and the reversions are coming in slightly ahead of your guidance from the previous quarter. Maybe could you give us your updated guidance on expectations for China?
Just to give a sense, leasing activities in China, generally is concentrated in the first six months of our quarter, right? once you get into the latter six months, there is the inaudible holidays, end of the year vacation, after that you've got Chinese New Year coming up. the later six months of the year, there will be less leasing activity in general, right? a lot of the work that the team does is focused on getting leases in the first six months. Hence first six months performance will be slightly better, will be better than the latter six months.
In terms of rental reversions, we have guided that rentals are coming down. The range could be quite large depending on where which leases have been signed. In some cases due to the tenants own internal requirements or the team's ability to manage the tenants, we can shrink that rental reversion. Just to give a sense, I've mentioned this before in previous results, that, you know, Sandhill general rentals in the past used to be about RMB 5+ per day. We are signing leases in the RMB 350 range at the current moment.
There are some tenants that we are able to sign at slightly higher numbers, and there are some tenants we will sign at about SGD 3.50. The rental reversion will range around, will follow what we are able to sign in terms of the tenancies. We are able to sign some leases north of SGD 4.00 and there's actually been one or two that were actually close to SGD 5.00 as well. Those are in the minority. They definitely help to bring our rental reversion slightly less negative.
That's the case for Gateway w as well, where in general our leases in the past used to be about RMB 250 per month per square meter, and we are in general signing leases between RMB 150- RMB 180. Within that pool of leases that we are signing, there are some that we are able to sign north of RMB 200, and there was one or two leases that were actually a bit higher than that as well. Again, these are either tenants that we are able to They had incentive to stay at the building or they were willing to negotiate for and stay at rentals that are slightly higher.
Again, that helps to moderate the negative rental reversion that you were expected if we went from, say, SGD 5+ to SGD 3.50 or from the SGD 2.50 down to SGD 1.50-SGD 1.80 sort of range.
Thanks, Leong. Maybe also just to get a sense, since you are saying that, you know, first half you expect better numbers versus the second half, do you expect.
No. First half better occupancy.
Oh, better occupancy.
Yeah. Momentum in MBC, momentum will be better at the beginning of the year than there will be a low.
There'll be a low.
Yeah.
How much should we expect for occupancy to dip into the second half for China?
Based on what we are seeing now, we are probably looking at maybe 2%-3%, 3%-4% sort of change over the next few quarters, depending on how successful we are in terms of retaining tenants now.
Okay. That's good. Also, I just wanted to ask on Mapletree Business City. I understand in the previous quarter you had mentioned about, you know, potential movement from CBD to Mapletree Business City. I'm seeing that, you know, occupancy, committed occupancies, does not seem to have moved up that much. Maybe could you give us an update on, you know, the leasing up of the Google space and also, any other concerns, like perhaps for the undisclosed tenant, will they be giving up their space?
Well, if I can't disclose the tenant, I can't disclose to you whether he's giving up the space or not, right? The Google space is currently still in negotiation. There is at least two tenants looking at it. The one tenant that we were negotiating very hard to move from CBD out, has decided to stay put even though the rental is more than double of what our rental at MBC is. I mean, each company has their own metrics for evaluating such moves. In some cases, it's whether the tenant's staff wants to move or whether they are willing to pay spend CapEx.
We had another tenant that was looking at the space and decided to stay put simply because they had to incur a very large capital expenditure amount. In general, the leasing for MBC has been going slowly. Well, slowly. We have signed up a few tenants over the past quarter. That's why you'll see that the rent occupancy number has creeped up a little bit despite the fact that we had one or two non-renewals in the quarter. Leases are in negotiation. We have quite a few that are now currently in documentation phase. We won't include those into our numbers until we get the leases signed.
Given that this is coming into the end of the year, we are hoping to get them done before December 31st. If not, it's gonna be into the next financial quarter before it gets these done up.
In terms of, let's say occupancies, I mean, now we are at 93%. Is there a possibility that we can tick over 95% by, let's say, the end of the year?
My leasing team's bonus will depend entirely on that. I think this is going to be a bit of a stretch simply because leasing demand has been fairly slow the whole of this FY. While I would love for them to cross 95% or even cross 97%, I think that's something that we may only see maybe next FY or maybe only in the next FY or later.
Okay. Thanks. Maybe a final question from me. Can I ask about Vivo? Could you share on, you know, how much of I guess for the phase two, we're only seeing about a month plus of contributions. I noticed that NPI margins are extremely high this quarter. If I'm not wrong, it's like 85%. Could you share on, you know, whether there's any anything happening on the NPI side for Vivo?
Just give me a second. Okay, the contribution is a very, a portion of phase one. The contribution had already started, even before this quarter, only the phase two is for this quarter. In total, 43, we spent over SGD 40 million. In terms of the, what is it called? ROI is in excess of 10%. That will be minimally your incremental NPI that you should be seeing. What is actually pushing the most of the VivoCity numbers are actually the rental reversion. I think most of our assets are trading around the 70%-ish, 70%-ish NPI level, margin. Yeah.
If you are comparing year on year, we signed this utility, the rates are lower now. We got it to a lower rate, so that's also quite a bit savings from utility expenses.
Yeah. What, what's driving the performance this quarter, if I may just sum up, which is similar to the results of Vivo, it's under the operations and maintenance, the utility expenses have come down. We have negotiated for a different rate during this period. Okay? The rates of our electricity has come down. That's about a SGD 2 million or SGD 3 million, about SGD 3 million saving, SGD 2.7 million, to be exact. Comes the net property interest. I think that's very encouraging that finally we see a big bar. That's a combination of the efforts of lower rate plus the divestments. The divestment proceeds actually bringing it down also. Okay? The divestments that we have done, especially Anson.
Anson is a positive in terms of, you know, accretion due to changes, due to the savings in interest. Those are the two big items. Unfortunately, China and China and Hong Kong continues in terms of the challenges that we have faced. There's a little bit of a positive. I think quarter-on-quarter, I think the sales number is better, preceding quarter, yeah. Comparing to last year, they're still not as good. We are talking about like before. That's why I say challenges still remain, even though quarter-on-quarter is better but still worse off, compared to last year. China, it is what it is.
I think overall we are the only comfort that we can seek is we are trying to beat at least the market norms. Or the market in indexes in terms of occupancy and where the rental rates are. It is also declining. What is pushing us through? We'll continue to see, if there is any relevant divestment we will consider, or any acquisition we'll continue to consider. I think we are in a very healthy gearing level. I think we are, with After the divestment, I think we are, we are in one of the better shape in terms of gearing levels, as a REIT. That gives us flexibility, we'll be very careful as to how we deploy it if we need to.
We expect interest to help us along the way. I sum it up for you as to where are our challenges, Hong Kong, China. Same story. Singapore will continue to fly. VivoCity especially will continue to fly. We have completed phase two. We are now upgrading also our drop-off point and improving the traffic of the taxi stand and all. We should be able to complete by early next year. Once that's done, we are in process of looking at other AEIs which we will disclose along the way. I think there's still quite a bit that we can do for the mall and it's not the end yet. I think that broadly sums up Q2. Q2 results are quite straightforward. Yeah.
Okay, thanks, Sharon and team. Call open up.
Thank you, Terry. Next we have Jonathan. Jonathan, you may unmute yourself.
Good evening, management team. My first question relates to Hong Kong. Recently there has been some concern over commercial real estate in Hong Kong. Capital values, I think for offices has dropped a lot. My question is whether the same is happening for retail property, and does that mean that there will be some attrition to your valuation for Festival Walk come end of the financial year? Second question relates to Japan properties. What is the outlook like to push occupancy higher than compared to the current 73%? Are you kind of looking at selling the three properties at Chiba, I think Chiba prefecture? Those are my two questions. Thank you.
Okay. Thank you for your question. I'll handle the Hong Kong one. Leong will chip in terms of Japan. In terms of Hong Kong valuation, I think it's the rent. Valuers typically take in rentals that you have signed. When there's negative regular reversion, definitely that will translate into lower numbers valuation. The magnitude is not like you're gonna see a 10% drop. I think you see from historical, because 10% is only a subset of the renewal. Okay? There are still existing leases. Typically, if you see for the last two years, we are talking in order of a low single-digit changes. Okay? That's from what we see.
This is on the basis of, number one, that the valuers did not change major cap rates. Last year they did. They did some minor 10, 20 bits change in cap rate. If they don't change cap rates, not that I know of today that they are changing cap rates, then it will be whatever sub-leases that are lower that will translate into lower val, but not in the same magnitude as the rental reversion numbers that you see that we have published, because it's a smaller subset. Okay. So that's one. In terms of office, I think you're right. I think there's a lot of noise out there in terms of office softness. It's the same methodology that the valuers will take depending on the sub-leases. Okay.
We are not expecting like a double digit kind of changes, but a very low single digit, there is a high possibility. Yeah.
Yeah. How is the office component at?
Very small.
Okay. Thank you.
These levels are not extremely small. They're about 200 over thousand sq ft, about 200,000 sq ft.
If you look at it in terms of valuation, the office valuation is about 10% of the total valuation for Festival Walk.
By size, they're about one third of retail. Okay? One Yeah. By value, the retail per square foot is higher than the office per square foot because the rent per square foot is lower for the office.
Yep. Understood.
On Japan, to be 100% candid, and this is information that we have disclosed before, occupancy in Japan is not going to improve anytime soon. The master lease at Fujitsu will expire at the end of this financial year. When that happens, the occupancy in our Japan properties will fall by another 15%-20%, that sort of range, right? Portfolio-wise, occupancy is not gonna recover anytime soon. Just to give a sense in terms of leasing progress for the non-Makuhari properties, leasing generally is quite strong. The office market in the Tokyo 18 wards has been strong over the last year and continues to be strong.
Most of the spaces that we have that we have coming up as vacancies in the non-Makuhari assets have generally been able to be filled in in a reasonable amount of time, you know, three months, six months type of downtime, which is quite reasonable for for office. The office market in the Tokyo 18 is actually quite tight. Vacancies are about 10% for the more fringe offices and if anything, if there's anything in the Tokyo Central five wards, we are looking at sub-5%, in some cases sub-1% vacancy. Makuhari, of course, is a district that has very different performance.
In general, vacancies within that, their precinct are north of 20, and in some cases, and our buildings inclusive are where vacancy is actually much, much higher than that. There are some green shoots, even though we have some tenants that have departed the building. We are seeing a lot more leasing inquiries this year as opposed to last year. Hence, if you look at the amount of leases that we have signed in the first half of this financial year for the Makuhari properties, the amount is about 50% more than what we have signed in the previous first half, in the first half of the previous year.
I think for Japan, we don't need to re-highlight it, but just to add is noting that Makuhari is weak. Early this year, we have already shared with the market what are the actions we have taken. We have reduced the valuation as much as we can due to the exit of the extra tenant. As you can see from slide six, the contribution for all the entire portfolio in Japan is 5% of our entire portfolio. Instead of one asset, we are talking about all the asset we signed is 5% of NPI. Japan, we are actively trying to reduce the portfolio. On top of that, we have also divested too. That is in lieu of potential issues that we see coming or to improve efficiency.
That was a move that we made recently. Yeah.
If I may have a quick follow-up. For VivoCity, with phase two, you know, coming up in the second half of the financial year, would the phase two contribute even higher rental reversion, meaning rental reversion hitting high teens or even 20%?
Okay, we separate our calculation. Renewals or leases that goes into rental reversion. Asset enhancement works, which is like the basement two, which we class it as asset enhancement. We will give guidance in terms of what we spend and the ROI. We don't double count that number into the rental reversion. For example, how do we all the leases that we trashed to create this new area, if ask, let's say SGD 100, let's say it's the lease sign was, let's say SGD 10, okay? The new lease sign is SGD 11. That is a SGD 1 upside. We times the area, and we divide by the cost. Just an example. That we do not double count.
We separate into two buckets so that it's easier for people to follow our numbers. Rental reversions are purely renewables. Anything asset enhancement are removed and guided by ROIs.
Okay, got it. Thank you.
Welcome.
Thank you, Jonathan. Rachel, can you unmute yourself and ask away?
Hello. Hi, good evening. Can you hear me?
Yes, loud and clear.
Okay, thank you. Thanks for delivering on the interest cost savings. I just want to clarify a little bit. Are you expecting the interest cost, average cost of debt will drop to about 2.7% by end of this year? Is that your newest guidance?
No. No, no.
Okay. Okay. Okay. Okay.
That's why I clarified just now that if my entire SGD 6 billion reprice at today's rate, that is about that debt, cost of debt that we will be looking at. Not all my debt is going to reprice tomorrow or end of this year. My term to maturity, 3.5 years. My fixed rate term to maturity is about 2.4 years.
It will not be this financial year or next financial year.
It will be a gradual, okay? It will not be just one year. I think, yeah, she was giving that number to answer your question if everything was done today.
Yeah. Okay. Okay. Okay. Got it. Got it. We should still expect it to drop further for this year.
Um, I-
Sorry to ask you.
I think 3.23% is more or less about the level that we will be looking at for this financial year. Even there is any saving is also plus minus a bit. Okay, because we do not have the saving from Hong Kong dollar borrowing anymore, which should start in sometime in August or September. August. Come next quarter, we will not be benefiting from the low interest rate from the Hong Kong dollar borrowing. I think last quarter everybody was very encouraged with seeing Hong Kong dollar crashing in terms of the interest cost. I think it has since rebound quite a bit.
Okay.
Overall, I would say the interest environment is definitely very encouraging. We have suffered a lot of years with higher interest, and I think it's a little bit of a catch-up right now. Similar to interest costs, similar to utility costs, that is also, we suffered SGD 10 million right now. Slowly we are seeing a slight reduction over time. The other thing that we're not seeing that we have suffered previously and have not seen is Forex. I was actually, beginning of the year, I was a little bit more optimistic, but right now I think the Sing dollar continues to be stronger than and like before. These were the three factors that were negatively affecting us. Two are showing positive signs. Forex is not 100% on our side yet.
Okay. Got it. Yeah. Maybe just passing on a little bit in terms of the HIBOR, where it is now. Next year, hedges that is rolling off, no more savings? Still got some savings?
HIBOR, floating HIBOR is about 3.5% today. In term of Hong Kong dollar, I have about SGD 650 million or HKD 3.9 billion notional amount of interest rate swap in play. About 80%-90% of those interest rate swap are currently above the floating HIBOR now. On this, when all this revert, then you will see how they proceed. Interest rate swap-wise, I have about SGD 1.5 billion on this, so about 83% is actually above the floating now. All these interest rate swap will slowly mature, roll off, and when we repay, then we can enjoy a lower rate if the rates remain low like now.
I think all the high interest rate swap, the highest one actually got roll off in September, October already. We do have some 3%, 3% over percent for SGD, which will progressively roll off until March, maybe to December.
Okay. Got it. Okay. Thank you so much. That's very clear. My second question is on acquisitions. Are you very keen now, ready to push the button? Is it still?
Um-
Where you're looking at?
I think we have capacity to do so. You know, stars need to be aligned, right? Price has to be right and asset has to be right. I think when we are ready, we will share with the market, but I don't think there's anything for us to share at this moment.
Okay. Can. All right. Thanks so much. Yeah, congrats on the good results. Thank you.
Thank you, Rachel. Yew Kiang from CLSA, thank you for waiting. You can ask your question.
Hi. Hi. Hi. Hi, Sharon. Congrats on the good result. Just two quick follow-up. One is, after the SGD 200 million senior green note issued recently, right, is your guidance for full year cost of debt still about 3.2%, is it, even after that 2.45% coming in?
Yes. Actually, 2.45% is a seven-year note. If you compare to my borrowings and if I were to fix three-year, it's higher.
Oh, okay.
The, the-
change much, yeah?
It does, it doesn't change much. Correct.
Okay.
Yes, the guidance for the year is about the interest cost of interest will be more or less the same as what we have today.
Okay. First half and second half should be about the same.
Right.
Roughly.
I hope, unless Sing dollar-Hong Kong dollar go crazy, then.
Yew Kiang, when was your last update of your report on us?
Quite a while back.
Yeah, I know.
Yeah. Yeah.
I see you are a outlier. You are a outlier.
Yeah. Yeah. Because I didn't hear you very clearly, but yeah.
I thought my IR had a typo, you know. Had a typo.
Yeah. Secondly, just to follow up on acquisitions, but I know your share price has been moving up. That's good. Clearly you wouldn't touch equity unless it's above one time, but is that the right way to think about it?
I think, yes.
Some of your peers are a bit more garang?
Okay.
Yeah.
I think investors are very careful. Investors will look at what are you using the equity for. Yeah? I think that should be the guiding principle of any form of equity if you're talking about us going to the market for equity. If the reasons have to be strong enough to convince people to cross the line. Okay? That means, creatively, the acquisition has to be rock solid.
Okay. Okay. Okay, that's it from me. Thanks.
Thank you, Yew Kiang . Brendan, you may unmute yourself now.
Hey, evening, Sharon. Can you hear me?
Yes, loud and clear.
Hey, yeah. Hey, great. Just wanna go back to your Hong Kong and China NPI margin. It seems to be hitting the sort of COVID, post-COVID kind of lows, right? As you continue to adjust rents for occupancy, right, where should we see that number trending?
Where should you see the number trending?
Yeah.
In terms of margins, yeah?
Yeah. NPI margins for Hong Kong, which is Festival Walk, and China.
The truth of the matter is, as our rentals start to drop, NPI margins will definitely worsen, right. If you see where China is now, a lot of the costs there are largely fixed. There is very little ability for us to reduce the cost on that front. As our rentals come downwards, the operating margin in China will certainly definitely worsen. For Festival Walk, we have a little bit more levers. Rentals really aren't well, while falling in terms of NPI numbers, it's not falling that much, a few percentage points a year.
For Hong Kong, we do have the same benefit as in Singapore where utility rates have come down a little, not as much as Singapore, but at least they have come down a little bit. The team has been aggressively cutting costs on things like cleaning, security, utilities consumption. The worsening of the NPI margin will not be as bad as you will see in China where the costs are a bit more fixed.
I think I'm not surprised if in China there are some people who are negative. No margins to talk about. What we are saying here is there will be a margin, but definitely China will be quite, the margin will be lower, lesser than.
So, so-
It will be lower than Hong Kong.
Can I assume maybe like China at 80%, like today it's like 81%, right?
Uh-
If 80% is safe number.
Actually, any office property north of 80% is a very decent number. Not that easy. Okay. It's like retail hitting 75% and above is a very, very decent number. All we can guide you is it will definitely China being weak will continue to be weak in the near term until we see some light into changing. Now, we don't see anything as of now. We're talking in terms of one year ahead. We just have to say that it will be softer than what it is today.
Okay. second question is,
Hanging on to your tenants is your best bet in terms of riding through the rough period.
Okay. Just touching a bit on tenant sales at Hong Kong, right? If you look at your this quarter, it was down like 2%, right?
Quarter-on-quarter?
No, no. Year- on- year.
Yeah, Hong Kong.
Year-over-year.
Oh, year-on-year. Yeah, year-on-year is about -2%.
-2%. If I look at the Hong Kong Island-wide for July and August, right, it was up about 2.8%. Is it something that happened in September or is it just you're a bit weaker than your peers?
Okay. We have worked with the local team to try and understand this a little bit better. What we understand is that the improvement in tenant sales in Hong Kong the last quarter was driven largely by tourism-centric events. A number of concerts that were ongoing as well as a few events that they ran over the last that were in the, I think was in July and August. That improved retail sales in Hong Kong in general. Festival Walk as a mall is more of a local catchment, less for tourists.
That impact that has come into Hong Kong from additional tourist spending didn't really translate into Festival Walk performance. Festival Walk's performance is largely driven by the local catchment where, you know, we have people who have the ability to travel out of Hong Kong or are spending less because there's some uncertainty in the economy.
Okay. Thank you. Maybe just please one last one. I didn't catch your answer for the question that Jonathan was asking about the Japan divestments, right? Are You're looking to sell your assets in the 18 wards, is that what I am hearing?
We are looking to rationalize the whole Japan portfolio. If there are opportunities to divest three Makuhari assets, one or all three, that's something that we'll certainly look at. The market is a little bit weak at the current moment. For the remaining assets in the Tokyo 18 wards, we'll take a measured approach to it. I mean, if there's opportunity to do something, we will. You know, there's a limited amount that we can do in terms of reducing the size of the portfolio because currently, that's the better performing part of the Japan portfolio.
Got it. Okay. Thanks so much. Thank you. That's all. Thank you.
Thank you, Brandon. We have Derek from Morgan Stanley .
Hi, evening. Yeah, actually most of my questions were already asked. Just maybe, just one from me on the occupancy cost for Vivo and Festival Walk. Could you share those figures?
Occupancy cost for Vivo and Festival Walk both are around the ±20% range.
20%. Okay. That doesn't seem to have changed over the last couple of quarters, even with, you know, rental reversions, trending up for VivoCity and trending down for Festival Walk.
Festival Walk rental drops, sales drop. All same.
Oh, okay.
VivoCity is the opposite.
Yeah, Vivo is the other way around, you know?
Okay.
Yeah. Actually Vivo's rent is moving up faster.
Yeah.
Faster slightly faster. Actually when we looked at what have we done to achieve the very high rental reversions, actually changing out certain trades and weeding out a lot of all the older term tenants who had maybe not innovated or have or the brand had started decelerating. New players come in, that's how we got all the rental reversions. I think back to your question numerator minus denominator minus everything that is concerned. If it's a plus or a plus about concern.
Fair enough. Thanks for that, Sharon. Earlier on, you know, talk, you talked about, we then talked about Hong Kong sales being bought by visitorship. I think in the numbers also, watches and jewelry was very strong. I saw 16%, 17% up for overall Hong Kong. Just wondering if it's Festival Walk is also due to your tenant mix. Is there something you could do on that front, increase the watches, representation, you know, change it up a bit to get more of that sales uplift? Is that something that could be done at Festival Walk?
You said something about watches?
Watch and jewelry. I mean, that was strong. That was pretty strong for Hong Kong.
Oh, watch and jewelry. Oh, of course. You know, gold is going up, right?
Yeah.
Gold is more value than diamond.
Yeah.
Right now everybody's, like, grabbing gold. I mean, all my jeweler all say, you know, better to buy gold than buy diamond right now. Anyway that you see jewelry moving up, it a lot of it is linked to gold prices, okay? We have seen that about 2x, 3x already. 2x, 3x , especially in Hong Kong when you see a pop, you see a movement in that. If you talk about watches, I think, if you talk about luxury watches, I think we have to take a different view, okay? The luxury watches are also in a way tightening their strategy to be located only in malls that have, let's say your Gucci and your Prada and so on and so forth. They are relooking at the way they distribute, okay?
This is what I'm speaking of for example, like Rolex, yeah. We are typically a mid-ish, a mass market mall as opposed to a luxury mall, okay.
Yep.
Festival Walk is still one notch above VivoCity in terms of the trade mix. If we say that you want all the watch players, okay, we can get the mid-range, okay? It's the lux that people that are driving the big numbers, okay? All your higher-end brands, be it your Patek Philippe, be it your Rolexes, okay? Those will typically not want to go into mass market mall. They want to go full lux malls. I think that will be a forward change that we are seeing. Yeah. If jewelry, very clear, gold.
Yep. Okay. No, thanks for that. Thanks for the color, Sharon. That's all the questions I have. Thank you.
Thank you, Derek Tan. We have a couple more analysts with questions. Next we have Vijay from BHP. Vijay, over to you.
Hi. Yeah, hi, good evening.
Hi.
Couple of quick follow-up questions from my side. Firstly, in terms of VivoCity, I noticed that the tenant sales for the 2Q has been quite strong at 5% compared to previous quarter. I mean, is this all driven by the retail expansion or are there other factors driving this tenant sales growth?
Oh, I have to thank maybe the government for also issuing the vouchers now. The SG60 vouchers.
It's still the vouchers effects, huh?
I cannot deny that. I won't be able to tell you exactly, but definitely FairPrice did say that there's a lot of the SG60 vouchers, yeah. Definitely a bit of that. I would say that also the Pop Mart event or the Labubu and all the CRYBABYs that we have done will also boost some of the traffic and will hopefully translate to sales there. If you ask me, I think I have government to thank for giving the vouchers, and it will translate to spend. At least that was a feedback from FairPrice itself.
Okay. Okay. With all this news about F&B tenant mix, F&B players struggling a bit, do you see that something in your mall? Have you been rejigging some of the tenant mix in your portfolio and, probably can you give some color inside?
Okay. What I like that I cannot get is good Nyonya food, good vegetarian, and good Indian restaurants. That are three of my missing gaps, which my team tells me that we have been searching. There is no true good operator that really can pay and decent offers. Either You know what I mean. They're either one-shop type or whatever.
Yeah.
On that basis, if we talk about one-shop type, we have tried, yeah. Right now, we this year we brought in Yang Ming, okay? It's actually, they upgraded a little bit. They used to be a very nice, in Hokkien we call it tze char, right? They have a very nice offering. Like, they have the lobsters and all, and drinks to accompany. We tried, and I say it's quite successful. They managed to up their presentation and it's actually doing relatively okay in the mall. I think those are the things that we also try to do, bring in new offerings.
There's a couple of Chinese players now doing all the Mala and all the suan and the la, which is the sour and the spicy. Like I said, where's my trade mix gap? In terms of F&B, I give you three. Nyonya food, vegetarian, Indian.
That has always been my own bugbear that I wanna complete. Those are the little gaps that I cannot fill, okay. It will not be a lot, maybe one, two restaurants of such. Singaporeans love Japanese food. Singaporeans love now the spicy and the sour, okay. Not to forget, we also have subset of halal, we need to cater to people who need halal food at all. We also cater to that in our trade mix in terms of F&B. Those are my three gaps left, which I am still waiting to find good operators.
Got it. Got it. Thank you. My second question is that in terms of your portfolio mix, with acquisitions and divestments, probably if you look at three to five-year point of time, where do you look MPACT to be in terms of geographies, portfolio mix, and income mix?
I don't think our geography will change. I think if you talk about Asia, you can't skip all these five. Okay? I don't see how I'll down CBD 18. In terms of allocation, what I can guide is Singapore will continue to be major. Right now, NPI's contribution is in order about 60% thereabout. Yeah. Two guidance, Singapore will be our core and markets unlikely to change in the near future. Unlikely to expand into new markets in the near future. Yeah.
Okay. Probably, where will your next acquisition be if you divest Japan assets?
You know, acquisition is not for me to time, yeah. I mean, we are always on search. Okay. Ideally, it has to be. We will always look at a few factors. Number one, hopefully, the accretion has to be there. If not, the quality or the type of asset is a different class, then we will consider. Yeah. Accretion, majority will drive the decision. If you take that point of view, that accretion is what we are after, it doesn't keep you go. If you look at where asset and borrowing costs are, you know there's only a couple of areas right now that will look a little bit more interesting.
Okay.
Okay. What we like is certain parts of Korea in terms of offices, but that doesn't, that's one area is pocket, yeah, pocket. We will not touch Hong Kong office. China, obviously not the time to touch today. Okay. Singapore, I think retail is something that is still interesting. Office, plus minus, not sure. Okay. From an outlook, we are saying that, as a matter of strategy, we try to gravitate more into the CBD where possible. Okay. I think we've done some analysis, and it's quite clear that, office valuation and volatility is always better when it's gravitated into the CBD. Okay. I think that generally share with you our thought process.
Thank you. That's very clear. Thank you. That's all I have.
Thank you, Vijay. Just a couple more questions. First from Tan Xuan . Tan Xuan , over to you.
Hi. Hi, Teng Li . Just one question on The Pinnacle Gangnam, right. Given your current balance sheet also cost of capital, do you think it makes sense to acquire the balance sheet?
We haven't really thought about it. It's actually, it doesn't give us any issues. It's, it doesn't have major impact. It's SGD 200 million, our share. We have, we haven't given it real serious thought now because it's, if we talk about investment or divestment, anything that's very impactful, something that we will stare very hard into. Plus, on the other side, it doesn't give us any problem, so we don't really stare at it also too hard, you know. Usually it's when you've got challenging assets, then that's when you start staring at it very hard. It has been doing what it's supposed to do. I think that's a question that we have not dabbled into as to whether we will look at full acquisition of it.
Okay. I guess overall, South Korea is like 1% of portfolio, right?
It's small.
This is a country that you will want to grow instead of just ending.
It's actually quite competitive, yeah. The pocket that we want to be in is actually quite competitive. Yeah. I mean, if it comes and it makes sense, we'll propose that. If not, I think it doesn't come every day in terms of deals on the table, good areas. Yeah. We have a very good team there.
Okay. Got it.
Yeah.
Okay. Thank you.
Thank you, Tan Xuan . Thank you. Hi. Last, but not least, we have Terence from UBS.
It's Terence from UBS. Quick one.
Hi.
Just, sorry if I missed this. Do you mind sharing more on MBC's prospects, both in terms of rents and occupancies?
Rent, prospects are good. Okay, never mind. The tenants that we are currently seeing include a bunch of tenants who, like we mentioned in the past, are looking to move out from CBD into a good class of business park. We also have one or two smaller new setups in terms of spaces. There were a few that were moving from industrial buildings, looking to upgrade their spaces into a better class location like MBC. The rental expectations and sort of numbers that they're looking at, of course, vary depending on what they're used to paying.
The CBD tenants can generally usually don't quibble with us on rent, on what our rental numbers, we get close. We usually get close to what our asking rentals are. A tenant who moves from an industrial area used to pay SGD 2, SGD 3 in terms of rentals. That's we get. We get first offers at SGD 5 sort of range, right? It is a range of tenants, and sometimes it just takes a bit of time for them to understand the market, and for us to get them to where we think it's a suitable rental for us before we sign them up. You know, the progress of leasing is certainly a lot slower than we would like.
If we can cross 95% by this FY, we will be very happy. I think realistically, on a, even on a committed basis, I think that will be slightly challenging.
Okay. Thank you.
Thank you.
Yeah. I think we have approached the end of the briefing, so. Just last one from Mervin.
Yeah, sorry it's gotten late.
Mervin, one from you.
Yeah. Can we just check on the GovTech again? Are they vacating MBC?
Not that I know of. Are you hearing something that I'm not hearing?
No, I mean, there's press reports that they may be moving to Punggol Digital District. That's all.
Oh, sorry. Is GovTech with us?
I mean, apparently you may be based on the direction.
I mean, in general, in general, there are number of government agencies that we know are looking at Punggol District. The guys who are with us, we do know that some of them have been asked to move some of their operations there, so they are moving some of their operations there. We are in negotiation with them for the rest of the spaces. You know, it's still in negotiation. When it comes to a conclusion, we'll be able to put it into our results. We'll be there.
I can say it's a partial exit then. Yeah.
I don't know what you're talking about, Mervin.
No, no. Not that we are aware of. I think we have some constraints talking about certain tenants.
Sure.
Hopefully you understand. Yeah. You can talk to Li Yeng.
Okay.
Yep. We can take this offline.
Anyway, we look forward to some maybe positive news on Singapore retail exposure. Yeah.
Just to close out, last final question, from Derek, DBS. What is our hedging rate, in terms of currency, this half, this financial year, and the rate for the next half?
Currency-wise, we hedge on a four, rolling four-quarter basis. We enter into many, many, many forward contracts. All I can tell you is most of our contracts are in the money at this moment. Yeah.
Okay. Thank you so much, everybody, for your time. Apologies for taking up your dinner time with your family time. If you have any further questions, feel free to reach out to us and we'll be happy to take them off. Again, thank you, and have a good evening ahead.
Thank you.