Good morning, analysts, investors, and members of the public. Welcome to Mapletree Pan Asia Commercial Trust or MPACT Analyst Briefing and Live Broadcast for our results for Q4 and the full year FY 2024-2025. I'm Li Ying. Today for our results briefing, we have the following speakers. They are Ms. Sharon Lim, Chief Executive Officer of MPACT, Ms. Janica Tan, Chief Financial Officer, and Mr. Koh Wee Leong, our Head of Investments and Asset Management. They'll be presenting our financial results, providing business development updates, and sharing some market insights. Following the presentation, we'll open the floor for Q&A session, where we invite you to ask questions and seek further clarification. Without further ado, I will hand the floor over to our CFO, Janica.
Thank you, Li Ying. A very good morning to everybody. We have just announced our results this morning, maybe we just go to slide six to quickly go through the financials. For Q4 FY 2024-2025, gross revenue was SGD 222.9 million and NPI SGD 169.5 million. These were lower by 6.8% and 7.4% year-on-year respectively, this largely reflects the absence of Mapletree Anson's contribution following its divestment on 31st July 2024 and lower overseas contributions. As you may recall, we had divested Mapletree Anson, our non-core asset on 31st July 2024, we have applied the proceeds, entire proceeds to the reduction of borrowings. Moving on to the OpEx.
OpEx improved by 4.9% year-on-year during the quarter. This was largely due to the Mapletree Anson's divestment and lower utility costs, in particular the Singapore portfolio. Net finance expense for the quarter, 9.4% lower at SGD 61.1 million as compared to Q4 last year. This was mainly due to the repayment of borrowings using the net proceeds from the divestment of Mapletree Anson. This was partly offset by the higher rates on the Sing dollar, Hong Kong dollar, and Japanese yen borrowing as our liability interest rate swap continued to roll off progressively. Consequently, its amount available for distribution was SGD 103.6 million. DPU SGD 0.0195, down 14.8% year-on-year for Q4. Moving on to next slide.
This shows the contribution by different markets. Singapore properties contribution increased by 1.4% year-on-year, excluding Mapletree Anson, and this accounted for about 53% to both Q4's portfolio gross revenue and NPI. On a full year basis, MPACT reported gross revenue and NPI of SGD 908.8 million and SGD 683.5 million respectively, lower by 5.1% and 6.1% year-on-year. The higher contribution by Singapore portfolio on a comparable basis, which is without Mapletree Anson, as well as lower OpEx and net finance costs, provided partial offset to the overseas and headwinds, Forex headwinds. Consequently, DI amounted to SGD 483 million and DPU SGD 0.0802. The next few slides are on our portfolio valuation.
MPACT's portfolio valuation is approximately SGD 16 billion as at March 31, 2025. Excluding the effect from Mapletree Anson's divestment, the portfolio valuation rose SGD 339.4 million, or 2.2% from their respective last available independent valuation, either as at March 31, 2024, or in the case of the three Makuhari assets in Japan, as at September 2024. On a year-on-year basis and excluding Mapletree Anson, the valuation increased by SGD 225.5 million or 1.4%. The overseas properties recorded lower valuations, largely stemming from the revised market expectations in Greater China and cap rate and discount rate expansion applied to Festival Walk. Okay, moving on to the next slide. This is the valuation for Singapore property.
There's a uplift of SGD 660 million or 10.9%. This more than offset the decline in the valuation of the overseas properties. Singapore's growth was led by VivoCity's better performance and tighter cap rates applied by the valuers to VivoCity and the business park segment of MBC. For Japan, the year-on-year valuation decline was largely due to the three properties located in Makuhari in Japan and has been captured in the September's results. The current six months change in valuation was largely due to Forex impact, while MBP shows some gain due to successful backfilling. Moving on to balance sheet. With the uplift of the portfolio valuation, NAV per unit is now at SGD 1.78 as at September 2025. This was higher as compared to March 2024 by 1.7%.
On capital management, the deployment of Mapletree Anson's divestment proceed reduced outstanding borrowings to SGD 6.1 billion. Together with the higher overall valuation, aggregate leverage ratio improved from 40.5% a year ago to 37.7% as at 31st March 2025. With an average all-in cost of debt maintained stable at around mid-threes, ICR kept at 2.8 times on a 12-month trailing basis. Okay. During the quarter, MPACT issued a seven-year green bond in March 2025, and this extended the average term to maturity of debt to 3.3 years as at March 2025. By the close of the reporting period, MPACT has a financial flex of SGD 1.2 billion in cash and undrawn committed facilities. This is sufficient 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 feasible. Okay. MPACT's debt profile remains balanced with no single financial year facing more than 23% of debt due for refinancing. Moving on to risk management. The fixed rate debt portion was lowered from 81.5% to 79.9% during the quarter. Without the seven-year fixed rate bonds issued in March 2025, the percentage of fixed rate debt would be at 76.6%. At about 80% of our debt on fixed rate, every 50 basis points change in benchmark rate is estimated to impact the DPU by SGD 0.001 per annum.
Lastly, at the close of the quarter, approximately 90% of MPACT's expected distributable income was derived from or hedged into SGD. The next slide is on the total return. For this year, the total return, from capital and dividend payout is 3.9%. Last but not least, on the distribution detail, TCD is April 25, 2025, and the payout date is on June 6, 2025. With that, I will now hand over to Leong. Thank you.
Good morning, everyone. Maybe let's move on to the occupancy performance. You can see that the portfolio occupancy has declined very slightly since December 2024. That's largely driven by the Japan properties, where there were a number of non-renewals at particularly in the Makuhari area. Moving on to the Singapore assets. For MBC, occupancy now stands at 91.2%. There have been a number of non-renewals in the current year in the financial year that just passed. Most of those spaces are still in the process of being re-let.
The experience over the last three to six months has been, 10 tenants have been taking a far longer time to make decisions, and commitments are typically a lot further into the future. We remain hopeful that we can bring up the occupancy in the coming financial year, largely due to the fact that the cost pressures for tenants in Singapore are driving them from CBD assets into lower cost locations like MBC. For the UCT, occupancy remains strong and small amount of vacant space largely due to AEIs which are currently ongoing. mTower is the main beneficiary of the increase in occupancy for the other SG properties.
Again, we have been the beneficiary of the movement of tenants out from CBD, looking for slightly lower cost locations. mTower also benefited because we were able to offer smaller spaces. We, the building has been multi-tenanted for a long time. Smaller spaces of 1,000, 2,000, 5,000 sq ft are easily available. We have also managed to retain a lot of the fit-outs from tenants that recently departed. This allowed incoming tenants to reduce their moving costs, making the building a lot more attractive. For Festival Walk, that a little bit of vacancy is largely due to the Office component of the building. We had one tenant move out earlier in the year.
We have backfilled about 40% to 50% of the space, we are working to fill up the rest of the spaces. China remains one of our more challenging markets. If you look on a year-on-year basis, Gateway Plaza actually lost a little bit of occupancy against March last year, whereas Sandhill Plaza has actually improved occupancy slightly. While both assets have performed better than most of the market comparables, recent demand still remains very weak both in Shanghai and Beijing.
In particular for Shanghai, we will likely see a little bit of headwinds going forward, as the Zhangjiang area, being a business park, does face a little bit more pressure due to the trade tensions, which have mainly been focused on manufacturing as well as on, and specifically on semiconductors and microelectronics-related industries. For the Japan properties, this is largely due to the termination of leases from the single-tenanted property vehicle, as well as the non-renewal of the master leases at MBC.
For The Pinnacle Gangnam, one of the, still one of the bright spots in the portfolio, All of the vacant spaces in the building have been currently taken up, except for a small retail unit in basement two. We expect The Pinnacle Gangnam to continue performing well over the next one year or so. Moving on to schedule reversion. MBC, the Singapore properties in general, have performed a lot better. MBC, VivoCity and mTower in particular, have seen healthy rental reversions. Festival Walk continues to see negative rental reversions.
That's also been pressured because of the current trade tensions and the potential impact on the economy of both Hong Kong and China. The China assets, as we have mentioned in previous quarters, there has been negative rental reversions. Market rentals have been falling. While we have managed to contain this to -9%, the reality is market rentals are quite a bit below our passing rentals in the past. Just to give a sense, Sandhill Plaza in the past used to sign leases in the RMB 5-RMB 6.50 per day RMB per day.
Most of the rentals we are concluding now are actually in the SGD 3.50-SGD 4 range. Okay. For Japan, now that's again largely due to the Seiko building and MBP and the Master leases MBP. Whereas The Pinnacle Gangnam continues to perform well, as this improvement in rental reversion is largely due to office leases, where due to the run-up in office rentals in the Gangnam area, where we still have quite a component of the building, where the passing rentals are where the current rentals are below the market. We can probably expect to see a positive rental reversion for The Pinnacle Gangnam going forward. Just a quick note on lease expiry profile.
Our portfolio is 2.3 years, retail is that same number, whereas office and this is probably at 2.3. You will see that we actually have a quite a large chunk of spaces coming up for renewal in current FY 2025, 2026. We are in negotiations with all of these tenants. The current indications are that most of these tenants will be renewing their leases. Although one or two of them might have some reduction in spaces. Moving forward on the performance of the office MBC assets. Singapore continues to perform well, with slightly increased vacancy at MBC.
Which we hope will close out throughout this financial year. China continues to be challenging. Retention rates are fairly low. We do have tenants who have been moving out to newer buildings, in particular in Shanghai. Whereas, for Japan, while we have signed up a good number of leases, some of this is actually some of the underlying leases in the master tenant, which have continued in the building. Rental reversions continue to be weak, especially in Tokyo. Korea, I mentioned earlier, continues to be one of the better performers in the portfolio. Moving on to visits with this performance.
Shopper traffic is down very marginally against the year-on-year, whereas tenant sales have been down about 2.1% against year-on-year. Part of the impact on tenant sales has been that if you have been to the mall recently, you have seen that we have had quite a lot of asset enhancement works ongoing, and that's contributed to significantly more downtime this current financial year than against the previous financial year. Looking at the asset enhancement works. For basement two, we have two phases of works ongoing. One phase is the upgrade of the food kiosks, as well as increase the number. That's largely complete.
Just a few more kiosks, which will be done by the end of this quarter. For phase two, which we have started a few months ago, where we'll be expanding the retail footprint into the car park area. That's currently ongoing and will largely be complete by Q3 of the year. Most of the phases have already been committed out, just a few more leases left to finish up. This slide just gives you a few of the tenants that we have signed up over the current quarter, as well as some of the asset AEI activities that are ongoing. Moving on to Festival Walk. Festival Walk, the shopper traffic has been up over 5.6%.
I think this has largely been contributed by, firstly, increased travel from China into Hong Kong, although that hasn't really translated into tenant sales. If you look at the Hong Kong tourist statistics, while the number of arrivals have improved, increased, the spend by tourists, either those who have stayed overnight or they're only on a day trip, have decreased quite significantly from what they were doing pre-COVID and even against the previous year. Tenant sales continues to remain weak. We do think that it's likely that this is starting to flatten out. If you look at the outbound statistics for Hong Kong, that number actually is starting to flatten out.
In previous years, in the previous months over the current past financial year, that could have been easily a 30%, 40% to 50% increase. Over the last one month or so, that increase has been very fairly muted. The mall continues to improve its tenant mix. A number of new tenants that we've brought in, as well as a number of pop-up stores that we have put through to the mall. The mall continues to be very strong in running marketing activities to drive footfall, and it remains very popular with social media related events, as well as with the stars in Hong Kong. We can come to the end of the presentation. Ha nd it over back to Teng Li Yeng.
Thank you, Janica and Leong. We're now ready to take your questions. We kindly request that all analysts state their name and their firm before asking a question, and also raise your hand to the team so I could allocate the turns accordingly. For the online participants, we invite you to send your questions to the online chat-based platform. First, we have Terence from J.P. Morgan. Terence, you may go ahead.
Okay, thanks. Thank you so much, Sharon and team. This is Terence Khi from J.P. Morgan.
I just wanted to ask on Japan occupancies, especially for MBP and Makuhari. Is this the load that we are seeing? Are any more vacancies expected for FY 2026?
Okay. The FGN property, as we have announced and shared with the market, that their tenancy will end in 2026. In terms of valuation, we have taken it down. In terms of the number, in terms of occupancy when you see the number, come 2026 there will be a drop due to Fujitsu. Valuation-wise, we have taken majority of the valuation down already for the asset.
In terms of master lease, are all the master leases?
Master, yeah.
for MBC, have they?
Yes.
The master leases for Seiko. Okay, we had two master leases that we shared with the two big ones, which is Seiko and Fujitsu. Seiko, we have already taken down. Both of the assets we have taken down the val. Occupancy is showing up already or has shown up for the Seiko asset, which is now called MBP, okay? That's the building. For Fujitsu is 2026. Valuation taken down, the occupancy, you will see it coming down in 2026.
Okay, thanks. In terms of the negative reversions, how should we expect reversions to trend for the overseas prop assets, especially for Festival Walk, China and Japan?
Okay. I think if you look at our entire portfolio reversion, if you look at the whole portfolio is a positive 3%, that is led by VivoCity, okay? The rest of the overseas are in the single digits, okay? If we're talking about Hong Kong and China, we're talking about single digit. I think right now there is still a little bit of uncertainty, okay? I think we're trying to keep and try not to expand this negative re-rented reversion beyond what we are seeing. Yeah.
Thank you. Finally from me, I just wanted to ask on the capital distribution, this, SGD 7.7 million. Can I ask, how much has been, utilized and, how much remains to be distributed?
Can you repeat your question again, Terence, please?
I understand that there's a SGD 7.7 million capital distribution from the balance allowance from the divestment of Mapletree North.
No, I think you got it wrong. We do not distribute any divestment gain on Mapletree Anson. If you are referring to our footnote in the financials, in the SG&A on that allowance that's relating to Mapletree Anson, I think this is something to do with the tax, because we used to claim capital allowance from Mapletree Anson, and some of it has not been claimed. Under Singapore tax, we've got to claim all. It's a deduction from our DI, and then we just adjust it in the DTC adjustment. It's in our profit, we just adjust it to our DI. Effectively, we are not paying out anything.
Okay. That clarifies. Thank you so much.
It's just a book classification. We are not paying out anything. Yeah.
Okay. That clarifies. Thank you. I'll leave it to the rest. Thanks.
Thank you.
Thank you, Terence. Can we have Geraldine from DBS next?
Yeah. Hi. Good morning, Sharon and everyone.
Good morning.
This is Geraldine from DBS. I think VivoCity's valuation was a surprise. I was just wondering how much of the AEI that you have done is reflected in this valuation uplift?
Okay, majority is due to operation. Okay. I think you see the rental reversion over the years, the year, it has gone up. Operations contributed majority of it, then with a portion of AEI and a portion of cap rate compression. Majority is operations led.
Okay. Thank you. Maybe one more, I think, to drag it back to the trade war tensions. Any expected tenant vacation or any talks of pre-term within the portfolio?
Not that we're aware of, but I think, you know, Leong can give you a bit more color into the exact.
Because I think generally w e are not the first asset class that will be hit in terms of tension. When there is uncertainty, all companies will be a little bit slower or a bit more cautious in their consumption of office space. Okay. I think we are expecting a slower decision-making, but I think we will take the lead from what we see, how it all pans out with other sectors, then it will slowly trigger down, flow down through our asset class. Okay. I think Leong will share a bit more on the specific markets that we're in and where we see our tenancies and how they are affected.
Okay. Maybe let's start with Singapore. If you look at our Singapore portfolio, and here we're talking about office MBC. We'll talk about retail slightly later. For office MBC, if you look at it, the majority of our tenants are in the IT sector, financial sector, as well as we've got a fairly healthy portion of government tenants as well. Looking through the portfolio, we feel that the likelihood for softness is probably from the shipping and transport sector. We saw this during the last round of trade wars in the 2017-2018 period, where a lot of our shipping tenants actually had a bit of weakness, and we had a number of non-renewals.
Currently, it's still early days. None of the tenants have come to us with pre-termination requests. However, we have been in discussions with some tenants potentially for expansion of spaces. At least one of them has come back to us to say that they will renew instead rather than expand. We are seeing a little bit of slowdown in terms of the sector. It's probably as much from uncertainty than it is from direct impact of the tariffs. Moving on from Singapore, the country that is great-most greatly affected is likely to be China. Two assets who have quite different performances.
If you look at Shanghai is a business park asset. The operations there are largely supporting manufacturing outs or supporting semiconductor-related activities. We, however, do have a number of U.S. companies in Sandhill Plaza. While they have mostly continued with us over the last few years, we are in close contact with all of the tenants. We do know that there will be some pullback. Some of the tenants are looking at downsizing when their leases expire, but that's largely related to the slowdown of the economy in China rather than direct impact of the tensions.
The Beijing office market is in some ways insulated. That's largely because during the previous round of trade tensions, a lot of the large American tenants within our buildings have actually already left. Most of those vacancies have been backfilled. The Beijing market now is a lot more local. There are a lot more local Chinese companies taking up spaces in Gate-in Gateway Plaza. We haven't heard in particular from any other tenants about impact of the tariffs. Even when we touch base with our largest tenants, their feedback was more that the slowing China automobile market has been a bigger impact on them than the tariffs directly.
So far for the Japan portfolio, we aren't seeing anything as well. In Korea, our tenants within the building are largely serving the local market, not so much export related. Moving on to the two retail assets. I think in particular for Singapore, in terms of retail, usually we do see a stronger, we do see the retail asset perform slightly stronger when there's a certain amount of uncertainty. While there, you know, people tend to spend less on luxuries and discretionary items whereas non-discretionary spending will usually improve.
That will definitely be a upside for VivoCity where the majority of the tenants are, where we generally do not have luxury tenants. For Festival Walk, we do think that there should be some positive impact as well. The larger picture really will continue to be that the Hong Kong dollar remains strong, and that the connection with China is easy. Yeah. The connection with China remain very fairly easy. There will still be amount of spending which will flow through to Shenzhen.
That's why as Sharon mentioned, we do expect the negative reversions to still be there. We still expect there to be negative method reversions, but probably in the same ranges as we have continued to see. I mean, in general, when there is uncertainty, retail spending does flip more towards the discretionary side. That does benefit both of our malls slightly, because of the fact that they are not completely high-end malls, and are located, in Festival Walk's case, located within a largely residential area, and serving the consumption of the people located there. We do have that here in Singapore for VivoCity as well. We do expect that the impact from tourism is likely to be more muted.
The other point that our leasing colleagues are sharing is from their dealings in the market today. Prospects are a little bit more cost-conscious. That's where I think we sit better today because our offices are slightly in Singapore, slightly decentralized, but near enough to town and of decent quality. The pricing, there is a differential that will place us better. Although there is everybody's a little bit more uncertain, they become more cost-conscious, and that's where I think our offices will place, will be better placed.
Thanks, Sharon and Leong for the very good color and taking the time to share. Yeah. Thank you.
Thank you. Can we have Derek Chang from UOB ? Derek, over to you.
Hi. Hi, morning.
Sure.
Hi, morning. Just want to follow up on the divestment gains from Anson. Would you consider paying out divestment gains to shore up DPU, especially as you've mentioned the pressures on DPU?
No. Okay. I think from the start, we did say that we are not distributing the gains. We're keeping it to improve our balance sheet. I mean, right at that time, our gearing was of certain level, and I think we have successfully brought to a super comfortable zone at 37. I think we will see along the way and assess future, if there is any potential future positive gains from divestment, we may consider. But for Anson, no, we have decided that we will keep it to strengthen our balance sheet.
Maybe let me add on that SGD 7.7 million is a deal that you see in the SGXNET. That relates to Anson's capital allowance. Anson is being taken off from my taxable income, so I have to do it through a capital distribution to balance it out. We are not distributing any capital gain from the Anson divestment.
Yep, got it. Understood. Could I also ask on the MBC, Google backfilling progress, where are we at right now?
For the two floors that Google gave up during the previous lease renewal, we are currently still marketing the space. There are a number of tenants who are looking at it. The reality is the spaces which are large have very, very few tenants looking at it currently. We have been engaging the one or two potential tenants now for at least six months, three to six months already. We are still working on that, working with them on when they can take over as well as what spaces they are eventually finally going to take. We had mentioned earlier, decision-making has slowed down quite a lot, and a lot of tenants tend to be a lot more cost-conscious currently, cost-conscious going forward.
Right. What is the percentage progress done?
For the two floors that Google gave up?
Yes.
Currently nothing. Both floors are being looked at by tenants to be taken up in their entirety.
Understood. Maybe, Leong, could we share some color as to you spoke about tenants moving from CBD to business park, cheaper business park area. Could you give a flavor of, you know, where, which industries they are from?
We have a it's a very wide range. I've got shipping companies, I've got financial institutions, I've got, I've got the usual IT companies as well. FMCG even, right? Not quite fast-moving, but definitely it's across all sectors. When CBD rentals start to cross SGD 13, SGD 14, it becomes a little bit more uncomfortable for them in terms of taking up spaces. Most of the tenants will start looking at what the more cost-effective solution. In some cases, they will split offices, which we have seen, taking front office spaces in the CBD as well as taking back office spaces or mid office spaces here.
I mean, the tight supply in the CBD does help to push up rentals. When that happens, more tenants will start looking at ways to rationalize their office spaces.
Got it. Understood. Just one last question. At VivoCity, what is the current occupancy costs, and when will these double-digit reversions come normalize back to, you know, single digits?
I think 10% of rental reversion is actually very, very high. Okay? Decently high. I think we have consistently been able to do so. I think we have to be a little bit more muted in our actions going forward, depending on the which are the leases that's coming up first. A lot of the rental reversions are due to changes in trade. Okay. Changes in trade or improvement in tenancy type within the same trade. That's where the team has been able to capture such decent rental reversion. For example, we had one restaurant that was there with us for 10 years. He was the bottom three, there was just a switch of a tenant to a better operating one. The rental reversion was a very decent jump.
I think VivoCity itself is These are my worry. I think we have seen that domestic spending will continue when there is certain form of uncertainty in the market. On top of that, we are also improving ourselves operationally with all the AEIs. I think if you have gone to VivoCity recently, you will have seen how we have reconfigured all the kiosks. The kiosk is increasing the number using removing our customer service office and also using common area spaces to better utilize the floor space to create an AEI. The look, feel, M&E, flow, tenancy mix, even toilet provisions are all included in the full upgrade.
The other one, the other AEI that we are doing is, which is the conversion of car park. Reconfiguring the space into retail, that will be quite interesting, because that is the front of where the MRT ingress, egress is, straight to the mall. Tenancies have been signed up successfully. It will be very nice. The whole look and feel, amenities will all be upgraded. I think this is VivoCity's major plus point. We have a big space. We have never stopped over 10 years in continuously upgrading the space, be it for revenue or be it for beautification and look ambience spaces. Rental reversion, of course, the team will be very measured, okay? Where there is potential to move, they will move.
I think we cannot guarantee that we will all be doing over 10 % every year. Actually, if you look at the market, over 10 % rental reversion is, consistently is not some, it I've not seen it in most of the other malls, okay? I think VivoCity is a little bit one-off. Yeah. Occupancy cost, it's always been hovering around 20%. While we move out the things, we will still have to try to move the sales. This round, I think we are tracking retail sales, okay? We have not significantly over the retail sales index. It's because we trashed a lot of units at basement two. When we trash the units at basement two, it means that they are not trading.
When we do the sales comparison, we do not remove when they are undergoing AEI. The way MPACT does it is as is. Okay? We do not remove when we are doing AEI and calculate the sales on a per square foot basis. Technically, we are not comparing on a like-for-like basis, but we are still tracking retail sales in that even though, even though we have trashed a lot of units for asset and enhancement works at the basement two. In short, answer to you is we are still around the same occupancy cost .
Gary, do you have another question or may I move on for now? Okay, it's all right. Next we have Brandon. Brandon, nice to have you again. Over to you.
Good morning. Morning to you too.
Good morning.
Hey, good morning, Sharon. All good. Yes. Can you comment a bit on BMW and BAIC?
BMW-
actually pre-term?
-very there. He's still in for China office occupying our major. His lease is till 2028. BMW is still there. Okay. We did renew the lease about two over years ago in December. The lease is till 2028. BAIC is still there. We have renewed the lease. I think in terms of operations, they are quite stable as of now.
Does BMW have any pre-term clause?
I think it's a signed contract. Nobody has a pre-term clause. Anything you want a pre-term, it must be negotiated. Not allowed. You can negotiate with us, but not allowed in the contract. None of our contracts allow you to pre-term. Only Japan, because Japan is rolling leases, right?
Yes.
Rolling leases by nature, they are allowed to pre-term.
Okay.
The rest of the market is very similar to Singapore. They cannot just walk away. Yeah.
Okay. Okay. I assume for BMW, they should remain.
They are there. I can just tell you that they are there. They are still there.
There are many, many, many, many BMWs in the Gateway Plaza car park. Many. Okay. Just going back to Festival Walk, where I think Leong earlier mentioned that the sales has bottomed out. As for the negative rent reversion, right, how long more do you think that could continue, especially given the current tariff war?
Okay. If you see, yeah, I can't really predict the general economy at this moment. Okay. Right now, everything is a little bit volatile. It changes. For retail itself, I think when you see the Hong Kong dollar slightly weakening, which is pegged to the U.S. dollar, I believe spending will be tilted back a bit more to Hong Kong. Our sole consumption is going on, but consumption has some leakage into Shenzhen. The Hong Kong dollar strength has some bearings to it. For me, I can't tell you when the whole world is gonna change or when we're gonna see the bottoming out. Now, is it feeling a little bit of pressure? I think entire Hong Kong, yes.
The good thing about Festival Walk is, one, we are In terms of retail sales, even though it's negative, we are a lesser negative than the general Hong Kong retail sales. It means it is performing better than the general retail in Hong Kong for Festival Walk. When will I turn? I think a good first step, a good first step that I will see immediately when the Hong Kong dollar weakens a little bit, okay, against Chinese yuan or whatever, then that's where you see the spending, I believe, will tilt back a bit for Hong Kong. Generally, where is it gonna stop flying, okay, is a bigger economic question. Okay. It's a bigger question in terms of where Hong Kong will lie as a financial sector. Okay. That I think is anybody's guess today.
Okay. Just one last one on valuations in China, right? You've taken them down quite a bit this quarter. Do you think that that's probably the worst that we have, we are seeing?
The overseas asset, is it a huge drop? It's a reflection of the operations. If you talk about very huge drop, like 30, 40, no, no. It's not in that scale. We have not dropped in that manner. I'm not saying that overseas drop is directly linked to the operations. Hong Kong drop, there is a portion of cap rate expansion. Are we gonna see, depending on where the operation go, I think China, there will still be a little bit of weakness in terms of valuation. Hong Kong itself is majority of the drop is due to the cap rate. Now, where the cap rate, will it continue to expand?
It will depend on where the valuers place it at the end of the time. This round, they did a 10 basis points. 10 basis points expansion, it may continue. We're not sure. What we see ourselves in terms of our financial strength today after selling Anson and all, our Singapore holding up strongly, our total value actually has gone up by the strength of our 60% odd percent portfolio, which is held by Singapore. Singapore has gone up, it's 60% odd percent of portfolio. It brings our gearing to about 37%-ish. It won't be able to withstand any shocks in terms of any major cap rate changes. I'm not saying there will be any major cap rate changes, if there is for China or Greater China, our portfolio will be able to withstand that.
I think our financial strength today can take us to withstand the next one, two years if there is any changes in cap rates. Okay. Valuation, even if it drops, it will be a reflection of the softening of operations in China. Okay. We will be able to withstand based on our current capital structure.
Okay. It is very clear, Sharon. Hey, all good for you. Thanks so much. We get it.
Thank you, Brandon. Tan Chen, good morning. Over to you now, Tan Chen.
Yeah. Could you explain a bit about the cap rate compression for Singapore, especially for MBC and Vivo?
VivoCity itself, if you look at it, our cap rate, our running cap is high fours. The marginal cap rate compression, if you look at the past deals, is tighter than what it is. The valuers really have no choice. They really have to give it to me because there was transaction. Majority of VivoCity's valuation gain is operations. It's operations. The 10 basis points doesn't get me to that SGD 600 million, SGD 500 million-SGD 600 million, SGD 500 million. It is majority the operation. MBC. MBC is due to transactions. They have done a mixture. They typically, valuers will have to take in transaction cap. They will be a bit measured in terms of maybe adjusting market rents down a bit. There was a mixture of that. The reason behind the changes is majority transaction, market transaction left and our own operations being positive for retail.
Got it. Second question is on cost of debt. If you look at the debt that's expiring versus what you're signing, what's the expected cost of debt for the next financial year?
Currently, I think rates are all going down or going down and then quite stable these few days. I would think it will be around this level, mid-threes, for the next 12 months.
Will you be able to share what's the average expiring debt cost for the next year?
Actually, average expiring debt cost for the next year is not quite meaningful because some of it we hedge, some of it we swap. What I can tell you is for this coming year, financial year, the fixed rate debt is actually at about 2.6%-2.7% on a blended basis. When that get rolled off, it will be reverted to floating rate. The majority of the fixed rate debt that is expiring in Q1 are all below the current market rate. There will be some increase. We are also working hard, talking to the bank to renegotiate the margin, and doing a lot of whatever things that we can do within our portfolio to bring down the cost of debt.
That to cushion the impact of when lower rates IRS roll off, it will impact in our books. At the same time, we are also seeing margin going down because we have been going back to renegotiate. Hopefully, that can offset each other, and then we can keep it at about three over mid-threes, continuing to be at mid-threes.
Okay. Got it. Thank you.
Thank you, Tan Chen. Derek from DBS. Over to you, Derek.
Hi. Hi, good morning. Can you hear me?
Yep, we can hear you.
Hi, good morning, Sharon team. I just have two questions, right? First one is on your way, all right. Could you give us a bit more color whether this year for the retail office business type of expiries, are you expecting any churn or downsizing? Maybe some thoughts around that given the current climate. That's my first question. My second question, back to what Tan Chen has asked? I think generally you have kept interest rates pretty stable, and you're still guiding for flat-ish. I'm just wondering whether are you being a bit conservative on that front now? Because you have moved Hong Kong to China, right? China is going down. Singapore is going down. Rightfully, I thought that maybe interest rates will rise.
Thank you for doing my job.
Huh?
Thank you for asking that question to my CFO.
May. Okay, let me take the-.
The interest rate.
Oh, sorry. Interest rate more important.
Yeah. Yeah. I just wondering maybe what you think it will be?
3.5, it meet. 3.4 also meet. 3.6 also meet, right?
Okay. Okay. Essentially, we should expect that your interest rate should have peaked. That's how we should look at it, right?
no, no, no, no.
Okay.
We do have interest rates swap at high rate at the moment, and it's going to only drop off next two years up to March 2027. Okay. When that says the interest rate cannot go down too much, okay, then when, in after March 2027, when all our high interest rates swap expire and we roll, then you will see that. Depend on the market then. If the market is same as today, then you will see it rolling down. I can safely tell you it's a low two, low threes. At the moment, not yet. I got to gradually manage the high interest rate swap that we have in our portfolio. To the mid-threes that I promised you.
Got it. You're saying that just to follow up, you mentioned that if interest rates remain at current level, you potentially could go in at low threes. Is that how I should look at it?
Okay, what is low threes?
Okay.
Yeah, it might be 10%-15% lower than what we have now.
Okay, okay. Yeah. All right.
Put it that way, if assuming all my debt reprice today and based on today's market rate, it will be around 3.3%.
Got it.
3.2% plus 3.3%. Yeah.
Got it. Thank you. That's very good color. Thank you. Sorry. On your side.
I still have interest rates swap, high interest rates swap.
I know, I know.
On my portfolio.
I know, I know. You won't be too bullish. Yeah, just some thoughts around. Keep us apprised. Yeah. Thanks. Thanks.
Okay, maybe let me just comment quickly on the way that we release expiry. Generally for retail leases, we aren't seeing any significant changes to lease durations. Right. Larger tenants are still signing slightly longer leases. The majority of retail leases are still three years. We still have a small component of shorter leases within our portfolio that's largely unchanged. The bigger changes will probably be on the office side. For office, you, if you look at our previous quarters and in fact, going back a few quarters, you'll see that our office bill has come down slightly.
That's largely due to the passing of time, where we have quite a large chunk of office leases expiring in FY 2026, FY 2025 or FY 2026. Because those leases largely haven't been renewed yet, their slightly shorter durations have brought down our bills slightly. Looking at the negotiations with the office tenants currently, we do see a lot of the tenants where previously they were assigned five-year leases, are now largely more looking at the three-year, looking at three-year durations. I still have five-year renewals. I still have four-year renewals as well. The tenants that previously had five-year leases are potentially asking us for three years rather than five years.
The office bill will come down slightly. In terms of the second part of your question, in terms of where you're asking about downsizing and the like, unfortunately, we do have a little bit of that. I mean, you mentioned that the market remains uncertain. The ability for tenants to continue to hold large spaces, especially in the current uncertainty, is not very high. While most of the tenants, especially our larger tenants have retained all of their spaces, That's not the case for all of our tenants. A number of tenants have actually given up spaces. I mean Google was a good example last year.
We still have a few of these tenants going forward that are asking for a slight reduction of space upon their renewals. It's not for these large tenants, it's not a huge amount of space. We are talking about maybe 5%, 10%, and 20% of space being given up, and it's only for a small proportion of the tenants within MBC in particular. If you go to Shanghai and Beijing, that story becomes quite different. For Shanghai, we do have tenants who have been asking for 50% reduction in spaces. Again, there's still a minority.
The, the bigger challenge in Shanghai actually has been non-renewal tenants where because the market rentals have been low, and because there's a lot of supply within the market, we do have a lot of churn within the tenant mix. Although the property has done fairly well, we have brought occupancy up from where it was about low 80s, it was actually high 70s about a year ago. We are now about 86% thereabout for Shanghai. We have a little bit of that, of the same issue in Beijing as well, where we do have tenants who have given up 50% of space. There is also a little bit of competition between landlords for tenants. For that building, we have actually managed to maintain our occupancy at a quite healthy level, around the mid-80s mark.
Okay. Okay. Thank you. Sorry for that, but just one more. For MBC, right, are we gonna see stable or negative reversions? Just one-off negative? I am just curious.
Passing rentals, market rentals, have remained fairly stable all around the mid-six range. Where the reversions will come is depending on where the tenant ends their lease. Which tenant is the one that is being renewed and what their rentals were. Within the port, there are a number of tenants where the average rent is actually a little bit, quite a bit higher than SGD 650 yeah. When those leases revert back to market, unfortunately there will be a little bit of negative rent reversions.
Okay. Maybe, Gary, I give you another perspective, yeah. I think the Okay. Most of our tenants have been with us for what? Five years, 10 years, and more. Certain amount, if we were to switch out a tenant, and let's compare switching out a tenant and a negative reversion. Just for example, a 8% over percent or 8% or 10%, 8% rental reversion negative, may sound like a catastrophe. Okay. If you look at what does that translate into the number of months for a lease term, we are talking two over months. On a cash flow basis, I may be better off as compared to switching another tenant, because switching another tenant, the likelihood of it being back-to-back and not giving rent-free is absolutely out of this door.
In a typical business, leases beside where they give fit-out rent-free and the handover unit is never so perfect. I think I've always said that for business park and all, I really prefer them to stay. My cash flow is definitely better. Okay. Anything that is single digit is nothing to worry about. It's even better than I switch tenant and get a positive reversion. That is from my operations perspective, yeah. Okay. Maybe I just share the other point is, that leads to your question pertaining to our lease expiry. The term to maturities in terms of our leases. The few of our top tenants by virtue of length of time, they are coming closer.
Good thing is one of our top 10 tenants in MBC is renewed. Okay? It will improve the lease expiry profile, okay, and have de-risk for MBC. I think when you look at rental reversions, especially for business park, yeah, changing a tenant, you see the percentage. Typically, we have to give minimum three to four months, plus a certain downtime because we cannot back-to-back. Today, I take back the key, tomorrow I hand out the key to another tenant. In terms of cash flow impact, it is worse in my pocket on that basis. If I can renew and the rental reversion is slightly negative, I'm more than happy to do so because overall on a cash flow basis, I'm better.
Okay. Okay. Very clear. All right. Thanks, everyone. Thank you.
Thank you, Gary. Can we quickly move on to Jonathan?
Thanks for taking my question. Lots of leases expiring for the next two years. You have mentioned potential weakness in Shanghai and Beijing. Are there other markets that could also have potential weakness in terms of downsizing or non-renewal? Maybe you can share in terms of quantum how some of that weakness could be. Second question relates to I think an earlier question on yeah, occupancy costs for Festival Walk. I think we missed out answering that part of the question. Thank you.
Yeah.
Oh, I think yeah, you go ahead.
Let me just so in terms of the significant risk in the portfolio, I think some of this we have really flagged earlier, flagged before in previous quarters. One of the bigger risks within the portfolio actually is non-renewal of Fujitsu at the SGM building in Makuhari, Japan. When that occurs towards end of this current FY, then there will be a drop in occupancy for Japan portfolio and the corresponding reduction in revenue and net property income. For the current. Moving on to other geographies, Korea is fairly stable, actually doing quite well now. Their buildings are up to 100%.
We are for Hong Kong, the office component has a small amount of vacancy. For the other tenants within the building, some of the leases were signed quite recently, especially for the anchor tenant at the Festival office that extends all the way out to 2030. If you move on to Singapore, mTower has a little bit of occupancy reduction towards the end of this current FY. One of the tenants has flagged that they were moving out. Actually, they have flagged the moving out for more than two years already, moving to a own, to their own used building.
For MBC, we are in negotiations with majority of the tenants which are, you know, really started negotiation with majority of tenants which are expiring in the current financial year. For the majority of them, they have not indicated that they are downsizing. There is one tenant that potentially may, and we are still working through the details with them. Their downsizing is not significant. It's not like a 50% reduction of space. It's probably closer to more or 20%-ish reduction. I think the last question you had was on Festival Walk's occupancy cost, right? That's also in the 20%-ish range, fairly consistent from what it was in the previous financial year.
Yeah. Thank you.
Thank you.
Yeah.
Thank you, Jonathan, as well. Next we have Joy. Joy, please go ahead.
Hey, Sharon.
Hi, Joy.
Hey, morning, Sharon, and all.
Morning.
A few questions. First of all, just on MBC, you mentioned about few non-renewals. Can I just get a bit of sense as to the reason of non-renewal? Is it cost or just-
Those were the previous financial year ones. Google gave up two floors, right? You know that,
Oh, okay.
P&G leased those spaces.
No new ones.
Uh, the currently-
No new ones, huh? Okay.
No new ones.
No new big ones are. There are small ones, those like, you know, half floor, one floor tenants, which doesn't impact the portfolio that significantly.
Okay. For those small ones, they're moving out because of cost?
Some of them are moving out because of cost. There's nobody that said that, "We are closing down the Singapore operations and therefore we have to exit MBC." We haven't heard that in quite a while. There have been some which are consolidations where, you know, they have like three or four different offices, and they were looking to consolidate. The Like I mentioned, for PJB, that was largely cost as well as the expansion issue.
There were a few other tenants which are largely driven by cost and consolidation.
Okay. Cool. The occupancy rate, I can take it as the current physical occupancy rate, right? The 91%.
For MBC, is it?
For MBC, yeah.
Well, the difference between our committed and physical occupancy is very small.
Okay, great. Second one on VivoCity, you mentioned that the valuation is largely on operational. Does that mean that once your AEI is completed, we can expect another one round of meaningful reval?
Yes.
Okay. It will all depend on if you see the NPI going up, which is typically a reflection of the rental reversion, that will slowly be taken into the valuation. They will always deduct the capital expenditure that we spend on the mall too. If it go up, it will go up. If it comes down, if it's operational, it will come down.
Got it.
If you say big cap rate changes, big cap rate changes are unlikely. Unlikely. There is no deal, on that front, the valuers will not unlikely move.
I see. Just lastly, you know, Sharon, you wrote on your press release that pursue targeted opportunities. Could you just elaborate a little bit more on the targeted opportunities? I guess, you know, also on, you know, divestment opportunities in other markets as well.
I think when we, when we talk about opportunities, very simply, without reading my press release, very simply, we always review the constitution of our portfolio. If there is opportunities to sell and we see that there is a reason to sell, we will consider doing it. I think what we have done last year at Anson is indication of how of capitalizing on certain opportunities when we see it come when the opportunity comes by. We are not here to hug assets. If we find that there is good purpose for doing so, we will continue. I think we are really sharing that we will continue to do whatever that we said, which is to recycle where possible.
Of course, recycling for commercial is a little tougher because our asset size are chunkier. Okay. That doesn't stop us from thinking of how to dissect and capture the opportunity when it comes. I think maybe I'd like to share, like, for the whole of the year, just in summary, yeah. What have we done well? What are we worried about? What have we not done well? Okay. Maybe I talk about what we think that we have done well first. Number one, the valuation increases well supported by operations is a definite positive. Over 60 % of portfolio is stable. In terms of NPI contribution, Singapore is about 60% over . It's about 60%. It's a very, very stable piece. Okay.
That leads to bringing down the worries of last year of our 40% gearing down to 37%. Now, what does this 37% mean to me? 37% mean to me is, number one, investors stop nagging about my gearing. Two, is I have enough buffer to withstand any shocks in this unstable market. Right now, globally, I would think that there's some shapes left. How you cannot assess a cap rate, I think we still don't know. Certain parts that start showing signs of expansion in cap rates. So valuation, I think we've done well, led by operations, better operations. The other thing is we also actively recycle, capitalizing on Anson with a gain and lowering our gearing also. Third is our two retail malls.
You may say that Hong Kong is weak, I would say that we are big retail sales. We are better than negative than the general negative in the market. Okay? On that basis, I would say capital structure is stronger. We've done what we can. Operationally, we push what we can, but we are not immune from the slight weakness in the China market and Japan assets that we have. Where are the downs? Japan, I think we have said enough about Japan, of our issues with the anchor tenant. We have actively taken down our valuation. Okay? The books have already registered the leaving of our two master leases. Japan is about less than 10% of our entire portfolio. What we can do, we have already done. Okay?
Control the OpEx, control the CapEx, bring down the val. Japan, we have done what we can as the manager. Hong Kong. Moving to our Hong Kong retail. We kept our occupancy high. Although the whole market is a bit weak, we push on to make sure that our occupancy is kept. Rental reversion, a bit there is a negative. It's a lesser negative than the market. Where we see the turn is there is still consumption. Hong Kong dollar, if it weakens, it will be a benefit to Festival Walk. Generally, we are not performing behind Hong Kong retail market. China. China itself, everybody hear a lot of bad news, trade tensions, whatever. It's not new to us. It's not new to China at all. In terms of operations front, our stability comes from occupancy.
If you see our occupancy, even though it has dropped, it's way ahead of market. Okay? We may be in the 80s, market is 70s. Okay? I would say that although we are negative, same story, we are better, we are performing better than the market. Those are our, if you ask me where our focus is, our down points are our overseas softening, but we are outperforming the market, be it on the occupancy or be it on the sales front for the retail part. As a manager, I cannot control the macro. We can control our ops. We can control our costs. We can control our spending, and we can control and push certain AEI plans to gain further revenue when we see opportunities like VivoCity. I think generally that sums up for what we have done for the year.
I guess going forward next year, we probably acquisition or sizable acquisitions are off the card. Is that fair to say?
I think right now, depends on what acquisition now and the size. Today I would say Singapore acquisition, far and few. Okay.
Our gearing 37%, I think most of the acquisitions for the last 10 years, you need a bit of gearing to push up.
Yeah.
Acquisitions. Your underlying portfolio that, historically is actually higher yielding than whatever that is selling in the market. Yeah.
Yeah.
If we are strictly looking at accretion and not the quality of the asset that you're bringing in, typically higher quality means lower yield. You will need gearing. Okay? I would say that if you, if you want strictly accretion, it will be slightly tougher. I am not against the idea of improving the quality even at neutral. Okay? Sometimes we are too fixated on certain things and, yeah. I think what I'm saying is I'm okay even with neutral if it's a higher quality asset.
In that scenario, would you be happy to trade, let's say, partial state of your sizable assets for those?
Oh, you-. Okay. Which one? I think we have always shared with the market, yeah. VivoCity and MBC are synonymous with MPACT. Okay. As of now, there are no plans of any divestment. They are core to us.
Okay. All right.
Yeah.
Okay.
If you say others, I do not know what you mean, significant others. Yeah. We will consider if the price is right. Yeah.
Okay, cool. That's very clear. Thank you, Sharon, for sharing.
Thank you, Joy. Last we have Rachel from Macquarie. Rachel, please.
Hey. Hello. Hi. Morning. Finally. Just very quick questions. I think firstly, Fujitsu's occupancy. Fujitsu non-renewals, how much would it form in your lease expiries for this year?
No, next year, next year, 2026.
2026. Yeah.
2026.
The 12.7% .
It won't show up this year.
2026 or 2027?
No, it's 2026.
2026.
Out of that 12.7%, Fujitsu is maybe about 2%.
2%. 2.5% .
2%.
Yeah. It'll be a little bit less than 2%.
Oh.
It'll be a little bit less than 2%.
Okay. Okay, got it. One more is, Japan, your Japan asset, Do you need to do AEI or anything or any color on leasing demand or?
So for the Japan assets, it's-
Can sell.
We do a little bit of AEI. The buildings, in particular the Makuhari ones, are a little bit old, so we do have plans to do more cosmetic type of work to just improve the leasing outlook of the building.
Okay.
That and the fact that, like I said, because they're old, then there will always be, you know, upgrades and replacements that need to be done over the course of the life of the building.
Okay. Demand is still soft, that area? Hello? Hello?
Sorry. Wait. I didn't quite catch your question. Can you repeat it? Repeat.
Oh, the Japan leasing demand, is it still soft or is it?
Interestingly, I have to split it between the Makuhari assets and the rest of Japan, right? The Makuhari leasing demand actually has been improving slightly. We're not talking like leaps and bounds, but at the very least, we are able to sign a number of leases. We do have a little bit more demand. In the past, I never saw, we never saw tenants that were like that there were more than 50, 60 tsubo. We actually now have tenants that are looking at spaces at the 100, 200 tsubo range.
There's a little bit of interest, a little bit more interest in the Makuhari market. The leasing demand for the rest of our Tokyo assets still remains strong. Even when there are non-renewals, we're generally able to backfill the spaces, either even before the tenant leaves or not significantly a long period after the tenant moves out.
Okay. Got it. Yeah. One last one. Share buyback. Would you use the capital gains or the divestment gains to do share buyback?
My divestment all used to reduce the loan with the bank.
Cannot idea no more.
I think we have the mandate. Previously, we didn't. We are able to do so, but doesn't mean that we will do so. We will balance between keeping or gearing to make sure that, because every SGD 100 million is a 0.6 impact and are positive to the DPU, no doubt. We will balance that and decide along the way there. As of now, I would say immediately, no, but we have the capability of doing so. It's a standby now.
Yeah. I think, if I may add on, if we need to, we can do.
Yeah.
We will do.
Okay. Okay. Thank you so much. Have a great day, everyone.
Thank you so much. Just a final question from our online participant, Mrs. Darleen. She is asking if you could share a bit more colors on Japan portfolio lease expiring in coming year.
I believe the question actually refers to lease expiries outside of the three Makuhari assets. I'll answer that way. For the rest of the assets, the largest chunk is actually our HP building, and that's got a committed lease all the way to 2030. For the remaining assets, there are always expiries here and there. I think the most significant one is where we have a single tenanted building at TSI in Ikebukuro. That asset, the lease expiry is coming up, we are in negotiation with the tenants.
So far we're still waiting for them to come back to us on whether they are gonna stay or gonna or gonna give out their space, or gonna leave the building entirely. That one's still work in progress. In any case, all of these assets are fairly small. In the case of the Ikebukuro one, it's. Insignificant.
Okay. I think in short, what is, what will be material will be HP. Okay. The pocket, lease, and that is till 2030. The rest is part and parcel of business and individually very, very small. If you say anything that will be significant, would be HP lease, that lease is till 2030.
Thank you, everyone. I would like to thank everyone for finding time to join us today. If you have further questions, feel free to reach out to us anytime. We'll be happy to take them on the side. Thank you so much and have a good day ahead. Goodbye.
Thank you.
Thank you.