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Li Yeng Teng: 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 1st April to 30th September 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.
Bee Lian Tan: A very good evening. Okay. The performance of MPACT across first quarters, 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 headwinds. So for second quarter, DI, distributable income, was SGD 106.1 million and DPU 2.01%, 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 divestments from Mapletree Anson last year and approved any property -- office properties in this quarter. The increase was also partly offset by the unfavorable asset impact from depreciating Hong Kong dollar and renminbi against SGD and higher withholding tax relating to the JGAAP profit on the divestment of the 2 properties -- 2 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, and this is partly offset by the higher property tax and staff cost. The year-on-year decrease in the NPI for overseas properties was mainly due to lower occupancies and negative rental reversions. 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, and the year-on-year increase was mainly due to operational contributions from overseas properties and the absence of contribution from Mapletree Anson. And this was further dampened by the depreciating Hong Kong dollar and renminbi against SGD. Savings from interest expenses mitigated the lower NPI. Interest rates on Hong Kong dollar and Sing dollar borrowings were lower year-on-year, coupled with lower outstanding borrowings. This slide shows that Singapore continued to account for more than 60% to both gross revenue and NPI with the 2 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 proceeds were used to repay on short borrowings. Moving on to capital management, gross outstanding borrowing, SGD 6 billion, aggregate average ratio improved from 37.9% last quarter to 37.6% as at September 2025. Additionally, the weighted average cost of debt declined 9 basis points to 3.23% per annum. This was driven by proactive debt management efforts, further supported by favorable interest rate conditions. Ended 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 '25-'26. 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 application. So we will continue to ensure a natural balance sheet hedge by closely aligning the debt mix with geographical distribution of MPACT's AUM where visible. MPACT's debt profile remains well distributed with no more than 24% of debt expiring in any single financial year. The outstanding borrowing in FY '24-'25, 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, CPG, and that was because the lender required the valuation to be not less than 3 months old. Hence, we did a valuation in relation to this refinancing. So in conjunction with the refinancing and the valuation for CPG 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 show against interest rate volatilities, we continue to keep our fixed rate debt above 70%. In August, we issued an SGD 200 million 7-year green notes at 2.45% per annum. As of September, the fixed rate debt stood at 77.5%. FX-wise remain volatile with Hong Kong dollar, renminbi, Korean won continue to depreciate against Sing dollar. More than 70% of MPACT's distributable income was in Sing dollar and most of the foreign currency distributable income were also hedged into Sing dollar based on a rolling 4-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 4th December, and the book closure date is on 30th October 2025. With that, I will now hand over the time to Wee Leong. Thank you.
Wee Leong Koh: Okay. Good evening, everyone. Maybe just to go through Slide 19, then we can look through the occupancy of the various assets. MBC has maintained its occupancy through the period and closed the quarter at 83%. VivoCity continues to maintain its 100% occupancy. The other SG properties' occupancy has improved slightly to 99.1%, while 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 our occupancy at a fairly healthy level, but that was a little bit of expense on rental reversion, as you will see in the later slide. For the Japan properties, one of the subtenants at mBAY POINT, which was one of the subtenants for NTT departed the building, so that resulted in occupancy falling slightly, while Pinnacle Gangnam managed to maintain occupancy close to 2 except for one of the small retail units. Moving on to rental reversion. So for MBC 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 resources were signed before COVID, most of them were north of SGD 7, and our market rentals at MBC now are actually closer to the SGD 6.50 number. Due to the rental reversion of this chunk of leases, the MBC vendor reversion is slightly negative. VivoCity’ continued its good performance, closing the quarter with a 14% positive rental reversion, while for the other SG properties came in by about 6%, driven by the improvements in performance at ARC as well as mTower. Festival Walk, rental reversion came in at minus 10%, widening slightly from the previous quarter. Retail sentiment remained fairly weak in Hong Kong, and we 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 have been continually being pushed downwards. To retain tenants and to ensure our occupancy remains at a fairly healthy number, we have moved our rentals downward 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 the Japan properties, rental is largely flat. And for Pinnacle Gangnam, that one lease that we signed is just a small retail tenant, even though the rental reversion is positive. So lease expiry for office and retail remain fairly healthy, 2 years for retail and 2.4, giving a 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 2 office assets in Japan, 2 fairly small assets, one in Tokyo in the Ikebukuro area and the other in Yokohama. For this transaction, we had announced it in -- towards the end of the previous quarter, and this completed in August. So moving on to retail, you'll see that for VivoCity shopper traffic and tenant sales remained strong. This is despite the fact that we had disruptions within the mall due to the AEIs that have been ongoing. So this slide shows the -- next slide shows the AEI works, which were completed at the mall over the last few months. So Phase 1 was completed in first quarter. That's actually the change of layout of the food kiosk as well as increase of the kiosks from 21 to 24. The second phase is the expansion of the Basement 2 area by about 14,000 square feet of net lettable through conversion of car park area and complete reconfiguration. Okay, so if any of you have been to the mall, you can take a look at this. But for those that have not, we have a video that will give you a sense of how it looks like. [Presentation]
Wee Leong Koh: Okay. So this slide just gives you some of the new tenants and some of the tenants that have come back to the mall. So 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 and with Labubu Mini Mart come Mid Autumn Fair as well as we have also done the Mid Autumn Fair at Level 1 of the mall. Moving on, so for Festival Walk, while shopper traffic has improved slightly year-on-year, tenant sales remained weak, largely in line with the -- sorry, tenant sales remaining weak. That's largely attributed to higher outbound 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 continuing economic weakness in Hong Kong. The mall has continued to try and rejuvenate its retail offerings, bringing new tenants at Birkenstock, Lush as well as a number of services like medical center, OSIM and then things like Nespresso, okay? If you look at the increased traffic, part of this is attributed to the events that we had done throughout the mall that has been very popular with drawing -- being able to drawing a large number of the shopper traffic. 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 so that we can bring in more traffic in the evening so as to boost the F&B spending. I think that comes to the end of the presentation. We can...
Li Yeng Teng: Thank you, Janica and Wee Leong. We are now ready to take the questions. [Operator Instructions] So first, shall we hear from the ladies for a change? So Geraldine from DBS.
Geraldine Wong: Congrats on the great results. Okay. 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? Yes, just a sense, if possible.
Bee Lian Tan: So you are 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?
Geraldine Wong: Yes, yes. Under the level, yes.
Bee Lian Tan: Okay. We normally do have this information. But as you know, our internal policy is to keep above 70% fixed. So 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 bps.
Geraldine Wong: So 2.7%.
Bee Lian Tan: Thereabout, but you know the spot rate change every day. So as of today, it's this. Tomorrow, it will change.
Geraldine Wong: Okay. Okay. Yes. That sounds very encouraging. Maybe a second question, maybe on Festival Walk. I think the previous guidance was that the non-anchor leases should see a flattening of reversions. And is that still the right thinking that we should continue to see that compression in the next 1 to 2 years? And maybe some color on the ground retail sentiment now?
Bee Lian Tan: Okay. I think segment-wise is not as bright. I think, we will be very upfront about it. In terms of the efforts that we are doing, we are trying to drive more people to the mall. You can see that we have intensified our marketing interim 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. So if we talk about reversion wise, I think I've been saying it's a plus/minus 10%, yes. Bulk of it has gone through major rental minus negative rental reversion. I think there's still pockets here and there. Hopefully, if things -- I mean, if the spending gets lesser in overseas and especially some dilution into Shenzhen, then hopefully, this will be a better trend for the mall itself. Yes. But generally, I would say that I think they are on the same page with most of the other mall operators.
Geraldine Wong: Okay. Yes. Maybe I can just squeeze in a last one. I think this quarter, you did a reval for Pinnacle. Just -- I think a similar is that I think it's because our mind whether you are looking to divest the asset and maybe get an opportunity...
Bee Lian Tan: No, no. No. That was -- it was a financial requirement. And it's under the REIT guidelines that any revaluation has to be announced. Yes. So don't think too much to it. When the time comes, if there is any, we will definitely inform the market. But don't read too much into this one. This is -- it was driven by a refinancing need.
Geraldine Wong: Yes. It's the financial condition for me to draw down loan.
Bee Lian Tan: Yes, yes. It's just administrative, okay? And REIT guidelines expect all valuations to be announced.
Geraldine Wong: Okay. Okay. I see. I see. Okay, then we will wait for your further good news. Yes.
Li Yeng Teng: Thank you, Geraldine. Terence?
M. Khi: This is Terence Khi from JPMorgan. Sharon, congrats on the results. Just wanted to ask on China. Could you give us a better sense of what you're seeing in China? It seems that occupancy picked up slightly and the reversions are coming in slightly ahead of your guidance from the previous quarter. Maybe could you give us updated guidance on expectations for China?
Wee Leong Koh: So, Terence, just to give a sense, leasing activities in China generally is concentrated in the first 6 months of our quarter, right? So once you get into the latter 6 months, there is the Golden Week holidays, end of the year vacation. Then, after that, you've got Chinese New Year coming up. So the later 6 months of the year, there will be less leasing activity in general, right? So a lot of the work that the team does is focus on getting leases in, in the first 6 months. Hence, first 6 months performance will be slightly better -- will be better than the latter 6 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 are being signed. And in some cases, due to the tenant's own internal requirements or the team's ability to manage tenants, we can shrink that rental reversion. Just to give a sense, and I mentioned this before in previous results, that Sandhill's general rentals in the past used to be about RMB 5-plus per day. We are signing leases in the RMB 3.50 range at the current moment. There are some tenants that we are able to sign at slightly higher numbers, and there are some tenants that we will sign at about RMB 3.50. So the rental reversion will range -- will follow what we are able to sign in terms of the tenancies. And we do -- where we are able to sign some leases north of SGD 4, and there's actually been 1 or 2 that were actually close to RMB 5 as well. But those are in the minority. They definitely help to bring our rental reversion slightly less negative. That's the case for Gateway 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 to RMB 180, but within that part of leases that we are signing, there are some that we are able to sign north of RMB 200, and there was 1 or 2 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 a rent -- stay at rentals, which are slightly higher. So again, that helps to moderate the negative rental reversion that you were expected if we went from, say, the SGD 5 plus to SGD 350 or from the SGD 250 down to SGD 150, SGD 180 sort of range.
M. Khi: Maybe also just to get a sense, since you are saying that first half, you expect better numbers versus the second half. Did you expect...
Wee Leong Koh: Better occupancy.
M. Khi: For better occupancy. So...
Bee Lian Tan: Momentum -- leasing momentum will be better at the beginning of the year, and there will be lull.
Wee Leong Koh: There will be a lull.
Bee Lian Tan: Yes.
M. Khi: How much should we expect for occupancy to dip into the second half for China?
Wee Leong Koh: Based on the -- okay, based on what we are seeing now, we are probably looking at maybe 2% to 3%, 3% to 4% sort of change over the next few quarters depending on how successful we are in terms of retaining tenants.
M. Khi: Okay. That's good. And also, I just wanted to ask on MBC. I understand in the previous quarter, we had mentioned about potential movement from CBD to MBC. I'm seeing that occupancy -- committed occupancies does not seem to have moved up that much. Maybe could you give us an update on 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?
Wee Leong Koh: If I can't disclose the tenant, I can't disclose to you whether giving up the space or not, right? But -- okay, I should not be. So the Google space is currently still in negotiation. There is at least 2 tenants looking at it. The one tenant that we were expecting -- we were negotiating very hard to move from a CBD out have 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 spend CapEx. So 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, but slowly. We have been -- we have signed up a few tenants over the past quarter. That's why you will see that the occupancy number has creeped up a little bit despite the fact that we had 1 or 2 nonrenewals 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. And given that this is coming into the end of the year, we are hoping to get them done before the 31st of December. But then if not, it's going to be into the next financial quarter before we get some of these done.
M. Khi: And in terms of, let's say, occupancies, I mean, now we are at 93%. Is there a possibility that we can pick over 95% by, let's say, the end of the year?
Wee Leong Koh: My leasing team's bonus will depend entirely on that, but 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. And 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.
M. Khi: Okay. And maybe a final question for me. Can I ask about Vivo? Could you share on how much of -- I guess, for the Phase 2, we're only seeing about a month plus of contributions, but I noticed that NPI margins are extremely high this quarter, if I'm not wrong, it's like 85%, could you share whether there's anything happening on the NPI side for Vivo?
Hwee Li Lim: Just give me a second. Okay. The contribution -- sorry, a portion of Phase 1, the contribution has really started, even before this quarter and only the Phase 2 is for this quarter. In total, SGD 43 million. We spent over SGD 40 million. And in terms of the -- what is the cost -- ROI is in excess of 10%. So that will be minimally or incremental NPI that you should be seeing. But what is actually pushing the -- most of the people numbers are actually the rental reversion. I think most of our assets are trading around 70-ish NPI level margins, yes.
Bee Lian Tan: If you are comparing year-on-year, we signed this utility, the rates are lower now, reverted to a lower rate. So there's also quite a big savings from the utility expenses. Yes.
Hwee Li Lim: So what's driving the performance this quarter, if I may just sum up, which is similar to the results of Vivo, is under the operations and maintenance, the utility expenses have come down. We have negotiated for a different rate during this period, okay? So the rates of our electricity has come down. That's about an SGD 2 million to SGD 3 million -- about SGD 3 million savings, SGD 2.7 million to be exact. Then comes definitely interest. I think that's very encouraging that finally, we see a big bar, and that's a combination of the effort of lower rates plus the divestment, the divestment proceeds actually bringing it down also, okay? So the divestments that we have done, especially at certain -- certainly is positive in terms of accretion due to changes -- due to the savings in interest. So those are the 2 big items. Unfortunately, China and Hong Kong continue in terms of the challenges that we have to face, but a little bit of positive, I think, quarter-on-quarter, I think the sales number is better, but preceding quarter, yes. But comparing to last year, they're still not as good you are talking about. So that's why I say challenges still remain. Even though quarter-on-quarter is better, but still Phase 2 was soft compared to last year. China, it is what it is. I think, overall, we -- the only comfort that we can see is we are trying to beat at least the market norms or the market indexes in terms of occupancy and where the rental rates are, but it is also declining, okay? So what's going to -- 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 levels. I think we are -- with -- after the divestment, I think we are in one of the better shape in terms of the gearing levels as a REIT. That gives us flexibility, but we'll be very careful as to how we deploy it if we need to. So we expect interest to help us along the way. So I sum it up for you as to where our challenges, Hong Kong, China, same story. Singapore will continue to fly. Vivo, especially will continue to fly. We have completed Phase 2. We are now upgrading also our drop off points and improving the traffic of the [indiscernible] 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 yet. So I think that probably sums up Q2. Q2 results are quite straightforward, yes.
Li Yeng Teng: Thank you, Terence. Next we have [ Jonathan ].
Unknown Analyst: Yes. My first question relates to Hong Kong. Recently, there has been some concern over commercial real estate in Hong Kong. So capital values, I think, for offices has dropped a lot. So 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%? And are you kind of looking at selling the 3 properties at cheaper -- I think cheaper prefecture? Those are my 2 questions.
Hwee Li Lim: Okay. Thank you for your question. I'll handle the Hong Kong one, then Wee Leong will chip in terms of Japan. In terms of Hong Kong valuation, I think the valuers typically fit in rentals that you have signed. And when there's negative regular reversion, definitely, that will translate into lower numbers, valuation. But the magnitude is not like you see a 10%, you're going to see a 10% drop. I think you see from historical because 10% is only a subset of the renewals, okay? So there's still existing leases. And typically, if you see for the last 2 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, but last year, they did. They did some 10, 20 bps change in cap rate. So if they don't change cap rates, not that I know of today that they are changing cap rates, then it will be whatever leases that are lower that would translate into lower value, 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. So in terms of office, I think you're right. I think there's a lot of noise out there in terms of office softness. So it's the same methodology that the valuers would take depending on the leases, okay? So we are not expecting like a double-digit kind of changes. But on very low single digits, there is a high possibility, yes.
Unknown Analyst: How big is the office component at...
Hwee Li Lim: Very small. These are -- but not extremely small. They are about 200 over 1000 square feet -- about 200,000 square feet.
Wee Leong Koh: But if you look at it in terms of valuation, the office valuation is about 10% of the total valuation for Festival Walk.
Hwee Li Lim: By size, they are about 1/3 of retail, yes. But 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.
Wee Leong Koh: So 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 at -- in our Japan properties will fall by another 15%, 20%, that's our range, right? So portfolio-wise, occupancy is not going to recover anytime soon. But just to give a sense in terms of leasing progress for the non-Makuhari properties, leasing generally is quite strong. The office market within the Tokyo 18 wards has been strong over the last year and continues to be strong. Most of the spaces that we have coming up as vacancies in the non-Makuhari assets have generally been able to refill in a reasonable amount of time, 3 months, 6 months type of downtime, which is quite reasonable for office. Office market in the Tokyo 18 is actually quite tight. Vacancies are sub-10% for the more [ Finch ] offices. And if anything -- if there's anything in the Tokyo Central 5 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 precinct are north of 20%. And in some cases, and our buildings inclusive, rental vacancies are actually 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.
Hwee Li Lim: Okay. So I think for Japan, I think Wee Leong has already highlighted, but I think just to add, it -- 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 anchor tenant. So as you can see from Slide 6, the contribution for all the entire portfolio in Japan is 5% of our entire portfolio. It's not one asset, we're talking about all the assets inside is 5% of NPI. So Japan, we are actively trying to rejig the portfolio. On top of that, we have also divested 2, okay? And that is in view of potential issues that we see coming or to improve efficiency. So that was a move that we made recently. Yes.
Unknown Analyst: If I may have a quick follow-up, for VivoCity, with Phase 2 coming up in the second half of the financial year, would the Phase 2 contribute even higher rental reversion, meaning rental reversion hitting high teens or even 20%?
Hwee Li Lim: Okay. So we separate our calculation. Renewals or leases that goes into rental reversion, asset enhancement works, which is like the Basement 2, which we class it as asset enhancement. We will give guidance in terms of what we spend and the return on investment. So we don't double count that number into the rental reversion. So for example, how do we -- if this is all the leases that we trash to create this new area, gives us, let's say, the lease sign was, let's say, SGD 10, okay? And the new lease sign is SGD 11. That is an SGD 1 upside. So we time the area, and we divide by the cost, just as an example. But that we do not double count. We separate into 2 buckets so that it's easier for people to follow our numbers. Rental reversions are purely renewals. If anything, asset enhancement are removed and guided by ROI.
Li Yeng Teng: Thank you, [ Jonathan ]. Rachel, can you unmute yourself and ask away?
Unknown Analyst: Okay. Thanks for delivering on the interest cost savings. I just want to clarify a little bit. Are you expecting that interest cost -- average cost of debt will drop to about 2.7% by end of this year? Is that your newest guidance?
Bee Lian Tan: No. No, no. No. That's why I clarified just now that if my entire SGD 6 billion repriced at today's rate, that is about that cost of debt that we will be looking at. But not all my debt is going to be repriced tomorrow or end of this year. My term to maturity is 3.5 years. My fixed rate term to maturity is about 2.4 years. So it will not be this financial year or next financial year.
Hwee Li Lim: It will be gradual, okay? It will not be just 1 year. I think, yes, she was giving that number to answer your question if everything was done today.
Bee Lian Tan: Yes.
Unknown Analyst: Okay. Okay. Got it. Got it. So we should still expect it to drop further for this year.
Bee Lian Tan: 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 savings, it's also plus/minus a bit, again, because we do not have the savings from Hong Kong dollar borrowing anymore, the rate should have been in -- sometime in August or September -- August. So come next quarter, we will not be benefiting from the low interest rate from the Hong Kong dollar borrowing.
Hwee Li Lim: I think last quarter, everybody was very encouraged with the Hong Kong dollar crushing in terms of interest cost. I think it has since rebounded quite a bit. But 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 -- sorry, 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, okay? So 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 and like before. So these were the 3 factors that were negatively affecting us. Two are showing positive signs. ForEx is not 100% on our side yet.
Unknown Analyst: Okay. Got it. Yes. Maybe just passing on a little bit in terms of the HIBOR where it is now, next year's hedges that's rolling off, no more savings? Or still got some savings?
Bee Lian Tan: HIBOR floating, HIBOR is about 3.5% today. So okay, in terms of Hong Kong dollar, I have about SGD 650 million or HKD 3.9 billion notional amount of interest rate swap in place. So about 80%, 90% of those interest rate swaps are currently above the floating HIBOR now. So all these will be, but then that will be a positive. For interest rate swap-wise, I have about HKD 1.5 billion on it, so about 83% is actually above the floating now. So this -- all these interest rate swap will slowly mature, roll off. And when we replace, then we can have -- enjoy a lower rate if the rates remain low like now, okay? Yes. So I think all the high interest rate swap, the highest one actually got roll off in September, October already. Then we do have some 3-over percent for Sing dollar, which will progressively roll off until March 2027.
Unknown Analyst: Okay. Got it. Okay. That's very clear. Then my second question is on acquisitions. Are you very keen now, ready to push the button? Or is it still something that you're looking at?
Hwee Li Lim: I think we have capacity to do so. But stars need to be aligned, right? Price has to be right, and asset has to be right. So 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.
Li Yeng Teng: Thank you, Rachel. Yew Kiang from CLSA.
Yew Kiang Wong: Sharon, congrats on the good results. Just 2 quick follow-ups. One is after the SGD 200 million senior green note issued recently, right, is your -- so your guidance for full year cost of debt is still about 3.2%, is it even after that 2.45% coming in?
Bee Lian Tan: Yes. Actually, 2.45% is a 7-year note. If you compare to my borrowing and if I were fixed 3 years, it is higher.
Yew Kiang Wong: Okay. So it doesn't change much though.
Bee Lian Tan: It doesn't change much, correct. And 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.
Yew Kiang Wong: Okay. So first half and second half should be about the same?
Bee Lian Tan: Unless Sing dollar like Hong Kong dollar go crazy then...
Hwee Li Lim: So, Yew Kiang, when was your last update of your report on us?
Yew Kiang Wong: Quite a while back, yes. Quite a while back.
Hwee Li Lim: Yes, I know. Because I see you are an outlier. You are an outlier.
Yew Kiang Wong: Yes, yes, because I didn't hear you very clearly, but, yes, obviously, I got to...
Hwee Li Lim: I thought my IR had a typo.
Yew Kiang Wong: Yes. Secondly, just a follow-up on acquisitions, but I know your share prices have been moving up. That's good. But clearly, you wouldn't touch equity unless it's above 1x book. Is that the right way to think about it?
Hwee Li Lim: I think just...
Yew Kiang Wong: Because some of your peers are a bit more [ gauranga ].
Hwee Li Lim: Okay. Generally, I think investors are very careful. Investors will look at what are you using the equity for, yes. So 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 it -- very simply the acquisition has to be rock solid.
Li Yeng Teng: Thank you, Yew Kiang. Brandon?
Brandon Lee: I just want to 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? So as you continue to adjust rents for occupancy, right, where should we see that number trending?
Hwee Li Lim: Where should you see the number trending?
Brandon Lee: Yes.
Hwee Li Lim: In terms of margins?
Brandon Lee: Yes, NPI margins for Hong Kong, which is Festival Walk and China.
Wee Leong Koh: So the truth of the matter is as our rentals start to drop, NPI margins will definitely have to -- will definitely worsen, right? So if you see where China is now, a lot of the costs there are largely fixed. So there is very little ability for us to reduce the cost on that front. So as our rentals come downwards, the operating margin at China will certainly -- will definitely worsen. For Festival Walk, we have a little bit more levers. Rentals really aren't falling. In terms of NPI numbers, it is 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 in Singapore, but at least they have come down a little bit. And the team has been aggressively cutting costs on things like cleaning, security, utilities, consumption. So the worsening of the NPI margin will not be as bad as you are seeing in China, where the costs are a bit more fixed.
Hwee Li Lim: I'm not surprised if in China, there are some people who are negative, no margins to talk about. But I think what we are saying here is there will be a margin, but definitely China will be -- the margin will be lower, lesser, and it will be lower, wider than Hong Kong.
Brandon Lee: And can I assume maybe like China at 80%? Like today, it's like 81%, right? Because 80% is a safe number.
Hwee Li Lim: 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, but now we don't see anything as of now. We are talking in terms of 1 year ahead, we just have to say that it will be softer than what it is today.
Brandon Lee: Okay. And the second question is...
Hwee Li Lim: Hanging on to your tenants is your best bet in terms of running through the rough period.
Brandon Lee: Okay. And just touching a bit on tenant sales in Hong Kong, right? So if you look at your -- this quarter, it was down like 2%, right? But if you look at the Hong Kong...
Hwee Li Lim: Quarter on quarter?
Brandon Lee: No, no, year on year.
Hwee Li Lim: Yes, year-on-year is about minus 2%.
Brandon Lee: Minus 2%. But if I look at the Hong Kong, I mean, like for July and August, right, it was up about 2.8%. So is this something that happened in September? Or is it just you're a bit weaker than your peers?
Wee Leong Koh: So okay, we have worked with the local team to try and understand this a little bit better. And what we understand is that the improvement in tenant sales in Hong Kong in the last quarter was driven largely by tourism-centric events. So 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 it was in July and August. So that's improved tenant -- that's improved retail sales in Hong Kong in general. But Festival Walk as a mall is more of a local catchment, less for tourists. So that impact that has come into Hong Kong from the additional tourist spending didn't really translate into Festival Walk performance. Festival Walk performance is largely driven by the local catchment, where 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.
Brandon Lee: Okay. And maybe just to squeeze one last one. I didn't catch your answer for the question that Jonathan was asking about the Japan divestments, right? So you're looking to sell your assets in the 18 wards. Is that what I'm hearing?
Wee Leong Koh: We are looking to rationalize the whole Japan portfolio. If there are opportunities to divest 3 Makuhari assets, 1 or 3, that's something that we'll certainly look at, but 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. But we definitely -- 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.
Li Yeng Teng: Thank you, Brandon. Now, we have Derek from Morgan Stanley.
Jian Hua Chang: Yes, actually, most of my questions were already asked. Just maybe just one from me on the occupancy costs for Vivo and Festival Walk. Could you share those figures?
Wee Leong Koh: So occupancy cost for Vivo and Festival both are around the 20 plus/minus range.
Jian Hua Chang: Okay. And that doesn't seem to have changed over the last couple of quarters, even with rental reversions trending up for Vivo and trending down for Festival Walk.
Hwee Li Lim: Festival Walk rental drop -- sales dropped, so all same. Yes, it goes the other way around. But actually, Vivo's rent is moving up faster, faster than -- slightly faster. But actually, we -- when we look at what have we done to achieve the very high rental reversions are actually changing out certain trades and weeding out a lot of all the older term tenants who had maybe not innovated or the brand has started elevating. So new players come in, and that's how we got all the rental reversions. But I think back to your question is numerator minus, denominator minus, everything the same concept. Then it's the plus -- minus/plus about concept.
Jian Hua Chang: Fair enough. Sharon, and earlier on, you talked about -- Wee Leong 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 for Festival Walk is also due to your tenant mix. Is this something you could do on that front, increase the watches representation, change it up a bit to get more of that sales uplift? Is that something that could be done?
Hwee Li Lim: You're talking about watches?
Jian Hua Chang: Watch and jewelry. I mean, there was strong -- there was pretty strong...
Bee Lian Tan: Not in jewelry...
Hwee Li Lim: Of course, gold is going up, right? Gold is more value than diamond. So right now, everybody is like grabbing gold. I mean, all my jeweler all say no -- better to buy gold than buy diamond right now. So if anything that you see jewelry moving up, a lot of it is linked to gold prices, okay? We have seen that about 2, 3 times already, 2, 3x, especially in Hong Kong when you see a pop, okay, when you see a movement in that. But if you talk about watches, I think if you talk about luxury watches, then I think we have to take a different view, okay? Now, the luxury watches are also, in a way, tightening their strategy to be located only in malls that have, let's say, Gucci and your products and so on and so forth. So they are relooking at the way they distribute, okay? This is what I'm speaking of, for example, like, Rolex, yes. So we are typically a mid-ish masstige mall as opposed to a luxury mall, okay? Festival Walk is still one notch above VivoCity in terms of the trade mix. So if we say that you want all the watch players, okay, we can get the midrange, okay? But it's the lux that people that are driving the big numbers, okay, all your higher-end brands, may be your PPs or may be your Rolexes, okay? But those will typically not want to go into masstige malls. They want to go full lux malls. And so I think that will be a forward change that we are seeing. Yes. So jewelry, very clear, gold.
Li Yeng Teng: Thank you, Derek. We have a couple more analysts who have questions. Next, we have Vijay from RHB. Vijay, over to you.
Vijay Natarajan: A couple of quick follow-up questions from my side. Firstly, in terms of VivoCity, I noticed that the tenant sales for the second quarter has been quite strong at 5 percentage compared to previous quarter. I mean, is this all driven by the Phase 2 expansion? Or are there other factors driving this tenant sales growth?
Hwee Li Lim: I have to thank maybe the government for also issuing the vouchers.
Vijay Natarajan: It's still the vouchers effect...
Hwee Li Lim: 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, yes. Definitely a bit of that. I would say that also the Pop Mart event or the Labubu and all the private lease that we have been -- that we have done will also boost some of this traffic and hopefully translate into sales. So if you ask me, I think I have government to thank for giving the vouchers. I think it will translate to spend. Clearly, that was a feedback from FairPrice itself.
Vijay Natarajan: Okay. Okay. But with all this news about F&B tenant mix, F&B players struggling a bit, do you see that something in your mall? Are you -- have you been rejigging some of the tenant mix in your portfolio? And probably can you give some color?
Hwee Li Lim: Okay. What I like that I cannot get is good Nyonya food, good vegetarian and good Indian restaurants. That are 3 of my missing gaps, which my team tells me that we've been searching, there is no true good operator that really can pay and even offer either -- you know what I mean, they are either one shop type or whatever. So on that basis, if we talk about one shop type, we have tried, yes. So right now, 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, [Foreign Language], right? But they have a very, very nice offering that they had the lobsters and drinks to accompany. So we tried. And I think it's quite successful. They managed to up their presentation, and it's actually doing relatively okay in the mall. So I think those are the things that we also try to do, bring in new offerings. There's a bit of -- a lot of -- a couple of Chinese players now doing all the Mala and all the suanlà, which is the sour and the spicy. So like I said, where is my trade mix gap, in terms of F&B, I can name you 3, Nyonya food, vegetarian, Indian. That has always been my own buck that I want to compete. So those are the little gaps that I cannot fill, okay? It will not be a lot, maybe 1, 2 restaurants of such. Singaporeans love Japanese food. Now Singaporeans love now the spicy and the sour, okay? But we don't -- not to forget, we also have a subset of halal. We need to cater to people who need halal food and all. So we also cater to that in our trade mix in terms of F&B. Those are my 3 gaps, which I am still waiting to find good operators.
Vijay Natarajan: Got it. Got it. My second question is that in terms of your portfolio mix with acquisitions and divestments, probably if you look at 3- to 5-year point of time, where do you look MPACT to be in terms of geographies, portfolio mix and the income mix?
Hwee Li Lim: I don't think our geography will change. I think if you talk about Asia, you kind of skip all these 5, okay? I don't see how ourselves deviating. In terms of allocation, what I can guide is Singapore will continue to be major. Right now, NPI's contribution is in order of about 60 -- about 60%, thereabouts. Yes. So 2 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.
Vijay Natarajan: Okay. Probably where would your next acquisition be if you divest Japan assets?
Hwee Li Lim: Acquisition is not for me to time, yes. I mean, we are always on search, okay? Ideally, it has to be -- we will always look at a few factors. Number one, hopefully, that accretion has to be there. If not the quality of the type of asset is a different class, then we will consider, yes. So accretion majority will drive the decision. So if you take that point of view that accretion is what we are after in terms of DPU growth, then 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? So what we like is certain parts of Korea in terms of offices, but that doesn't -- that's one area. It's pockets -- yes, pockets. We will not -- unlikely -- we will not touch Hong Kong office. China, obviously not a time to touch today, okay? And Singapore, I think retail is something that is still interesting. Office, plus/minus, not sure, okay? What we -- from our 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 lesser when it's gravitated into the CBD, okay? So I think that generally shared with you our thought process.
Li Yeng Teng: Thank you, Vijay. Just a couple more question. First from Just a couple more questions. First from [ Tanshin ]. [ Tanshin ], over to you.
Unknown Analyst: Just one question on Pinnacle Gangnam, right? Given your current balance sheet and also cost of capital, do you think it makes sense to acquire the balance sheet?
Hwee Li Lim: We haven't really thought about it. It's actually -- it doesn't give us any issues. It doesn't have major impact. It's SGD 200 million, our share. We haven't given it real serious thought. That's because it's -- if you talk about investment or divestment, anything that is very impactful, something that we will stay very hard into. Plus, on the other side, it doesn't give us any problem. So we don't really stay at it also too hard. Usually, it's when you got challenging assets, then that's when you start staring at it very hard. So it has been doing what it's supposed to do. I think that's a question that we have not delved into as to whether we will look at full acquisition of it.
Unknown Analyst: Okay. But I guess overall, South Korea is like 1% of portfolio, right? But if you think longer term, this is a country that you will want to grow instead of just...
Hwee Li Lim: It is actually quite competitive, yes. The pocket that we want to be in is actually quite competitive. Yes. I mean, if it comes, and it makes sense, we will propose that. But if not, I think -- it doesn't come every day in terms of deals on the table, good areas, yes. And we have a very good team there, obviously. Yes.
Li Yeng Teng: Thank you, [ Tanshin ]. Last but not least, we have Terence.
Terence Lee: Terence from UBS. A quick one. Just -- sorry if I missed this, do you mind sharing more on MBC's prospects, both in terms of rents and occupancies?
Wee Leong Koh: Rents' prospects. Prospects are good. It came into mind. We are looking at -- the tenants that we are currently seeing include a whole bunch of tenants who -- 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 tenants -- we also have 1 or 2 smaller new setups in terms of spaces. And there were a few that were moving from industrial buildings looking to upgrade their spaces into a better class location like MBC. So the rental expectations and the sort of numbers that they are looking at, of course, vary depending on what they used to be paying. The CBD tenants can generally -- usually don't quibble with us on rent -- on what our rental numbers. So 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 we get first offers at SGD 5 sort of range, right? So 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. But 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. But I think realistically, on a -- even on a committed basis, I think that will be slightly challenging.
Li Yeng Teng: I think we have approached the end of the briefing. So just last one from Mervin.
Mervin Song: Yes. Just on -- can we just check on the [ Gulftech ] again? Are they vacating MBC?
Hwee Li Lim: Not that I know of. Are you hearing something that I'm not hearing?
Mervin Song: I mean there's press reports that they may be moving to Punggol Digital District.
Hwee Li Lim: Sorry, you got that with us.
Mervin Song: Apparently, you may be based on the direction.
Wee Leong Koh: So -- I mean, in general, there are a number of government agencies that we know are looking at Punggol Digital 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. And it's still in negotiation. When it comes to a conclusion when we are able to make -- put it into our results, you'll be there.
Mervin Song: So I can say it's a partial exit then.
Wee Leong Koh: I don't know what you're talking about, Mervin.
Hwee Li Lim: No, no, not that we are aware of. I think we have some constraints talking about certain tenants, and hopefully, you understand. Yes. You can talk to Lian.
Bee Lian Tan: Yes. We can visit offline.
Mervin Song: Anyway, we look forward to some maybe positive news on Singapore's retail exposure. Yes.
Li Yeng Teng: Just to close off, last final question from Derek, DBS. What is our hedging rate in terms of currency this half for this financial year and the rates for the next half?
Bee Lian Tan: Currency-wise, we hedge on a rolling 4-quarter basis. Then we entered into many, many, many forward contracts. So all I can tell you is most of our contracts are in the money at this moment.
Li Yeng Teng: Okay. Thank you so much, everybody, for your time. And apologies for taking up your dinner time and valuable time. So if you have any further questions, feel free to reach out to us. We'll be happy to take them offline. Again, thank you, and have a good evening ahead.
Hwee Li Lim: Thank you.
Bee Lian Tan: Thank you.