Mapletree Pan Asia Commercial Trust (N2IU) Earnings Call Transcript & Summary

A very good morning, everyone. Welcome to Mapletree Commercial Trust second half and full year ended 31st March 2021 results briefing. Given the ongoing COVID-19 measures, this is a fully virtual call. [Operator Instructions] Thank you. So with us today, we have Ms. Sharon Lim, CEO of MCT; Ms. Janica Tan, CFO of MCT; Mr. Koh Wee Leong, MCT's Head of Investments and Asset Management as well as [ Jane ] from Investor Relations. Without further ado, I'll pass the line to Ms. Janica Tan who will bring us through the results presentation. Mr. Koh will thereafter bring us through the portfolio performance. As of now, thereafter, we will take questions from the floor.

A very good morning to all. Let me start with the key highlights for MCT second half FY 2021 results. On financial performance, second half FY '20 NPI rose 1.8% year-on-year mostly due to full period contribution from MBC II and the tapering of COVID-19 rebate granted to eligible retail tenants. Including part release of the retained cash carried forward in fourth quarter FY '19, second half FY '20 DPU grew 57.9% year-on-year to $0.0532, bringing the full year distribution DPU to $0.0949. MCT's maiden full year -- MBC II maiden full year contribution has provided cushion against the impact from COVID-19. For the purpose of our financial year-end, we have conducted a full valuation in March, and the valuation of the portfolio were held steady $8.7 billion. On portfolio performance, VivoCity's growth for the year with lower shopper traffic and tenant sales, but we continue to see progressive recovery in tenant with the phased easing of health and safety measures. And in part of the disruptions from COVID-19, we managed to secure a further expansion by adidas, one of our existing tenants. adidas launched its second flagship store for its Performance line on Level 1 earlier this month, and this store is more than 3x the previous booking and the largest in Singapore. So our expanding collection of concept store further strengthen VivoCity's position as a key destination mall. On occupancy, the committed occupancy as of 31st March 2021 was 97.1%, and MBC continues to provide stability and support in such [indiscernible]. On capital management, our approach continues to be disciplined. To date, we have completed the refinancing of our borrowing due in FY '21/'22. Going into more detail on the second half financial results. Portfolio gross revenue was $257.6 million, down 1.5% year-on-year before taking into account the net government grant income, and NPI was $205.6 million, 1.8% higher as compared to second half FY '19. VivoCity and Mapletree Anson posted higher revenue, whereas MBC and mTower's performance were impacted by lower other revenue and/or lower occupancy. On property operating expenses, $54.8 million and 3.5% lower year-on-year, despite the full year impact from MBC II. So in general, property operating expenses were lower year-on-year across all categories. Below the NPI on interest expenses, lower by 14.8% as compared to second half last year, mainly due to lower SOR and lower fixed rate cost and also the interest incurred on the bridging loans in last financial year. Removing the impact of the potential and the release of cash, the distributable amount for the year -- for the second half was $163.3 million, 6.5% higher as compared to second half last year. And with the release of $13 million from the cash retained, amount to be distributed for the second half FY '20 was $176.3 million, which translates to a DPU of $0.0532 cents. On a full year basis, gross revenue was 0.8% lower at $479 million as compared to FY '19, and NPI for the year, $377 million, 0.2% lower as compared to last year. VivoCity's gross revenue and NPI contracted 19.5% and 20.8%, respectively, from FY '19, mainly due to rental rebate granted to eligible retail tenants impacted by COVID-19, whereas Office and Business Park assets registered a higher year-on-year gross revenue and NPI by 13.7% and 14.7%, respectively. This was largely driven by MBC II's full year contribution as well as higher contribution from Mapletree Anson due to higher occupancy and step-up brands in existing leases. On property operating expenses, 2.8% lower at $102 million as compared to last year, in spite of MBC II's full year impact. So in general, the property operating expenses were lower year-on-year across subsidiary for the full year as well. Interest cost 2.4% lower at $76.1 million, mainly due to lower SOR. Lower cost of debt from the refinancing of MTM terms loans, offset by the full year effects on MBC II. So including the $28 million of cash released and to be released, the amount available for distribution was $314.7 million. We released part of our -- of the $3.7 million cash retained in the fourth quarter last year in the first half. That's about $15 million. For this round, we are further releasing another $13 million. Okay. DPU for the year was $0.0949 and up 18.6% year-on-year. Moving on to portfolio valuation. On this slide presents the information on the recent valuation. There was a slight growth in portfolio valuation as compared to 30th September, mostly driven by compression of capitalization rates for MBC and MLHF due to market transactions. On balance sheet, NAV per unit eased to $1.72, mainly driven by the year-on-year change in valuation of MCT's portfolio due to COVID-19. On key financial indicators, as of 31st March, MCT total debt outstanding was $3.03 billion, and approximately $70.7 million of the total debt was fixed by way of fixed rate debt or interest rate swap. The rest of the indicators remain stable. All-in cost of debt, 2.48% per annum, and the interest coverage ratio was healthy at 4.4x. This is the debt maturity profile of MCT, well distributed with no more than 24% of debt due for refinancing in any financial year. MCT has more than $600 million of cash and undrawn committed facility, providing ample liquidity to meet working capital and financial obligations. And subsequent to March 2021, $70 million of the MTN were redeemed, thus, completing all FY '21, '22 refinancing ahead of time. So thereafter, there is no refinancing till August 2022. This is a summary of MCT's performance as compared to a year ago. So FY '20 was an extraordinary year for everyone, as COVID-19 pandemic will have full of challenges that still persist today. So we will continue to focus on maintaining a healthy portfolio occupancy and sustainable rental income. This slide shows MCT's unit price at IPO from April '11, and he unit price improved well from 31st of n[indiscernible] 2021. And on return to our unitholders, we continue to focus on delivering long-term sustainable returns. Total return to the unitholder for the year was 21%, and total return since IPO was 231%. So with a [indiscernible] portfolio and with key [indiscernible] in constant FX, MCT is expected to derive stable cash flow from highly quality tenants, and MCT's overall resilience will keep the business well placed right through the pandemic. Lastly, DPU 5.2% for the period of October '20 to March '21 shall be paid on 4th June. So this pay-up include $30 million of the retained cash in the fourth quarter last financial year. So BCD is [indiscernible]. Thank you. I shall now pass on to Wee Leong.

Okay. Good morning, everyone. I'll run through a bit more details on the financial performance as well as the performance of the assets. So if you're comparing full year gross revenue to the previous financial year, it was down about 0.8% on $482.8 million to $479 million. Net property income for the portfolio is only marginally lower than the previous year. But if you look at assets on a same-store basis, the NPI is really down 11.9% largely due to the impact of COVID-19. One key reason for the new parity in portfolio in net property income was that we had a full 12-month contribution from MBC II in the current financial year as opposed to only a 5-month contribution in the previous financial year, and that resulted in debt of about $40 million. The other positive contributor was Mapletree Anson, where we saw higher year-on-year occupancy, which contributed to a gross revenue and NPI increase of about $2.8 million. If you recall, occupancy at Anson had doubled all the way to about 75% in the third quarter of the previous financial year, and that was due to fitting up period of the major tenants and -- of a major tender at that period. Following that, we have been more or less fully occupied from more for this year. So the other same-store assets saw reductions in gross revenue and net property income largely due to COVID-19-related rebates as well as low occupancy for some of the Office and Business Park assets. So VivoCity saw the serious drop in revenue largely due to rental rebates, which have been given out to retail tenants over the COVID-19 period. A later slide will give a bit more detail on the rebates we have given out. The lower shopper traffic and tenant sales also resulted in reduced carpark revenue and DPU rent. And we also saw a near total drop in A&P revenues due to restrictions on atrium events. This is aggravated by lower rental income due to downtime negative reversions as well as some restructuring. Moving on to mTower, the building saw low occupancy largely from the nonrenewal of [indiscernible] units in the later part of last year, but also had lower cap up and miscellaneous revenues due to the lower number of people coming in during the COVID period. MBC I also was a contributor to the lower revenues, and that's largely due to low occupancy due to downtime in vacancy. On a portfolio basis, operating expenses are down 2.8% and that's despite MBC II's full year contribution. On a same-store basis, operating expenses were down about $11.3 million, above -- close to 12%. The receipt of job support in credits helped lower staff costs. COVID restrictions also caused lower traffic and fewer office and business park tenants to be at work, and that reduced our utilities and property maintenance. There was also a cancellation of the majority of A&P events at the malls, which reduced our spending on our homes quite dramatically. The next slide gives a bit of detail on portfolio occupancy. We ended the year at about 95 -- 93.5% largely due to vacancies at mTower as well as MBC I. So let's look at mTower first. The currently vacant spaces was originally committed, but a large part of this is originally committed. But we have mutually agreed to terminate the lease ahead of commencement just after the end of the financial year. We received compensation of more than 15 months, which gives us more than sufficient lead time to [ pack] the space. The committed occupancy of the building will, therefore, be affected. We will drop to 91 -- we will drop from 94.7% to 79.7%. And for the portfolio in general, that will drop from 97.1% to 95.9%. For MBC I, the majority of the vacancy is due to the fit-up period of tenant, which will need to commence in the first quarter of FY '21, while we are marketing the rest of the space. So if you look at our leasing updates, overall rental reversals for the year came in at minus 3.1%. Obviously, retail has been badly affected by the COVID-19, and it came in minus 9.6% for the portfolio. Obviously, the business park is still slightly positive. Some of this was due to leases we had signed before the -- sorry, we negotiated before the full impact of COVID, and that's helped to buffer our numbers a little. So lease expiry and WALE still looks slightly healthy. WALE is 2.4 years for the portfolio, a little bit shorter for retail at 2.1, slightly longer for office and business park at 2.7 years. The next 2 slide will give you a bit detail on the tenant mix in the properties. So moving on to VivoCity. Like Janica mentioned -- Janica has mentioned this already that adidas expanded their footprint at VivoCity. Towards the end of the -- they initially had about 7,000 square feet space total on basement 1. And now with the opening of the Performance store on Level 1, they now have about 19,000 square feet of space across Basement 1 and Level 1. So the pictures here show the Level 1 space, which houses the adidas Performance, while the Basement 1 space, which houses [indiscernible] was already opened in December 2020. So the next slide shows some tenants that we opened at a mall. Mango actually takes over the space that was given up -- a part of the space was given up by Topshop and SP, while the remainder of the space have been taken by adidas Performance. So if you look at the performance of the mall during the COVID period, and these numbers actually look quite stark on a full year basis, right? Shopper traffic is down about 50% on a full year basis. Tenant sales is down about 23.3% on a full year basis. But in the next slide gives you a bit of more of a time series that shows that the most -- majority of this impact was actually in the first half of the financial year due to circuit breaker as well as major restrictions on the opening of shops, and that has gradually recovered over the course of the year. And while we are not back at pre-COVID levels of sales and shopper traffic, but we are getting -- we are slowly getting there. So with the level of drop in sales and level of drop in the shopper traffic, we had to give quite a significant amount of rental assistance to tenants in the portfolio. So overall, we have rendered about $70 million of rental assistance to help eligible retail tenants, and that translates to something like 4 months of fixed rentals. We will continue to push long-term resilience of the portfolio. One of the main drivers of performance for this year was actually the acquisition of MBC II. The additional 7 months of performance has helped buffer much of the drop of income that occurred because of COVID-19. The portfolio is relatively diversified with the big business in the current retail portfolio being anchored -- being supported quite well by the Office and Business Park rents, while there's a little bit of slightly higher vacancy still remains strong. If you look at MBC as a whole, the property still -- is still in excess of 95% occupied. So for [indiscernible], we will continue to be committed to the sustainability of the retail ecosystem, the tenant support that we have rolled out over the year is more than 4 months and a strong indication of this. Okay. We will continue to manage costs. And as you can see, at times that we need to reduce operating costs due to lower traffic and lower number of [indiscernible] we'll be more able to do that. We also maintained financial flexibility. We have retained cash when needed and also done all the refinancing that was required in the early part of this year. Okay. So that comes to the end of the presentation.

Thank you, Janica and Wee Leong. We will now open the floor up for questions.

[Operator Instructions] Any questions were asked?

This is Terence from JPMorgan. I just wanted to check on 2 questions. Can you tell me more about the tenant fee termination at mTower? And also now [Technical Difficulty] compensation will be paid out? And also can you talk a bit about the [indiscernible] reversions for retail? And how is this expected to impact income?

Okay. The -- I cannot name who is it, you roughly can guess who is it. When COVID came -- before COVID, the leasing, I think, was a fantastic. That was what they were telling us because we wanted to take the unit back for our own expansion. They didn't want to. Subsequently, when COVID came, they had a change of mind. So when we were going back and forth, we decided that if I look at the financials, I think long haul, it may not be a bad thing, that again some compensation than to maybe potentially face with a pretermination by virtue of their business not doing well. So we came down to the table and said -- and negotiated a compensation some, okay? So that's equivalent to about 16 months of rent. Actually, in this bucket of space, there's some history. Remember, when PSA [indiscernible] we charged them punitive brand for slightly shy of a 2-year rent. Then that was like 6-plus to 9-plus and about quite a huge jump. And now I've got 16 months. So in a way, I got quite a breather in terms of getting back sales. So the cost is still on to backfill it, but I do have 16 months to do it. The money is in a pocket. Money is not booked in yet. It's not in the book. It's not flowed through in the book yet, but because it's only got done in early part of this April, okay? We definitely -- we can't keep the money. Somehow, it will flow through the numbers. But whether we can spread it, I don't think the auditors may allow. I'm not sure because technically, it's for the period of the tenure. [Technical Difficulty] But the money will flow through to the investors, whether upfront, one lump sum or over a period of time. The likelihood is the first option. Okay. Now the second question, which is the reversion, actually, if you track our retail, yes, my fourth quarter retail for Vivo is much better than the Q. We widened all the way to about minus 12, if I didn't remember wrongly and the Q -- and because our numbers are cumulative, yes. We pulled the number back with the last quarter of leasing down to less than 10. At the start of the year, I did say that where we are expecting the reversion, I said negative. I hope not to cross 10, and it's not unrealistic, yes, 10% for -- during the COVID period. So I'm pleasantly still -- I mean, it is a negative, no doubt about it. It's not our expectation. And 4Q definitely pulled back some of the cumulative negative or negative double digit to slightly shy of 10. Yes. So that's my -- I seek comfort from when I look from the quarter-to-quarter accumulated number.

Sorry, just to add. Is this offset by higher GTO? And what's your outlook for reversions this year?

You know that there will be some changes in the way leases will be structured in terms of GTO structure, yes. There is -- because there is a very mixed bag of -- there is no one formula in the way we structure our leases, okay? So generally, I would say that if we look at how the retail is growing, it's stable. But is it coming down? I have that -- all these reversions, it will take a while to digest, but it's not the whole mall that is going down by 10%, 20%, okay? It's not all leases are up for expiry at one point in time. But whatever I sign in the next 1, 2 years, it will come through the negative for the fact of leases. So I would say that Vivo actually is relatively stable, okay? We took the funds last year. It's -- seriously, the tenants were driving a very, very good bargain. So for that, occupancy will move on because it was not easy to look for any replacement tenants if -- during the peak of COVID, and I think when COVID is still around. But at least, if I look at the sales and the [indiscernible] numbers month-on-month is looking relatively good. Like for example, like for sales, right, first Q, we are down 63%. Second Q, we're down 22%. Third Q, we're down 14%. Yes. So I was quite happy with the third Q because the last month of the Q was like 10%, okay? Then the fourth Q itself is plus 5%. But we have -- these are very encouraging numbers, okay, very, very encouraging numbers, plus 5%, but that we have to remove a little bit of the like-for-like normally because the Chinese New Year and COVID also started somewhere in between the quarter, okay? So generally, if I take pre-COVID means actually last -- if I compared to last year, last year, there's still a bit of COVID, yes? It actually started. So my plus 5% may sound sexy. My last month is plus 18%. It sounds very, very sexy, but if I pair up everything else and look at historically, there is still overall a general drop if I compare to pre-COVID, okay? But trending looks very, very positive, okay, to have an over drop before pre-COVID slight drop, it is not uncommon, okay, but trend is very encouraging. Now look at footfall. We are minus 80, minus 50, minus 40. This is on a quarter-on-quarter basis. Then the last quarter is minus 20%. You can -- I would see this number definitely coming down further because with the relaxation of the work-from-home arrangement for most of the corporates, okay? So I would say that we softly are out of the woods. I would say that, yes or no, but it's not definitely very encouraging quarter-on-quarter from -- when I see the numbers, yes. This is MCT [indiscernible]. It's so sad that I go and report negative for this kind of signal, first time in history, yes. First time in history.

This is Nicholas from Crédit Suisse. Just a couple of questions from me. Could I ask on the -- I guess, some color on the sentiment you're seeing on retail and your confidence levels on how quickly you could backfill spaces if there were some terminations.

Okay. I think in terms of sentiment, we had to break down into sectors. We don't have very -- I think we don't have -- we've got very, very limited vacancy, okay? So what we did was -- I mean, we had a couple of casualties unprepared for in the peak of COVID. I'll give you an example. People like [indiscernible] they announced that assortment are short -- it got caught -- a little bit out caught out, okay, a bit caught out than [indiscernible] during peak of COVID. So I would say that the team was very fast in reacting. That's where you saw the expansion of adidas to bring in together with the performance and the casual and it's a flagship store expanding. And also Mango coming in, we've recouped a lot. So if you say that there's totally no tenant, I say no. But you say definitely lesser, definitely much lesser. So in terms of segment, yes, I would say that the leisure is still okay, but they are very selective. But if you say [indiscernible], I think [indiscernible] will be a bit more tricky going forward, and I think that has always been the issue residing in the retail industry, which is the fashion players a little bit more sticky. But F&B is relatively okay. So we don't have a lot of vacancy. We don't have a lot of vacant. And I think to suffer a single-digit drop, okay, and to save some downtime, because even if you get another tenant, you'll drive another hot bargain, if I stay at my numbers, my replacement in terms of all the small leases, they really drive the bargain very, very hard for them to be enticed to set up store. But Vivo, at the end of the day, I think, still has a little bit of traction. So we did manage to backfill most of the spaces already.

Okay. And just the last question for me would be on the remaining amount of income you have left that was retained previously, I assume the plan is to...

About 1/3 -- yes, so we will commit when, but if you see our trending is 1/3, 1/3, 1/3, we let go of it. Yes, the intention is still to be -- yes, really, yes. But timing-wise, the return on COVID [indiscernible] While we wrote this, what we have been doing every half, we release 1/3, 1/3, 1/3. So you just decipher from our behavior that we need consistency.

Okay. Rachel from DBS has some questions.

Happy birthday to MCT.

Yes. In all the step mother, it wasn't a biological mother to over. First time got announced [indiscernible].

Okay. But it's trending upwards with the tenants.

But still, I remember one over a year ago when we were looking at the group. 2 properties had never seen a negative from the day it is started, 1 was Vivo. So it's come down to [indiscernible] and resume. I bought it down, anyway. Yes.

Okay. A couple of questions from me. I think from MBC I, could you give us some color on the decline in occupancy? And how are the back fillings coming up? Is it coming from relocations or expansions?

Okay. The cash [indiscernible] that we had was the -- one of the tenants to small space, yes, actually want to move to a co-working space, yes. So that was where we are. I think we are still in the high-90s mark. It's -- there's a little bit -- I mean, everybody is reviewing. There's a bit of reviewing going on, but that [indiscernible] is very clearly moving to co-working space as a strategy.

Maybe Ruth, if I can talk a bit. As you know, it's actually 2 different [indiscernible] based on 2 tenants that was controlling the operations. As you are well aware, the majority of tenants in the [indiscernible] directions light space [indiscernible] over the past few years. So one tenant had given up 2 floors and a tenant had given up 1. We managed to find 1 tenant to take up all 3 floors and that was relocation from a building that was undergoing redevelopment. So we were quite fortunate in the sense that we have managed to match the demand and the space that was being given up. So all the vacancy that you see at MBC I, more than half of it has already been filled up by the tenant taking up these 3 floors.

Just to follow up, the tenant that's taking up the 3 floors, it's just expansion from existing tenant. Or is it a new tenant?

No, no. It's a relocation from a building that was being redeveloped.

Okay, okay. All right. And can I just ask if MBC I was the rental reversions?

Rental reversion, MBC I is actually quite positive, and the reason for that is that we actually signed -- we actually negotiated quite a bit of the leases that were expiring in the past financial year, early on in the FY before -- and before COVID really hit. So we had agreed majority of the terms for the major renewals last year. And because of that, we were able to keep MBC II -- MBC I rental reversions positive.

Broadly, MBC I was about mid single digit, okay, positive mid single digit.

Okay. Would you be able to share the mTower's compensation amount?

Roughly, roughly count that. Our average rent on 16 months roughly, roughly. Our rental is about 7-ish, you roughly, roughly count that.

Okay, okay. Got it, got it. Just last question. Any thoughts about acquisition now that MBC II has been all included already?

What's my model answer? I do anything, also don't tell you. I don't do anything, also don't tell you. When I announce, I tell you. Yes, I mean, generally, I mean, we are always on the lookout. If it makes sense, we'll do the deal. If it doesn't make sense, we won't do the deal, okay? We were actually quite fast in our decision-making. Singapore [indiscernible] is definitely one of our key focus in terms of this vehicle. That will still continue for this -- for at least the balance of our 5 years till we review again our strategy for MCT. Definitely still Singapore focused. Why I prefer Singapore, I think Singapore has come up quite nicely, and I think it still has quite a bit of positive in terms of anchoring themselves -- or the country anchoring itself down at a regional center. If you look at Asia, definitely, China is one part. If you want to set RHQs or even headquarters in Asia, where would you find -- where will you pick the country? I think definitely -- we used to, I think, compete with Hong Kong. I -- definitely with this COVID and how we maneuver, the government maneuver, I think it gets a lot of confidence in the big corporates who are rethinking or thinking of locating. It makes a lot of sense. Singapore has managed it quite well. And of course, I think our currency, our stability, our government, I think, is a positive. yes.

We'll let Yew Kiang from CLSA for the questions.

Just 3 questions -- or rather 2. Can you confirm how much of retained capital you still have left to -- for the rest of the -- this couple of years? And then secondly -- well, go ahead answer that question first.

Okay. We retained 43. First quarter, we released 15; second 13, about 1/3, 1/3. Last year, you still got balance 10 or 1 million. We still have another 15-odd million, yes.

Okay. And then my second question is on the portfolio revaluation, it seems like it is driven mainly by the retail. Can you share like what are the assumptions the valuers are using? Is it like how much of the rents are there?

That's a -- okay. The valuators will just take in whatever that they see in terms of the leases that's signed. The -- all the reversions they signed, they will ticket in into the valuation. So the valuation portfolio is relatively -- I mean, if you compare -- are you comparing from -- is about...

Yes, yes.

Year-on-year. Okay. If you talk about year-on-year, it's about 3.5%. The first -- remember, we did that for proper because we can tell whether valuers are going to shift all the big markets. So it was a bit more prudent to do half year retail valuation during this pandemic, so that's the stance that we took. so if you compare to September, all the pain came out during the first valuation, that was a September mid-6 months one-off valuation. Then after that from September to March, it held flat, steady. So most of the pain were in the first half well, the valuation as at September. But September to March, the Vivo change -- to Vivo. So I would say that the Vivo is setting out in terms of the sale. So the valuation in -- if you talk about September versus to-date March, is the marginal up. But if you take year-on-year, it's about a 2% drop across the portfolio. So if I look at it across the assumptions that they use coupled together with the actual -- some of the lower reversions that you see, all those will come through into the valuation. That's where it resulted in the 2%.

And then my last question is on between office and retail, which one are you probably more positive on? And then in terms of acquisition, would that also drive and determine which kind of asset cost you would prefer down the line?

If we talk about retail, retail, like my view has always been the entire retail sector is a little bit weaker. But the specific assets are also doing well and will continue to be steady. So retail itself has to be very driven on specific asset. If you say buy out everything -- I'm talking about generally. If I need to look at the specific asset. Anything less than the [ 200,000 ], I've always been saying, without the connection without a very clear purpose. It will be very tricky in the current environment or environment going forward, I've been saying that for about 3, 4 years. I am unlucky to touch anything that is smallish without offers because retailers will consolidate, and there's no reason to go there. Shoppers also have bigger a reason to go there, provided they are an amenities. It's supporting something else, then that's their purpose, okay? So retail, if you ask me, overall, I'm not so optimistic. But if you say Vivo, I'm still okay. That's my general thought. For Office, for Business Park, I love it, but unfortunately, not so many because the cap rate itself is an asset class that are low. I love this asset class from investment hat if wear my investment hat. But this class of asset is not going to be very -- the no release lag, very limited.

Joy?

And then second, just on -- in terms of Office, can we understand what's the physical occupancy for MBC.

Physical. Physical is 70-something.

No. No. No. Physical is 92.

Wait. Wait. No. No. MBC is -- sorry. I keep thinking mTower.

I'm not -- I don't mean the occupancy itself, but physically as how much people have returned back to MBC for work.

Let me pull that thing back. The 70-ish occupancy, physical, I was talking about mTower, not MBC, yes.

Okay. So in terms of number of people coming back, we see the number book increasing, is definitely more the easiest measure for us to track is actually occupancy. So occupancy is down still about 60-ish percent, 60% of what it was previously. So that's a rough indication. It's definitely better than what it was a few months ago, but still nowhere near where it was before COVID. But we are now -- is COVID less, right? Some new stores in the queue and the traffic is trying to get back at [indiscernible], Alexandra is turning already.

Okay. Cool. And the 60% car park is as of late or was sort of average of first quarter?

No. As of late.

Okay, cool. And then last question from me on retail. Can you share in terms of different trade performance? So overall, you've seen tenant sales gone up, but different trade how has it differed?

Okay. I think I will go a little bit more specific. The top trade for us, luxury watches and jewelry, F&B, and sports. Okay, those are our fourth quarter trending. Then what's not doing well, cinema, food court, lifestyle, a little bit because of the those travel-related ones related to tenancy and electrical. And yes, so that's generally my top view and my bottom view in terms of the performance. How severe? Let me see. How severe, we are talking about maybe about 10-ish drop for those at a bottom. The [ top ] ones are quite wide. Things like luxury watches are actually very big numbers, positive. So that's generally where we are in terms of specific -- I'm breaking down a little bit more into specific trades, that's -- yes. Luxury watches, jewelry, F&B, sports, [indiscernible], electrical, lifestyle, department store, cinema, food court.

Okay. Got it. Got it. And fashion is actually in the middle. So meaning it actually recovered.

Not the top, not the bottom. Somewhere in the middle.

Jenny from Goldman Sachs. Jenny, please.

So I just wanted to check how much more rebates do you expect in the coming quarters?

Okay. I don't have a forecast now. Usually, we look back in terms of the sales performance, then we will decide whether we want to give. Generally, the rental rebate has turned off quite a bit, okay, quite a bit, especially for retail, yes, Vivo's been specific. We started with the year with about 41 million, 12 million, then we dropped, all the way down to a low single-digit region. So I'm hoping to really taper off by this year. If I look at the sales number, maybe selective tenants on a short basis, but definitely on a lower side already. We are clearing off the rental rebate where we can. Very small this last quarter.

Okay. Sure. Also, can I check WeWork? Is it still your tenant in mTower?

Well, I'm in a bind. Vivo is a tenant in mTower [indiscernible]. Yes. Okay. So think about it, [ $50 million ] is one of the operators.

Okay. Yes. So can I chart on -- for both Google and WeWork and Mapletree Anson, are there any guidance on the space that they are taking up or any give back or anything like that?

Okay. I think Google got big chunks with us. MBC II is -- I would say that we are in the serious final stages. Not talking about numbers anymore. We are just going through the legal documentation on the renewal. I don't see any big shift as of now. So that's Google. Who else, the big ones? Yes, Google is the biggest -- I think Google is the biggest risk for us. But like I said, from -- we already started talking a while ago, even as of last year. End of last year, we already kind of like locked in already. So now we can only fully announce it when we sign off, okay? And it's a normal process for them to review the whole legal documentation, again, which takes a while.

WeWork answer, no change?

No change.

No change.

We would like to have Brandon to go next.

Just a question on the retail side, right? I think I want to find out from you, how important is it for you to get this tenant sales and traffic back to 100% before we could see this retail revenue go back to pre-COVID level? And when do you think that will happen?

I think we are very close already to pre-COVID level. I think -- I'm looking at even comparing to really, really, really pre-COVID, not just last year, last year same quarter, which has got a little bit of the COVID impact already. Borders not opened. Because my tourists from day 1 before COVID is about 20% contribution. So right now, I think the locals are spending more. So I don't think it will go up to 100% because you can see that clearly that micro force is still in a minus, significantly minus, but the sales is marginally down, okay? In March, it's marginally down. So clearly, there's a little bit of transient coming from MRT, maybe onward to office, okay, kind of thing. So borders is the next one that needs to open. Borders come, then might tourists. That will be my last bonus point.

Okay. Okay. So basically, at current footfall, we don't really need 100%...

No. When I look at the trending of the footfall, very clearly, there's a quarter of transient. Because the rate of increase in the sales don't 100% -- it correlates, but the rate of recovery of the sales is definitely faster than footfall. So I can -- either that or people don't know where to go, they start spending locally. That's one possibility. Second possibility is the footfall, although it's not moving up as much, it's because of there's a portion of transient. In anymore, there's a portion of transient that don't spend. You know what I mean. So I don't see the need to go all the way to 100.

Tan Xuan from Goldman Sachs, please.

I have 1 question on bank reversion. So based on your current conversation, what's the sense on reversion for FY '22? And would the focus be more of improving occupancy or rent? And it will be helpful if you can break up between Retail and Office?

Focus has always been on occupancy or rent. Depends on the period, we focus on one or the other. Only on like COVID, harder to find with [ patient tenant ] and have people to set up shop during period of COVID. We definitely try to protect occupancy for retail. I think that's a very logical growth. We don't forecast reversion. I definitely focus the numbers of this year don't go into next year. That's my focus.

And just want to clarify on what you mentioned earlier about being Singapore centric. Are you rolling out overseas acquisition at all? Or is it just that Singapore is a majority?

I think we are Singapore and Singapore alone. I've already mentioned that when we review our strategy every 5 years, nothing stopped us from our mandate and, in terms of our [ trustee ], nothing stopped us. But as of now, we have made a conscious decision to stay in Singapore for the time being. I cannot commit that Vivo would never go overseas, right? Because they're not Vivo forever, but we will always review our strategy once every 5 years.

Derek, you're next. Derek from DBS.

You forgot that [indiscernible] and myself did your IPO 10 years ago.

Really? So you're not a young one.

Sorry, just a quick question on your retail, right? Sharon, I remember you mentioning that VivoCity has always been somewhere tourists is important. So did 4Q number surprise you? And do you think it's sustainable? I just want to get a sense of VivoCity...

I think when the border open, we need to balance a bit because Singapore will also start flying now. Yes. So there's a -- so you're not going to get the full impact of tourism. And say that, hey, I just add on. I think it would decrease a little bit from the tourism impact because our locals will start flying out. So that's where I think it will be a positive, but it will not be 100% add-on of the stores or my number and units set. Okay, quite clearly, Singapore has had its door open, like 7 months. I think everybody will run out.

Okay. And rumor of tenancy...

We're definitely looking for normalcy. I think the good news is the vaccination is rolling out quite nicely. But of course, we have to be mindful that -- hopefully, there's not going to be another second round, okay? I'm praying that the government continues its good work. And we can still contain it within the country. But my concern has always been if the country can -- however well you do it, if your neighbors are not doing it as well, how would you dare to open up fast? So that is, I think the current default position will continue for a while.

Okay. Okay. Sorry, just 1 more question for me. I just look at our retail that you have been able to also remix a little, you cut the space, et cetera. Is there more of this expected the next 1 or 2 years? Or any tenant...

It's a continuous exercise. Sometimes it's driven by idealism of how we want to better the mall. Sometimes it's driven by unexpected. But right now, I would say that we are continuously doing stuff. So when -- if there are spaces that up -- if you notice, we try to pace out what we do. I think there is still room to do things because the retail trends and the sizing that people require and the type of tenancies are ever changing. So that's where, over time, we will definitely keep doing stuff like that to improve the trade mix where we can.

Okay. Got it. Last one. Do you know you did new code of conduct, right? Just wondering whether what are general guidance or feel about your margins for Vivo, especially going forward?

Okay. This year, the margin depends on when the legislation comes out. Legislations come out end of the year, marginal because not many months left. Okay? The good boys will have to implement by June. So you look for the big boys and ask them. The insight will come earlier, the 1st of June. They're suppose to -- encourage -- because they were leading their discussions, they were encouraged to implement. I'm not a big boy. So -- okay, legislation, maybe part of the backdrop is legislation is coming out. So there are a lot of issues, not insurmountable in my view, a lot of issues that they raise, sometimes we're having a [indiscernible], but industry don't practice. So removing it, it's not a problem. But SOPs and tenancy schedules also need to keep up-to-date and get changes to make sure that we are in compliance when the legislation comes. So for example, you cannot kick -- last time, most of our leases in Singapore, we can kick out tenant when we want to. Now what they're saying is care and you can kick out, but you need to compensate. But typically, we already do compensate, if you want to kick out. We don't just kick out a tenant like that. You put into effect to kick out tomorrow, Six months later, I say, hey, I want to take up 1 square meter from you. And later on in the agreement, say, I have all the right to remove you. So in industry practice, we don't. So now we are not allowed. So that's one of the changes. Things like how we calculate the resurvey areas where we lease out, that's no issue at all. We always go by actual area, so they want a certain threshold because sometimes when you lease out it's 10,000 square feet. Then once they get the actual unit, it becomes 12,000 square feet. It doesn't happen for us because you use actual blueprints in measurement. So we don't have that kind of issue, but we have to do certain things to make sure that our language doesn't look like violation. The other thing is the utilities. The utilities, I think, is quite clear, has to be passed on at cost to the tenants. So if I evaluate everything, the rest like, we cannot charge legal cost. To me, no big deal because if you follow the deal, then the legal costs are limited for me. But if you want to change anything, the rule does not prohibit you from lapping the tenant pay because they're asking for the changes. So we have to look at the details. So that wants to mean no cost impact. So all or most of the issues, I think, is quite fair. It's not insurmountable. It's just some of the people work needs to catch up. But the utilities one is the one that will have an impact on the industry. We have to pass on our utility cost at cost to the tenant. Most of the landlords are free to earn an arbitrage, a little bit from the outbuying to their own service. So that is a decision made by the government. So implementation is likely to be end of the year. So the impact only if it really comes through part [indiscernible]. Then at the end of the year, the impact will start coming in, nominal because it's only for existing leases who continue. New leases have to adopt. So my big ones, the big guzzler of utilities are usually your anchor. So those are -- you don't have the change. It's only the new leases signed from 1st June onwards. But over time, there will be some impact. They might only be bearer of bad news from other players, other landlords. Other landlords say, no impact now.

Now we have another Derek from Morgan Stanley.

Just 1 question on the leasing structure for retail. Just want to get a sense of what would be the average percentage of GTO components for these new leases being signed? Just on average, ballpark.

We haven't deviated very much in terms of the percentage of GTO. Our GTO constitutes about 4-ish percent of the portfolio. So we haven't deviated in terms of the plus percentage. The only thing is we have -- we do not have the all, whichever is higher, which is not allowed after legislation also. So we have already don't have the all whichever is higher for more -- a lot of the leases that we have signed in recent time. So we haven't deviated very much. But in terms of the numbers wise, no, we have not deviated in a percentage range.

Okay. Sure. And over the next 1, 2 years, I suppose, do you see a deviation or material change in the variable proportion of your retail revenue?

It will all boil down to how my overall sales looked out. I don't see that's going to be very, very, very major changes. In terms of cumulative basis, yes.

Okay. I see...

So we used to like to do this where if you hit a certain amount, you give me a very huge amount, whichever is higher. Now the legislation also don't allow. So now we have to really revert back to the old position now, which is more base rent kind of situation and not take risk together with the tenants that's what the government wants, that's what the tenant wants, become legislation, they've got more choice.

Understand. And just lastly, given the GTO be linked to just the off-line sales portion, are there any measures in place that you have for full transparency for tenants on their off-line sales?

They won't tell you, they won't share with you. We have started to go blind now, I'll be very upfront with you, when online came. That's why 2 years ago, I said the measure because it's going to be a little bit not as relevant as how it was 10 years ago. And I still don't have an answer how I'm going to break this. Because I have no access. Even the local team may not have the full access, user may not come to their whole P&L. It may go into Asia level. And we -- and for me, as a landlord, I'm slightly going blind on that portion in terms of the overall sales level, online and off-line. Off-line, I can see. Online, I cannot see. So the occupancy relevance of explaining the health of my tenants is a little bit warped already, which I never denied that. I haven't corrected this.

All right. How do you usually determine the GTO component, given the lack of visibility there?

Okay. Right now, the team is not so fast. I mean, we work hard with 0.25, which is very small, 0.25, 0.5. Now what they will commit to you is the store performance. When we look at this store performance and to see whether it at least meets a certain threshold for us. Actually, it's more to see the confidence of the tenant. Right now, I mean, if you come Apple, store, they'll tell you that I think I can do x, y, z. Then Apple store technically can register you very, very low sales, yes, very, very low sales when the phone is launched. How -- what do we deal with it? Do I kick him out as a tenant? So I don't bring Apple as a tenant, also wrong. So there's a little bit of change in the way we do leasing and analyzing the tenants already. We have to look at the business as a whole. We look at whether this trade makes sense as a whole rather than the specific numbers that they potentially are showing us or can deliver for us. I cannot don't have an Apple store, if I have a choice, okay? I think Apple is the way to go. But is Apple going to chop me a lot of numbers, Apple can show all his sales online. But I cannot on that basis, on the surface, the number is you, I don't want Apple? No. Apple store is a draw. Apple is a draw. But this part, in terms of the online sales number that doesn't come to the landlord, and we do know what our share is from there is very, very hard for us to use that number going forward. So we just have to go by general trending as to what we see that what trends will continue. Like, for example, don't bother to go market to anybody that sells winter coats here. It's going to fly for the next 1, 2 years. Like, for example, banks. Don't try to market to the banks because banks are also going online. They don't need so many physical. Now next one, things like your supplement, don't even think that -- don't even try to go and market your supplements because we can get cheaper online and they cannot compete and it's a dying trade. So those are the things that we look at in terms of how we want to tighten the trade mix along the way. Like Apple will not give me a lot online. We're getting a lot online sales, but we'll not dedicate it to [ Vivo software ], it that bad? But I still want Apple. So it's a little bit tricky now as to how we operate. You've got to use a little bit -- you can't use pure numbers already. Pure numbers ain't going to work.

May we take questions from Yew Kiang.

I just have 1 quick question. Sharon, you mentioned that how you compare to peers. I can tell you that when we look at some of your peers, suburban malls tenancies are higher than pre-COVID levels. Even downtown more than just 1% to 2% below pre-COVID levels. But when I look at Vivo, it is about slightly about 10%, 15% lower than pre-COVID level. So how should we...

I can't really know 15. No 15. No, no, no. I don't remember the 15.

But Slide 28, is it about 10%? Would it be right to say about 10%?

Yes. About 10%.

That one is compared to 2019, really pre-COVID level. So 1H based on [ 2019 January to March '19 ].

Okay. So would you say that bulk of it is attributable to tourism.

I can say that. I don't deny that -- okay, in terms of this COVID period, right, definitely the pure suburbans are ramping a bit now in terms of sales, no need to spin one, okay. Yes, definitely. We are still -- if I look at the numbers, I'm talking about making everything equal, meaning that because last year got COVID started also, right, because now if I just purely tell you what my [ this Q ] is, my [ this Q ] is plus 18. What I think is a little bit -- and you're right, because this year, I'm fully -- I'm kind of like open, but last year, for a short period are not opening. So I'm not going to tell you that I'm actually plus 18% in terms of March.

In March, we are plus 18%.

Plus 18%. January, minus 16%. Then in February, plus 25%. March, 18%. But overall, I'm a plus 5% for the quarter. But like I said, inside, the January, February last year, [indiscernible] it already started, in fact. So I'm trying to break down, not solving better mistake. I should actually just tell you the plus 18%. But generally, I'm telling you that -- overall, it's still slightly down. If I'm talking about pre-COVID, we are not talking about last year at all. I'm talking about my highest period. So that's how my comparison comes. But I don't deny it was incorrect. Suburban is definitely higher and Vivo is always the ranking.

But the market is back to almost pre-COVID levels already.

Really? We got so many basis. I can either tell you minus 16%, plus 25%, plus 18% or plus 5%. I'm using the worst with the best number of pre-COVID with the worst current number. I can use plus 18% and tell you why not so good, but come on, let's replace a little bit of last year or so.

I will take just 1 final question from Derrick Heng from Macquarie.

Actually 2 questions from me, bear with me, please. So if we look at the retail...

Just use commas, commas, and commas when you talk, then it's 1 question.

Yes. Yes. So I think most of your peers have retained -- returned all the retained income, but you chose to hold back 1/3 for now. So what exactly are you worried about? Because -- I mean, I'm just...

Okay. We just want to make sure we are a little bit careful. Make sure there's nothing else in the bowl, but seriously, I think it's relatively stable. Next thing, we started on about 1/3. So we continue the consistency. No magic answer. Like you asked me why 15, why not 14, why not 14.5. I got no magic answer. When we went out the first round, we just go like, okay, let's consistently go around the same number and just divide.

So it's not because you are still worried about something that could be an outlier?

I think the former answer is we are not out of COVID period, let's just in case it's something. Now let's -- realistically is we started with about 15 1/3, 1/3, 1/3 now. But we don't -- I'm not saying that I know something. I am holding back the balance of these, no. If you're asking me that question, no.

[indiscernible] we are 1 case away from 1 customer and 1 customer away from the back end way.

Okay.

Yes, don't worry. I'm not keeping it for something that I think there's something else that's coming. No, no.

Got it. So the next thing is on the half-on-half valuation uplift for MBC I, right? The physical occupancy came down. So trying to understand the drivers behind the valuation...

The drivers was a 10 bps compression of the Business Park and Office space, driven off by -- the valuers actually educated us that is driven off by transactions in the market. So when there was -- there were, I think, there are 2 transactions that happened. So it's quite logical that they tighten the cap rate, not much, but 10 bps.

Okay. So it's more cap rate than reversions and income?

Yes, yes. There was one cap rate -- 10 bps compression for MBC -- or the MBC minus the retail in the MBC. [ They pull out ] Merrill Lynch. Because neighbor already sold Keppel Bay, so they put into consideration Keppel Bay. It's still under consideration. I think [indiscernible] so they make the adjustment.

Got it. Last one is a simple one. The reversions for retail, right? Can you give us the fourth quarter number?

Fourth quarter -- no, our number is accumulated in terms of the reversion. So what you see is cumulative. Actually, third quarter was like minus 12%, 13%, then after that, it go back to minus 9-ish. So that is cumulative. Vivo is better than that. Actually, it's more than that. So that's a number fro Vivo now with the retail line in there. So that was more painful than Vivo.

Let me say 4Q of low single-digit for retail?

No, no. We are in 4Q. We already finished 4Q. My year-end is 31st of March month. So this number -- how you interpret this number is a cumulative number. If you just want the renewal done in 4Q?

Yes. That's right. That's right.

But there's no relevant plan. Even in the 4Q, the renewals are done before 4Q.

No relevance. I mean, to me, you want to see what's the impact on your cash flow, you look at this. Like I said, it was wider than this in the third Q, then got pulled back from 12%, 13% down to minus -- less than 10%.

Thank you, everyone, for your time. This concludes our briefing. It was a pleasure having all of you here with us. So if there are further more questions, feel free to drop us a line on an e-mail, and we'll get back to you as soon as we can. Thank you.

Thank you.