Mapletree Pan Asia Commercial Trust ($N2IU)

Good morning, everybody and members of the public. Welcome to Mapletree Pan Asia Commercial Trust, or MPACT Analyst Briefing and Live Webcast for our results for the fourth quarter and financial year ending 31st March 2026. I'm Li Yeng, I have the pleasure of hosting 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, Chief Financial Officer; and Mr. Koh, Wee Leong, our Head of Investment and Asset Management. We will be presenting our financial results, providing business development and updates and sharing market insights. Following the presentation, we will open the floor for a Q&A session, where we invite you to ask questions or seek further clarification on our results. Without further ado, I will hand the floor over to our CFO, Janica.

A very good morning. For FY '25-'26, this was a year of deliberate reshaping of MPACT, 3 non-core assets were divested, 2 in Japan completed in August last year. And in February, we completed the divestment of our Festival Walk Tower, the office tower of Festival Walk. And all proceeds were deployed towards debt reduction, strengthening MPACT's financial foundation. In relation to the divestment of Festival Walk Office Tower, a loss of divestment of SGD 10 million and a balancing charge of SGD 8.3 million on the capital allowance previously claimed on Festival Walk Tower was recorded in fourth quarter FY '25-'26. Okay. Now let me quickly go through the results. Fourth quarter gross revenue and NPI were SGD 210.7 million and SGD 160 million lower by 5.5% and 5.9% year-on-year. This was largely due to lower overseas contribution, unfavorable FX arising from weaker Hong Kong dollar and Japanese yen and the divestment effect from the 2 Japanese assets and the Festival Walk Tower. Singapore's gross revenue and NPI grew 1.8% and 2.1% year-on-year, respectively, led by VivoCity as well as from other office properties. OpEX wise, it's down 4.1% year-on-year, mainly due to reduced operation and maintenance expenses and lower utility expenses. The lower contributions from operations were partially offset by interest savings from lower interest rate on Sing dollar and Hong Kong dollar borrowing as well as on loans repaid using the divestment proceeds. Distributable income for the quarter, $100.2 million and $0.019, which were 3.3% and 2.6% lower as compared to fourth quarter last year. And we saw the one-off balancing charge, which I mentioned earlier, the DPU would have been $0.020 which is 4.6% higher year-on-year. Moving on to the full year results. Gross revenue and NPI were $876.3 million and $654.4 million, down 4.6% and 4.3% year-on-year, respectively. Similarly, this reflects lower overseas contribution, the divestment effect and FX impact. Singapore's gross revenue and NPI, excluding Anson, which we divested in last financial year, grew 2.3% and 4.1% year-on-year, respectively. Interest expense were $186.8 million, lower by 15.3% mainly due to interest savings from lower interest rate on Sing dollar and Hong Kong dollar borrowings and loans repaid using the divestment proceeds. The lower interest expenses, combined with the better Singapore contribution more than cover the lower overseas contributions. Distributable income for the year, $421.4 million, DPU $0.0797, both marginally lower than last year. And without the balancing charge, DPU would have been $0.0811, 1.1% higher year-on-year. Okay. This Singapore portfolio delivered 4.1% higher contribution to NPI. And Singapore portfolio now accounts for more than 60% to both group's gross revenue and NPI. VivoCity recorded a 7.6% growth in full year's NPI despite the AEI disruption anchoring Singapore's performance. We did a full year valuation at 31st March 2026. So MPACT total portfolio valuation were $15.2 billion based on the independent valuation. And on a same-store basis, this is 2.1% lower year-on-year. Singapore's valuation uplift of $278 million or 3.1% year-on-year, largely offset the $301.7 million operational valuation decline in the overseas portfolio. The overseas portfolio was further impacted by a $301 million of FX effect resulting from a stronger Sing dollar against Hong Kong dollar, Japanese yen and Korean won. Excluding this FX impact, the total portfolio valuation would have been broadly stable. The higher valuation of the Singapore portfolio was driven by VivoCity, which recorded a 5.4% uplift on a year-on-year basis with the remaining Singapore assets holding steady. On the overseas valuation, these were lower year-on-year, driven by FX impact and softer market contributions in Greater China and Makuhari submarket of Chiba in China -- in Japan. Moving on to balance sheet. With the divestment and the lower valuation and lastly lower borrowing, MPACT NAV per unit decreased from $1.78 a year ago to $1.73 as at 31st March 2026. Okay. Moving on to capital management. Gross outstanding borrowing, $5.7 billion. This is following the repayment of Hong Kong dollar loan with proceeds from the Festival Walk Tower divestment. Leverage ratio improved to 36.5%. Weighted average cost of debt the declined to 3.16% per annum and whereby strengthening the interest coverage ratio to 3.2x on a 12-month trailing basis. This improvement were driven by proactive debt management supported by our -- by the lower interest rate conditions. So the average term to maturity of debt profile was 3 years by the end of the financial year. By the end of the reporting period, MPACT has a financial flex of approximately $0.9 billion in cash and undrawn committed facility, ensuring sufficient liquidity for working capital and financial obligations. We will continue to ensure a natural balance sheet hedge by closely aligning the debt mix with the geographical distribution of MPACT AUM where feasible. MPACT's gross debt profile remain well distributed with no more than 23% of debt expiry in any financial year. Okay. We have started to work on the refinancing for FY '27-'28 and the $255 million perps will be refinanced using bank borrowings, and this will bring our gearing post the refinancing of the perps to approximately 37.6%. On risk management, to shield against interest rate volatilities, we continue to keep our fixed rate at above 30%. As at 31st March 2026, the fixed-rate-debt stood at 71.5%. ForEx remains volatile against Sing dollars. So approximately 95% of our foreign source distributable income were hedged into Sing dollar based on the rolling 4-quarter basis. Okay. On the total return, the total return for the year was 12%, comprises of 5.6% appreciation in capital and 6.4% in distribution. So we remain focused on driving sustainable performance through market cycles. On this slide, it shows distribution detail. DPU for fourth quarter was SGD 0.019. Unitholders can expect to receive the distribution on 17 June, and the book closure date is on 28 April 2026. Okay. With that, I shall now hand over the time to Wee Leong. Thank you.

Good morning, everyone. I'll just run through some developments on the portfolio and give you a bit of color on the performance of assets. So on occupancy, you'll see that our occupancy on a year-on-year basis remains largely stable even taking into account the impact of the divestment of the 3 assets. That's largely driven by improvements at MBC, which has offset the lower occupancy in China and Japan. So for MBC, you will see that we have improved occupancy slightly. There has been a number of new signings at a property that includes a fairly large IT company, which will be taking up a substantial amount of space, close to about 3 floors. And that's a tenant that lease will commence towards the end of the calendar year. Some of the other leases will start -- will commence slightly earlier, but still looking at July, August, September type time frame. Drilling down to the two slightly more problematic geographies. So for China, occupancy remains fairly constant against December, but has dropped against a year ago. That's largely driven by the economic -- macro economic factors in China, together with a significant amount of supply, particularly in Shanghai. That's caused the leasing to be fairly weak, and we can talk a little bit of about the rental reversions in the next slide. For Japan, we have been seeing declining occupancies in the Japan portfolio, largely due to nonrenewal of the master leases. So we really had 2 rounds where Seiko had left SII building, and we had NTT UD give up the master lease at MBP. Those were in the last 2 years. As at 1st of April, Fujitsu would have terminated their Fujitsu's master lease at FJM would have ended. So this number as at the 31st of March will have dropped down. This was 71.5% as at 31st of March will have dropped down to 57.1% if you took into account the ending of Fujitsu's master lease at FJM, okay? So for the other assets, occupancy remains fairly constant and strong. Moving on to rental reversion. Rental reversion on the portfolio basis is flat. The Singapore properties improvement in rentals, particularly at VivoCity has helped to offset the weakness -- continuing weakness in Festival Walk China as well as in Japan. So moving on, lease expiry profile has improved slightly from the previous year, particularly driven by lease renewals at the office properties. Okay. I think one thing -- so one thing that we should mention is that post the close of the quarter, we actually managed to renew one of the largest tenants at MBC. So that helped to push out the lease expiry profile because that lease was on a fairly long-term basis, more than 5 years. Okay. So moving on to the next slides. There's a lot of questions around utilities cost and the impact of the Iran conflict. So we taken risk mitigation measures to try and limit the impact. Earlier in the month we have renewed -- we had extended our utilities contract. So if you recall, the Singapore Utilities contract was originally signed to October of 2026, and we were looking for suitable opportunities to extend out the contract. Given the current market volatility and given it was interesting to find out that we could actually extend the contract at substantially the same rate as what we had entered into for the current contract. So that's given us a little bit of stability. But because of the longer-term uncertainties as well as the market's perception that this conflict will be -- will not be long drawn. We had locked in rates only for 1 year. So for the period 1st November '26, to October '27, we have locked in rates at a substantially the same as what we have currently -- that we are currently paying for the Singapore portfolio. The second year, we have allowed rates to float. And that's true and that's to potentially take advantage of changes in the market as we go forward. Certainly, if things start to -- if we have a bit more certainty as to how things will be moving whether up or down, then we have the option to fix the contract for the second year as well. So Singapore accounts for about 2/3 of the utilities expenses for the portfolio. And for the other assets, there generally are not so much of opportunities to do what we have done in Singapore, which is to do long-term fixes on utilities rates. But that being said, the other geography tend to be a bit less -- seems to have not seen significant increases in utilities rates despite the fact that most of the geographies have fuel-related components in their utilities formulas, utility rate formulas that allow the utility providers to pass on some increases in fuel rates. That's largely due to the fact that most of the geographies have got substantially less oil and gas in the electricity generation mix. So we'll continue to monitor. And one thing that across the portfolio, we will be doing is to reduce electricity usage, whether that's by optimizing chiller performance, increasing set point for air conditioning or implementing early turn on -- later turn on early turn off for air conditioning and other building services. So hopefully, that will allow us to limit the impact of the utilities increases going forward. But bear in mind, a lot -- most of these measures are fairly incremental. At best, we're talking about 2% to 3% improvement in electricity usage. Okay. So moving on. Let's talk to VivoCity. In terms of shopper traffic year-on-year, they've seen a good 3.6% increase. And on tenant sales, it's up 3.7%. Bear in mind that throughout the early part of last year, we had the whole of basement 2 down for asset. A fairly large chunk of basement 2 done for asset enhancement. So in the next slide, you can see the completed basement 2 asset enhancement. This was fairly substantial. Phase 1 had changed the kiosk on the -- as you come out of MRT on the left side. And on Phase 2 was the conversion of some of the carpark spaces to retail, and that's as you come off MRT on the right side. So that delivered a fairly healthy ROI of 10% and has definitely enhanced the retail experience as well as improved the tenant mix in basement 2. So moving on. We continue to refresh our tenants throughout the mall, both in terms of new contracts as well as getting tenants to revitalize their spaces. Previous quarter, Chinese New Year celebration was the key highlight for our A&P, and that's brought in a good amount of traffic. And because Chinese New Year was fairly late last year, we could have our Chinese New Year events run for a little bit longer, and we definitely see better performance on that basis. So moving on to Festival Walk. Shopper traffic that we did see an improvement year-on-year, but tenant sales still remain fairly weak. I think Festival Walk is -- while you will see that Hong Kong in general has had some improvement in tenant sales, that's in retail sales, that's largely -- we feel that that's largely been driven by improving tourism in the territory. And fortunately or unfortunately, Festival Walk is not a tourist-centric mall. So you will see that most of those improvements have accrued to retailers and retail malls in the Tsim Sha Tsui and central area. Moving on. So we do see a number of new tenancies in the mall, and this has helped to refresh the mix within the mall, especially on the F&B front. So shopper engagement continues to be key at Festival Walk, and we believe that, that's actually contributed to improving the shopper traffic at the mall. So these are some of the events that we have done at the mall. One positive development. We have done, this is the current ongoing space reconfiguration, the small AEI at Festival Walk. We reconfigured the space for one of the anchor -- fast fashion tenants and split the space into 6 different concepts. The works are currently ongoing and expected to complete by second quarter. The outgoing rentals or the... Hello. Hello.

Yes, I can hear you.

Okay. So the ROI that we expected will be close to 50% for this exercise. Last but not least, we'd just like to update that we have completed divestment of Festival Walk office component earlier in the quarter. And next update on some of the tenancies.

Thank you, Janica and Leong. We're now ready to take your questions.

[Operator Instructions] So first, we have Terence from JPMorgan.

Congrats on the results. If I may ask on AEI plans, thanks for starting the AEI work at Festival Walk. Perhaps maybe you could share a little bit more as to whether you have further AEI plans for the broader Festival Walk and perhaps for VivoCity? And the second question from me, you divested 3 assets this year. So gearing stands at about 36.5% and even after the refinancing of the perps, you still do have a bit of gearing headroom left. So I would like to ask whether you'd be looking to redeploy some of the proceeds into investments going forward?

Terence, so in terms of asset, let's take asset enhancement question first. So I think we have mentioned before, and this is something that was quite surprising to us when we took over the Hong Kong asset. Development planning in Hong Kong seems to take a fairly long time. We had a number of asset enhancement plans, which we have been toying around with for the last 2 to 3 years. And some of them are -- and it's been -- it's taken quite a while to get approval going. One key asset enhancement which we are working very hard on is actually the reconfiguration of cinema at Festival Walk. I think we have mentioned before, the cinema trade in Hong Kong seems to be a lot bigger than here in Singapore. And we are concerned that there may be the a shakeout in the industry and might result in some tenants weakening. Hence, we have been planning on what we can potentially do with the cinema space and those are currently still ongoing. And once we are ready, we will make -- once we are ready to proceed with the asset enhancement, we will make the necessary announcement. For VivoCity, well, yes, we can move a little bit faster. The truth is that we have done most of the low hanging fruits, right? So if you recall earlier as enhancement ever done at VivoCity, you have seen ROIs being a substantially higher number. The other thing that we are a little bit concerned about is that construction costs have been going up. The AEI that we currently completed was already something like close to $50 million in those costs. And we are expecting that any AEIs that we will have to do in the future will be substantially more expensive. So those are decisions we will not take lightly, and we are still evaluating what are the best things that we can potentially do to the mall, bearing in mind that costs are going up and that we have already done quite a lot of AEIs, right? Practically once every 2 years, and in some cases, once every year,we have had AEIs at the mall over the last 10-plus years. So looking at our gearing and acquisition potential, I mean if we talk to CMOs, you obviously want the gearing to go down even more. We have really done quite a little bit. We have done a bit on quite a bit in terms of divestments, and we have also managed to -- Singapore has also managed to cushion some of the reductions in valuation coming from the overseas assets. On an operational basis, FX seems to be something that -- FX is obviously something that we can not control, and that's had a bigger impact on our valuation than we would have liked. Have we been looking at acquisitions...

Yes, maybe I'll have to chip in. Maybe I sum it up for you. In Hong Kong, short term, next year, the lease renewal for cinema is coming up. That's why we are actively looking at reconfiguring. Number one is to contain a smaller cinema. The rest will subdivide, okay? That's the plan. Subdivide majority will be F&B. The long run, which we have been taking a while because of regulatory approvals, that is more for the basement. I think we shall not talk about that because it's a bit long drawn. Then moving along to VivoCity. VivoCity this year, you will see we have revamped continue to revamp now the drop-off. The drop-off point is actually the back of VivoCity. We have reconfigured how the cars move and taxi and drop-off point. At some time, we are still exploring whether the back of VivoCity can become our another front. Nothing is firm, but I think there should be good traction if we can get the right tenancies because we have always been using the drop-off point like a back of a house. But technically, the car park flows actually pass through there. So it must be significant. It must be destinational trades that will be able to benefit from that location. We have not found that out, but I think it's certain trade point that we are trying to share with you. Okay. Then moving along to what we -- our gearing is comfortable, okay? It took us a lot of effort. I think we are very, very comfortable with our gearing. We'll continue to explore as long as it makes sense to the portfolio, but we'll be very careful in terms of certain countries. We will definitely avoid China. For the time being, I think the weakness will still be continuing. Singapore looks like a good base. But in terms of transactions, it's very limited. So we will continue to explore, but we will be careful in terms of overseas markets into the acquisition.

May I invite Yew Kiang from CLSA.

Just 2 questions for me. I didn't quite get the MBC negative reversions. Can you explain on that? And then secondly, when can we expect China and Festival Walk reversions to bottom? It seems like with the AEI plan at Festival Walk, this should drag on for a little longer. Is that correct?

Okay. MBC to me -- I'll just chip in and after the details, Bee Lian can handle. The MBC, I would say that it is close to flat. Like I always mentioned, changing over a tenant, we have our downtime is will be way more than that 3 months out of 24 months, 36 months, cost you more than 10%, okay? For MBC, they are big takers and they are slow in taking up space. So in a way, you hang on to the tenancy and we got good names, okay? I'm not bothered when it's minus 1%, okay? And I think it is a good number. If I change one tenant, I may get slightly higher, but you don't see the downtime. You don't see the downtime in this calculation, and that will actually hurt your cash flow, okay? So China, expect it to go down for this year, too, okay? I do not feel that it is actually strengthening. We are trying our very best in terms of handling of the tenants and trying different strategies, even fitting out certain areas, because fit-out cost is not very expensive, basic furnishing cost, so that tenant can just take the back in and start operating. And I would think that, that is the only way we can just hang on in China, okay?

Magnitude -- will we see the same magnitude of 21% for this year?

Well, at least 10% over, minimum.

Okay, okay. So slightly improving? Okay.

I really can't tell, yes, because the number is coming in. China, as long as you got taker, you're happy. The vacancy rate is very, very high. And yes, I think our -- I won't be too optimistic with you when it comes to our Chinese assets, yes. We just try to hang on to occupancy and control our costs. And that's all we can ask for China for the time being. Yes.

Festival Walk with the AEI?

Okay. Festival Walk AEI, if you're talking about is cinema, it's 2027. But work has to be starting well, yes.

Okay. Just one more last one. With the Japan portfolio occupancy slipping to 57%, I think is it fair to say divestments could take a while longer if there's any plans to divest?

Okay. If we can divest, we will divest, okay? I think Japan, especially for Makuhari assets is tall order. We have done what we can as management. Number one, contain the cost. Number two, dropped the well as -- so that it's very negligible. The 2 buildings are 2 huge buildings. Adding up, we are talking about $200-ish million, okay? So I think we need to put that into the magnitude in terms of the valuation that's carrying in our books, $200-odd million is our problem assets and 200 plus in Japan. That is Fujitsu and Seiko building, yes.

Geraldine from DBS Bank.

Just wanted to ask on the Festival Walk divestment. Are you able to share the asset yield? I is a low 2%? And has gearing already reflected the debt repayment from the divestment proceeds?

So the office yield was in the 3-plus percent range, closer to 3.5%. The -- you're asking whether the gearing has taken into account the repayment of debt, right? So yes, that's...

36.5% after repaying the Hong Kong dollar loans using the proceeds from the divestment.

Okay. Got it. And maybe one more on the just Festival Walk. Hong Kong tenant sales seems to be doing quite well this year. So from what you are seeing, are retail landlords a bit more asking in terms of rent. Or should we still expect to see a lag time between sales and rents?

Okay. So I think the one small bright spot doesn't allow landlord to start moving rentals that significantly. And the other thing also is that the sense is that a lot of this improvement last year was tourism either by the events that have been ongoing in Hong Kong or the shift in travel patterns by PRCs from other countries to Hong Kong. That has concentrated the improvements. And we feel that, that's concentrated the improvement in tenant sales to the tourist -- more tourist focused areas. Tsim Sha Tsui Central, Causeway Bay and the like. So those landlords may be able to ask for higher rentals than they are currently. But bear in mind, the last 3 years, which is the typical duration of retail leases, Hong Kong has had a fairly rough time. And that may not -- because of that, it's unlikely you'll see positive net reversion coming through whether in our portfolio or others. I mean some people might be lucky, but we don't feel that's the case, right? Festival Walk still remains a mall that is very focused on the people who are living around and working around the Kowloon area. And it's not a tourist focus mall. So that improvement in sentiment has not really translated down. What we have been more focused on is actually improving the trade mix or rather optimizing the trade mix at the mall, getting rid of tenants and bringing in concepts, which will appeal to the people who are working around and living around the area.

Okay. Okay. Understood. So reversions will be in this ballpark for next year? Negative single to 10%?

Yes. Yes.

Rachel from Macquarie.

Can you hear me well?

Yes.

Maybe my first question is on interest cost. What's your guidance for FY 2027? And could you give us a sense the perps rate versus the debt rate that you will be getting to refinance the perps?

Interest rate guidance is -- it will still be above 3%. But you know, interest rate is very volatile, especially with the Middle East crises. So we -- based on our estimate, it would still be above 3%. Hopefully, lower than what is currently we have here. It'll be a low 3%. Okay. Currently, the perp issued at 3.5%, and we -- there's CCS on it. So we are paying actually in fact, 2.5% on these. So if I were to refinance this using borrowings that we have on hand, it will be -- they're about the same as what we have been paying or slightly lower. It depends on how much I fixed the drawdown at that point in time. So it should be there about the same. And our cost had already the [indiscernible] 3.16%.

Okay. Got it. Can I just get an update on your Hong Kong rates? Is it still above the current Hong Kong rates? .

What do you mean above our Hong Kong rate? The current...

Hong Kong debt?

Yes, we still have some high fixed interest rate swap. Hopefully, majority of them will drop out in this coming financial year. Yes.

Okay. Then my next question is on -- just a follow-up on the Festival Walk AEI. If I were to take the cinema space, if you were to break out the cinema space and get a higher rent, will you be able to then cover some of your negative reversions is coming up from Festival Walk? Actually, I'm trying to see whether you're NPL will flatten out?

We will not -- we don't tell -- we separate the AEI and the rental reversion operation, okay? So will one shift a whole mall? Answer is no. Yes. One AEI shift the whole NPI? No.

Okay. And then lastly, now with your debt during or gearing that headroom and HarbourFront redevelopment will be coming up in second half of the year. What are your thoughts on that? What are our thoughts on that?

What are our thoughts in terms of -- you're talking about investing?

Yes. Or will that be in partnership with the sponsor.

For the time being, no. Okay. So what we are doing is just preparing for certain disruptions, which I think that has been well handled by the leasing team. It's still a ROFR. So when time times and they're ready, then we will reassess them.

Rachel, Janica here. I just want to correct myself, the 3.16% cost of debt is without accounting for the perps.

Okay. So if you count the perps, it should be lower?

If I were to add on the perps, the 3.16% per annum will be lower.

Derek from [indiscernible]

Just follow-up on the just interest rate question. Assuming current REITs, what is the outlook for interest rates?

Outlook for our...

From 3.16% to what?

It will be still above 3%, a low 3%, hopefully, maybe another 10 bps off. Interest rate is very, very volatile. So maybe next quarter, I can tell you another guidance. So now for now, it's about maybe about 10 bps off based on -- based on the current prevailing market rates.

And just on the valuations for Festival Walk, I mean local currency terms still was down close to 5%. Is that -- do you think the valuers were being pretty aggressive and bring that down given that it's fully occupied, I mean, outperforming the rest of the other overseas assets? And I guess does that make it -- is that clear way for potential divestment of Festival Walk?

Derek, if you look at the net property income movement at Festival Walk, the 5% reduction in valuation is actually quite in line -- it's actually fairly in line. We have also tried to see what the other valuation movement for retail assets in Hong Kong are not many of them are disclosed. But from the view that we can see, the majority of retail assets in Hong Kong have gone down 4-ish to be as high as 9% over the last year. So the 5% reduction for the retail asset is more or less in line with the performance as well as the market.

Okay. Yes. I mean I'm just asking just it's difficult to see the comparable transactions. I think Hongkong Land, they were reporting like book value up 5%, but I'm not sure what's inside. So I'll ask on Festival Walk.

Brandon from Citi.

I just want to go back on Festival Walk, right, so if you look at the tenant sales for this quarter, it was up year-on-year, it's been closely like more than 2 years. I think you've seen this improvement. So earlier, you sound very skeptical, right? So is it correct to say that tenant sales hasn't exactly bottomed out for Festival Walk?

I think 1 quarter doesn't make a trend. And we are still continuing to closely monitor the performance of the mall and the performance of the tenants. There are some strong points and there are some strong areas. So F&B is doing fairly well. But fashion, some of the tenants, tenant mixes, cosmetics and the like are still very fairly weak in the mall. And those continue to drag down our performance a little bit. So this quarter, we've had some interesting or rather not say unexpected, but if you look at our jewelers, if we look at the goldsmith shops within the mall, those have done extremely well and has definitely contributed to that improvement. But like I said, a few trades doing very well, doesn't quite make case that overall retail sales are improving within our particular market. So we will continue to monitor. We'll continue to remix the tenancy such that really we weed out a bit of the tenants and bring in stuff that we want to spend there.

Got it. Got it. Okay. And also just on a bit related to Derek's question, right? So if you look at the latest valuation for Festival Walk, $20.7 billion, right? And that seems to be still like about 13% above the acquisition price, right? And if you look at over the years, the reversions is still not great. So do you think at this point in time, it's still looking a bit overvalued of Festival Walk -- based on -- not on valuation, not on independent valuers guidance.

Okay. If you look from -- as a process is done by professional third-party valuers, okay? So that part, I don't think there's any form of interference or manipulation of the part. So there's a market value determined by the party. But if you talk about investment climate, as per whether is buoyant and whether this price is something that people will look at. I think overall, most of the investors are still very careful pertaining to Hong Kong, okay? So your valuation is there, but investor appetite may be slightly a little bit more cautious than what we -- in a typical market. So the 2 markets that I see investors very, very cautious is definitely Hong Kong and China is stopping it. Yes. So I wouldn't say that our valuation is not correct. Our valuation is done by third party, but the investment climate is not as strong in terms of the pool of investors looking and ready to put more money into Hong Kong and China.

Jonathan?

Two questions. First question relates to MBC. You mentioned like one tenant secured during the quarter and then another big one also after the quarter. So I presume both are new tenants. Could you give us some color in terms of like the industry trade they are in the and then also the size of the lease that they have taken up. And then for the large tenant that came in after the quarter, if you include that, what would the level of occupancy at MBC be?

So the tenant after the quarter was a renewal. That was for more than 5 years, and rental reversion was actually just a little bit positive. So that would have had no impact on the occupancy, okay? The other tenant, which is a new tenant that took up about 3 floors, and that's contributed to the improvement in MBC's committed occupancy. That's in the IT trade.

Okay. Okay. And then for guy that renewed, could you give us like the industry sector? And also, I have a follow-up on Japan -- [indiscernible]. So a follow-up question on Japan. I couldn't help but notice that the tenant retention is like 10% looks extremely low. Is that only unique to the quarter and then you see some rebound after that? So could you comment on that and how that affects your outlook?

So the tenant retention in Japan, the loan number is largely driven by Fujitsu. So master tenant at FJM , they are not expanding the tenancy. So the whole building is going vacant because that tenant has booked out. And it's a fairly substantial portion of our portfolio. If you look at our occupancy number, Japan now stands at 75% with assuming we take this FJM out of the equation, the occupancy will be down 57%. So it's a fairly substantial impact on the portfolio and the retention rate is brought down largely because of this tenant.

So excluding this sort of high-impact events, normally, what would you expect tenant retention to be for Japan?

It flows quarter-to-quarter. If you exclude this particular tenant, and we are probably looking -- last FY, we will probably be around 60-plus -- no, actually, a little bit low maybe about 50% plus 60% mark. Sorry, generally, we -- generally, we will expect the number to be a bit higher because in Japan, tenants tend to be a little bit stickier. Aside from the Makuhari assets. Most of the other assets tenants are a little bit stickier. But last year, we did have 1 or 2 nonrenewals in the other parts of the portfolio, which we have -- actually we managed to backfill the space, but that will actually contribute to a slightly lower retention than we had normally expected.

Terence Lee.

Terence Lee from UBS. Just a question on the one-off tax charge, the $8.3 million. Let's say, if you sell -- manage to sell Festival Walk, the retail portion, should we expect another such one-off tax charge that would be flushed into the DPU?

Unfortunately, yes.

Is there a sensing for us to understand what kind of percentage or applicable tax rate that would be?

Okay. I do not have that on hand now. I can get back to you. But basically, whatever that we charge off now is what we apportioned for the office part. Yes. The allowance was claimed as Festival as a whole. So we -- based on some formula to a portion of these parts, yes. So of course, it's also subject to the tax office agreement on the way we apportioned. I can get back to you on the amount, but I do not have that on hand, my apologies.

Could we not just take the $8.3 million divided by the divestment price for the office portion proxy?

No. No, we cannot.

Okay. And I guess a separate question, can you remind us of the FX income hedge policy. And at this juncture, like how far forward rate for the coming year, looking like relative to spot? And I guess, particularly for Hong Kong dollar and JPY.

I think Hong Kong dollar and JPY outlook is appreciating, but I don't know how they are going to appreciate. Hong Kong dollar is depreciating. So far, whatever swap that we had on the books, I think both of them are -- not -- sorry, forward hedge or both of them and majority out of money.

Okay. So is it fair to surmise that there should still be continued FX-related income weakness into FY '27?

Based on the cash on hand, maybe there will be, but you -- yes, that should be -- interest rate is very, very volatile. And the reason why we do in compass actually to just protect and lock in the rate to ensure income stability. We are not actually speculating the market -- so that is a risk management, whatever that the Board guidance set on the threshold, we would just make sure that we monitor, and we make sure that we lock in to mitigate risk. It is not so much of speculating and trying to earn from the market. All our hedges is more risk management. So whether the currency will depreciate or appreciate further, we will still make sure that we hedge the necessary threshold, the risk threshold as set by the Board to give us stability on the income. And of course, when we hedge, we will look at market and make sure that we don't go in at a rough time or some at a time point in time where the market is really very rough.

Yes. I guess all in, if I may, summarize the outlook for FY '27 DPU in terms of downside pressures, it's probably from the negative reversions from some of the overseas assets and a bit of pressure from potentially weaker FX rates. And I guess on the upside forces, there appears to be lower rates for the portfolio, lower interest rates for the portfolio?

I think we do not provide a forecast. But if you know we have already announced Fujitsu and that's already a SGD 10 million to the book. So I'm not sure how -- on the other hand, you can get a comfort that the income from Japan will be lower, although it's depreciated. I don't know whether there's a comfort or not.

Sorry, just now Jonathan asked about the retention rate, not including Fujitsu. So it's not 55%. It's actually about mid-30s. That's due to nonrenewals at MBP as well, where some of the remaining leases from the master tenancy, which expired 3 years ago, those leases have actually expired as well.

We do have a question coming from online. It's relating to the impact of online sales on -- given that online players have been given heavy subsidies.

So if you look at online retail in Hong Kong, it's actually a very marked difference from -- within China. If you look at online sales penetration rate in Hong Kong, we are looking at probably in the sub-10% range. Whereas if you look at the status same statistics in China that's probably in the 40% range. If you look at Singapore, we've actually been stabilized at about just under 20% fluctuating on a quarter-to-quarter month-by-month basis. So it looks like online retail in China -- sorry, in Hong Kong has been fairly stable. And there is some inclination that the online retailers are being a bit more -- trying to be a bit more aggressive in Hong Kong. But it might be -- part of the reason is that the proclivity of the Hong Kong residents to not use online payments that much also happens to shop physically. I think a bigger chunk -- but the truth is that the bigger chunk of the impact of retail sales in Hong Kong has been the leakage to Shenzhen. The ability for Hong Kong is to go across the border to the shop has probably had a much bigger impact on retail sales performance in Hong Kong than the online impact.

Thank you, Leong. Just want to double check again, Terence, you can have another question?

Yes. Just a follow-up to the earlier question, Janica, just on the part on the one-off tax issue, what's the rationale that this is flushed into the quarter's DPU, as opposed to it being netted off against as sort of net divestment proceeds?

This is something that -- okay, we asked the same question to our tax consultant, okay. This is considered an operation issue because the allowance was being claimed and offset against the operation income. So now there is clawback, which will be against operation income. Actually, when we divest Mapletree Anson, there is also a similar kind of balancing allowance and charge. But at that point in time, it was allowance. So an allowance will reduce our DPU because it's an allowance and we pay off the unitholder via capital distribution.

Yes. I guess that was my -- that will be my next question. Like why not repay like make unitholders whole in terms of the cap distributions?

You see, it's different from Anson. Anson is reducing, but I'm not paying any money to the tax office. But this is different. I'm paying over $1 million to the tax office -- Hong Kong tax office. And if I were to distribute, I'm coming out another $8 million to pay to the unitholder. But having said that, it is considered a transaction cost, it would definitely net off or charge to a divestment gain or loss. But when we claim the allowance is net against the operational income. So now when there's a clawback, it should be against operational income.

Just to clarify, so was there even a choice to distribute capital distributions to make unitholders hold?

This capital distribution, we can distribute, okay? Of course, taxable distribution, tax exempt distribution, you must have the relevant income, okay. Our capital distribution, we can, if we want. It's just like the -- if there's any gain or the proceeds from the divestment, if we want to distribute or we will distribute via capital distribution. So yes, we have the choice to distribute. But because we are paying the tax office, we have only $1.3 million. If I'm paying tax office and I'm paying unit order, then we are effectively borrowing to pay.

We do have one more follow-up from Brandon from Citi.

Just a couple of household matters, right? Can you share with us the occupancy costs for both FW and VivoCity?

So for both malls, occupancy cost plus/minus 20%.

Terence from JPMorgan.

I just wanted to ask a little bit more on MBC. So you are seeing occupancies improve on a Q-on-Q basis. So maybe could we get a sense of what -- how soon could we see occupancies move back above, let's say, a 95% handle? And on a broader scale, has the war impacted demand for space in Singapore in terms of leasing, both on the office side and also on retail?

So obviously, MBC is already above 95%. We expect throughout the year occupancies will remain around the mid-90s range, plus/minus a little bit. In terms of our leasing, leasing impact, what the war has introduced is actually uncertainty. And what that causes tenant to do is actually to delay decisions, right, as it is before the conflict started, all of the tariff issues as well as uncertainty between U.S. and China has really caused tenants to be cautious about picking up more space or to spend money on fitting out spaces. That has continued. If anything, delay decision-making a little bit more, right? In the past, we were probably looking at tenants taking our space 6 months, 9 months, 1 year before they move in from the point of signing a lease. Now that's probably gone up by another 1 to 2 months at 1 to 2 months. In some cases, what tenants have been doing delay decisions, right? They know they have to make a decision within -- they have to make a decision within the next 6 months, they don't have to do it now, they'll just wait in the 3 to 6 months. So that's really been the key. The other thing is that the impact of the war is likely will affect construction costs. And that will mean that the fit-out costs will likely go up that will then make tenants a little bit more reluctant to move from space to space, to mitigate that what we have tried to do is as far as possible if we do have departing tenants, and we do have a few. We have tried to retain fit-out such that we can then use those fit-outs for new tenants. And that has really helped to push some of the occupancy for some of the floors. But in general, what the result of that is also the tenants are more reluctant to move, so it's actually helped to maintain our occupancy and improve the retention rate at MBC.

Thank you very much, everybody. May I do a quick check if there's any more outstanding questions from participating analysts. If not, I would like to thank everybody again for your precious time and all your questions for today's results briefing. Should we have any other questions feel free to reach out to the Investor Relations team. Thank you again, and we wish you a great week ahead. Goodbye.

Thank you.