Mapletree Commercial Trust

OTC:MPCMF

Earnings Call Transcript 2023-Q4

[Li Yeng Teng, executive]

Yes. Good morning, esteemed analysts, investors and members of the public. Welcome to Mapletree Pan Asia Commercial Trust or in short MPACT analyst briefing and live webcast for our fourth quarter and full financial year's results. This is a very important event as it marks our first set of full year results since the merger with MNACT last year. It is also the first time we're resuming fiscal briefing with our analysts since the COVID-19 restrictions. So I'm Li Yeng, Director of Investor Relations at MPACT. And it's my pleasure to host this event today. Allow me to introduce our speakers for today's briefing. With us today, we have Ms. Sharon Lim, CEO of MPACT; Ms. Janica Tan, CFO of MPACT; and Mr. Chow Mun Leong and Mr. Koh Wee Leong, our respective co-heads for investments and asset management.

So they will be presenting our full year financial results, discussing key business developments and sharing market insights. Following the presentation, we'll open the floor for a Q&A session where you can actually ask questions or seek further clarification that you may have. So once again, thank you for joining us today. Without further ado, I would like to hand the floor over to Janica.

[Bee Lian Tan, executive]

A very good morning to everybody. Let me quickly take you through the results for fourth quarter and full year FY '22/'23. Yes. Okay. We go straight to the financials. Fourth quarter FY '22/'23, MPACT achieved a gross revenue of $233.3 million and NPI of $177.4 million, up 55.9% and 82.2% year-on-year, respectively. The increase was mainly due to the effect of the merger and better performance of the Singapore properties. If we exclude the effect of the merger, just the old MCT same-store basis, gross revenue and NPI were 9% and 8% higher with positive contribution across all revenue categories, but this is offset by higher property expenses and the full quarter impact from the utility high. Net finance costs, 184% higher at $50.9 million year-on-year, mainly due to the enlarged borrowing due to the merger and the rising interest rates. So consequently, 4Q DI, distributable income was $117.6 million, 58% higher than fourth quarter last year. The higher NPI was offset by the higher finance costs incurred. So 4Q DPU held steady at $0.0225 as a result of the above and the enlarged unit holding base. So fourth quarter MCT, fourth quarter last year, MCD released $15.7 million of the balance of writing cash. This cash was retained in FY '19/'20. So if we were to include this one-off retained cash being released, the DPU will be lower by 17%. 

Okay. On our full year results, overseas results were consolidated from 21st July, the date of the merger, completion of merger. So year-on-year, MPACT achieved 65% and 63% growth in gross revenue and NPI respectively. So both figures reaching $826 million and $632 million. The growth was mainly driven by the contribution from the overseas property acquired through the merger as well as higher earnings from the 2 core assets, namely VivoCity and MBC, which cushioned the increase in utility and finance costs. So amount available for distribution for the period $445.6 million, up about 40.6% and DPU for the year 6.1% higher year-on-year, excluding the release of within cash. So notwithstanding the one-off $15.7 million operating cash release as well as the higher utility and interest costs, DPU for the year is still slightly better off at 0.8%. Okay. This is the colorful chart. As you can see from this chart, the Singapore asset recorded a higher NPI of $33 million for this year, okay? This is already taken in the effect from the utility high. 

The 2 core assets, VivoCity and MBC contributed more than 50% to the portfolio's NPI. So this provides stability for the portfolio. On the other SG, I said, this might seem to be underperforming from last year, but that was mainly due to last year, there's a one-off compensation from pre-terminated leases about $7.7 million. If you take away that the other SG property is about 7% higher than last year, okay? But regardless, the better performance not only cover the impact from the higher utility cost. It also more than covered the increase in interest cost of the MCT original portfolios borrowing. Okay. Can we move on. Okay, to coincide with our year-end valuation was carried out on all the assets of MPACT. MPACT's property valuation totaled about 16.6 billion, including our 50% share of TPG. So overall valuation is lower by 0.2% or $43.1 million. This was, however, due to the weaker foreign currency against SGD valuation dropped by 2.3%. Capitalization rate discount rates all remain unchanged as set for TPG, where the discount rate increased by about 20 bps, and this was due to different values assessment.

Singapore portfolio valuation increased by $58 million from [ 8.8b ] in March '22 to [ 8.9b ] in March 23, and this was driven by VivoCity's increase. Overseas in SGD term dropped by $456 million from $8.2 billion in July to $7.7 billion in March. So the decrease comprises the effect of weaker currency and to a smaller extent, the drop in valuation due to weaker operation of the Greater China asset. Festival Walk and Gateway, the valuation in local currency dropped by 2% and 1.7%, respectively, due to lower passing and lower market rent assumptions, whereas the marginal drop in Sandhill was due to lower occupancy. Japan portfolio saw a 0.4% increase in local currency. Valuation was stable, and the increase were offset by a decrease in valuation in Saco building following the nonrenewal of the master lease in June 2024. So last is about JV asset, TPG in Korea. The strong leasing performance mitigated the increase in discount rate. Okay, on the balance sheet, MPACT gross net asset value stood at $9.2 billion and NAV per unit is $1.76 as at March '23. 

Okay. Let's move on to capital management. Key financial indicators. Total debt, 6.94% as at March and of which 75% is hedged through interest rate swap of fixed rate debt. So at 75% fixed, every 50 bps change in interest rate will impact DPU by $0.016 per annum. Leverage increased from 40.2% in December to 4.9% in March. The higher gearing was due to 2 factors. Of course, one is on the lower valuation, and this accounted for about 1/3 of the increase in gearing, and the balance is from higher borrowing. As you know, we issue bonds on 29 March 2023. So we have deployed the funds to repay RCS. Unfortunately, as at 31st March, there is still some cash sitting in our balance sheet, waiting to be deployed, and that was being deployed for refinancing in April, okay? But I'm not saying that the increase is temporary. But at the moment, if I were to be able to deploy the ideal cash in my balance sheet, the gearing will not be that high. 

Okay. Then moving on, average term to maturity is tier improving from the 2.8 years in December 2022 because of the refinancing and bond issue. FY 2023 with an average all-in cost of that 2.68% and adjusted ICR is approximately 3.5x on a 12-month drilling basis. Moving on to the next slide. This is the debt maturity profile, remain well spread with no more than 22% due in any financial year. So post merger, we have put in place about $1.4 billion of committed bank facility to ensure financial flexibility and liquidity. And this undocumented facility is sufficient to cover all our refinancing mix in FY '23/'24, okay? Balance sheet wise, we were practical. We maintain natural hedge. So about 50% of our borrowing is in SGD and 30% in Hong Kong dollar. To mitigate the effect of volatility in interest and foreign exchange rate, we fixed about 75% of our total gross debt and 93% on a rolling fourth quarter basis of MPACT DI was either derived or fixed into Singapore dollars. Okay. If you exclude the contribution from the Singapore, the overseas asset is actually more than 80% hedged.

Okay. This is the sum up of the year. So FY 2023 continued to be impacted by various challenges. With the prolonged COVID-19 restrictions, especially in Greater China, the Ukraine-Russia conflict, along with higher inflation, rising interest rate, energy prices. So despite these headwinds, at least there are some positive news nearer home. So Singapore is back to post pandemic diplomacy and China has lifted partially most of their COVID-19 restriction early from beginning 2023. So we remain committed to delivering steady results. So year-on-year result was boosted by the merger and the better performance from VivoCity and MBC. Okay, but all this better performance, of course, cushion the increase in interest and utility costs. Okay. The removal of COVID-19 in Greater China should present opportunity to drive performance. So we will continue to actively manage our assets and our balance sheet to navigate this uneven post-COVID recovery. 

On the next slide, on long-term unit price performance, we continue to outpace the broader market. So the share price growth at $1.80 as at 31st March 23. And on total return, since IPO, we have generated in assess of 20%. Last but not least is the return to the distribution to unitholders $0.225 for the period 1st January to 31st March will be paid around 15 June 2023.

With that, I'll hand over to Wee Leong.

[Wee Leong Koh, executive]

Okay. Good morning, everyone. I'll just run through a brief overview of the retail -- of the portfolio performance before I hand over to Mun Leong, who will cover the retail assets. So on a portfolio basis, we're running at 95.4 meter occupancy, which is slightly up from the end of the previous quarter. Rental reversions for the whole portfolio are 0.7%. This is largely positive for the office and BP assets, except for China, unfortunately. But this is brought down slightly by the negative rental reversions at Festival Walk. So on the total net lettable area renewed and we let, we have done about close to 20% of the portfolio net electable area on the retail side, about 370,000 square feet and just over 2.1 million square feet for the Office and BP portfolio. Among our top 10 tenants, we have renewed leases for 4 of them this financial year. So Europe Bank of America, BMW at Gateway Plaza and Google at [indiscernible]. So Google renewed a chunk of their leases. There's still another about 20% of their lease, which is expiring in FY '24/'25 and we're working on that. So both VivoCity and Festival, we have seen improvements in tenant sales and shopper traffic on a year-on-year basis, and we'll give you a bit more detail on that in a slightly later slide.

 So moving on to committed occupancy. So like I mentioned, we are running at 95.4%. The major changes on a quarter-on-quarter basis actually are for this building, mTower, where we have actually brought occupancy past 90%. If you all remember, we were hovering around the 70% mark about 2 years ago, and we managed to improve that over the last 2 years. We do see a lot of -- we do see more demand for office leases, especially for smaller spaces, which fortunately, empower managers to provide. The China properties are running on slightly lower outcome to occupancy at the moment. As you are aware, China really only removed their COVID restrictions towards the end of December. The entire period from December to Chinese New Year was effectively COVID running ramp-up throughout most of the country. So for that -- for that period, together with the Chinese New Year period, we had very limited prospects as well as viewings. So that affected the leasing progress for the China assets quite significantly. Once Chinese New Year is over, we were seeing a lot more improvement in market sentiment. There are -- there is a lot more demand. There's a lot more viewings and we are progressively signing up leases. So we should see this number improve over the next quarter or 2.

So moving on to leasing update. So we have signed 313 leases this year and rental revision is at 0.7% for the portfolio. As you can see, the Singapore assets are running at positive rent reversions. Festival and the China properties are the ones that are pulling down the numbers slightly. The Korean market still remains extremely positive. The lack of supply and demand by local enterprises, especially by the technology company for-- technology companies for spaces in Gangnam has moved the need on the rental reversions for the asset. The next slide just gives a snapshot of our lease expiry profile. On a portfolio basis, we still running at 2.6 years, roughly the same. And Office and BP is -- of is at 3 years will and retail is at 2. We'll give a quick snapshot of the Office and BP assets. So for the Singapore assets, like I mentioned, the comment occupancy has gone up for the other SG asset, and that's mainly due to improvements at Empower, both Anson and [indiscernible] are running at 100% occupancy-- 100% committed occupancy at the moment. Retention rates and remain quite good. For MBC, we do see a little bit of weakness in the technology as well as the financial institutions, and we are seeing a little bit of downsizing on that front. For the other SG assets, largely due to the renewal of BLA, the retention rate is very, very positive, okay.

So in China, like I mentioned, we do have a little bit of weakness in the occupancy dropped slightly from the previous quarter, largely due to very limited leasing activities in the first -- in the fourth quarter of our financial year. Due to lower demand as well as a significant amount of supply in the -- in both the Shanghai and Beijing markets, rental reversions remain challenged. Market rentals are not really moving even though occupancies are starting to improve. So in Japan, our portfolio remains fairly constant. We do see a slight positive entry version and commitment remains about 97.5%, okay. So Korea is the one that has been doing pretty well over the past year, and that's largely driven by a very small amount, very limited supply in the market, but -- and there's a lot of assets to maintain very high comment occupancies. The remaining 0.7% is actually just one of the retail units that we are still working on leasing up. So tenant retentions remain high and reversions are well, as you can see, very positive. Okay. We just do a quick summary of the retail assets. So committed occupancies for both assets are in the high 99s. -- recently still remain fairly good, although it's a slightly low Festival Walk. Rental reversions at 7.5%-ish for Vivo and minus 12% for Festival Walk.

So Mun Leong will give you more color on the performance of the retail assets.

[Chow Mun Leong, executive]

Yes. Thanks, Wee Leong . So I think back on the other slide, right I think for Slide 27. Yes. So we see that the rental reversion for Sasol is actually minus 2.7%. Then the question we ask ourselves is that do we hope this to be better, right, of course, but I think this is the best they can do. Perhaps maybe let me try to put 2 contexts for your reference, right? The first context is that in the last 2 years, the rental reversion has been like minus 20% in '21 was 21%, minus 21% and '22 last year was minus 27%. So I think we see a kind of like a downward trending in terms of the negative rental reversion. And then of course, going forward, if you recall, we did mention in the previous meeting that there are still some leases, right? They are actually -- the rental are set before the COVID. So currently, there's about 15% of them, right? So they will still be subject to these rental reversion. Of course, going forward, we hope that with opening this will be mitigated. 

The second context I want to share with you is maybe we go back to -- go to Slide 33, 34. Yes. So I think the financial year for this year is actually April 22 to March 23, which is the right-hand side of the chart here, right? So if you recall, right, I mean, today, we are all sitting here but I think we tend to forget, but in December 2021, there was this wave of Omicron COVID in Hong Kong, right? And therefore, most part of this financial year, actually, Hong Kong has been working in a very challenging environment. I was doing a research yesterday, I come across some of the terms, which seems so familiar but yet so remote. Things like 0 COVID policy. No die-in. Social gathering limited to 2, right? So I think in October 20, a few months back, October 2022, myself and Sherry went to Hong Kong when the border was opened. The airport was quite deserted, right? And all this just happened a few months ago, right? So we need to have that context. Of course -- and of course, there was also 2 long years of prolonged COVID. And before that, Hong Kong also have the social incidents. So there was this prolonged tick that the tenants are facing. So if you ask me whether minus 12.7% today, is it good, I think there are a lot of challenges for the Hong Kong tenants, right? But going forward, what are we seeing, I think it's good that Hong Kong has opened the border. And then I think in March, all the restrictions have been released-- have been relaxed the borders with Mainland China. And we were doing well, I think recently, we saw 2 indicators, which we think that Hong Kong will recover well. First is the hotel room rates. The hotel room rates actually shot up twice when we were there in October. And secondly is that we could not find flights to Hong Kong. So I think there is some positive news going forward.

So I touched on Festival, 33. So with that context right, today, I think fast work on a full year basis is the shopper traffic is still 22%, sorry. The shopper traffic is still 28% below pre-COVID. But then we can see that it's actually improving. If you look at the second chart on a quarterly basis, it's actually improved 6%, Shopper traffic from $7.9 million to $8.4 million on a quarter-to-quarter basis, right? And in terms of tenant sales, right, unfortunately, it's still 26% below COVID. But compared to last year, there is a 9% improvement, right? And of course, compared to quarter-to-quarter, there's a slight 3%, but it's actually quite stable. So we are cautiously optimistic. I think it has been very challenging over the last few years, but we are cautiously optimistic that hopefully, there will be some growth going forward. But of course, bear in mind, there's still 15% of the lease that was set to rental asset before the pre COVID time, right? Quickly going through Slide 35 of the new tenants that we are bringing. Also to reiterate, I think during the very challenging time, I think the local team in Festival, they have a very focused strategy, which is to maintain the occupancy despite the challenges. So that's why you see a bit of the rental reversion. But yet, we're able to maintain to 99% occupancy. And then at the same time, the team actively refreshed the tenants. So still, these are some of the tenants that was brought into Festival this quarter. I think Kimco is one of the new brands. I think in Singapore, they are in ION and MBS, right? So they have 3 stores in Hong Kong, one in HarbourFront City and then 2 stores in Cove.

Then quickly to 36, I think these are just on the events showing that the crowd are coming back. I think this again photo is the Chinese new separation, you see all the crowd coming back. And of course, to also to highlight to you the bottom right photo, I think we're also pleased to observe that the skating ring has actually reverted back to pre-COVID level, right? The people coming there and still achieving is actually turning back to pre-COVID level. Now going back to VivoCity, which is the star performer. So Slide 28. So we will see, as you can see, although the shopper traffic is still 22% below pre-COVID but in sales has actually achieved a record-breaking 1 billion sales this year, and it's actually 30% higher last year. And yes, I think it's doing very, very well. Next slide. And this is, of course, a combination of a few business, right? Apart from the Singapore COVID relocations rules are opening much faster. I would say that Singapore is like 1 year before Hong Kong. So Hong Kong probably -- hopefully, we'll see a recovery a year later, hopefully. Yes. But of course, the other is also the active asset management by the team in VivoCity. So I think we have actually announced-- shared this with you previously, which is the AEI commencement, and we are pleased to share with you that you will be opening from end May onwards. I think the renovation has been in progress. 

So a few points to also recap on this AEI, right? So with this AEI, as you can see from the floor plan on the right, we are actually activating the escalators, right? That is the B, right, the point B. So this escalator used to be used by tanks internally. So right now, we're actually activating it. So the shoppers can actually go from this to the baseline level, which is where the popular is, right? So escalation of the mall will be greatly enhanced, right? And of course, with this, right, we're also creating a new cluster of retail shops, right? Moving to the next slide. I think these are some of the brands that we have managed to -- but apart from tanks or refreshed tanks with new offerings, we have some of the beauty brands like Chanel, Dior and [indiscernible]. And there are also a few new F&B brands to VivoCity, which is [indiscernible]. So I think you guys should watch out for this space. We are very excited. I think the team is planning for a marketing campaign as well. So we are looking forward to this opening of a new retail cluster in May. 

Yes. Next, I think these are some of the new brands and refresh concept of our existing brands, right? So the T2T is a new brand used to be where coffee business. We have downsized it, make it more optimal. And then we introduced a new brand, T2T, right? And then of recruit, we have enhanced and refreshed concept, wider selections of visits and beverages, right? And that's all for VivoCity. In the next slide, you can see the transfer gain, I think this is what the team is very good at in creating Marco events. And of course, Singapore being opening up much faster, we see returning our crop much faster and earlier than Festival Walk. Okay. I think that's all for the retail. Maybe I move on to Slide 37 on the top 10 tenants. So I think this lease, you guys should be familiar. It's the top 10 tenants. They don't change much. Maybe we'll just give a quick update also on the key assets, right? I think BMW, we have actually renewed that been resolved. CECO we have announced that CECO is actually leaving in June 2024, right? So a portion of the tenants have agreed to stay. We are still in the finalization of the leasing agreement with them, right? So, and we're also actively stepping up on leasing the remaining part of this building, right. [indiscernible] is in June 24. We are quite happy with we are not in discussion with them. HPE is 2030, so it's not an issue. NTT, MPP NTT is actually multi-lend building. And NTT currently owns about 50% of the leasable space in right? 

There is a master lease agreement with NTT, and NTT actually sublet to many different office flats and third parties. So we are currently in discussion with each of these sub-lessees to try to retain as many as possible, right? Then I think Arup, we have also managed to resolve that. We have renewed that to 2030. So that's all for top 10 tenants. Next, the portfolio. I think this one, the key message really is really well diversified portfolio. I think we don't have any trade that is more than 15%. I think it's quite well spread and quite diversified. Okay. I think that's all for the portfolio.

[Li Yeng Teng, executive]

Thank you Janica, Wee Leong and Mun Leong for the presentation. We shall now open the floor to Q&A. We kindly request that all of you state your name and your phone before posting your questions. And for our online webcast participants, please feel free to send your questions through the text base platform.

[Unknown Analyst]

Just want to understand any updates on the Google risk, given that in one phase to be renewed, what's the sentiment on the ground as well as any strategy for this lease, if they do not renew.

[Chow Mun Leong, executive]

We are still in negotiations with them. We are expected to get the lease done up. Well, we thought we have it done already. But negotiations have been taking longer than we had originally intended. As you have already seen, Google is already starting to retrench. It has affected some of the stock here in Singapore as well. So we are hoping that, that will not have a significant negative effect on our leases. Unfortunately, you do see that they are giving out space, and they've already announced that they're giving us some of the space that they have taken up at ATP. We hope that that doesn't continue, doesn't affect us. But as you're well aware, the technology companies are shrinking. So we are keeping our things across as far as we can. Yes.

[Bee Lian Tan, executive]

Maybe just to put in perspective. Majority of the Google's lease is already done. They have about 600,000 with us, 80-over percent, about 80% is done. So what is there's another balance of about 100,000 square feet, okay, which is next year. We're still in a way early days with them. Assuming okay, if this gets done, then we -- they have already chosen this place to be an anchor. Now it's just whether they optimize the space or not. Okay? They recently refitted up about 4 new floors with the kitchen and everything else, okay? So if the other expected comes, which is called the return of 4 floors, for us dealing with 100,000 square feet of space, it's not uncommon, okay? And I kind of like the fit out is actually nicer than any of our fit -- so that is also a positive if the worst happens. But rest assured, Google is already 80% renewed with us. Yes.

[Unknown Analyst]

Thank you for that. So with China reopening, do we expect to see any divestments or acquisition plans in the North Asia region?

[Bee Lian Tan, executive]

Okay. I think it's still very, very early days. Although there's some repeat in terms of the borrowing cost. We still have to be a bit careful in terms of the supply situation in China. Our current leasing team has been doing very well on the ground, holding for getting all the renewals done, even agent feedback that our leasing team and the leases that they are signing are very, very decent. But are we going to add more today? I think we can still wait and see. But if it's to recycle, if I happen to sell something and to buy back in the same area, it's just to improve the quality and to improve the age of the building, okay? That is the only thing I will consider doing. It means I sell first then a recollect, okay? And if I read plowback is because I want to improve the age because of the supply situation. But if you say divestment is always on our cards. Right now, of course, it's not the most ideal time. I love to do it. But market is not on my side. So we just have to patiently wait. I think there's still some jitters amongst foreign investors, but they are slowly having a second look at the -- slowly getting a little bit more interested again. 

Why I say so? Because if you look at the 4 key markets that we are in, the positive forecast in GDP is highest is China, next come Hong Kong. Whether it materializes is a separate issue. But a forecast -- the GDP forecast for the market, those markets are still looking positive. So would I want to recycle some? Yes. What's our strategy? I will let go some before I buy some. Yes.

[Unknown Analyst]

Understood. One last question as was the cost of borrowing guidance for this FY '24 we ask that for.

[Bee Lian Tan, executive]

Guidance. Okay. It really depends on where is the lending of the interest rate based on today's rate, based on our forecast, it should be around mid. Actually, what I wanted to highlight, which may not be 100% coming through very clearly in terms of our results. I think, can we go back to the caters a little bit of noise because last year, we merged -- so all the numbers look big, okay, 80%, 60%, 70%. So as management, what we did was we dive straight into the operations. Our properties at least, are they performing better than last year. I think that is the first question we always ask ourselves. Then we look at could it even cover utilities and the higher interest cost. This slide, because last year, we did not own full of on a full year basis. We have no basis of comparison.

Now if you just look at PR Singapore itself, Singapore outperformed by $33 million. Within the $33 million, it's already a $8 million of increased utility costs that he has already covered and still charted a positive NPI. The increased cost in terms of interest is $15 over million, okay? So all in all, it's more than enough to offset -- and I know you want to bring up that last year, I had a one-off from compensation from the $7.7 million that we got from the tenant, okay? Now definitely, operationally, on the Singapore side, it is stronger than before and able to cover the 2 cost increases. 

Now let's move to the overseas. I saw I believe some people think that I think maybe is there a drag in overseas assets. Okay. Now I look at local currency perspective, which is not shown here because we did not own the overseas asset then I cannot put up the numbers because I don't own the numbers. But if you compare what you have seen in net, you'll note that local currency portfolio NPI to NPI-wise, we are up about 10%. But the translation from the currency brought us down to minus 3%. So operationally, Singapore and overseas locally, it is stronger than the year before. The other issue is people -- there's some tendency to think that, yes, there's some drag. I don't deny that, okay? The drug is coming from Forex, and the drag is coming from the expectation that the overseas will deliver very, very fast, higher return, okay? That I don't deny it's a bit slow down, okay, because the market is not on my side. But on a local currency terms year-on-year, NPI, it is not worse off. I think that's something that I really need to share because we can see or you have to do a lot of work to go and compare last year and this year. Then you can see what I'm saying, okay? So although it looks like -- and last year, we had a release of retained cash, okay? That was retained a few years ago. 

So if I strip that out, it gives me a full picture of my operations is flat, okay, flat in terms of DPU because it could cover both utilities and also the interest cost. And on a year-on-year basis, we are definitely up 60-odd-percent. And I think based on what I'm saying, you will be able to sell that operationally, we are not weaker, okay? Are we slower in the recovery of the overseas. Yes. But is it with an expectation of the numbers that we book when we did the merger, I would say, yes, because it's not weaker. Is the Forex that is something that is not within my control that took us to minus 3% for the overseas port.

[Unknown Analyst]

First question from me. Good to hear that the performance is actually improving. But I just want to get a sense post March when China really lifted all the restrictions. Are you seeing a higher-than-expected stronger return of these Chinese tourists, both in Festival Walk and also in VivoCity.

[Bee Lian Tan, executive]

Okay. The sales -- the shopper traffic, unfortunately, we cannot dissect whether it's a local or not, absolutely cannot dissect, whether it's Chinese or Indian I cannot say, okay? Now what are the indicators? I mean, if you look at the tourist arrival into Singapore, I think we are about, what, half of what it used to be. If you look at Hong Kong, of course, it's lower use would be about $4 million a month from China. They only did like $1 million $1 million. I think the last 2 months was about $2 million. So there's still some room, okay? I think that have they come back, have we both gone back to the good old days in terms of travelers into the mall. Travelers definitely into the mall, I can't really tell because we have not done our survey, but definitely, it's very, very linked to the big data numbers that I just quoted.

[Unknown Analyst]

Yes. Okay. Just quickly on VivoCity. I noticed that the AEI ROI estimate has gone up to 20%. Is it because you are more positive on the rentals now.

[Bee Lian Tan, executive]

Okay. Actually, when we first go out, anything -- actually ROI is just an indicator, yes. Anything that is positive is always good because it's already something sitting within you are just starting the asset better to get a better return. Whether it's a 20 or 30 is usually when we come on a number, it means that we have improved trends from expectations means what we expected and to the sign. So we are very close to opening already, okay? So I think it's only one lot that is not done. So all the leases are in a way kind of locked in. That's why the asset can openly come out with a number. Usually, they will tell you about to keep themselves on buffer. Yes.

[Chow Mun Leong, executive]

Yes. Maybe to add, apart from the higher rental, it's also the cost because it put a number, we just have a prelim cost estimate. But as we progress, we were able to actually fine-tune the design. So the cost also came down a bit as well.

[Bee Lian Tan, executive]

I think it will be very exciting, a lot of new shops, activating the whole area from one tenant to multi-tenancy, reconnecting the basement to all the way to the new corner. They'll be very nice opening in May. And I think the design and all is -- it will add a bit of excitement refresh. Yes.

[Unknown Analyst]

Sorry. So maybe moving to office, please. Just wondering what's the update on the new lever backfill. That's 100,000 left in.

[Chow Mun Leong, executive]

Well, I would like to say that -- I would love to say that we've got the lease -- all the spaces at least start at the moment, but partially, that's not the case. We are working to close out leases for 1 of the 4 floors. We are hoping to get a large tenant for the other 3 floors. But as I mentioned earlier, largely the technology company is not really expanding or are they looking to move. They don't spend CapEx either. So it's a bit difficult trying to get large tenants. Hence, we actually cut out one of the floors, and we are -- should be mostly done with that floor should be mostly done with that flow suit. So unfortunately, we're still leasing out the remaining floors. Over and that, there are still a small amount of vacancies at the other blocks in NBC, so Block 20 East is where Unilever is there is another floor vacancy in the top West and vastly working to fill out as well.

[Unknown Analyst]

Okay. Just rents, is it holding up? Or is it EBITDA?

[Chow Mun Leong, executive]

The BP rentals are actually holding up quite well. In the next 1 year or so, there really isn't a lot of supply in the central area. It's just working through some of the shadow spaces that have been given up by some of the tech companies with ourselves as well as one-off.

[Unknown Analyst]

Okay. Last question on divestments. And I know you spoke about China properties. Any thoughts about other properties in your portfolio?

[Bee Lian Tan, executive]

Okay. I think I won't name the properties. But I think that you -- I see and hear that there's some discomfort without gearing, although we are okay with it. But then again, putting ourselves back to the 30s will always be an ideal situation, a target for us to go to. So what's the -- what is the only way for me to do it divestment if not its equity call. Equity call is no go for no reason, equity care is the no-go. So you can logically just decipher. That's the only way if I want to go to hit my ambition yes. I'm not answering you -- I answered your question, right?

[Xuan Tan, analyst]

Yes. Xuan Tan here from Goldman. My first question is on Festival Walk. How should we think about when the reversion turns positive? Is it after the 15% back

[Bee Lian Tan, executive]

We -- that is our target, okay? Now we can logically point out to you that the balance of 10% is a whole -- the higher rent of last time will definitely have a negative. Why? Sales has not gone up to the pre-COVID level. So that is, if I join the tool, the expectation for the reversion to be down, it can be safely concluded, okay? Now after we finish the entire batch, if there's good signs of recovery, okay? Consistent, yet has to be consistent to the tenant because tenant has suffered for 3 to 4 years. They are not going to buy in with 1 quarter of good sales and say, "Hey, I give you the rent because they've suffered for 3, 4 years, they need to see some sustained higher sales than we will see, okay? So this year, we still have a batch of about 10% that is still on a corporate levels, yes. We have to sit out, see where the sales go and confidence gets back up, I think we will be on route.

[Xuan Tan, analyst]

Do you have a sense what occupancy cost for the 85% as we knew versus the 15 that's on own pre-corporate rent?

[Bee Lian Tan, executive]

Can you repeat the question again?

[Xuan Tan, analyst]

Do you have a sense of occupancy cost for the 8.5% that lease has been renewed, right? We set in those rent versus the old 15% rent...

[Bee Lian Tan, executive]

Well, I don't have it off head because that means I have to look at individual sales for this then yes. I don't have it off head.

[Chow Mun Leong, executive]

There are of different trade categories. So they are different occupancy costs as well.

[Xuan Tan, analyst]

And then can I confirm that Vivo revenue fell 4% Q-on-Q...

[Bee Lian Tan, executive]

Okay. Very clearly, last Q is festive. Okay. Festive GTO. So usually for retail, the December includes the year-end at higher GTO period. Yes. For Q-on-Q, usually, you will see a slight drop from the third Q to the fourth Q. GTO is always one indicator. Then if that is not explained with the GTO, then it will be either softening or rent here or a little bit the rental reversions, the negative rent reversion at like Festival Walk coming through into the numbers, okay? But generally, over the period 3Q to 4Q is always GTO rent. Yes.

[Chow Mun Leong, executive]

But I think you should focus on the record breaking $1 billion sales on a full year basis.

[Bee Lian Tan, executive]

Yes, that was our 4 years ago target, then COVID hit that we missed again. We were very close. We will add about $950 million. So I told the team, hey, you costly $1 billion this year. And after COVID came we never saw that. Quite glad that it's 150 this year, much higher than pre-COVID. I think the propensity to spend is there. Of course, I think -- I believe that certain cost of goods items did go up also in terms of inflation. But that being said, the sentiment and the outlook for most of the tenants are very, very positive for Singapore. Yes.

[Xuan Tan, analyst]

Just one last question on Office and Business Park. Can you talk about reversion expectation and banking and tech tenants?

[Chow Mun Leong, executive]

Reversion expectations, we more or less expect rents to be fairly flattish this year. We rent reversions of about -- well, last year's 8% was largely due to 1 or 2 leases signed a good 6, 7 years ago, and it was probably the last 1 or 2 leases that were still at low rentals held over from the previous rental cycle. So you're not going to see 8% anymore, right? Rentals will largely be flattish for the Office and Business Park due to the profile of tenants also due to the profile of our leases. The majority of the growth in rentals are largely from the CBD. And my one CBD asset is fully let with very minimal renewals over the coming one in this current -- in this new financial year. So you're not going to see superstar rental reversals like Pinnacle Gangnam. Okay? On the office and tech tenants, I think we mentioned on the office and BP tenants, you're asking about the tech and the financial sector. 

So tech, we talked a little bit about. You also -- if you go out and dig and you go ahead look for the agency reports, you will see that there's actually quite a lot of shadow space coming up. All of the tenants, all of the tech companies that you know are retrenching, -- you know that they're giving us -- they are looking to give our space as well. On the financial sector, I think I mean, given that your, you're no better than me, right, everybody is cutting costs. And if you look at where -- what the banks are doing in the CBD that is flowing through to the BP sector as well. So there is definitely a weakness in the BP market simply because the tech guys are not expanding and contracting to some extent. Banks have been contracting easily for the last 3 to 4 years, right? Before they're not doing well, after during COVID everybody work from home, so everybody wants to cut space. So those catalysts for growth for the BP sector in the past, which have -- these 2 sectors have been a catalyst for growth for the PV sector in the past. So these 2 growth engines have dropped off. Our only saving grace is that there really isn't a lot of supply in the Central region BP market, really only one product coming on the market, which that's Elementum at one-off later part of this year, right? So demand has dropped off, but the good thing is that there's not a lot of supply.

[Jian Hua Chang, analyst]

This is Derek, Morgan Stanley. Just a question on VivoCity. What's the turnover rent right now as a proportion of our rentals?

[Bee Lian Tan, executive]

Okay. Our turnover ran as a proportion. Let's see. It's usually around single digits. You take it as around plus/minus 3%, 4%.

[Jian Hua Chang, analyst]

Was the market high tenant sales, GP was about 64%.

[Bee Lian Tan, executive]

Okay. No. Okay. Well, it's not a direct, okay? Not a direct. The GTO numbers are actually very, very small. It's usually about plus 2, 3, sometimes 3 to 4. It used to be 6, and we restructured down to more base rent and lesser GTO. That's why the quantum of GTO came down over the years because we took protection more from the -- we took the stance of we wanted more base rent as opposed to taking a little bit more risk, okay? That was how we have shifted over the last 8 years. It's not a very big number. It's only -- it's actually for us to just have a gauge of the tenant sales because they submit the numbers to us because if there is no numbers that is required, very hard for us to ask the tenant to do so at the sales to us. So that was more of the purpose. But for GDO to drive the whole revenue of Vivo, very difficult people is about $160 million net NPI. So the GTO of a few million dollars is not going to shift the needle.

[Jian Hua Chang, analyst]

Going forward, will you reverse direction ship..

[Bee Lian Tan, executive]

Okay. We had a good run. We need new catalysts before we move to the next phase, okay? To say that this run is going to continue forever and ever is -- I think it's tall order, okay? Now we have to make sure that we continuously revise the space to make the place more interesting and change and read out weaker tenants and keep changing, okay? That is the game of retail. Now to say that I can reproduce what we have done over the last 10 years, I would say, it's a target, but I wouldn't say that I confirm I can do it, okay? Because we are of different base now. We used to be -- or I think $10 kind of average rent by the first we Vivo started $910 or single-digit type. We are closer to the teams already. So we have driven valuations from less than $1 billion. This property has grown to $3 billion. It has chartered consistent growth year-on-year. I think in terms of performance-wise, from inception to today, Vivo is definitely one of the better performing as an asset in Singapore, okay, from day 1 built to today.

[Chow Mun Leong, executive]

Now it's always a lot of pressure on the team. Today, you achieved 900 I ask you for 950. 950 I asked you $4 billion. You achieved 120 NPL move view day by day. So like I said, it will always be a constant pressure, but I'm not going to commit to you. I'm going to give you another 7% growth. In short, okay? But the discipline is there to look at every area, and that includes doing the hard call of weeding up weaker tenants. So that has always been the consistent mindset of the team. If you have no words, after a while, it may not be full, we will change you. That's where we are.

[M. Khi, analyst]

This is Terence from JPMorgan. If I could ask for festival walk, is there a target to get back to pre-COVID sales?

[Chow Mun Leong, executive]

Yes. Yes, I think, of course, we really hope that you will recover to pre-COVID as soon as possible. But a lot of this is actually beyond our control. I think although when China borders announced relaxation in early February, but it was not exactly so there was a number of Visas. People can come in, not all the orders was opened, right? And ever when you go to China, it's year to do all those tests. So everything was really truly relaxed, I think, in the early part of March. So we are still early. Right now, it's only April, right? And then we don't see -- like what Shane mentioned on a money basis, we only see 1 million instead of the pre-COVID $4 million. So a lot will be actually deepened by the macro environment. But what I can say is that the local team is actually getting ready, right? So they have been continuously looking and refreshing these tenants. We have new -- a few new tenants coming up, which we will report in the next quarter, which is actually quite refreshing to the vessel work. Some of the bigger tenants like what Janica said, they are not performing well. So we view them out. So we actually brought in new tenants. So I think -- I think we are confident with the local team is constantly getting ready. 

And the other telltale sign is really the niceties really the ice rink. Right now, he has actually recovered to pre-COVID level, so we hope that, that is a leading indicator of what will come mix for festival wall. Is there a need to try to treat the tenancy mix to target the motor is oriented trades?

[Bee Lian Tan, executive]

Okay. If you ask me personally, I think the treatment is good in terms of servicing the domestic market. Nothing wrong. Enough for percentages of allocation to F&B, fashion and all is in good order. I think what we are questioning ourselves is that little pockets here and there, which is like the beauty corners, those cosmetic brands, which are typically more patronized by the Chinese, do we want to slow down on that. Okay? I think it's just little pockets here and there. I think F&B was another area that we analyzed that we are not 100% complete. I think the team wants to do a little bit more -- when they look at restaurants, to cafes, to the cuisines and all, quite clearly, I think Asians cafes, they are a little bit lucky, okay? So those are the things that they will try to improve. But if you say specific trade mix because of maybe lesser Chinese coming in, quite clear for me, it's the beauty. The beauty cosmetic sector is something that will be first to feel the impact.

[M. Khi, analyst]

Yes. Okay. And maybe for Japan. I understand that there's some supply coming up. Should we expect divestments of some of the more challenging properties like MVP and Seco? Or if you choose to lease up, should we be expecting positive reversions there?

[Bee Lian Tan, executive]

Okay. I think the -- on a gross, we are actually leasing to the tenant on a gross basis and based on a certain rate. Okay. I think the question is how fast can we backfill the space after it turns, I would say that it will take a while, okay? Japan economy is not like booming, so to speak, okay? What people like about Japan is the spread between borrowing costs and the investment yields. That being said, I think the drag will be on the backfilling, okay? If to just put out one asset and say, "Hey, do you want to buy this? Nobody will buy it. Let's be fair. Okay, because nobody wants to take any formal leasing risk without having a very few share cut, let's be very fair about it. And I do not want to -- the asset is not big in the whole scheme of things. We have 9 pieces in Japan of asset, constituting about 10%, that 1P is low 1-ish percent, okay? I'm not going to sell something with such a big -- with a haircut regardless. And after that, and it's a 1% asset. And for the next 2 years, I'll be prompted with it. So I'm not going to go down there, okay? As the first move, it will be quite odd, although there's no impact, okay? That's a limited impact to the portfolio. So Japan right now is very stable. But Japan will have its risk with the -- some of the single tenancy. Yes.

[M. Khi, analyst]

Okay. And final question from me. Would you consider divestments in Singapore.

[Bee Lian Tan, executive]

Like I said, I think if you go back to our strategy, right, like we were very, very clear that the 2 core assets that we will not touch that will be core and synonymous to impact is NBC and Vivo. The rest of the asset, it goes whether into bucket B or bucket C, okay? Bucket A is don't touch. Bucket B is take cost the asset first. Then after you use it, then you go into bucket C and see whether you deserve to be kept or you deserve to be thrown away, okay? So only 2 -- these 2 assets as of today are in our call. The rest, if it makes sense. I would say that we can consider. Yes. Okay. So the call is 54%, about 54% NBC and Vivo. The rest is -- we'll definitely have to be put through the rigorous analysis of whether we should keep or not. I think as a manager, most of the time, people like to -- we prefer to have assets, yes, because assets so hard to come by, okay? I think over time, if you run a vehicle, you have to take a very detached view and see whether there's any more upside, no upside, how does it affect your portfolio on a long-haul basis, that questioning and putting the asset through the analysis of whether we should keep or sell. It should be a part of a disciplined exercise every year that is being reviewed. Yes.

[M. Khi, analyst]

Just want to touch on Festival Walk, right? I think you mentioned about this 15% leases. What's the strategy here? And what kind of reversion could we be looking at?

[Bee Lian Tan, executive]

Negative. If I tell you, negative not good enough. I need to go down to the numbers. Okay. We are at the start of the year, okay? We are at the start of the year. I think over time, you have seen the minus EUR 30 million minus 20 down to minus 12% thereabouts, thereabout. That gives you a sense, that's thereabout. Am I expecting a minus 40%, minus 50, I don't think so. It's closer to what we have done before. recently, okay? [indiscernible] Okay. My view is, okay, before we have actually received the interest, okay, especially on interest. My point is I'm at 90% on my bottom. Why would I want to consider today? And I think that there is more upside than those at risk from that perspective. I never went further than just reading somebody's just a are you interested, okay? We didn't even advance any further because I don't think it fits the game plan. We have suffered 4, 5 years. Why do I intend to let it go before 5. I think there's a little bit -- there's definitely more room up than down. That's my view on a medium-term basis. Yes.

[M. Khi, analyst]

And just one more on Korea. I think in the 4R strategy, there was a view to sort of expand.

[Bee Lian Tan, executive]

Which part are you reading?

[M. Khi, analyst]

Is there another for...

[Bee Lian Tan, executive]

Okay. But you see, after that interest rate shot so high in Korea, okay? I think it went as high as what 2% to 4%. At a point when we did that circular when we did that presentation, I think it was early last year, you going to compare the interest in and then okay, what puts the interest, yes. What's interesting about Korea is specific markets is the operating metric is fantastic, okay? If you get it like for example, our comment -- the reversion numbers that I've never seen before in any of our assets, not because of the lack of supply and because there is still demand specific areas. So Korea is not everywhere. Special areas growing very, very strongly. Then we ask ourselves, the spread between the interest borrowing and the properties are so wide, how can valuations do hold? That was a question we even asked the valuers directly. Very clearly to us, that is only one factor that everybody thinks is the basis of valuation and ascribing the cap rates you say no. When they look at Korea, they were comfort that in the valuation is because of the operating metrics, the rental reversions, coupled with the lack of supply and couple that with the cost of construction has grown so much to the point where completed asset is cheaper, looks reasonable, more reasonable than building. 

So this is according to agents on the ground, okay? They said that today, you buy one piece, you build, it's going to cost you more than what you're holding. So that's where they are comforted in holding their valuation. Even though the spread between asset new and borrowing cost is actually again, okay? And their view is for the next -- well, this will hold out for at least the next 3 to 5 years. Okay? That's what I get it from all consistently in Korea for the good spots. Okay. So to me, Korea is a very simple thing based on what we see, the supply and everything and whatever the local market conditions is in and on okay? Anything that goes up and whole so long before supply comes down you have to let go, right? So if they forecast that it's going to be a good run. Something's got to stop, something's going to get. So the horizon should be -- if you want to time it, then the horizon should be about the 3 to 5 years before you see what a next. Yes. Yes.

[M. Khi, analyst]

This is Terence Lee from UBS. In terms of time line, when would you expect to renew the 15% at Festival Wall?

[Bee Lian Tan, executive]

It's over a period of this year.

[M. Khi, analyst]

So to finish the 15% by end of this financial year, there's expectations.

[Bee Lian Tan, executive]

Latest.

[M. Khi, analyst]

And could you also share the latest occupancy cost for Vivo and whether it is reasonable to expect to continue to push rents and reversions higher given the record sales.

[Bee Lian Tan, executive]

The occupancy costs are around 16... Didn't remember wrongly, okay, about 16, 18. Okay. Good orders will we say anything like 15, 16, very good. Then subsequently, during COVID, they all got to shop with the 20s, but I don't think the high 20s is something that is sustainable. But then again, I think we are -- the good orders are being below 15%. If you take yourself 10 to 15 years ago, everybody will say about cost most about 12% to 15%. Is gone. I think I've always reiterated that. What we are blind to is the online sales component that does not come to the landlord. All the landlords are a little bit -- maybe I would say, 20%, 30% blind, so the total revenue numbers of the tenant, okay? So that is where the relevance in forecasting is a little bit of -- the is a little bit more muted in its use as compared to before, okay? Very clearly, you look at my Apple shop. I don't want to forecast it sales. The sales cannot be what he's doing and what I'm seeing. You buy any phones, you buy any of the phone launches that are all online. They're all online, it doesn't come to me. It doesn't come to me. You can call collect that. You cannot -- it doesn't come to me, okay? So like I said, landlords are a little bit blind to the total sales that tenants are generating today because of the online component, that's where over the last 5 years, we have shifted away from GTO, okay? Because GTO is not a big number. So I might sell take certainty when I can. So that's where you see the shift over the last couple of years. 

Okay. So you're asking whether you -- we can expect rental reversions of people to still go with the sales being higher. Okay. Rental reversions is always very specific to the natural leases that is renewed expiring on that year, okay? On our whole, I think if you look at the average rent of people at about, okay? It's not like in the 19 or 20, okay? But is it harder to push that 10%, of course, is harder because we are at $16 as opposed to $12 a square foot, okay. What remains in the challenges we made in the retail Singapore is the manpower. Manpower is still a challenge for Singapore retailers that will inhibit the ability to grow more. Most of the time, when you go to a restaurant, you see -- you can potentially see open spaces, but they have not enough staff to turn to the chin. So that is an inherent problem that is coping the growth of retail sales going forward. Yes. Yes. So if you allow me, I will take a little break, and I will pose some of the questions that have been asked by the online participants. So first, on a quarter-on-quarter basis, revenue and NPI had fallen 2.7% and 1.1%, respectively. What drove the decline? And MPX reported leverage has crept up to close to 41%. What are the plans to pare down the debt. That's the first question. I think like what mentioned just now, we are actually comfortable with our gearing level. But I know everybody is nervous. 

So either I call capital, which is a no-go because we don't call capital for no specific purposes. So the other way to bring it now to me you comfortable is to look at divestment. Yes. So here, we have our property put in 3 buckets. Vivo and NBC is a non-goal. This is our core asset and the rest, we will see how it goes. Okay. Maybe just to dwell a little bit in terms of our gearing ratio. Last quarter, we are 40.2%. You may see that, hey, what are they developing so fast to 40.9% and it's only a little bit of reval -- the real loss, we're talking about $50 million, okay? $15 million, you divide our asset doesn't give you 70 bps in terms of gearing, okay? There's a little bit of the bonds that she was doing actually sitting on some of the cash that has not been deployed, okay? But if you look at our gearing ratio at a point of merger, we are about 40.6% from day 1, okay? Because we didn't do pubs. We already wanted to do pubs to bring it down to below 40. But the pulp cost to and we said that it doesn't make sense just to show a nicer number and to take cuts. So we went on a basis which is the best cost for us, and we took the normal loan as opposed to puts that that we wanted to do to make sure that the number looks acceptable to most of the analysts and investors, which is called below 40, yes. 

So but we didn't do that because the put cost was just tremendously high and it didn't make sense for us to do that kind of window dressing. So we didn't do that. So that's where our original gearing at inception was already above 40.6%, okay? The valuation drop of $50 million, okay? $50 million is about 0.25% in terms of change. Now the big amount, the rest of it is on ForEx. That goes into a ForEx reserve that goes up and down every year, okay? So the true impact on the fair value, we are talking about the $50 million. So that $5 million translates to about 0.2 billion. So the actual impact on our is about 0.24 bps as opposed to the 70 bps that you're seeing here. So I also want to clarify this point is because when people are seeing like that, they get worried like 50 bps gallop, 70 bps, 50 million gallop, 70 bps is quite dumping. Yes. So when we dragged out, we analyzed it. It is not far from what we were. The impact of the valuation is only about 24 bps on the gearing. There she has some lazy cash in our balance sheet that adds on to the -- that adds on to the gearing. Donald.

[Donald Chua, analyst]

Donald from Bank of America. A couple of questions, maybe following up on the gearing issue, right? Looking at the valuations, this appraisal Singapore looks pretty strong. But if NBC continues to be difficult in backfilling and vacancy rates starts to remain high, do you expect values to come in and cut valuation?

[Bee Lian Tan, executive]

Okay. We valuations okay, maybe later, we look at it on. Valuations, you have to look at what market rents they have for scrap to valuation and whether you can achieve those market rents. If you can still achieve those market rents, even the temporary vacancy that you don't see a big shift in terms of the valuation -- the output of the valuation -- the valuation numbers. So my point is, how close are we to the -- in achieving the market rents? I think we are about there, okay? So you're not going to see that big shifts. Are they going to change cap rates, which is the bigger issue. I think Singapore itself looks like the valuers are quite comfortable. Quite comfortable in terms of the cap rates. The retail, of course, is enough transaction. Actually office, if you go by transaction, you're supposed to compress, okay, which I don't think they did. If you go by transaction, technically office assets should compress because values always is that they need transaction, then they will shift cap rates. 

Transactions are actually tighter, tighter than what we are seeing in our valuation. But I don't expect our valuers to be that on hold. I think they will be a bit cautious, but quite happy they have enough transactions to back up their call. But yes, they'll be cautious in not moving. That's my own personal take. Yes.

[Donald Chua, analyst]

Okay. I understand. But would you consider doing a half yearly appraisal?

[Bee Lian Tan, executive]

Usually, we don't only -- because the last round that we ever did at half yearly was during COVID. When we first started COVID, nobody knew where it was going, right? Then plus lockdown that your revenue hit so much during the lockdown. That was when we -- our Board decided like, hey, let's do a half year well to see where we are going because it's untested territory as to how valuers to get a big hole in your cash flow, right, and how they look at the valuation. But we didn't do the yearly well. Now the valuation exercise is quite humongous, yes. Do we expect valuations to shift by 20%, 30%. No, no, no. Usually, it's small moves. Only if when there's big cap rate changes, then you'll see big shifts. If not operationally, even our rental reversion minus 20, minus 10, you're talking about converting it back into the numbers you're talking about 2%, 3%, okay? Now if we think that there's going to be big cap rate changes when we hear the market, then maybe our Board would say, "Hey, I think you need to call for a well, which I think is fair because we have to make a statement out there as to what our fair value is. And usually, our fab back to buy valuation, okay? So only if we think or we hear that there will be big cap rate changes to reactivate or uncertain -- the last time was uncertain because of COVID. We didn't know how valuation of assets are impacted during that period. 

But now having gone through COVID, it's now a matter of now it's the interest rate variance, yes. I think certain markets were quite comfortable. Singapore is one. Korea is definitely -- I mean Korea is also another one that people are very comfortable based on Gangnam area. So of course, we have to put our years into China. But I think there's some repeat in terms of borrowing costs. So it's not like it's continued to escalate, it's essentially a little bit. So we just have to put our years on the ground to have a, to be in constant conversation with values to see where cap rates are, whether they have intention to expand cap rates, especially for Hong Kong and China. I think the rest are okay.

[Donald Chua, analyst]

Okay. So we are not done yet. -- which is great. So my last question is on divestments. I appreciate that it's difficult to find a buyer for the current price at this point. But what about divesting to your sponsor? Maybe as a value-add asset, you can take it and spreads on the other side. Is there an option here that can be done?

[Bee Lian Tan, executive]

You mean to sell my asset to the sponsor. Our sponsor used to be like a unitholder suppose side, right? So we are -- what I'm hearing, it will be like a merry-go-round. First, we merged the 2. Then after, I think I'm confused already.

[Donald Chua, analyst]

Things have changed, right? The market has become more uncertain. Is it possible that it could...

[Bee Lian Tan, executive]

I can't speak on their behalf. Okay. The truth of the matter is I can't speak on their behalf, okay? In terms of -- are we trying on some terms of divestment, I think it's always on our cards, okay? Whatever is successful or not, okay, it's a different story, okay? But definitely efforts are there in terms of looking at some form of divestment, where possible, yes. Whether it's this year, next year, whatever, like I said, anything that is not core asset, which is Mapletree Business City, and Vivo is not off the hook. We have to review. Normal times, rough times, gearing issue times or whatever time it will always have to go through that review. Yes.

[Li Yeng Teng, executive]

A couple of quick questions from online from Mr. Tang one of the retail investors. Assuming interest rates do not move from now, what will be the expected borrowing costs for this full year? I think I've mentioned that just now is about mid-3, but I just look at the outlook. I think the interest rate increase in another 3 to 4 bps today. So it really depends. Okay. Yes. Another one is how have the tenant sales be performing in Singapore and Hong Kong in the last few months? And what are the occupancy costs at present in VivoCity and the Festival Walk? How much of the sales increase is actually due to the increase in GST component?

[Bee Lian Tan, executive]

How much of the sale is to GST, I think you can just take the total sales and minus the delta, which is 1% of GST as a very rough calculation. Okay. Over the years, Vivo has already climbed to pre-COVID levels. Pre-COVID we did about $900 million of sales. Today, we have done a full year of $1.05 billion of sales. Okay. Quarter-on-quarter, there are some issues because last quarter -- the last quarter is always the festive, okay? Where you have your kick of your Christmas and on. So usually, the Q3 is always the highest in terms of footfall and sales for shopping centers yes. You want to add on, yes.

[Chow Mun Leong, executive]

I think nothing much further to add on. I think hopefully, that next few months will be better than these. And I think it will be better, yes.

[Bee Lian Tan, executive]

Okay. You see our footfall is still not near the pre-COVID phase. I think we are about 20-ish percent behind pre-COVID, okay? But sales as such, 16% above pre-COVID. The gap, I think it's due to tourism is one. The next thing is a little bit of work from home from the office community that we usually get for VivoCity, okay? So there's still a little bit of buffer there that we have not fully extracted based on the footfall. If I extrapolate the footfall to where we were previously, I believe there's some still upside from the traffic itself. And when people come, usually, they would spend, okay? So the tourism is definitely not in full order -- and of course, they go from home, there's still some impact from the office that the office can't do actually come in into VivoCity.

[Donald Chua, analyst]

Yes. I think maybe that if the question is that what is the current sentiment, right? Maybe the person can go to VivoCity today, if you take a look. Now they are having Nissan cars, right? They are actually pushing out their electronic cars. So quite interesting. Every time I go there, there's always a lot of bustling activities, the atrium are always full of events. So the Nissan Costco is actually quite interesting to visit it. Okay.

[Bee Lian Tan, executive]

So that next part of the question is we are in order about below 20%, okay? So that's where we are for Vivo. First of a work.

[Donald Chua, analyst]

To work, of course, is slightly above 0, right? About 20% fits about 20%. Fast is slightly above that, right? And in terms of the tenant sales, as you can see, like we mentioned earlier on a year-on-year basis, it has improved. And on a quarter-to-quarter compared to last quarter in this 1049 is about the same, right, quite stable at 118 and this largely due to the festive season. Yes. Sorry. And if you look at historically, the fourth quarter has always been slightly lower than the quarter and the trend has maintained as well.

[Bee Lian Tan, executive]

What's interesting to note here is I think the part of recovery for Vivo has already surpassed the Hong Kong side. Hong Kong only started opening recently, it was not in full scale, okay? As a landlord, what's interesting between Singapore and Hong Kong retail is the intensity per square foot that it generates. Hong Kong is -- you see Hong Kong is at $5 billion, and it's only a 600,000 square feet more. Vivo is $1 billion, is 1 million square feet more. The intensity Hong Kong generates is far hit from Singapore, okay? So -- and this is on a weaker basis already. We're not even at pre-COVID level. We're about 20-ish percent below pre-COVID. So what we know as a landlord is the churn per square foot is higher than tenable. The intensity is much better. So that's where tenants typically prefer areas like this because per square foot, they may pay higher square foot, they're turning much more. So effectiveness and efficiency from tenant turnover is higher in Hong Kong. Now tenants are waiting for it to show signs of coming back to free profit because Hong Kong is still a very key area for them in terms of churning as a revenue center. Yes.

[Li Yeng Teng, executive]

Yes. One last question from our online participant, I noticed on Slide 27, retention rate for festival is close to 44%, although occupancy is very high. How much of this is -- can we give a sense of how much of this is due to tenant remixing? Yes, this 40-plus figure is actually excluding the short-term lease. So you actually include the short-term lease retention is actually above 70%.

[Chow Mun Leong, executive]

So maybe to share a very interesting phenomenon because of the uncertainty, I think a attendants prefer to actually go into shorter-term list to monitor. And on the landlord perspective, we also want to go into a shorter, especially when we are at the lease stage where there is going to be a recovery going forward, unless it's a tenant that we really like to have, then we will enter in the longer term. It's not -- we also do not want to lock them at a lower vendor today, right? So that's why if we include the short-term leases, the retention is actually above 70%.

[Li Yeng Teng, executive]

Maybe going back to one previous question. On a Q-on-Q basis, revenue and NPI has fallen by 2.7% and 1%, respectively. Can we actually give more color on the drivers? It's a combination of things. 3Q versus 4Q, typically retail GTO, on top of that, the revenue -- again, very small numbers, we are talking about 3Q to 4Q variance of about $2 million between the 2 quarters, slightly down. But broad factor is GTO is one, higher in Q3 than Q4. The other thing is definitely some weakening of like Festival Walk, for example, because of the negative rental reversion you will just come through. Then on top of that, any other peculiar items.

Yes, if I may add on, of course, China with the lower in rent, so it's also weaker. And I would say part of the reason or maybe 1/3 is due to FX especially Hong Kong and China? Okay.

[Bee Lian Tan, executive]

So the variance is $2 million for that quarter. It's a combination of issues. On top of that, we have also made a provision in terms of rental rebate for a tenant, but that has not been utilized, okay? That's equivalent to $2 million. So if you ignore all the noises, you can just put that $2 million and account for it. And that $2 million has not been used, okay? So that's in short. So the it's -- I would say there's a combination of issues, but very, very small numbers.

[Geraldine Wong, analyst]

This is Gerald from DBS. I have 2 questions. First is regarding retail supply in Hong Kong. So I understand in Carlos, there's a I think, a record number of retail supply for this year. So I wonder if you're tracking the occupancy there, but are you concerned with the supply? And would this add pressure to your rents there?

[Chow Mun Leong, executive]

Yes. We understand that our malls at color on this. And then there's this Kita area where there are a lot of new malls coming up, right? Yes, I think it will definitely be some sort of competition. But I think the latest we heard is that the Hong Kong government was trying to introduce some affordable housing in the Kita area as well. And thereby, it actually creates some confusion to the tenants and the landlords as to work positioning that would be. So yes, I think there will definitely be some competition. We are monitoring them quite closely. But I think the positioning of that area is also currently facing challenges as well, right?

[Bee Lian Tan, executive]

So I think when we first look at the supply, we were very, very nervous. one or million square feet, super new. When we met the tenant, the biggest groups at all, they were telling us that no fear, they suddenly got fear themselves because they locked in like 5, 6 shops, different brands. And when the government announced that you're going to put public housing, although they say temporary for 5 years, they all go very nervous because that means human but not spent, okay? So when -- so it was you're in a different positioning. And for them, definitely they are getting a bit more co-feed because there'll be human, but not spend because of the public the public housing which quite a lot out cry because a lot of people bought reside at higher.

[Geraldine Wong, analyst]

Okay. My next question and last question is regarding Mapletree Anson. I understand we work as one of your top tenant there.

[Bee Lian Tan, executive]

WeWork is steady. We were so worried about WeWork. And actually, the co-working space is doing quite well in Singapore. No worries.

[Geraldine Wong, analyst]

Okay. Because I think there's some weakness in the financials and its share price. So just wondering.

[Bee Lian Tan, executive]

This question is how be years 6 years, right? They're still a life. Okay. We try -- we have to make sure -- we try to contain them, okay? We are supposed to have we with remember. That's how I got the $7 million, $8 million compensation. During COVID, over the space, they didn't take over, we asked for 14 months of rent as a compensation. And that's why we had to -- the numbers that you see is comparing to last year that already have another $8 million to $10 million of compensation inside, which is a one-off. So that's why I'm saying that operationally is actually much better than what you are seeing, okay? I release money, plus also the compensation. And the compensation was contributed mostly by WeWorks. Actually, I shouldn't say, but one of the tenants. So actually, if you summarize you can see that operation is not weaker, okay, it's definitely stronger. And so WeWork, we don't have a concern. Even if something really bad happens, CBD rent [indiscernible], no problem. I think it's sustainable. No issue. I'm not concerned.

[Li Yeng Teng, executive]

Thank you all very much for your insightful questions and active participation. Unfortunately, due to time constraint, we have to end the briefing now, but feel free to reach out any time if you need further clarification or information. Again, thank you very much for making time today. We wish you a great day ahead. Thank you.