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Mapletree Commercial Trust
Earnings Call Analysis
Q4-2024 Analysis
Mapletree Commercial Trust
The earnings call for Mapletree Pan Asia Commercial Trust (MPACT) offered a comprehensive overview of the company's performance in the fourth quarter and full financial year of 2023/2024. Key executives including the CEO and CFO discussed the macroeconomic challenges, financial results, and strategic priorities moving forward.
The global market faced significant disruptions due to ongoing conflicts and economic uncertainties. High interest rates, aimed at curbing inflation, increased financing costs for businesses, including MPACT. Additionally, forex fluctuations impacted earnings and asset values when foreign earnings were converted back to Singapore dollars. Despite these headwinds, MPACT's team adapted their asset and financial management strategies to meet these challenges.
For the fourth quarter, MPACT's gross revenue was $239.2 million, a 2.6% increase year-on-year, while Net Property Income (NPI) rose by 3.2% to $183.1 million. This growth was driven mainly by the Singapore portfolio's positive performance. However, China underperformed due to lower occupancy. On a constant currency basis, the growth in gross revenue and NPI would have been 3.8% and 4.4%, respectively.
Over the full financial year, gross revenue and NPI increased by 16% and 15.2% to $958.1 million and $728 million, respectively. The overseas assets acquired in the merger contributed significantly to this growth, although merger gains were tempered by a stronger Singapore dollar. Finance costs rose by 39% due to increased interest expenses and elevated interest rates. The amount available for distribution was $468.6 million, up 5.2%. However, the full-year Distribution Per Unit (DPU) fell by 7.3% year-on-year to $0.091, primarily due to the enlarged unit base from the merger.
Occupancy levels remained robust despite slight declines in certain markets. Singapore assets performed well with high occupancy rates, maintaining the company's stability. China assets, specifically Gateway Plaza, saw improvements, with occupancy increasing to 90%. Japanese and Korean markets also remained strong, while the China market remained challenging due to economic headwinds and supply issues.
For the fourth quarter, available funds for distribution increased by 2.2% to $120.5 million. Consequently, the DPU increased by 1.8% year-on-year to $0.022. Valuation of the portfolio stood at $16.5 billion as of March 31, 2021, with noticeable value increments in properties like VivoCity. However, there were valuation declines in overseas properties due to the stronger Singapore dollar.
Looking ahead, MPACT has defined three strategic priorities: strengthening its capital structure, continuing proactive asset management, and focusing on the Singapore portfolio to ensure long-term sustainable returns. The company aims to navigate the landscape of high-interest rates and market volatility by recalibrating its capital structure, maintaining high occupancy rates, and enhancing asset values through strategic projects.
MPACT remains focused on delivering sustainable long-term returns to its stakeholders despite ongoing market headwinds. The company is confident in its ability to navigate the challenging environment by adhering to its strategic priorities and maintaining financial discipline. Moving forward, MPACT aims to leverage opportunities in its core markets while enhancing unitholder value through proactive management and strategic initiatives.
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Good morning, analysts, investors and members of the project. Welcome to Mapletree Pan Asia Commercial trial, or MPACT Analyst briefing and live webcast for the fourth quarter and financial year 2023, '24. I am Li Yeng and have the pleasure of hosting today's results briefing. Allow me to introduce about details for today's briefing. They are Ms. Sharon Lim, Chief Executive Officer of MPACT, Ms. Janica Tan, Chief Financial Officer of MPACT; Mr. Chow Mun Leong and Mr. Koh Wee Leong, our Co-Head of Investment and Asset Management.
They will be presenting our financial results providing key business developments and sharing market insight. Following the presentation, we will open the floor for a Q&A session, where we invite you to ask questions and take further clarification on our results.
Without further ado, I will hand the floor over to our CFO, Janica.
Good morning. Thank you for joining us today. Before we get into the details of our full year FY '23, '24 results, I would like to give more color to the 3 key teams shipping our broad business environment. The first is the global market has been very much affected by the ongoing [indiscernible] conflicts and economy uncertainty. Second, including MPACT are may be giving through a new era of high interest rates, following MPACT rate hikes in the last 2 years in an attempt to cut ramp-on inflation. And this significantly impacted cost of financing for banks and businesses.
Third, financial market has been volatile. ForEx fluctuation has particularly impacted reach with overseas exposure affecting their earnings, distribution and asset values when they are converted back to Sing dollar. Despite these hurdles, MPACT had shown resilient with our teams adapting their asset and financial management approaches to meet these challenges hit on. So for fourth quarter, FY '23, '24, MPACT gross revenue, NPI and DPU, this meeting is being recorded overcoming broad market headwinds, including ForEx challenges and high interest rates. Gross revenue of $239.2 million was 2.6% higher as compared to last year's same period and NPI was $183.1 million, 3.2% higher year-on-year.
And this growth was primarily driven by Singapore portfolio, which delivered positive contribution. Hong Kong and Japan delivered steady performance on a local currency basis, whereas China has underperformed as compared to last year due to lower occupancy. Property operating expenses were 0.3% higher at $56.1 million, mainly due to higher staff costs and property management fees, partly offset by lower utility expenses. And on a constant currency basis, the year-on-year growth in gross revenue and NPI would have been higher at 3.8% and 4.4%, respectively.
Net financial expense for the quarter were 10.8% higher at $56.4 million as compared to fourth quarter last year, and this was mainly due to higher interest rates on both Hong Kong dollar and Sing dollar borrowings and this was partly offset by the Hong Kong dollar and [indiscernible] store executed during the financial year. Amount available for distribution rose 2.2% year-on-year to $120.5 million mainly driven by higher NPI, which more than caused increased interest costs. And consequently, fourth due DPU was $0.22, up 1.8% year-on-year.
This is the year-on-year contribution by properties. The Singapore properties contributed $6.6 million or 6.3% of higher NPI with better performance across all properties whereas Japan and China were impacted by the adverse ForEx investment and China, lower occupancy. Contribution for festivals [indiscernible] On full year, gross revenue and NPI rose 16% and 15.2% to $958.1 million and $728 million, respectively. This increase was mainly due to the year contribution from the oversea assets acquired in the merger, although the merger gains were tempered by a stronger sing dollar against our foreign currency.
On a constant currency basis, the year-on-year growth in gross revenue and NPI would have been higher at 17.5% and 16.6%, respectively. The finance cost for the financial year were 39% higher year-on-year, and this was also mainly due to the full year impact on interest expenses from the merger asset, the acquisition debt and the elevated interest rates on Sing dollar and Hong Kong dollar borrowing. So for the full year amount available for distribution was $468.6 million, 5.2% higher year-on-year and the full year DPU, $0.091, 7.3% lower year-on-year, and this was mainly due to the enlarged Unit 3.
Personal property for 5.4% growth in gross revenue with improvement across all major revenue categories, including fixed rent, CapEx income and A&P income. And the higher NPI of $15.7 million was after fully covering despite in utility expenses. The next 2 stats are on our independent valuation. There was a change of values for the year in compliance with the properties and guidelines. So changes to cap rate and discovery is any were due to the deferred house view of the value. [indiscernible] portfolio valuation was $16.5 billion as at 31st March 2021. Value of no properties increased by 2.7%, particularly VivoCity, which saw $126 million up lease in valuation.
The valuation decline in the overseas properties was largely attributed to a stronger Sing dollar against all foreign currency, about 87%. Operational valuation MPACT from -- of the overseas assets accounted for a minor portion of the total value variance. And this was mainly due to the revised market expectations for China and specific adjustments for Sico building which is undergoing conversion into a multi-tenanted building of [indiscernible] when Sico instruments lease expires on 30th June 2024.
So consequently, NAV per unit was $1.75 at 31st March 2024, lower as compared to March '23, mainly due to the impact from ForEx. As at March 2024, the [indiscernible] growth was $6.8 billion, average ratio, 40.5%, and at 40.5%, the debt headroom was $3.2 billion to 50%, and assuming total debt remained unchanged, it will take $3.2 billion in investment property value for gearing to reach 50%, which translates to a cap rate of 94 big expansion across the entire portfolio.
Okay. But with the average all-in cost of debt for the financial year was 3.35% per annum and the adjusted ICR approximately 2.9x on a 12-month drilling basis. By the close of the financial period, MPACT has a financial flat of about $1.5 billion in cash and undrawn committed facility, ensuring sufficient liquidity for working capital and financial applications. The debt maturity profile remained well spread with no more than 21% of that deal in any financial year.
On the next slide, on the percentage of fixed fee debt, 77.1% as at 31 March '24 and at 77% every [indiscernible] change in the benchmark rates is expected to impact the DPU by $0.13 per annum. And as at the close of the quarter, approximately 93% of MPACT expected distributable income based on rolling fourth quarter was derived from or hedged into Sing dollar.
Okay. On MPACT unit price. MPACT unit price, especially in the last year, has been disproportionately affected by interest rate hikes and broader market admiration to the [indiscernible] markets. So as a result, our unit price growth at $1.28 as at March '23/'24 and from the leasing unit pace of $0.88 and including total distribution of over [ $11.07 ] to date, the total distribution unitholder is approximately 168%. This slide is on the distribution detail. Please [indiscernible] May and payout is on 6th June.
Bfore I hand over to Leong, I would like to emphasize our continued focus on delivering long-term sustainable returns to our holders, but we expect ongoing headwinds in the broader market, especially in the new era of higher interest rates. Our strategic objective is to position impact effectively for future opportunities. And to navigate this landscape, we have set 3 strategic priorities.
So first, is to strengthen our capital structure and redefine our portfolio mix. We are actively pursuing opportunities to recaliberize our capital structure and this involves an agile portfolio management strategy that responds to current market conditions. We will also undertake initiatives with [ Luca enhance ] unitholder value.
Second, continued proactive asset management efforts. For operational backbone remained resilient, our China asset market has unperformed than last year, but they are either at par or better than market. So we remain focused on maintaining healthy occupancy and ensuring the rental income. So by adaptively we aim to stay ahead of the mortgage interest, ensuring that our assets drive even through volatile conditions.
And third, our Singapore portfolio. Singapore is at the core of our stability, accounts for about 55% of our AUM and 60% of our NPI. So looking ahead, Singapore will continue to be a key component of our portfolio, providing a stable position as we navigate through record. Thank you.
Good morning, everyone. I'll try and bring you through the portfolio performance before I hand over to Mun Leong to cover the performance of our retail assets in Singapore and Hong Kong. So if you look at the -- starting with occupancy. So if you see that on a quarter-to-quarter basis, we have had a very slight dip in occupancy. That's largely due to reductions in occupancy at NBC that we had 1 of 210, we had about 2 or 3 tenants move out over the quarter. Occupancy remains at 96% as we have good measures that in [indiscernible], which will comment over the next 1 to 2 quarters.
You will see that there is a bigness in the China properties. There is improvement over the last one year. One year ago, on 31st March '23, we are at 86.5%, that's improved to 87.5% that is largely due to improvements in our banking property, Gateway Plaza, where the occupancy now stands at just over 90%. It was in the mid-80s one year ago. Shanghai too remains a challenging market, both because of the economic headwinds as well as the amount of supply, which is coming on stream even within the same market where Gateway Plaza remains -- so [indiscernible] plaza is seasoning at about low 80s in terms of occupancies. And there is very -- and it doesn't seem that we will be able to increase occupancy for the next few months.
Okay. Japan is now running at about 108% occupancy. However, we do have a master need that is expiring on 31st of March. With that expiry, the commit occupancy will drop to 93.8%.
Korea remains a strong market for us. CPG has been dented at 99.1%. Look at [indiscernible] rental reversions are positive for the Singapore properties, NBC end other Singapore assets all recorded positive enteric version. You see that UCP rental reversion is 14%, which is improvement over the last few years for sure. Festival in China remains challenging for us. Festival dealing with some leases, which performed a pre-disturbance period, and those have buttered downwards in the current period. China is a strange set of numbers and Gateway Plaza actually has a slightly more negative rental reversion. And that's actually driven by more new tenders at the building where you generally have given a slightly lower rental as they generally have to incur CapEx and improvements costs.
Santa Plaza, this semi-plastic [indiscernible] reversion, which is only very slightly negative is largely due to renewal tenants that have actually been very few new tenants at the building over the last 1 year, okay.
Japan is very slightly negative, and Korea continues to show very positive numbers. The client profile remains fairly stable at about 2.4 years for the portfolio, 2.1% for retail. And 2.7 for business [indiscernible] I'll try to give it a little bit more color on the performance of the office MPP assets across all different markets. So for Singapore, occupancies continue to remain strong. However, the reality is that there are very few large space takers. We've gone other days that we could expect 80,000, 100,000, 200,000 square foot tenant. The vast majority of our leasing deals are actually under 10,000 square feet.
We do have a small number of 20,000 square foot tenant, which have came through at which have came through at NBC. And that's the one of 2 tenants that I mentioned with resets will be starting in the next quarter or so. Tender retention remains strong, largely due to the fact that the tenants are reluctant to spend CapEx. Hence, there are a lot easier to retain tenants than finding tenants. Rent reversions lineation remain strong across the board.
China, looking at the performance of our assets against your peers in the market, especially for Gateway, Gateway has done well against the market where occupancy os crossing 90%, which is better than most of the other properties within the submarket as well as throughout the rating area. [ Sandi ] Plaza is running at low 80% occupancy, and that's part of cost for nearly all of the assets in the [indiscernible]. Then the [indiscernible] retention remains fairly good, but bear in mind that most of this is actually driven by Center Plaza [indiscernible] reticent to minus 2.7%. So Japan is a mixed market for us. Half of our assets are doing reasonably well, retaining fairly high occupancies. The 3 [ China ] assets, like I mentioned earlier, we have an expiry of the master lease at MBP and that is expected to have a forward reduction of the commit occupancy to 94%.
So well, Korea one of our smaller assets remains -- continues to perform well as the market dynamics in the [indiscernible] area fairly positive for all these salons. I think let me hand over to Mun Leong, who will run through the detailed assets.
Thanks, Wee Leong. Good morning, everybody. Yes. This is Mun Leong. So I move on Slide 20. I think this is the step shot of the performance of our retail assets in APAC, diversity and test. I think I got to actually share that actually both assets are going in the very local market conditions, right? So far, if you look at diversity and [indiscernible], they have committed higher occupancy. And close to 5% in [indiscernible] 99.7%, right? Tenant retention rates are still pretty high in at 22.2%, a festival is at 63.2%, right? But I think as we have also shared previously, I think this, we can exclude the short-term retention. If we include the short-term retention, short-term leases, the retention rate would be 84.4% in factor.
And then [indiscernible] as UP, it is actually achieving very strong rental reversion 14%. Whereas over in fact, we see a narrowing negative gap, right? If you recall in the last few years was minus 20, then was minus 12, this year, we see minus 8.5%. And as what had alluded earlier, huge power is minus 8.7% due to pre-COVID leases that we need -- and to date, right, there's still about 6% to 8% of the leases that too in pre-COVID leases. And we will continue to see some of these negative rental reversion mix that we are renewing, right?
So moving on to Slide 29. It's a detailed chart of 0. Again, I think we are pleased to announce that actually [indiscernible] has again achieved a record year in terms of tenant sales of almost 1.1 billion, right? This is the second consecutive year for the CP to achieve above 1 billion tenants sales right?, which represent 2.6% year-on-year, right? And if you look at the quarter [indiscernible] sales actually came in very strongly at a 6.5% growth year-on-year. And on the other hand, shopper traffic has still been increasing tremendously well at 10% year-on-year. So for this [indiscernible] of resources, if you compare to other Singapore listed assets, right? And so compared to Singapore retail market as a whole, we can see actually we will actually outperform all these other benchmark, right? So I think we have actually done very well for the full year '23/'24.
Moving on to Slide 30, I think as this is coming to the full year, you just summarize some of the AEs that we've done over the year, right? So on the left, I think the team -- the analysts probably are very familiar. These are 2 years we have actually successfully executed in the last year, right? First is what we call the -- [indiscernible] AI what we did was we actually took back some of the space from the hands and actually, we created a new cluster with the cosmetics and F&B, this will actually generated more than 20% ROI for us, right?
On the right side, we have this what we call internally the [indiscernible] because previously there was a few tenants, which is the [indiscernible] right? So these are huge large spaces for SMB. What we did was actually look at the space and we suboptimize entail space into like 3 to 4 SMB. So we also -- by doing that, we also improved the SMB offerings in VivoCity, which we think is a very important component for our shoppers, right?
So today, this AI has been successful suite as well. And then it is now a very vibrant color of the VivoCity, right? It has delivered more than 20% for us. Okay. I think just to keep good trading beside some of the new tenants that has been -- that we introduced to us the in last quarter, that's extent there's a cost and also at I think most recently, which is to [indiscernible], which is actually attracting a lot of attention from the media, right? So it's a stick out for King in Japan. As we say open in it has been attracting a lot of media attention, being the first store in Singapore right.
And I think just could reover the next 2 slides. I think it's a large [indiscernible] that VivoCity has been as these are our unique fashion like the Chinese New Year. And I think recently, we also have discoloration with the Cooper -- and we actually decision over diversity, very [indiscernible] moments for our shoppers.
Moving on to festival [indiscernible]. I think the environment in Hong Kong is slightly more challenging. I think we'll probably read a lot of news about Hong Kong is moving to intent shop, right? And then this boat hover the last quarter, right, where there was the Easter Friday [indiscernible] we can, a lot of people actually move to travel up north to -- for shopping, right? So -- but I must say that despite that, I think the mall has done pretty well. They have actually created a very unique [indiscernible], to actually retain some cost, right? So I think there are some shoppers to be lower amount, but there are still people coming to sort of this unique [indiscernible] what has been organizing, so on the fact that before looking on the tenant sales, I think despite a very challenging operating in Bradley, in Hong Kong, I think we are glad to say that actually Fest block has like [indiscernible] stabilized sales contact to year-on-year, right.
If you look at the chart on the right, you can see that it's quite apparent in the fourth quarter, there is a minus 10% drop for the fourth quarter year-on-year when this we also want this spot long [indiscernible] there is a lot of this type in moving to sensor, right? And then in shopper traffic, again, I think, against a very challenging environment. I think the traffic has [indiscernible] like stabilized at 6% year-on-year. And again, if we bring your attention to the last quarter, there's indeed some drop compared to the last year from 8.4% related to sales, which is minus 14%, right? So we are continuously monitoring.
I think recommendation on monitoring to see whether the long distance we get is a one-off incident. And I think on the team, we are continuously to come up with very creative and unique [indiscernible] to attract shoppers.
So moving on to the next few slides, I think these are some of the [indiscernible] that achievement plan, including our flagship, our Chinese area event. And then we also, like I mentioned, we actually organized this [indiscernible], which I had is a very famous any series, right? And then this first product store in Hong kong and was even managed to attract a lot of a big cost despite some of them moving to sensors for long superlong shopping still coming to that's why I can so from the forth? right?
Then moving on, I think the other, I think what we believe is really we need to create all these experiences for the shoppers. So this platform invest will be one of them, right?
Moving on to the mix slide, I think [indiscernible] tenant. I think you should fetuses. We will have MVPDs, -- so maybe our update on this, as you look long, I think beyond the lease, I think case expiry is July 24, we are in negotiation. I that's based on the final documentation, then moving to SICO. As you know, the master lease is going to end in June 2024. To date, about 25% of paying as activity marketing the rest of the building. HP is in 2030. So it's not a lease right now. Marilex is not an entity. I think [indiscernible] mentioned earlier, right, the NTT master lessee is living in expired in March '24, to give a bit of color, right? NPP today actually occupies roughly about 50% of the building NPP,?So about 1/4 of the lease has decided to release as the remaining 3 quarters has decided to stay, right? So I think we also mentioned earlier that the occupancy of Japan will move to -- from 97% to 93% following the NTT UD expiry.
And raw have also renewed we have of previous year, we have actually released at 2030. So yes, a Yes.
Thank you, Janica, Wee Leong and Mun Leong. We are now ready for your questions. We could request that all analysts clearly state the name and our phone before asking the questions. And for our online participants, we will submit your questions through the text base platform. So first, Mr. Karen from JPMorgan.
Could I ask on this revised strategy, given that you're looking at the revised strategy, how does it affect your asset recycling plan, or how committed are you [indiscernible] like your own divestment -- that's question.
Okay. I Thanks, Karen for your question. [indiscernible] part and parcel of our phones when we look at how we manage our assets. Number one is definitely looking at operational. Again, when you look at capital management, or constitution of portfolio that has to be reviewed every year and a very serious review every 5 years, okay? In terms of recycling, as I previously mentioned, anything that is not core, which is VivoCity and NBC. If it makes sense for our unitholders, I think we will definitely consider whether in relation to book, in relation to the impact on the balance sheet, in relation to the impact on the DPU, whatever, we are very -- we will be open.
I think we will take a very disciplined approach. If the market is right, open is right, and it's not the 2 core assets, we are definitely -- will definitely consider. The other issue that we are very mindful of is Singapore. Singapore will continue to be core, okay? -- it will unlikely come to a point where we're going to swing our asset contribution where Singapore will only be a very, very small amount, okay? So Singapore will still be core. We will not touch MPC and diversity, reason being they have, in our view, very long-term longevity in terms of sustainable numbers and we see the assets able to sell through good long period, okay? So I think we are committed. If it's right, we will do it. And when the -- we are as and when the deal is done or whatever, relevant announcement will be done.
And Sharon, just to tack on. This line that we have taken out this quarter is not new. Nothing is new -- we are just emphasizing that we are focusing on this now, and this is our party.
Yes. So I think that a lot of people -- we have got a bit of feedback saying that our balance sheet, our gear really is high. I think we have always said that we are not that concerned with our gearing at 40-point something, okay? Number one, liquidity of refinancing is there. Second, valuation is not stretched a point where it will break and not being able to withstand any major shape. So if you knock at diversity in terms of its growth over a period of time and how the valuation has grown over the period of time. You know that we have not -- the values are not stretched diversity valuation.
A release of a couple of millions to bring down during, I think that is [indiscernible]? considering is at this level, we are comfortable. But I hear people saying that any I prefer you to show what we handle as opposed to a 4 handle. We take notice of that. And we will -- we'll maybe do something about it.
And first of you did mention first of all, so I wanted to ask the valuation for Festival Walk? I see that actually it remains actually very, very resilient, but on the back of this negative reversions. Is there that valuations could dip further. And could you share a little bit more on the -- like how the extent of negative reversions this year and the lease renewal for a supermarket. Are they giving up space and to what extent of [indiscernible] inversion should we expect from that.
Okay. Okay. Valuation for festival loan been pretty much stable. I think the effect is majority FX issue translation. The other thing is other revenue has gone up quite significantly. The valuers do the typical things, which is taking all the committed and adopting [indiscernible]. -- okay? So those are difficult whatever that we signed and values they get in other revenues, they see growth, they put it in, okay? So I think there's nothing surprising about how the valuation has come about, but the cap rate has remained the same, okay. So I think if you're alluding to what [indiscernible] has not changed, I think across Hong Kong, the [indiscernible] has not changed.
The valuation of our assets are very similar to ones that is of similar class, so the next thing is you're asking about case taste, supermarket is key to us. The basement. We are more than happy if we can realign them to reject the space a bit. But definitely, we are very comfortable in the sizing okay? There is some space constraint at basement, okay, in a way where if you say you want to make them 2x, no, we are not a hypermarket. Just remember that [indiscernible] positioning is slightly one not higher than VivoCity. The difference is 600,000 mall versus a 1 million square feet net lettable area. So the relevance of a supermarket a year over 1,000 versus the requirement for a higher one and the hypermarket is different because of the size and because of our positioning. So -- what we have in Festival Walk is definitely very relevant, no need to downsize them. You downsize them, it will not be effective as a supermarket. What I meant was maybe just lay out the position of where they are in the basement a little bit better, that could be considered over the next renewal.
And these short-term leases, should we be concerned on the short-term reserve and on reversion, how should we look at reversion for Festival wall this year.
Reversions itself, I think you see narrowing from 30 to 30 to minus 10%, now it at minus single digit. And I think we are endearing to close the gap as much as possible. Even all these indicators that when you see that negative -- if you look at the NPI, you look at NPI quarter-to-quarter, the reversion is not all the year. That's one. the NPI is it a combination of other things. And if you seriously look at MDI, yes, it has not decelerated as bad as what people are envisaged to be. Okay. There is a lot of noise around Hong Kong is going away to [indiscernible] then a lot of noise about whether that will be the end of Hong Kong retail.
I think we remain a little bit more optimistic than that. I think our mall is actually in a way servicing the local. The other thing is it could be a potential of a novelty effect and also a foreign effect. If there is no parity that we use travel has to buy something, we do travel spend unlikely, okay? So back to this year. [indiscernible] of all, reversion for over the years, minus 30%, minus 20%, minus 10%, now single digit, we are hoping to close the gap. If you take a good state at NPI over the period, it is not the same magnitude because other revenues have ramped up. Yes.
Thank you, Karen. Next we have Rachel from DBS.
Congratulations that you have kept the asset value is very stable and giving I didn't do it.
I didn't do it at all. The value -- any articulate the evaluate the numbers.
Maybe for question from me. I think -- would you able to give us an update on your elite and Google [indiscernible]? And what the reversion that you're expecting is the tax? And is BNP taking up the unit or a Google space?
So Rachel, of course, Unilever is currently about about 40-ish to close to 50% up. We are in negotiations with a few other guys who most should be able to start it in the next half year. So the comparison again over these reversions are actually quite okay because it delivers -- these were the expired rentals are actually sub-6. So there's one reversion for any tender that comes into the spaces there. Those things is currently goes to market in the space. Like I mentioned earlier, there is actually a lack of a large space taking on large spaces.
So we are still working on 1 or 1 or 2 prospects, but I think it is still some time away before we came in to our commitments. The Google lease was at market. So an please that we signed on that side, we'll already see the flat rental reval. Okay?
The next question is on [indiscernible]. I think some NPI has been very stable, but common sales in fourth quarter seems the trend down a little bit. I'm just wondering, is it one-off quarter? Or do you expect this kind of tenant sales level moving forward?
No, no, no. I think I hope to believe that it's a one-off quarter. As you can see from quarter 1, quarter 2, quarter 3, it's actually very positive. It's -- what is a little bit of putting us off track was 4Q total sales number. I think that is a general number that is also reflection of other malls in Hong Kong. So -- the 4Q was a little bit unexpected, okay? But in terms of Q1, Q2, Q3, I think they started the year well, then you do the right at the end of the quarter.
So I think this Central Hong Kong phenomenon, I think it's time to see how it settles, okay? It's a trend that we have to do it, but whether the magnitude of the impact of it having on Hong Kong retail sales today, is a long stage and at the same impact or could be later. I'd like to believe that there's a little bit of novelty. There's also a little bit of ForEx. Let the ForEx play a very big role in this trend.
We do give us the [indiscernible] GTO percentage for festival wall?
GTO rent, you mean?
Yes, rent, right.
You just give me a second and I'll come back to Correct.
Yes. And then also adding on to -- adding on to the earlier question on rate fourth quarter was a one-off I think if you also look at the shopper traffic, I think in the fourth quarter, there was -- normally, there was a big drop I think the team we've also been monitoring these shopper traffic beat on a weekly basis. So I think so far, it seems to be okay, right? So it's something that I can share with you to be a good comfort right?
So I think on the GTO rental, right, should be.
GTO is about -- for the -- for this current financial, it's about 2% of festival yes. And if you translate that into MPACT core portfolio, including BOC is less than 2%.
Okay. So your question is about 2% of festivals revenue. Yes. So all our leases are predominantly with fixed and variable rent. The variable rent is actually not a very huge component, but it's always an indication of the sales system as the shop so that we have a better than of the journey and individual shop. But in terms of the percentage here has never been big.
I think even for Vivo, it's always been the single digit, maybe about 3%, 4% for the longest time yes.
Just 1 last question on interest rates, what you expected for FY 2024. And in terms of with the delay in interest rate cuts, right, are you seeing buying interest buying assets in the link or you are still able to find values of that.
Okay. I think we have to segregate in terms of countries, right? Does that make interest level, foreign insurance level or any interest level in China is a little bit new today. I think I've been saying it for maybe a quarter 2. In terms of -- in terms of the fare markets we're in, I think if you talk about Hong Kong and our Hong Kong asset is because it's one big ticket item. The item is relevant heavy as a single asset. So the investor interest, I think they will be a little bit more limited, okay?
Now let's look at the more positive months. Korea, parts of Japan and that in Singapore. So like I said that the -- the interest level remains elevated, definitely, there will be a total return concern of potential buyers. But if the investors are looking at the combination of reversion potential, even look at the currency, that's how they typically make sense in terms of whether they buy an asset in a certain country, okay? So yes, whether we have a more negative impact, yes. But I don't think that certain of our office in Singapore is definitely still will be still people looking at.
Okay. And so if you're asking for guidance for the interest rate for this FY resorted, the rigs have been very, very volatile, but may be based on a rate in maybe another [indiscernible] we see now? Because he still legacy interest rate swap and unfortunately, as Japanese interest rate is going up, and we do have 100 of for refinancing this year?
I don't think any of the REITs have gotten out the right of the elevated interest it will be maybe potion for at least a 2 before we -- if there is a reprieve at the end of the year, then you will see bit by bit the interest rate line improving over time.
Right now, I think we have good hedges. We also in between the interest rate hike also added into so-called [indiscernible] better rate today, but we will still have product sales, although that is dropping off, okay? So I think we remain optimistic that today's interest rate environment is already at a very elevated level, okay? We are not saying that it will go back to the good old times, but I think there should be some decrease other to the end of the year, as what most of the contents are taking.
Thank you, Rachel. Next, we have Brandon Lee from Citi.
You hear me?
Yes, loud and clear.
Okay. Great. I just want to have a question on your China cap rates. I noticed that you changed roster. So can you give us a year-on-year change on a net basis.
So Ben, that's not really an easy number to talk about, simply because of the change value was last year to this year. So I think the message we want to bring across is that the communicated values on their cap rate trends. The understanding is that they, over the years, they haven't moved the cap rates.
Okay. Okay. But just on a forward basis, based on what you're seeing on the ground, do you think that this 1% to 3% decline for FY '24 is sufficient.
So this decline has already taken in the operational performance of the assets. through any reductions in rentals as well as a slightly elevator of different elevated vacancy number. I think the key things driving the the valuation for the China assets actually is the stability at gateway plaza. Bear in mind, gateway plaza is 2/3 of our -- slightly more than 2/3 of our China portfolio, and half of that is really entered by the end on a very long lease at very reasonable rents. So that helps to provide ability to -- that helps to provide stability to the operating numbers as well as valuation.
Got it. Got it. Okay. Just going back to Korea, right? Given that your sponsor owns 50% of the asset, do you need the approval to divest now?
Noi, no, no. I think the issue that we move, the asset is not like to [indiscernible]. So if any buyers were to come, when would they want to buy 50%? I think we are aligned in terms of our investment growth and also investment time horizon. And for us to answer a question straight is no, we don't need the approval, but reality is we ever go out a market for 50% of assets at 1 million -- $200 million on one share. And it's not logical for any buyers to look at 50%. Yes.
Okay. Okay. Just 1 last question, right. I know you're giving is still 40.5%, but what was the optimal. What's the optimal level now? And would you be open to just sort of just do a bit of share buyback to show the market how undervalued our shares are.
Okay. I think 2 things. Let me reiterate again. I don't think there should be any nerves around our gearing. I've always remained comfortable with Gary, it's just that your asking me to saying you are not comfortable. As you, okay? But if you just -- like I mentioned before, just look at evaluation, just take your biggest just take our diversity and you'll see that -- how much is it per square foot and running -- is there any more room for valuation increases, I will tell you competitively Erica, okay? But I mean, I'm asking the values, if you look at this and this and this, it doesn't make sense, okay? But anyway, for us, we are not a company that we look at stretching the valuations and a pure NAV team.
I think we're more focused on the DPU. So that 1 aside. Share buyback. Share is not a strategy. I mean we have a lot -- if we have the capacity and the cash, why not buy my 1 sale in the short term. okay? But it's not a long-term strategy, okay? It is always just -- to me, long term is always looking at real estate, building the bottom line fundamental real estate as opposed to marking around your own stock, okay? I think that is the message. But are we willing to do it? I would say that was the capacity why not? on a short-term aspect is never a long term or would I even call it a strategy.
Okay. So is it -- maybe is it correct to say that you may included as part of your resolution for the upcoming AGM?
Yes. I think it's just -- yes, why not? Why not? It's good to have there, no issue.
Thank you, Brandon. Xuan Tan from Goldman.
My first question is on going into FY '25, looking at the lease expiry, can you give some sense on portfolio reversion and also strong occupancy?
Sorry, if I mean repeat your question. You're asking about looking forward to the upcoming FY, how are we thinking about the occupancy and reversion levels, right?
Yes. Yes.
Okay. Maybe I'll give you a very, very broad stroke, okay? Occupancy in different markets is absolutely key by China. So our internal aim is at least to be occupancy in our comparable properties. We have done so today, although the number is -- although occupancy is at one s 90, one is 80 plus, it is still a very respectable number when compared to neighboring properties of similar quality, okay? So for that market, it's very clear. maintain our occupancy. You lose one tenant, your downtime to replace will cost you more as opposed to having hanging on to your tenants, okay?
Then let's go to the next one, Singapore. Singapore, I think, is whether it's a retail -- I think retail, we are still driving it again. Year-on-year sales is good. There's still a few, we are pushing the boundaries in terms of doing more asset enhancement that may not show any reversion that will show up at the ROI, okay? So what you see, we move Citi plus 14. It is -- this is just renewal. Over on top of that, we also have done as an enhancer. We do not mix the tool and not count, so that is why diversity has actually more an additional prong, which is more the asset enhancement over the year that we have done conversion to improve pass rent to the retirement incremental revenues, okay?
Then it comes to what is our focus. The entire market is not the best-looking market, okay? But I would say that our assets have been relatively stable, okay, for the whole entire year. When we look seriously into our Singapore, yet done better. It more than offset the utility. Utilities at $10 million, okay? but even though that the $10 million got either weighed by utility the loan, the asset was able to cover. All things being equal, the higher revenue of Singapore has more than offset the down whether you hear in China or the little bit that you'll hear in [indiscernible] first of all, it's pretty much flattish for the year. Okay.
So in terms of NPL, I think we're relatively stable. So we are a little worse will take a bit of time. So forecast has always been on occupancy, and I think the team has done tremendously well in comparison to the market, especially with the renewal of BMW, I think BMW is very, very key, and BMW lease has derisked the asset by a tremendous like I could say 80%.
So occupancy for travel markets push all the way for rental up and all for the rest of the revenue market.
Got it. Can you ask a bit more about festival lock, right? Looking at your FY '24 core version, what's the split between pre protest leases in cost for test lease that will be new in terms of reversion?
Yes. So if we actually -- I think what we probably can share is that if we execute the pre-code, right? The remaining reversion is actually a positive point, right? It's about a single-digit positive intervention. And then I think, of course, we see a varying range of reversion some of the SMB, we see a bit of a double-digit reversion and then of the rest, we see a bit smaller, right? So -- but to remind you again that the envision is winning for the lease expiring for the year. But so it's not for the entire mall. So probably I hope that is some kind of inside. So if you exclude the [indiscernible], remaining rental reversion is a positive single-digit number.
Got it. And do you expect no reversion on positive mix financing?
So I mentioned, there are still about 6% to 8% of the leases that's preCOVIDright? So they were happening in -- we'll be starting in the next year. So we have to [indiscernible]. Definitely, the gap will narrow. We also hope that should be positive, but we will be able to wait and see, yes. Because it's now actually the -- it's only the beginning of the year. So a lot of the leases are there are still a ingestion. So it's far because for us not to comment.
Question from Joy.
I just have one question. Just in terms of retail sales in Singapore, we've had quite a bit of incoming visitors sort of in first quarter. Do you see your sort of tourism sales trending up? And can we get something.
Actually, we are very surpass COVID year-on-year, quarter-on-quarter, I do not pay attention that much anymore.
Year-on-year quarter-on-quarter is duly. In terms of for real, anything that has got tourism element -- if you say that any positive from tourism VivoCity tend to a little bit enjoy it. but virtual is being RWS and those are using it, yes. There is -- I can't -- I won't be able to prove to you the amount, but it's -- when we look at our sales trending is quite typical for over the last few years, it's been tracking the inbound trending of the tourists.
Yes, maybe, Joe, also give another perspective is if you look at the fourth quarter, right, some of the key contributors to the sales rate, actually largely contributed from the SMB, right? And then this is a completion of same-store increase and some new tenants increase. If you recall, right, I think we have a lot of new FMB in the so-called [indiscernible] cluster. And then we also have more SMB at these using cluster. So all this new F&B customer has actually proven that this delivered strategy, right, of improving the FNB has been a good position, right?
So on a same-store basis, we're also seeing existing SMB recording very high increases as well. So I think in short, I think SMB is one of the key competitors in the fourth quarter sales increase. And then, of course, if you -- I hope that will give you some insight.
I think back to your question on whether we are linked to tourism definitely a little bit, but the majority is still local. Differently trending in terms of sales to inbound tourism.
Right. And just on tourism, do you notice any change in shopping patterns meaning more SMB entertainment focus rather than sort of just purchase of.
I think we noticed is there's a little lot more interest in the Chinese players trying to come into Singapore market. But you talk about taste-wise. If you look at all our F&B, I think now we have even a deeper mix of variety of these, the Japanese or the Chinese okay? So over time, I think Singapore loves Japanese food, okay? Now it's a little bit cut. It's the rest expanding towards Chinese foods. Okay. You are talking about the [indiscernible] you're talking about the campus and whatever you're doing it, okay, is in the bit expanding towards the direction. And on the leasing front, definitely, there's more interest from Chinese players trying to come in more into the single market.
Do they pay a higher rate?
Do they high pay rent, so but anyway, they are not coming in for -- they know Singapore is definitely not a cheap market. They know what -- what are typical market brands. A lot of more FMBs are trying to come into Singapore. And further faster line, not the high end, we're talking about the median passion lines are also trying to come in then. So FMB is a little bit more than what we have experienced a couple -- let's say, about 2 years or 3 years ago, definitely more.
Yes. Maybe adding on to that, right? You look at some of the most recent addition, right, like team Holters and I just want to make sure how you right -- this foreign FMB right chose people as our first talk in Singapore, right? So you also how they view the city and as you probably can guess that what kind of rent that we willing to pay for the first one in Singapore.
So I think people at due over the years, organically, and also on the real estate side, which is the asset enhancement year-on-year. We will continue to do something. Planning further. And I think by the end of the year, we should start another piece, okay? I think if you noticed, we have touched corner A, corner B, corner C that we are not touched, we will continue to do so, and we will restart the cycle of business ones. So I think that we have been very actively extracting value, but we are not just purely screening talents for the rental, we are actually the adding space subdividing stage 3D configuring the space and not just squeezing tenants rental, we are actually adding more space and rationalizing the base because like we changed some [indiscernible] we got the G&A from the Fiery and stopped to retail GFA.
I think those are the things that we are unlever the year. So if the mass going to stop for Vivo, I doubt it. Okay. I think horizon for the next well, next 3 to 5 years, actually, we have planned already for 5 years. ones, there will be asset enhancement or okay? There will not be one day of reading of stopping on their assets. We find that we have to continuously build the gap and to widen the gap to competition. okay? So then we were, so we'll continue to do what we have done.
Thank you, Joy. We then have a few rigs and the next one on the list is Derek from DBS?
Sorry, just 2 questions. I just wanted to just go back to a festival work, right? I mean now the operating environment has changed not only for Hong Kong, but also there's also competition, right? So just wondering whether should we think about a bigger kind of remix, tenant mix or is there in the plant or what you talk to?
Okay. The current competition is something that we can compete with. We may you went down to -- I think even though what I see in [indiscernible], I think it's something that we can take on. The positioning of the nearly small -- the new model is more to urban, definitely a very different from, okay? That, I think we are confident to be able to take on.
Now we need to reposition. Retail is actually every 2, 3 years, you switch to this year, you switch it there. It's never constantly at [indiscernible]. Remember how we first dealt with fashion than in at leisure, then came a little bit more entertainment and came big on FMB and if I take you 20 years ago, it will be big on department store for stability and big chunks of spaces and stable rent all has changed. So I'm saying that we cannot stay put for retail on have to change. Specific to, first of all, was very clear. They are very similar profiling in terms of [indiscernible] half not higher in terms of the brand positioning.
They have [indiscernible] B, we don't have okay? Just give you an example later, we don't have, okay? So what I'm trying the is they are saying there, but different, they have to one not higher in terms of positioning. Now over the last few years, what has been being that we -- any more will have to deal with, number one, fast-moving question, was not yet at the deal with\. Fast-moving fashion was definitely taken away by a lot more of the online loan brands by intro-type of goods as well not to be better, but I mean not luxury, okay?
Second, came at leisure, which was a very, very good trend that everybody will be -- we bought on it about maybe 4 to 5 years ago, we started going big on it because people were exercise where the home, casual and sometimes half of their office update is actually exercise work. Sneaker, you never knew that sneaker was allowed in the office. -- you take just 10 years ago, were you able to wear speakers at all to the office. I think we'll also kick you out the room -- but right now, seems to be quite an okay thing, yes.
So what I'm trying to say is it's not just factory everybody got a gem. -- [indiscernible] cost the for the type of food, the quantum of health consciousness, what goes in, how much input is provided to the consumer is also changing, okay? So I think it's not just a festival issue -- it's a typical business of running and retail. You just have to change every time. You don't change the whole mall. I think more is relevant. I'm talking about pocket, share pockets there that you improve over time as a force to changing big chunks -- maybe the big change that you have to think about is always the anchor spaces, whether the hypermarket makes sense, okay, whether Big Cinema makes sense today. okay?
Those are -- this will be more significant. And whether a department store makes it. So I think we have gone through a department store space in the DTC, okay? -- where department stores as far as still now -- for it to be sense to take expected real estate at GPS and consignment out, okay? So that trend, I think the landlords have handled it well. You can see that department stores are taking big status in the mall to rather direct to the tenant and the tenant had our own shop and opt in the mall as oppose to in a long rental, big space with a landlord and with the department store and the depots or sublet, okay? So back to your question, [indiscernible] what I like is I think F&B seems for the last few years, what people go to a more is a little bit more in great. They like to be entertained, they eat and by the way they shop. okay?
So I think the placement of the motivation of going to the mall has shifted over the last 30 years, last time we have a expo shopping. There's no such thing as a go shopping or letras a new or let's meet up something then by the way, it must be conducive enough for you to be able to extract money on the world, okay? So 4 months, we draw a couple of their key actors must be a draw and entertainment or entertainment-related experiential definitely will be a drop, okay? Quite clearly, you see like our stream. [indiscernible] from day 1 as it's actually Hong Kong really sustainable. Is it justifying is the space as a weaker unit on a prospect basis on land use.
We thought, we calculated every calculator and corporate, said yes.. It's a repeat visit people like the experience is the differentiator -- so our this 1 of the, I think, top 2 top to a lot opposed to they can hold competitions and all -- so part is you need a combination of people, process and motivation to draw family set over and along game, okay?
And it changes over and it means that our business is not easy to run. Like I said, my life is very difficult. My team that is not easy running the ball -- every year, they have to compound and thing or something. But this year, you just look at the round of Marcom event and the part of Mason event that festival work has those out. This year, versus the last 10 years -- it's a world of difference, okay?
It may be muted by the general market metal sentiment, but the effort and the focus and the the thinking behind the way the mall is marketed and the activities that they bring in the intensity is at least 5x okay. We were very clear that the market is rough. There's only 2 things they can do, okay, bringing the people in. So that's where the [indiscernible] in terms of bringing up the assets.
Okay. Got it. So just a quick follow-up, right? So I am just curious about in Singapore, right? I mean, Vivo is doing so well. How about center have you started any I don't know your [indiscernible] -- can we respond.
Okay. I think we -- it remains a possibility, but it doesn't mean that we haven't had serious conversation. I think there is still some time away. We see the very terminal there, right? You see the building still there, right? I don't think anybody wants to listen to me right now. Okay. Okay.
Next, Yew Kiang from CLSA..
I just want to follow up on 2 questions, I think which has been asked by just some more details. For our core asset, when I look at square foot versus some of your peers assets, it seems much lower. So if I think your peer -- on a per square or basis is lower. So if there are market transactions at much higher than your would incentivize you to focus on divestment in this market, right, in Korea for your core exposure. Is that a fair statement?
Our is about 38,000 million [indiscernible] salesman so many currency. Okay. I think we -- if you say are we undervalued? are we overvalue I think it's the market, yes. saw storage, which assets you're comparing the asset now is -- do you want to have.
So maybe let me add I think we used to notice that there were a few recent transactions in Ghana, which I see $40 million , right? But those -- if you look at the net, those are actually along the main dynamic street, which are a good frontage, right? So 1 of those 2 things in terms of location, right? They are slightly better than our location, right? So I think our valuation today is a fair dilution. Yes. Okay. Okay. Okay.
And then my second question is on -- first of all, what the 33,000 square feet expiry for 45 bone that the entire amount is the 6% to 8% of leases signed in recoat.Is that fair? So which means after 25, the -- assuming the market stabilizes, you should see positive reversions for best overall Yes. So sorry, I didn't quite get a question, but let me try a if I get a question wrong, so actually, right now, I can rephrase again. 6% to 8% of leases, right, to sign still has the remaining 68% of our leases signed in pre-proven is likely to be flush out entirely in FY '22. So that is going beyond that, right, it should be positive reversions really? Is that a fair statement? Because you've also mentioned that right now, the 8.7% negative reversals for those leases that are signed -- not -- excluding the prerelease, you are still doing single digit, right?
I think anything beyond the year because of some lenders in terms of we see the 4Q in Hong Kong, I think we will be less possible to make a statement because -- when it came 2 years later, the reversion and whether people renew will be very highly dependent on this year's sales.
Okay. Okay. But you being so much market a little bit.....
Yes, yes, every shop we go. I think we have been there before. We are adding our corner. [indiscernible], we are experiencing not a customer work issue is a Hong Kong issue. I think that's on Hong Kong regulated format retail, yes, I'm not talking about other forms of retail. So why I'm not so committed to talk about in 2 to 3 years' time, if I do tax book, I will tell you, definitely, we'll try to get there, right? But that's the reality is whether -- how would the settlement and the sales can out this year is more important in determining what the rental reversion will like the year after, okay? But if everything continues steady is, it will not be as big, okay? Yes.
Okay. That's it from part the rest yes.
Thank you, Yew Kiang. Jonathan.
Yes, encouraging to see year-on-year increase in DPU. 2 short questions. Just on -- firstly, on Korea. Retention is low at 17%, but you have very strong rental reversion at agree that it's a strong market. Could you give us some color on why this unique mix of number?
And then secondly, on the leverage of 40%, you're comfortable with that. Would you consider scrip dividend to gradually lower the leverage? And how do you see the -- am I right? You have not used scrip dividend before open. Yes. Okay. So do you find -- how are you open to using scrip dividend? Or is there some disadvantage that you are stopping from doing that?
I think if you look at how much is our DI per quarter and all. I mean if you can gradually like I think fundamentally, we're not uncomfortable where gearing the second part is they have too much an impact right? Then if you look at how much is our total debt versus how much is our quarterly distribution is a bit slower -- it's a bit of.
I would say we do not go out, but we do not have the intention to enrollment yes.
Okay. So a bit cautious about the dilution.
No, I think that if you want to -- it's not a matter of cautious or dilution, how much is your distribution for the quarter okay? Versus our debt, how many percentage points can you move? 0 points, I don't know I think it's nominal.
We own about 50-odd percent of us. It really depends on the takeup Yes. No, the cost is a fixed cost, but the take-up rate is uncertain. Yes, yes.
Then the dividend -- if you are talking about ERP, I think long ago, MPACT, we already sold the CRP for the reasons. When we look at recovery, okay, when we look at the cost of doing so easier that I go through a banker and say, hey, basis for me cheaper, I remember doing the analysis myself. -- called antifa did money, $50 million is for me. It will be cheaper than me doing the DRV.
Understand, understand. Okay.
So on the question on the TPG right? So I think this retention rate, right, if you look at it together with occupancy -- so what happened last year was there was 2 tenants we left us for various reasons. I think one particular tenant, directed the space because of a specific project, which the project has ended, so they no longer need the space, and that's why they moved up. The other tenant move forward because the rental was simply too high for that. As you know that the reverse -- because of acknowledge we are facing in Ghana, right, is a serious shortage of space and then a strong demand, right? So another tenant because they kind of for the high-end -- so -- but if you look at it together with our comment occupancy, right, today, TPG is at 99.1%, which is pretty high, right?
So I think we should look at both numbers together, but so the details on why we have a little tension 1 because the project has ended. The other was because they can afford the to move up.
The rental reversion is 39% looks extremely high?
Like I said, is no metric in a way it's calculated. There's a lack of supply, great interest, but I think we are coming to the top-ish part of it already.
Thank you, Jonathan. Just to round out the final question from Gary. Gary are from [indiscernible], please. Before we proceed on to the last question that has been raised by the online participants, Gary?
All right. Perfect. I just keep my questions brief. First question is on the divestment strategy. Sharon, you mentioned it's hard for Hong Kong and China, but what about Japan where CRE transaction volumes have been a record high and is still pretty robust. So we see, I guess, the first divestment coming from Japan? And could it happen sometime this year?
Japan is 10% of our portfolio, yes. So it's literally all or nothing. Even if that tick 1 or 2, it's not going to achieve anything. So I think what we intend to do is Japan, the issue more is to do with our Makuhari asset, okay? But just to sell one or 2 also doesn't change the needle. Absolutely, in asset tax 1% because there's no impact on whatever that we do.
So if you ask me, Hong Kong, China, I that should be on the top of the list, but that has to wait. I think it will come back. It's just...
I mean, Japan is not a $1 billion as well. So that could move the needle on the portfolio as a whole proactively.
Why do you get made post out of Japan. And I think in Japan long haul, we still want to say.p
Understood.
You know what I am saying. Youre talking about on an deploy everything out of Japan means in mid Japan. I don't think we are comfortable to [indiscernible].
Right. So more diestment.
Sorry, [indiscernible] rotate rigid some of the assets what we can, okay? Japan will long term be a small piece in our entire portfolio in whichever form, okay? But it will not be a very big portion of our portfolio. So if you ask me because of the -- some of the project minuses that we are dealing in Japan for this specific cluster of assets that we have, it will be an all-make issue. But long term, I still want to be in Japan for a small caution, so it will be a stake.
Understood. And just my last question is on occupancy. -- at Festival Walk and Vivo. Could you give us some color on that.
Minus of minus 20 years.
Still for minus 20..
One is plus 1 is minus we get restart.
Just quickly moving on to one question that has been raised by [indiscernible] from Randall investments online. David's question is, what is the occupancy cost of [indiscernible], which I believe we have just answered. The next question from Jamie is actually when should we expect the effect of prepandemic leases to ease in the mall, maybe [indiscernible] can just recap generate in cap
Sorry, again, the...
When should we expect the effect of.[indiscernible]
Yes. So as I mentioned earlier, right? So today, we talk about 6% to 8% pre-COVID year. So hopefully, next year where we actually renewed that, I think this minus 8% active avert you see today, right? So hopefully, we'll be narrowly as we move towards the next year.
I think we have approached the end of our full year results. Thank you so much for your questions and active participation today. Again, for further -- if you have further questions, please feel free to reach out with the Investor Relations team here. We always at service. Thank you again for your support and the time today. We wish you a great day ahead. Goodbye. Thank you.