Mapletree Pan Asia Commercial Trust
SGX:N2IU
Earnings Call Analysis
Q2-2024 Analysis
Mapletree Pan Asia Commercial Trust
In the latest quarter, MPACT saw its gross revenue and Net Property Income (NPI) rise by a modest 1.3% and 2.2%, respectively, reaching SGD 240.2 million and SGD 183.2 million. These increments were bolstered by the robust performance of its Singapore assets alongside consistent contributions from its international properties. However, a stronger Singapore dollar has partially dampened these gains due to currency translation effects. The Distribution Per Unit (DPU) grew by 2.8% quarter-on-quarter to SGD 2.24, but faced a year-on-year decline influenced by heightened gross revenue and NPI, higher interest rates, and foreign exchange headwinds.
MPACT maintains a strong committed occupancy rate at 96.3% across its portfolio with a tenant retention rate averaging at 75%. The company prides itself on its ability to retain and attract tenants, evidenced by re-letting approximately 1.3 million square feet of space, achieving rental reversions of 3.2%.
The company's retail malls, particularly VivoCity, are experiencing an impressive recovery in the post-pandemic era. VivoCity especially stands out with a 100% occupancy and strong double-digit rental reversions, sustaining its momentum from previous quarters. Shopper traffic and tenant sales have grown significantly, with the potential for the year's sales to match last year's record performance. MPACT is also committed to sustainability and has boosted its solar capacity to nearly 4 megawatts peak, implementing 1.5 megawatts at MBC and VivoCity, which also helped them achieve a 5-star GRESB rating.
MPACT faces a challenging environment with rising interest rates and foreign exchange volatility. However, they have taken purposeful steps like realigning their debt composition and converting loans from HKD to CNH, yielding a beneficial 2% interest pricing differential. Their proactive financial management strategy has allowed for approximately SGD 401 million in savings. The all-in financing cost guidance for the current financial year indicates stability despite the broader economic pressures.
Occupancy in key properties like the MBC remains robust with a very high occupancy rate in the high-90s, coupled with a positive rental reversion of approximately 7%. The executive team is confident in the quality of their prime Singapore assets such as Mapletree Anson and holds a strong disposition against divesting such assets below book value. However, they remain open to advantageous offers above book value.
Despite the rough market conditions outside, MPACT’s occupancy rates remain stable and resilient, with positive rental reversions across the board, except for Festival Walk which showed a negative trend but was propped up by other income streams. This resilience is a testament to their operational strength and strategic tenant management, minimizing downtime and maximizing tenant retention during tenant turnovers, particularly in challenging market conditions.
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Good evening, esteemed analysts, investors and members of the public. Welcome to Mapletree Pan Asia Commercial Trust or MPACT Analyst Briefing and Live Webcast for the Second Quarter and Financial Period from 1st April to 30th September, 2023. My name is Li Yeng. And as the Director of Investor Relations, I have the distinct pleasure of hosting today's results briefing. Before we dive in, I'd like to extend our apologies for holding this briefing at this hour. We appreciate your time and thank you for accommodating us.Now allow me to introduce our speakers for today's briefing. They are, Ms. Sharon Lim, CEO of MPACT; Ms. Janica Tan, CFO of MPACT; Mr. Chow Mun Leong and Mr. Koh Wee Leong, our Co-Heads of Investment and Asset Management. They will be presenting our financial results, providing key business developments and sharing market insights. Following their presentation, we will open the floor for Q&A. We will invite you to ask questions or seek for the clarification on our results.Without further ado, I will hand the floor over to our CFO, Janice Tan.
Thank you, Li Yeng. A very good evening. Let's start off with the financial results. This quarter, we have continued to provide Q-on-Q result comparison. So comparing to the preceding quarter, gross revenue and NPI for the quarter rose 1.3% and 2.2% to SGD 240.2 million and SGD 183.2 million respectively. This was on the back of better performance by the Singapore assets, while largely stable contributions from the overseas properties were weighed down by the ForEx effect resulting from a stronger SGD against renminbi and Japanese yen.Despite ForEx headwinds and a rising interest rate environment, DPU for second quarter was higher by 2.8% against the preceding quarter to SGD 2.24. On the year-on-year basis, both second quarter and first half recorded growth in gross revenue and NPI. This was driven by stronger performance of Singapore assets and full period contributions from the overseas assets acquired through the merger, which was completed on 21st July, 2022. Higher gross revenue from the Singapore assets more than offset the rise in utility costs, but gains from the overseas assets were diluted by the stronger Singapore dollar against all foreign currencies. The higher interest rates exerted pressure on the DPU, leading to year-on-year decline for the second quarter and first half. NAV per unit stood at SGD 1.75 as at 30 September, 2023. And excluding the impact from ForEx, NAV per unit has been SGD 1.76.Moving on to the key indicators. As at 30th September, the total gross debt was SGD 6.8 billion, leverage ratio 40.7%. At 40.7%, the debt headroom was about SGD 3.1 billion to 50%. And assuming total borrowings remain unchanged, it was SGD 3.1 billion drop in IP, investment property, our gearing to reach 50% and this translates to a cap rate of 94 bps across the entire portfolio. And following the completion of refinancing of all term loans maturing in this current financial year, the average term to maturity was extended to 3 years.All-in cost of debt for first half was 3.34% per annum and the adjusted ICR was approximately 3 months -- 3x on a 12-month trailing basis. Every 50 bps increase in interest rate will reduce the ICR by 0.5x. By the course of the reporting period, MPACT has a financial effect of SGD 1.1 billion in cash and undrawn committed facilities, ensuring sufficient liquidity for working capital and financial application. And we are currently working on the refinancing for the next financial year.The debt maturity profile remained well spread with no more than 21% of debt expiring in any financial year. And to navigate the rising interest rate environment, targeted steps were taken to enhance the balance sheet and debt profile. Over the quarter, the fixed rate debt was raised from 74% ended June '23 to about 80% as of September '23. The swapping of a portion of Hong Kong dollar swapping rate loans to CNH further optimized the debt metrics, reducing the Hong Kong loan component from 30% in the last quarter to 27% now and increasing the renminbi component from 0.3% to 4% of the total debt.So this adjustment better aligns MPACT's debt and AUM composition, yielding risk management and also the interest rate benefit. With close to 80% fixed on the debt, every 50 bps change in benchmark rates is estimated to impact the DPU by SGD 0.013 per annum. And at the close of the quarter, approximately 92% of MPACT's expected distribution based on a rolling 4 quarters was derived or hedged into Singapore dollar. The last slide shows the distribution details. So BCD is on 3rd November and payout day is expected to be on 8th December.I shall now hand over to Wee Leong.
Good evening, everyone. We'll just go through quickly the portfolio highlights before we open the floor for Q&A. So at the end of the quarter, committed occupancy for the portfolio is 96.3%. That's slightly up from where we were at the previous quarter. So far, we have let or re-let close to about 1.3 million square feet of space and rental reversion of 3.2%. We'll talk a little bit about how that split through the various properties and the countries in the later slide. Our tenant retention rate is about 75%. And again, that's dragged down a little bit by performance in Japan and China as well as a little bit for Korea, but that's a slightly different market.So we'll move on to the next slide which shows the occupancies for the various portfolio. Like I mentioned, on a committed basis, on quarter-on-quarter, we are up very slightly from 95.7% to 96.3%. The improvement is largely driven by VivoCity as well as a little bit at Festival Walk. If you see that MBC is still having occupancy improving slightly. We have leased out a little bit more of the space which was vacated by Unilever last year in November. We are progressively working on the rest of the spaces. VivoCity is not at 100% committed occupancy, but 100% committed occupancy with the completion of the AEI as well as some other works that we are doing, which Chow Mun Leong will elaborate a little bit further later.The other SG properties creeped up a little bit to 97.7%. That's largely led by increased occupancy at mTower, Anson and BOAHF are still 100% committed occupancy. So Festival Walk has also improved occupancy to 100%. While the China assets have improved slightly on a quarter-on-quarter basis, we are still seeing a weakness in the market there. And going forward, this number may come down a little bit due to non-renewals over the next two quarters. Japan maintains a fairly strong occupancy at 97.3%. As does The Pinnacle Gangnam has come down slightly due to some change over [ attendance ].On the rental reversion wise, we are seeing on a portfolio basis, that's positive 3.2%. You can see that the performance is largely led by very positive rental reversions at MBC, VivoCity as well as the other Singapore properties. Bearing in mind that many of the leases that are being renewed this year was actually signed three years ago during COVID. We are seeing a good rental uplift for the leases being signed this year.Festival Walk as well as China is still seeing slightly negative rental reversions. Festival Walk still has impact of some leases which were signed before COVID There is positive rental reversions in these numbers and that's largely led by the F&B tenants. China is still seeing some weakness. We are seeing a lack of demand, particularly in Shanghai. Activity in Beijing is actually slightly better than Shanghai, although rental revisions are negative due to one large lease that was actually signed. That was a fairly long lease from pre-COVID period. So Japan, minus 0.6% and Korea continues to perform very well at 45.5%. On the lease expiry profile, we are at, on the portfolio basis, 2.5 years. So retail is shorter and business park slightly longer than that.The next slide just gives a bit of a little more detail on the performance of the various geographies. So as mentioned, Singapore occupancy continues to be strong. MBC is at 96.8%, while the other SG properties are close to 98%. So far this year we have re-let in the Singapore portfolio close to 500,000 square feet of space. China continues to be slightly weak. You can see that in the slightly lower tenant retention rate as well as the negative rental reversion. As I mentioned earlier, this negative rental reversion is across both Shanghai and Beijing assets, with Beijing being slightly more negative, largely due to a large tenant which had quite negative rental reversion because their lease was quite long and was signed before -- and the old lease was signed before COVID. Japan, while the committed occupancy still remains very high, we are seeing some weakness, especially in the Chiba area. A large chunk of the tenant retention -- the low tenant retention rate was due to leases which were signed -- which were not renewed or re-let from assets in the Chiba area. Korea continues to be favorable.I'll hand over to Mun Leong, who will take the performance of the retail assets.
Thanks, Wee Leong Koh. Hi, everybody. So moving on the slide on retail performance, I think both retail malls actually showed different pace of recovery. For VivoCity, it's actually continuing strong recovery. Both malls have committed 100% occupancy. For VivoCity has a high retention rate of 81% and continue to have this strong double-digit rental reversion. If you recall, I think in fourth quarter, we recorded about a single-digit -- high-single-digit; first quarter, double-digit; and I think this quarter we are pleased to announce that it continues very strong double-digit rental reversion.As for Festival Walk, I think if you look at it, we have a tenant retention of 57%. But however, if we include the short-term leases as well, this retention rate is actually up to 81%. Rental reversion is 9.5%. Again, if you recall, previous year's rental reversion was double-digit and right now this is moderated down. And this minus 9.5% is largely due to a certain part of the leases that was actually entered into pre-COVID level at higher rents. So to date, we still have about 6% to 8% of these leases that are entered in pre-COVID level.Moving on to the next page, let me deep dive into VivoCity. I think VivoCity on first half, this is shopper traffic, increased 17.4% year-on-year and on the tenant sales increased 4%. If you recall, I think last year we recorded SGD 1 billion record sales. And at this half year mark, I think we are already at a SGD 500 million, slightly more than SGD 500 million. So I think there could be a high chance that we could repeat this very strong sales for the full year as well.Moving on to next slide on the AEI. So after the very successful TANGS AEI, which is now completed and I believe most of you have visited, the VivoCity team has embarked a new AEI. Internally we call it the OSIM Cluster AEI. So why is that so? Because if you look at -- if you recall, in this area previously there were three tenants, OSIM, Morganfield's and Crystal Jade Jiang Nan. So each of this space unfortunately is not efficient. Morganfield's has a very small frontage and a big backside. And then Crystal Jade Jiang Nan has a very wide frontage and a lot of big space. In fact, it has a 20 square meter space, which is very inefficient.So what the team has done is that the team at VivoCity actually deliberated on this and they realized that it's important to actually enhance the F&B offering and writing on the strong recovery of demand for F&B trade mix. So what the team has done is really to reconfigure these three units into four F&B units, each having space of 150 to 200 square meter, which is a more optimal size. And most importantly, they actually brought in a lot of new-to-concept F&B into this space and offering more.So to summarize, there is [Indiscernible] which is [ Toronto Chocolate Eatery ]. There we have this new concept Japan Hot Pot. We also have a very famous [Indiscernible] cuisine into this cluster. And lastly, a halal western cuisine as well. And I also want to highlight is that we also concrete a space such that we increase the kind of like indoor sitting area and the amount of [Indiscernible] area has also increased slightly. So watch this space. This new cluster is expecting to be completed somewhere in the mid to end November. And then it will definitely be a new enhancement to our F&B, already strong F&B offering in VivoCity.So moving to next slide, again, I think just to refresh some of the new brands at the TANGS AEI, we have Rituals and Prada. So we have now successfully created cosmetic cluster around the area and it has been doing very well. And then with that as well, we also have some of the new exciting brands relocating and refreshing their storefront like Aesop. And some of these new brands that you see in the slides are also like YAOYAO, which is a very famous restaurant in China which we managed to actually introduce in VivoCity as well.And then moving on to the next slide is our Signature Mooncake Mid-Autumn Festival event in VivoCity. Again, this time around, we managed to actually collaborate with Sanrio to actually bring in this gardens of lights theme in the lavatory of VivoCity. So it attracted a huge amount of shopper traffic. There was this gigantic Sanrio and a bit of lighting. And then in line with that, we also have merchandise that was sold and it also helped to push up our sales. And of course, there's this collaboration with TANGS where we have this very famous and popular Mooncake Festival sales and it attracted a lot of shopper traffic.Moving on to Festival Walk. For the first half, I think on a -- for the first half on a year-on-year, shopper traffic increased by 7.4% and tenant sales has increased by 7.8%. I think the strong performance is due to borders reopening, consumption vouchers disbursed, but unfortunately, there were also a few days in September that was actually adverse typhoon and actually affected a bit of our shopper traffic in the second quarter.Then moving on, I think these are some of the new brands that we have introduced in Festival Walk. I think the team understand that we need to further entrench its position as a family mall with experiential. So I think the team actually brought in a new concept like, for example, One Piece Pop-Up store, which is now a very popular animation and there's a Netflix TV show as well. So in conjunction with that, we actually brought in this One Piece Pop-Up. And then we also introduced a new brand which is Moodytiger, which is actually a children apparel. And we also brought in Hang Seng Bank as well.And then on the [Indiscernible] side, we have actually brought in -- we understand that experiential is an important feature of the mall to attract crowds. So our [Indiscernible] festival has actually created very creative these [Indiscernible] events. So they are like Sailor Moon and also we have this Death Notice Gala Movie Premiere at our ice rink. So it actually attracted a bit of crowd in Festival as well.And the last slide on Festival Walk I think again is to also to share with you that the team is constantly trying to strengthen its tenant mix. So one of the areas that the Festival team has decided to do is really to introduce pet-related tenants mix because in view of the increasing popularity of pets in Hong Kong, among Hong Kongers, so we have introduced Private i Pets which is like a pet grooming service for pets. And we also have this Pet Garden -- The Dog's Garden which is actually selling dog accessories. Apart from that, we understand that lifestyle is actually a very important tenant mix for Festival. So we have actually brought in this very famous eslite spectrum, which span over about 8,000 square feet of space in Festival Walk. So this has actually also attracted a lot of shoppers into Festival as well.That's all for Festival. Li Yeng?
Maybe just a quick update on the sustainability side for MPACT. So if you go to Slide 36, you'll see some of the achievements that we have done on the sustainability and ESG front in the first half. We have completed the installation of 1.5 megawatt peak of solar panels at MBC and VivoCity. Majority of this was actually at MBC with a small increase at VivoCity. We have raised our solar -- that increased the total solar capacity to close to 4 megawatt peak for the portfolio.We have also just received our GRESB rating. So we have achieved a 5 star rating. That's improvement over the previous year. And we have got -- we have maintained our A for disclosure. The other few pictures just give you a sense of some of the activities we have had on the ESG side over the past six months. So tree planting, first-aid training as well as our continuing support for Hair for Hope at VivoCity.So with that, we've come to the end of the presentation.
Thank you, Janica, Wee Leong and Mun Leong. We are now ready for your questions. We kindly request to all analysts raise your hand via the online platform. And thereafter, please state your name and the firm before asking your questions. For those of you who are online, please submit your questions through the Techspace platform provided.So first, we have Terence from JPMorgan.
I just wanted to check on this impact of the targeted debt currency swap. Congrats on adopting your Hong Kong dollar debt to RMB. Could you give us a sense of what your expected funding costs after the swap going forward? And is there room for more swapping as more Hong Kong dollar debt comes due? That's the first question. And in terms of -- could you update us on the Google lease and backfilling of the Unilever space? And the final question on the divestment side. Can you share anything on Mapletree Anson? And would you be willing to sell at book or discount to book? That's the 3 questions from me.
Okay. The first question is on the softening of Hong Kong dollar loan to CNH. The margin that -- based on the margin as at, for example, 20th October, few days ago, the 14 Hong Kong dollar loan margin that we are paying on this Hong Kong dollar loan. And versus the CNH that we have entered into, there is a price differential of about 2%. So whether there's more to be done, but more that we can do to further support the advantage of the interest pricing difference. It very much depends on the intent of doing this exercise.What we want is for risk management to better align our borrowing with the AUM composition. So as you can see, our CNH loan is 4% versus the AUM at 10%. So there are some more rooms, but we will have to monitor very closely. So I would say today, we have done about Singapore dollar equivalent, SGD 401 million and the saving is about 2% if you were to base on the frosting Hong Kong dollar loan rate as at today. Does that answer your question?
And in terms of all-in financing costs...
All-in financing cost guidance, the easy, we have SGD 8 billion or SGD 7 billion, close to SGD 7 billion and this is SGD 440 million. So I would still guide to [Indiscernible] for this financial year.
Terence, I'll take your question on MBC. So the Unilever space currently is about close to 35%, 40% leased out. We are talking to a few prospects for a good maybe 3/4 of the space that's remaining, but that's still ongoing. For Google, we are still in final negotiations with them to conclude the renewal. At the current moment, it looks like they will renew the majority of the space, but their total takeout space will decrease very slightly. They will still remain our largest tenant. And the percentage of contribution to the portfolio will not change very much. The likelihood is that they will renew the majority of the space that's coming up for expiry.
And on the reversion for that space? Is there any guidance on reversion?
They are paying market rentals. So their previous rentals were also quite close to market. So there won't be significant changes to reversion numbers.
So on the divestment front, I'll answer the easy question first. For Mapletree Anson, being a prime asset in Singapore, there is no reason for us to divest any asset. This is the asset of the top quality or below book value. If there are any offers or anything on the table that is above book, that's something that we will definitely consider. But at or below book is not something that we will look at.
We now have Rachel from DBS. Rachel, please.
Maybe just a few questions. For Festival Walk, I noticed that the NPI for this facility will be stabilizing at one level. So I'm just wondering whether moving forward is this the bottom really? Because I know you still have some leases that you haven't yet renewed the leases?
The thing what we have been saying is, I mean, rental reversion is something that when you look at it, you may get a bit nervous with a minus 9%. Maybe let me put it into perspective here. It's not all the leases that are all minus 9%, there are still step-ups. There are still other revenues. That's why if you look on a quarter-on-quarter basis to the preceding quarter basis, Festival Walk, even though with a minus 30, minus 20, minus 10, the NPI is still holding up on the local currency front.So for this quarter, higher ice rink, higher car park, higher other revenue are all kicking in. And on the flip side, if you look at, the other argument is, they maintain their occupancy very well. Every time when you change over a tenant, you minimally will suffer downtime, be it from fitting up carrier, albeit from vacancy period. So with that, they actually have been pulling along without suffering so much on NPI with the strategy that they have taken.So if you look from the NPI basis, they have been holding up even though a negative reversions have kicked in. So I think that still rental is one portion, there's still others. And it's not all the leases are all minus 9% or all. So -- but that is what I've always been saying that even though there's negative reversion, the impact on the NPI is still not on a full magnitude in the same level.
Can I just ask what was the percentage of leases that you haven't renewed? That were signed in pre-COVID that you haven't you just yet?
It's about 6% to 8%.
We started with about 10, 11 thereabouts. Now we are down to about maybe say, 6-ish, 7, about that.
Okay. Got it. Next question is on Unilever backfilling the reversions. How is it looking like? I know you've given the Google one, but...
The rental reversion for MBC, if you look at it, it is not negative at all. As of now, rental reversion is in order of about 7%. And occupancy is very, very high. It's still in the high-90s. So I think we are talking about pockets of spaces here and there, which is not uncommon in any property. So I think let's not scale ourselves over 1 Unilever space. It's actually very, very small compared to the entire portfolio. It is 97%, 96%-plus occupancy.
Okay. And I remember last quarter you said demand has been slowing in the business at pace, especially for this backfilling...
That's why the [Indiscernible] only increased 1% over the quarter alone.
Of course, it has changed. If you see quarter-on-quarter, occupancy has actually gone up across the board, except Japan. If I remember wrongly, it's just a very, very slight change or flat. The rest are -- I don't think there's anything to quibble in terms of the occupancy rate even today in a hot market. I think we cannot deny that the market out there is rough, but our occupancy rate of our assets is very steady in the high-90s. It's not like in the 60s or in the 70s.Are there issues? Obviously, there are issues, because we used to have very little issues. Market change for the -- it's a little bit more negative, definitely, we have more issues. But if you look at our occupancy rate, has it gone up? Yes, yes, it's gone up. Have we chartered positive rental reversion? Yes, we have chartered rental reversion. Did Festival Walk chart negative? Yes, but if you look at it on a portfolio retail basis, it's VivoCity Mall and [Indiscernible].So there are -- on the NPI level, it is still holding up. And the magnitude or drop is not the same as the rental reversion that you are seeing because there's other income, which is also a significant chunk of the revenue that is in the net property income of the retail asset itself, which is your car park, which is your other revenue, your eatery space, your GTO rent, they are all kicking in right now. So you can see sales year-on-year is moving up -- for year-on-year is moving up. That's why you see all the other revenues all moving in the same direction.So MBC, even though we said that what we are seeing as a general trend is there are lesser bigger takers of space. But that doesn't mean that there are no takers of space. We used to have people coming in asking for 100,000, 200,000 that kind of thing, which we never had space for because we have always been 98, 99, even 100. So that car demand is lesser, but it doesn't mean there's no takers for MBC. So that's where we can still go on to our occupancy and still chart positive rental reversion.
Okay. I just wanted some color in terms of who are the demand -- the demand that you're seeing in MBC is picking up.
In terms of what industry we are seeing it from, Rachel?
Yes, correct. Yes.
So it's been quite mixed. We have some IT companies, start-ups or not just start-ups, but more fairly well-established companies already. We also have industrial companies as well. We have companies who are looking to improve -- increase their premises or looking to our site quality...
Maybe just to help out in that manner. I think the -- it's not as clear as before, like there is specifically FIs or tech. Now it's more a mixed bag of prospects that are looking at this area. So be it the gaming, be the IT-related, be it the -- even some bank expansion or also a central mall, big spec. Last time was very, very clear, there was a few years, nothing but just FIs. There was a few years, nothing but mostly all the textile wherever that were coming in or the consumer goods industry. So currently, it's more mix in terms of -- so there's no clearly identifiable to say that, hey, this shipping industry is going today. We will be able to say that.
Are they moving out from the city area to this area or are they moving from other lower quality business parks in your MBC or is it totally new to Singapore?
All of the above.
So when MBC was established, the trending was clearer where it was moving out from CBD. Now it's not as clear in the combination. So it's not one specific reason. Then when we filled up MBC was very clearly, all majority, a high percentage was from CBD, be it the banks, the Googles and the like, they're all from CBD coming up. But now it's more a mix back. Some [Indiscernible] to quality, some new and some expansion, some contraction then move to our place, looking at our place. So there's a combination, not as defined as previously.
Here we have Brandon from Citi. Brandon, please.
Sharon, just want to ask 3 questions. First one on the rent reversion outlook for the remaining 6% to 8% in Festival Walk. Are you feeling a bit more positive now that you're seeing a bit more tourist going back to Festival Walk? That's my first one. The second one would be, I think Wee Leong mention that for high 20 assets, probably not going to be at discount, but how about the other markets? Will they be open to accepting a discount for those assets? And the last one would be, can you share what the amount of Hong Kong dollar and Sing dollar debt that's expiring in FY '25 and '26?
Okay. First of all, definitely, we are a little bit more positive. If you look at the sales, it's moving up year-on-year, definitely growing. But in terms of reversion, because there were really good old days high rentals that we still need to strip out. But that being said, it's not going to like the NPI straight away in that kind of magnitude. But we are definitely more positive than last year. But the reversions for a few of the key tenancies, we had -- because it was signed at too high, that may have to change.And in terms of -- if you talk about divestment, are we willing to take a gain or a loss in other markets? I think generally, there are different -- right now, [Indiscernible] in China is up task. I think that is the reality. Good that we are very derisked. A lot of our leasing assets, especially gateway. BMW did not renew with us, we will have a big problem, but we have successfully renewed BMW a very decent market rent in comparison to local markets. Whatever the stress that you're seeing is not uncommon in China. And I would say that the performance of our 2 China assets are still better or at market, whether is it occupancy or whether is it the rental rates that we are achieving.Now if you look at the rental reversion, let me put some color into the rental reversion. For China to be a single-digit very low, for me, it's a non-issue. If I were to change away a tenant and give 3 months of phase-out period, it's equivalent, 3 out of 36 is 8 months, it's 8%. There is minimum that any changeover of tenancies that we need to suffer as a landlord, which is not a reported number. So for them hang on to the tenancy in a rough market and suffer low-single-digit, not even crossing the 8, I think it's a very decent number. I will easily have chosen that growth because it preserves my cash flow better as opposed to giving a very nice rental reversion and suffer a long downtime, which you don't know. So I think I just want to share the perspective on the numbers itself.Now to Festival Walk, when you look at the -- maybe I should finish the divestment first before I start rolling into reversion. [Indiscernible] I think right now everybody is a little bit cautious about China just to look at investment front a little bit more cautious. So I think timing is not right today. The only market what we want to sell will be something that's more difficult to buy, because interest rates are at a level, everybody also want a certain return.Now the only market that I see that people will be very more interested to look at will be Singapore. But Singapore gives us no issue at all, absolutely no issue. So if the price is right and it helps me in strengthening my balance sheet is something that I would consider. But if these two conditions are not in place, I don't see the need for me to let go something that doesn't solve my problem or solve anything.So time must be right. It must be significant enough for me to strengthen my current holdings, then I will consider. So the reason -- I think that our fill tasks today. So I think that decision has to be really looked at maybe in the new year on a very -- I will be very realistic to you. New Year, they start looking because I think everybody is also adjusting to how to adapt to the new interest rate environment.
When you mean right, what do you mean by right? 10% premium, 5% premium.
There's 2 points, Brandon. It's like I'm asking you how many kids you want in your life. The more the merrier, right, Brandon? So that's the same answer I'll give you. I mean, I think we are all -- the entire industry not ourselves alone, we are a new product. New product gets affected when -- especially when interest rate hits at certain manner. When the long-term interest rates hit in a certain manner, we are also affected.Now what we -- although, we cannot disclaim responsibility. But what we can do is only to ensure that we manage our assets as the best that we can. So that's why on the leasing front, we try to derisk, we try to do things here and there, and we still try to push even VivoCity, even though it had 11 -- how many ears? 11 or 12 years of continuous growth. Vivo only 1 year where we were forced to give rental rebate by the government, you see a drop. Beyond that is year-on-year year-on-year. So where there is opportunity, I don't think that asset management is letting go the panels, okay, in pushing the business. But in certain markets, like turn variables like interest is something that Janica will just have to see what is the best way to minimize it or optimize it. There's no way to get it back to the good old days.So we look at different fronts to optimize it. So that's when they started changing. We look at the asset hedging versus the amount of low, which is the arbitrage that we can get out of it. So that's the SGD 400 million that you have done recently. That will be some savings. So if you could the number, every little thing will change. Every little thing ends up. So from our perspective is whatever that we find at avenues for us to improve, we will try. Now we also have to be realistic to push out asset in let's say any asset in China with [Indiscernible] So -- and now my leasing is -- yes, a bit of stress, but is better than market. You can take our China Beijing property, even though it's minus 4%, if I did remember, it was minus 4%, rental reversion or if rental reversion -- the market and the occupancy is higher. The occupancy is definitely higher than majority.So I know my asset is a market. We have to deal with it. So I think things have to be put in perspective. You compare it to the local market on the assets that we manage. Did that answer all your questions, Brandon?
Yes. Can I just circle back to the Festival Walk? Are you able to just quantify your improved optimism through the reversion expectations for the 6% to 8%?
Okay. Currently, it's minus 9%. This year, we are on a cumulative basis. So for the balance of business to make it up low. I think the minus single-digit is what we're expecting for this year. But I think if you look at by year or by quarter-on-quarter, preceding quarter is not collecting at. So you have a look at the NPI is quarter 2 to quarter 1 is holding up. Even though you have heard so much about my rental reversion, put that into perspective. My other revenues are kicking in. My video, my car park, my ice rink, they are all kicking in. The supporting that is covering some of this pain, which I think has been overlooked. Retail is not just purely rental, there's still others. It's not enough, even though you hear how many rental reversions negative are ready.
Brandon, you have a borrowing question, right? Are you referring to FY '24 expiry, the SGD 1.46 billion loan?
Yes, and the '26 as well. I think those 2 big towers. Can you share that split?
Yes. FY '24, '25, you have a mixture of...
'25, '26.
It's a mixture. So like, for example, FY '24, '25, you have about half of it in Sing dollar, 30% in Hong Kong dollar, 20% in JPY. As for '25, '26, I do not have the information with me. So I will have to come back to you. But as so far down the road, we will -- early refi, we have to have bit of early refi and that will change.
I think just to allay any fears that you may indirectly be asking are we doing? And if we are not doing divestment, are we keen on raising funds from the investment community? I will tell you the answer is no. I don't think -- we will always look at it internally what else we can do without thinking of touching the investors. That has to be exhausted. I don't think we have gone through everything.So the -- I think there's a lot -- a few questions here and there, are we going to do EFR? I think actually that's down a little bit. It was more in the bar, 6 months ago when other REITs were doing EFR to show up, I don't think that is a strategy that we'll be taking. Nothing that we have got a lot of apartments from investors that they are not ready to spend too much money in today's context. We hear that. And I think our gearing, our capital structure is still okay today that we don't need to do such a move.
Next on the line we have Tan Xuan from Goldman. Tan Xuan, please.
Can I just follow-up on the Festival Walk reversion? I think earlier you mentioned you expect reversion to turn positive around mid-2024. Does that still stand?
Right now -- we are still completing our sharpening our handles for next year. Give me one more quarter, I'll give you a better answer. But this year, which is that we are likely to be negative. It will stay negative.
Okay. Got it. And for divestment. In terms of...
I think for your modeling -- I mean for all the property analysts, for your modeling, you look at our NPI for the last few quarters of Festival Walk, that will give you a percent that modeling directly the rental reversion will render a work of number of what we have been performing. So do look at car park, do look at other revenue, do look at our ice rink or covers up some of this gap.
And on divestment, can I really ask Singapore is most likely followed by Japan and lastly China?
Okay. If you look at my preference, of course my preference is still the other way around. Our preference is still the other way around, but I will upfront tell you that China is [Indiscernible] review it here again. But if you ask me between China and Singapore, of course, I'll say Singapore.
Japan?
In between. So investors are opposite -- sorry, buyers and sellers are totally opposite. What I prefer will be what they don't prefer. I want a higher price, they want a lower price. But my second order will be opposite from the buyer perspective.
Got it. And just one last question. At the GPU level for second half versus first half, do you think the strength in your booking more than offset the Hong Kong China witness and also higher...
The Singapore, China -- Singapore to overseas, the issue is more ForEx. The little drop here and there usually is about 30% drop, 70% accounted for of the drop is due to ForEx. So it depends on where ForEx go. So Singapore has been pushing -- falling along, covering some of these. But overseas majority of the drop, I would say -- maybe let's take it simple 1/3, 2/3 manner. 1/3 operations, 2/3 is ForEx. Every SGD 10 million we drop, 2/3 is due to ForEx. So it depends on where ForEx go.Most of our utility increases has already been factored into our numbers because Singapore kicked in the most since November last year. We are close to 1 year of that already. So the numbers itself, Singapore will have done even better without the utilities. So we are hoping for the next round where utilities stabilized a little bit better, lesser than the 30 over kilowatt hour. That's where we will see more upside on the NPI front.Vivo is Vivo. Vivo will continue its way. Vivo is actually pushing some of the new boundaries. MBC is not -- is still performing. Occupancy is high, rental reversion is there. mTower and all the rest of the Sing assets -- actually Anson and all up rental reversion, especially Anson significantly one lease was already close to 10%. The lease was already over 10% rental reversion. So Singapore is still okay. Whether it can cover depends on where the ForEx is, because ForEx has been a very painful issue for us. So when we -- local currency, we apply then it gets translated, the thing get amplified.So the 2 issues that will continue to affect us is the likelihood is ForEx and the other issue is interest. So interest will continue to move up. It will continue to move up, because we've got all hedges, we need to roll it new. It was only [Indiscernible] we have suffered most of the pain. You can see from Q2 to Q1, the pain comes from where. NPI is fine. It's the distributable income. And distributable income is due to what? It's majority change of the interest. So what we can only do as a manager is to how we can optimize our financing structure to gain the arbitrage. So that's what [Indiscernible] has been doing and take advantage of better rates without overly exposing ourselves in terms of asset hedging. There's still good matching. We are not overly in any asset -- there's a currency match to the asset.
Brandon, I'll go back to your questions just now on the currency break for FY '25, '26. It's about 30% -- SGD 30, about HKD 40 and the balance are Japanese yen in quarter 1.
Next, we have Yew Kiang, CLSA. Yew Kiang, please.
I also want to ask about the second half numbers, because it seems like -- I mean, I take the view that ForEx has largely stabilized, although some of them have been weak and utility cost is no longer that much of an issue, and then you are hedging some of your interest in a more optimal way. So I was just thinking whether you will be like-for-like about SGD 0.44 for the second half?
I'll get in trouble for giving you a forecast. So if you read one thing, we are relatively stable in terms of operations. If you're saying that my overseas is stressed, majority is due to ForEx. So if you have a view that ForEx is okay, then you roughly see where we are heading. That is -- it won't -- we don't change overnight. We have leases locked in. So technically, numbers will not just change overnight. Every move we are talking about 1%, 2% quarter-on-quarter type. So if you -- that can actually -- it's quite easy to model. Don't get me in trouble and give you a forecast.
We had interest rate swap dropping every now and then.
Yes. My second question is on divestments. So much money is going to depend, but you have not been -- I don't know whether you've been actively trying to sell those. But I'm also thinking...
We will only may announce them when deals are done. I already -- I think I generally shared the guidance. We don't have to do something today. We only do -- if we want to do something, it's good to have, not a [Indiscernible] I need to do. I'm not indulged in that I have to do something. However, if I were to do any form of divestment, it is potentially to maybe show up and to build up my balance sheet for the future. It's not a -- I have to do to cure myself today. I think that message has to be very taken in a different context, yes, in terms of divestments. It's good to have...
I'm thinking about -- If you sell the Japan assets today at say 2.5% at DPU, but because of the currency, you still be losing in Sing dollar terms, right?
Right. Japan is Japan. Japan is a very small component. Japan to me is not a very exciting class. It's just there. I think I've always said that Japan is there. Japan has never been an attractive area, except for its spread into base interest rate environment. You take yourself 5 years, 10 years, 15 years ago, it was not super excited for Japan. There is always there, but not a fix significant growth driver or a portion that we rely on as a significant portion of the portfolio.Why I say that is because the metrics is just [Indiscernible] So Japan will never be a big area. I think you have rightfully pointed out that there's ForEx issues that we have to deal with. I mean, the income coming back is affected. And divestment, of course, as part of any divestment exercise, we will also will measure ourselves against what is in our books and what is translated and does it make sense. If you borrow Sing dollar to pay off, why should I do it?You know one thing, let's say, for example, ForEx came down, I'd borrow Sing dollar 4%, 5% and pay off, it sounds a bit odd, right? I affect the DPU. So I might still just continue, right? Then ForEx may change any other time. So I think when we look at divestment, it's not just pure one angle, it's different angles. For us, what is -- what we always focus on what is exactly the DPU impact along the way if you were to do certain capital actions. Like I said, it's not die, die must do. If it's good to have to do, we will do it. But it's not a die, die we have to do it. So we will always look and count from the DPU ago, which is what you're saying that ForEx losses, you crystallize, what does it mean? If I [Indiscernible] I quickly have to Sing dollar, though I think it's not a good move.
Can we have Xavier from Morningstar. Xavier, please.
My question is on Hong Kong. So you know that [Indiscernible] the Hong Kong retail market currently is that the Chinese tourist consumption habits have changed so that some people are saying that they no longer -- Chinese tourists no longer saw Hong Kong as an attractive destination for shopping because of the stronger Hong Kong dollar. And second was even if they went to Hong Kong, they were spending a lot less when compared to the past. On the other hand, we are also saying that Hong Kongers are going to strengthen for the cheaper food and entertainment. This is obviously having a negative effect on retailers in Hong Kong. So I just want to know what your thoughts are on these trends? And what sort of impact do you expect to have on Festival Walk?
Okay. I think you're not wrong. I think now [Indiscernible] is viewed like JB to Singapore. With our strong -- the Hong Kong dollar actually has not depreciated much, except for this quarter slightly. So definitely, there is an impact on spending. I think you have rightfully pointed out. But as to the attractiveness of Hong Kong, I think we need a longer runway. But that being said, our mall is not 100% focusing on tourism. Tourism in any retail that we run is a bonus, but it is not the core. The core is still your day-to-day -- your families nearby, your residential catchment and all. So that as you can see that the sales is still moving up. But is it going back to the good old days? I think it needs time.So the effect that you are saying, which is a strong dollar, people going to Shenzhen I think is real, it is there. It's like Singaporeans going to JB. It doesn't mean Singapore retail is going down too. There are still people who go JB for cheaper food, maybe cheaper accommodation and we can't get away. That doesn't mean Singapore retail collapse. I think we have this Singapore JB issue for very long. So we have to look at Hong Kong and [Indiscernible] or whatever as a whole, as the retail market as a whole. But the relationship is very similar between us and JB. So I think that you can see the effect that not everybody will just travel there. Currency has an effect, no doubt. Focus is still on the locals. It's not domestic. All malls that we do are not in just targeting the tourists. It is still dependent on the local spending.
Got it. I think -- I mean, maybe just a further question...
Actually, personally, I've not gone JB to shop yet. I'm trying going to JB to shop a hassle [Indiscernible] but it's a hassle to cross and all. But if you say, if we're going there for a weekend, yes, potentially, yes. But if you say go there and shop there every weekend, no, I won't do it just to carry a few [Indiscernible]
Yes. I understand that from -- between Hong Kong and Shenzhen at the border crossing is a lot more efficient than I suppose the [Indiscernible]
It is efficient, but you still need to go through that.
So I suppose you're not hearing anything from our tenants and [Indiscernible] about sort of impact from this outbound movement of Hong Kong, as Hong Kongers going to Shenzhen?
Okay. I think the F&B is no issue. I think what they're saying is you have grounded yourself. I mean, certain key tenants that we have, F&B the operator, to them, [Indiscernible] has got a very stable established. It's very established. Our catchment is not poor. The general effect is felt across entire Hong Kong, not just Festival Walk alone. So what they are saying is focus on what you're already good at, which you have things like your skidding rigs and stuff. It may sound a bit far-fetched, but certain things are adding on to the experience that when people go into the mall, you have decent supermarket, you've got a very good array of F&B, which we are also continuously improving.So it's not all doom's day in Hong Kong. Are they feeling some of the impact because of the high Hong Kong dollar strength? Obviously. So that's something that we have to switch out of certain -- we have to tighten our trade mix a little. They have been doing things like personal care, like your -- things like your make-up and your skin care, that will be affected. But things like your more casual, like your [Indiscernible] they are doing actually much better than before. So for retail, it's very clear. We adapt along the way.So give an example from people's perspective, we kept very big lots from day 1 due to the design. Then everybody was cutting into 500 square feet, 1,000 square feet to earn the higher per square foot. At EM, there was a sudden trend that people want the flagship stores. We were able to cater to that either by lot of our strategy, mix was when Vivo was first started, nobody believed in the catchment. 50% is water. So what did we go down in the past? We went on the path with higher F&B, with about 30% of F&B where most malls are around 15% at that time. You take yourself 15 years ago, F&B quantum is never so high. So Vivo has today entrenched itself as a place where you can find good food, not the Michelin Star, but decent food where you can bring your family and you have an array of variety for you to choose.There we adapted along the way. Fashion was the money turner. Then fashion got affected with all the Taobao and online selling. So people don't mind buying something cheap online, throwing it away if they do not like it. Then we realized that, okay, going down the casual fashion, we had to change. So the last 5 years we were tuning a little bit more. That's why we went a bit more at leisure, which was up and coming, where people wear sportswear into office, track shoes into office. It was a different trend and office growth became a downtrend.So along the way retail there is no fix. Things will change. Your target market will change. The preferences will change. But one thing we realized that doesn't change is F&B. If you do good quality F&B, today, retail is very simple. Look, there's so many options that people have. Your [Indiscernible] activities have to be short, but you can draw people in. When you draw your people in, that's when they will at least spend a meal with you. That is basic. Then you fight on your trade mix. That means your tenants itself that you bring in F&B must be a draw. The F&B must be a reason for people to come into your mall. Then that's when you can make the [Indiscernible] your mall. That's where you have your hands in your wallet.So if we think that just sitting around our fashion can draw people, gone are the days. Gone are the days that fashion alone can draw people into the mall. Food is always the first thing that people cross their mind in walking into a month, where do we want to eat? So I think we are very clear on that. And we are slowly trying to improve our offerings in terms of F&B.Where we found ourselves having gaps were we have a big array of 30%. We found small gaps like we don't have enough [ halal ]. So that's where we stopped to up the game in terms of improving with a little bit of halal options, as you can see from the new cluster that we're bringing in, we have a Western Halal Concept. There we see that hot pots used to be very good, but I think hot pot now is a little bit weak already. And the pancakes came in. So long and short is retail is ever changing. So you just have to adapt and make sure you refresh your F&B constantly.
Any good restaurant to recommend at Festival Walk so I can check on?
Everything is. You just spend money in my mall, I feel good.
On the topic of Festival Walk, we actually have a question from our online participant Sean on Festival Walk. So what have we observed since the opening of the malls nearby Festival Walk?
Okay. The one is actually one station away. I would say that in terms of -- although it is one station away, in terms of size, I think it's comparable. We are slightly bigger in terms of retail offering. Second, in terms of crossover, it's only maybe about 1/4 is similar type of tenants and that also includes F&B. F&B you can have everywhere. So I'm not too concerned about the F&B.I think if you ask me, I would say that our catchment is very stronger. It may look like they have more props because they got residential on top. But in terms of the buying power, where we are in the [Indiscernible] is definitely of the higher end. And we entrench ourselves to be a reputable mall with decent -- very good maintenance and very good offering. So are we afraid of the competition? No. I think we have ice rink that people don't have, that we can hold competitions and stuff, a differentiating factor. I think our cinema looks better as of now. In terms of the feel, I think if you look at the trade mix, we just have to watch out for the cross -- what do you call it, similar tenants that are non-F&B, which is maybe 10%-odd that will be of more concerned.So if you look at the sales, when they opened about 2, 3 months ago, our sales were still improving year-on-year. Maybe people will say that, hey, maybe [Indiscernible] But I can see from last year to this year, our sales is still better. Our footfalls are still better. We just have to watch out for the similar tenants, which is about maybe 10%, similar tenants that are non-F&B.
Okay. Nick have 2 questions on Japan. Can we elaborate more on the challenges they are facing by the Japanese properties? Is there a lack of demand on an overall basis or is it a location-centric issue? And Mr. Li has also asked us to kindly elaborate on the occupancy risk for the 3 assets in Chiba? And what are the mitigating measures that we are taking?
Okay. It's Mun Leong. I'll take the questions. So maybe first the background is that, today, we have about 9 assets in Japan. And what Sharon has mentioned, this Japan portfolio as a percentage of [Indiscernible] they're about 9% to 10% of our total AUM. So out of these 9 assets, 3 assets are in the Chiba or what we call the Makuhari, whereas the remaining are actually scattered all around 18 malls. So for the rest of the non-Chiba, et cetera, they're actually performing very stable. They are delivering a positive returns in a very low interest environment. So they are very steady.So the issue for us today is these 3 Chiba assets, which I will go into one by one. So first of all, Makuhari is located about 45 minutes away from the Tokyo City. So it's actually quite far away. It is actually targeted at the back of house with long-time phasing and maybe call center kind of tenants who are more cost cautious. So today, for these 3 buildings, I think we have also shared some of the information in our previous briefing. So first of all, it's really Seiko. Seiko have actually previously already announced [Indiscernible]. Seiko has really announced that they're not going to renew when their lease expire in June 2024.So today we still have about 6 -- more than slightly more than 6 months to deal with this problem. So for Seiko,they are not renewing. And they have actually agreed to remain in the building for a few floors. And then if you recall, at that time when Seiko -- I think it was in 2021, October, when Seiko first announced that they're not going to renew, and that has really marked down their valuation. So it was made known that they are going to leave and then it's going to be changed to a multi-tenancy building, yes, actually, I think it is actually a markdown evaluation from SGD 25.8 million to SGD 20.5 million. So that has really been reflected before MCT took over this asset during the merger.So today, we have confirmed Seiko to take over a few floors. Unfortunately, despite leasing activities, we still are able to identify prospect tenants for the remaining space for Seiko F&B. However, like I said, the expiry is only in June 2024. So we have slightly still more than 6 months for us to deal with this issue. So right now, what we are intending to do is really to relook at our leasing strategy and see how we can ramp up this leasing effort in the next few months.However, I also want to share another information just to -- like for your understanding of the market. So recently, we also come across a major MNC, an automobile company who was looking for space in Makuhari. So our buildings in Makuhari was also one of the few shortlisted office for this evaluation. So we were actually quite close in securing this. We went over the final bid. Unfortunately, in the end, this automobile company chose the office that is nearer to the train station. So it was a bit unfortunate. But I wanted to share this to also show that there are still demands for this long-time phasing tenants who are cost and if who want to come to Makuhari. So that's the first case of Seiko.Then the second case is MBP. MBP, as you know, we also mentioned previously, we have a major anchor tenant there, NTT UD, they occupy about 52% space of MBP. This master lease will expire in March 2024. So what will happen when the lease expires is that -- so if -- NTT UD actually subleased their space to all the NTT affiliates. So once come March 2024 when the master lease expire, there's agreement for us to inherit all the sublessee from NTT UD. So we will then continue to inherit all this leases on a rolling lease basis.Today, a small portion of this NTT UD sublessee has actually informed us that intention that they will not continue after March '24. So that represents about 10%, roughly about 10% of the total MBP NLA. So the rest of this NTT affiliates, they have not actually told us they're going to leave. So they are likely to stay with us. So there is NTT UD in MBP.Then lastly, the next property is FJM. As a reminder, this FJM, the lease expiry is in March 2026. So it is another issue for us in 2 years later. So I think it's nothing that we should be actually worried about today, but something that we also be cautious of and monitoring closely. We are in active discussion with Fujitsu. We will continue to discuss with that. So that sums up the 3 properties that we had in Chiba.
[Indiscernible] also has another question following up on this. So distributable income increased 15.8%, but the yield dropped by 10.5% for 1H on a year-on-year basis. So what is the reason for this contract between DI and DPU? I noted that the number of per unit actually increased by 1%-plus over the period.
Yes. The difference in DI and DPU, 15% versus the down 10% is really because of the enlarged unit base outstanding. You may look at our balance sheet and/or the announcement and the percent -- the number of units outstanding might be about SGD 5 billion, but you must understand that in July last year, and July last year, we actually issued above about 57% of the 10 MCT unit days for the funding of the merger in terms of purchase the merger consideration unit.
Okay. So in short, I think to make it simple,there's no magic in it. It's just a calculated number based on the number of increased unit that has changed the DI percentage positive number to a negative number. It's just a calculated number.
So before the merger, MCT's total unit issue is about SGD 3.3 billion and now it's about SGD 5.2 billion. So that's an increase of 57%. So the number that you've seen or you have indicated is the exact number. But in between last financial year, the number of units actually increased from SGD 3.3 million to SGD 5.2 billion, which is a 57% increase.
Going back to our analysts participating. So Derek from DBS.
Okay. Just a quick one. Could you just give us a sense of what's our cost now for Vivo and Festival Walk?
Yes, it's minus 20.
Okay. And for Festival Walk, I was just wondering whether it should be trending above its historical trend. So what levels do you think we'll be comfortable before you start to see that whole reversion of the environment and more stable? Do you have a number?
If you're talking about the reversion number, we have to look at the leases, yes. We see it's expiring and all. It's very hard to pinpoint a number today without looking at the specific lease itself and the period that is coming up. But generally, I would say that it's positive growth in terms of the sales. Can it be better? I definitely hope so, because as of now, Hong Kong dollar is still strong. There are still people running up to Shenzhen to shop. So if that stabilizes, I think there should be better sales for local if that trending is reversed. But even with the trending of people going to Shenzhen and the strong Hong Kong dollar or whatever, there is still local demand because we have domestic-driven shopping center.
Okay. Got it. Sorry, just one last one for me is, I look at your Vivo stats. And while it's really breaking new heights, I'm just wondering whether -- is there a risk that you will flatten out? Because honestly, it's very crowded more already. So how much more crowded can you get? Just curious.
I think if noticed, what we are doing is we are not pushing more people. We are trying to dig harder into the pocket as opposed to push more people. The activities that we are putting is not more than before, it's maintaining what we have been doing. Now -- but in terms of the trade mix wise, we are trying to move up a little bit in terms of the value chain where we are hoping to dig more money out of investors -- not investors, sorry, but we're trying -- how much money have we spent today?
A lot, yes.
So Vivo is no more the -- sometimes people say, all your shoppers are the ones that wear slipper. I think we are slightly beyond that. 10 years ago, I would say, it's [Indiscernible] wear mostly purse, but it doesn't mean they don't have money, yes. It's just our saga, Singaporean style. But generally, I would say that we have moved up in terms of our trade mix. Spending power, I would say that is definitely higher than before. So I think we are heading in the right direction.It's a bigger -- like I said, retail management is always a combination of activities. There's no one single action that gets you there. It's to make sure your colors are fine, your lights are working fine, people are comfortable with the car park, they feel safe, they can get what to eat what they want, they do not queue too long, but also don't -- and they have a good supermarket to complete their weekly shopping. It's everything that comes together that makes us more successful.So I cannot tell you that it's one thing that we did right. We will continue to push our edges. So we will rejuvenate spaces to make sure that more F&B come, we will also make the look and feel, feel better, make sure we do more IRA, look cool rather than walls that you see. All this feel better, feel good and that's when the experience is enhanced. So there's still other things that we will continuously do. So it's a combination of things that we do in retail. There is no one thing that will make a retail more successful. It's a combination of efforts from operations to leasing, to marcom, to the asset managers to us, everything that comes together. So it's not 1 year effort, it's years of efforts that builds upon it. So it's not just Ms. Lim coming in and work on it for 1 year. It's years and years of people who are building on each other.
Got it. Sharon, how about [Indiscernible] it's not back to its optimal level, right? So...
Yes, definitely not. So like I always said that our numbers are very trending [Indiscernible] a little bit. So our percentage is still very local. We are very, very local, and it's always icing. In [Indiscernible] even better.
I'm very well aware of the time now. So may I invite Mervin from JPM to raise his final question for today.
Thanks for the opportunity, I'll try to keep short. First on Festival Walk, I appreciate that negative rental reversions, because you have leases that were signed in pre-COVID in more buoyant times. But can we assume that the leases were renewed from -- that were signed in 2020 given the strong recovery in tenants we're seeing very strong reversions?
Majority of the negative reversions will be tracked down by the rail or leases that were signed way before COVID. Those will be the biggest threat. The 2020 leases depends on the trade. My eyes are not focusing on them. The pain, if anything, will be all those that sign on a super high, long, long ago. Those went out, we will be more watchful over. The rest I think is the GM is handling well. It's not something that is top on all this.
Okay. Yes, I will just try and look for some green shoots within Festival Walk beyond I guess a strong car parking.
My NPI is not dropping. You all see my rental reversion minus 20, minus 10, I think it's decent. And last quarter, even though there's typhoon, 2 days of pain, although our property was definitely not affected, it was just that on the day itself we have to sip out some of the water, but it's not that there were major leaks or flood, but it was down during that period. And even last year, last year, there's consumption vouchers that the Hong Kong government gave. So even when you compare when last year they give consumption vouchers reached numbers that was obviously higher, this year, it's really higher than last year. When last year had even consumption vouchers off given by Hong Kong government. So I think we have to take a little bit of positivity there. But if you say, hey, tomorrow, you're going to change, Hong Kong dollar is too strong. There's still people going to JB.
Okay. Very good. We got your point.
But it's not like I go JB every day. When was the last time you went to JB for your grocery shopping?
Very frequently. Anyways, just a follow-up on Wee Leong's comments on China. I mean, like how low can occupancy go from here? And then on Google space, I think they're renewing most of the space, but is there -- how much space in square foot they're returning? And how close are we backfilling that space?
So the channel occupancy, we are now currently -- both assets are in the mid-to-high-80s. I mean, the numbers won't move significantly from there. It's not going to be a 50% occupancy next quarter or something like that, that's not. It will still remain in the 80s. For Google space, the amount of space they're giving up is not significant, only 2 floors. They will still be our largest tenant at MBC and they will still be our largest tenant in the portfolio. So the lease actually expires only next year, actually our next FY. So we have a good 6 to 8 months in terms of backfilling the space. So we are working on that.
Small amount, it's little space. So that is actually quite good for that in terms of leasing into this hot market. So when we strip it, you tend to be in the better position because some prospects do not want to spend on CapEx. So no big number, it will still be a big tenant. No worries.
Thank you, Mervin.
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