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How MPACT Defies Global Headwinds – Q3 FY25/26 · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:08
  Welcome back to the Deep Dive. Today, we are opening up the books on a true heavyweight.
• 0:12
  And when I say heavyweight, I mean we're talking about a landlord managing a
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  portfolio worth nearly $16 billion.
• 0:19
  That's right. We are looking at Maple Tree Pan Asia Commercial Trust,
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  or as most people know it, MPACCT.
• 0:27
  It's good to be back. And, you know, heavyweight is definitely the right word.
• 0:31
  This isn't just about owning a couple of office blocks. No.
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  It's about owning entire retail ecosystems across five key Asian markets.
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  We're talking about the places where millions of people shop and work and eat every single day.
• 0:44
  Exactly. And for everyone listening, our learners, who I know range from,
• 0:47
  you know, casual observers to really serious investors, we are focusing on their latest report card.
• 0:52
  This is the third quarter and year-to-date financial results for FY2526,
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  which just dropped on January 30th, 2026. All right.
• 1:00
  Now, I've read through this, and I have to say, usually these quarterly reports
• 1:03
  are pretty dry, but this one, this one feels a bit like a logic puzzle.
• 1:07
  It really does. It's a report that's kind of full of contradictions.
• 1:10
  If you just glance at the headlines, you might be a little confused.
• 1:13
  That's exactly what I want to untack today.
• 1:15
  Our mission is to figure out if this is a portfolio in trouble or if it's one
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  that's brilliantly maneuvering through a storm.
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  Because here's the headline tension. Revenue is down. The amount of money the
• 1:29
  buildings are bringing in has actually dropped. Right.
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  But the payout to investors, the actual cash dividend is up.
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  And that doesn't usually happen.
• 1:38
  No, it doesn't. it's sort of the corporate financial equivalent of,
• 1:41
  I don't know, losing weight while eating more cake.
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  It takes a very specific set of circumstances to pull off. Right.
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  And honestly, it's quite rare to see it executed this cleanly in the current
• 1:50
  market. Okay. So before we dissect this magic trick, let's just set the stage.
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  What exactly are we holding when we buy a share of impact tea?
• 1:58
  You are holding a basket of premium commercial real estate.
• 2:02
  The Pan-Asia in the name is real, or at least it has been.
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  You have assets in Singapore, Hong Kong, China, Japan, and South Korea.
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  It's a mix of retail malls, you know, destination shopping, and high-grade office
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  buildings. So five countries, malls, and offices.
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  If you had to give me a vibe check on this latest report, just the 30-second
• 2:23
  summer before we get into the weeds, what's the story here?
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  If I had to put it on a bumper sticker, I'd call it resilience through agility.
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  Sounds like corporate buzzword bingo. It does, a little. But here's the reality.
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  The top line, the gross revenue is shrinking. The markets in China and Hong
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  Kong are incredibly tough right now. Right.
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  But management has managed to pull levers on the cost side and the debt side
• 2:44
  to actually increase the cash that's landing in investors' pockets.
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  They are, in a way, shrinking to win. Let's start right there, then. The bottom line.
• 2:53
  Because as an investor, I can appreciate a good strategy, but ultimately I care about the RET check.
• 2:58
  What's the distribution per unit, the DPU? For this third quarter of FY2526,
• 3:03
  the DPU is 2.05 Singapore cents.
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  2.05. And how does that compare to last year? It's up 2.5% year on year.
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  Two and a half percent. Okay, look, I'm going to be the skeptic here for a minute.
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  In an inflationary world where my coffee costs 10% more than it did two years
• 3:18
  ago, a 2.5% increase isn't exactly setting the world on fire. It feels a little...
• 3:24
  Modest. It is modest if you compare it to a soaring tech stock, maybe. Yeah.
• 3:29
  But you have to view this in the context of the REIT sector right now, specifically in 2026.
• 3:34
  Okay, fair enough. We're seeing REITs across the globe slashing dividends because
• 3:38
  interest rates have, you know, eaten their lunch.
• 3:40
  For impact to not just hold steady, but to actually squeak out a 2.5% gain,
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  that makes them an outlier. Okay, fair point.
• 3:49
  In a sea of red, a little bit of green does stand out. But let's go back to
• 3:52
  that paradox I mentioned. I'm looking at the income statement.
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  Gross revenue fell by 1.9%. Yeah. Net property income.
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  So that's basically the profit from the buildings themselves before you pay
• 4:01
  the bank or the taxman fell by 1.2%. Right.
• 4:04
  If the buildings are making less money, how on earth are they paying us more?
• 4:08
  This is where we get into the how.
• 4:09
  Usually when revenue drops, your payout drops. It's simple math.
• 4:13
  But EmpathCT managed to cut costs faster than their revenue fell.
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  What kind of costs are they, you know, deferring maintenance,
• 4:21
  firing the janitors? because that kind of stuff eventually comes back to bite
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  you. Yeah, no, nothing like that.
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  Operational costs were actually managed quite well. Utility expenses came down
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  because energy prices have stabilized.
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  But the real hero of this report, the thing that saved the dividend,
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  was the finance expenses.
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  The interest on their loans. Precisely. Their finance expenses dropped by a
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  massive 10.2% for the quarter. Wait, hold on.
• 4:46
  We have spent the last three years talking about higher for longer interest rates.
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  Every homeowner listening to this knows that refinancing a mortgage right now is painful.
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  How is a multi-billion dollar corporation paying less interest in 2026 than they were in 2025?
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  It's a mix of smart treasury management and a very deliberate strategy.
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  First, they benefited from lower interest rates on their Hong Kong and Singapore dollar borrowings.
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  But the bigger factor is that they've been selling assets.
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  Ah, the divestments. We saw the headlines about those. Right.
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  They sold maple tree anson in Singapore, and two buildings in Japan.
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  T.S. Aikabukuro and A.B.S. Shin Yokohama.
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  When you sell a building, you get this massive chunk of cash.
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  And instead of buying something new. They didn't go out and buy a new building
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  with that cash. They used it to pay down their most expensive debt.
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  So let me get this straight. They sold revenue generating assets,
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  which explains why revenues is down. Yep.
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  But by using the cash to pay off the credit card, they saved more on interest
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  payments than they lost in rent. That is exactly it.
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  They realized that in this environment, holding on to debt was more expensive
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  than the yield on some of those assets.
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  So they shrunk the portfolio to save the margin.
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  Trimmed the fat to feed the investors. That's it. It's actually pretty shrewd.
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  It's defensive, but it works.
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  It's classic capital recycling. You sell the stuff that isn't working hard enough
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  to protect the balance sheet.
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  Okay, so that explains the financial engineering.
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  But you can't cost cut your way to growth forever. Eventually,
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  you run out of debt to pay down and you need the properties themselves to actually perform.
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  For sure. So where's the strength coming from in the portfolio?
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  Because looking at the map, it seems pretty uneven.
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  There is one clear engine driving this entire train right now.
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  Singapore. I feel like every time we talk about Asian real estate lately,
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  it comes back to Singapore being the safe haven.
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  It's becoming a bit of a cliche, isn't it? It might be a cliche,
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  but I mean, the numbers don't lie. In this portfolio, Singapore isn't just a
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  contributor. It is the absolute anchor.
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  And specifically, we have to talk about Vivocity. The mall at Harborfront.
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  I was there last weekend, actually.
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  It was absolute chaos packed wall to wall. And the financial statements totally back that up.
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  Vivocity is a beast. Its net property income was up 10.1% year on year. Double digits.
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  For a mature mall, that's incredible. Usually, mature assets grow at, what, inflation?
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  Maybe 2% or 3%? How are they getting 10% growth out of a building that's been
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  there for nearly 20 years? Pricing power.
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  And this brings us to a key metric for REITs.
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  Rental uplift. They achieved a positive rental uplift of 14.7% at vivacity.
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  Okay, let's unwrap rental uplift for anyone who might not speak REIT fluent. Sure.
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  So, leases expire every few years.
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  When a tenant's lease ran out of Vivosity and they went to negotiate,
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  a new one, or a new tenant, came in to take the space.
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  The new rent was? The new rent was, on average, 14.7% higher than the old rent.
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  That is a massive hike. If my landlord tried to hike my apartment rent by 15%, I'd move.
• 7:53
  You would, unless moving meant losing all your customers. Yeah.
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  Retailers know that Vivosity has the footfall.
• 7:59
  Tenant sales there actually grew 4.4% in the quarter. Ah, I see.
• 8:03
  So as long as the shops are making
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  money, the landlord has the leverage to squeeze them for higher rent.
• 8:07
  It's pure supply and demand. And I saw they did some renovations,
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  too. The report mentioned an AEI.
• 8:13
  Yes, the Asset Enhancement Initiative at Basement 2. They reconfigured this
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  space. This is the active management part we always look for.
• 8:20
  Right. You don't just buy a building and sit on it like a bond.
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  You move walls, you change the layout, you improve the flow so you can cram
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  in more rental space or higher-yielding tenants. That 10% income growth is a
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  direct result of that work. So Singapore is booming.
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  The NPI for the whole Singapore chunk of the portfolio grew 5.3%. That's the good news.
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  But this is the Pan-Asia Commercial Trust.
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  We have to talk about the Pan-Asia part.
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  Because looking at the report, it seems like Pan-Asia is where the headache is.
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  It is. Management was very upfront about this. They cited overseas headwinds.
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  And really, it breaks down into two specific problems.
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  Currency and the Hong Kong consumer.
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  Okay, let's take them one by one. Currency. This always feels a bit abstract
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  to me. It's like an invisible thief.
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  Think about it this way. MPAC Solity collects rent in Japanese yen,
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  Chinese renminbi, and Hong Kong dollars.
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  But they pay you, the investor, in Singapore dollars. And the Sing dollar has
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  been incredibly strong against those currencies.
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  So even if the building in Tokyo earns the exact same amount of yen as last
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  year, when you convert that yen back to Singapore dollars to pay the dividend,
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  you just get less cash. It's a translation loss. Exactly.
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  The underlying property might be fine. Occupancy might be fine.
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  But the money just shrinks on the plane ride home. And the second headwind, Hong Kong.
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  Specifically, Festival Walk. This has been a crown jewel for years,
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  but I'm seeing some cracks here. You are.
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  Tenant sales at Festival Walk softened by 3.4%. Is that just the economy slowing down?
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  Or is something else going on? It is partly the economy, but there's a specific
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  behavioral shift happening in Hong Kong.
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  The report calls it the outbound travel trend. Meaning people are leaving Hong
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  Kong. Not leaving for good, but traveling for their leisure and their shopping.
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  They're heading north into Shenzhen where things are cheaper or flying to Japan
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  because the yen is so weak.
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  So they're spending their weekends and their wallets outside of Hong Kong. Exactly.
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  And that is a fascinating structural problem for a local mall.
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  You can't fix that by just renovating the basement. That's a really tough one. It is.
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  Now, to be fair, the mall is still full. Occupancy is 100%.
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  But if the tenants aren't seeing sales growth because everyone's shopping in
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  Shenzhen, eventually they're going to push back on those rent hikes.
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  Yeah, you can't do a vivosity 15% uplift if the sales aren't there to support
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  it. I can't. So you've got this bifurcated portfolio.
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  Singapore's rocking. Overseas is dragging. Which brings us to the safety net.
• 10:50
  We touched on this earlier, the debt situation. You called it a hero, so let's verify that.
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  This is arguably the most critical part of the report for a risk-averse investor.
• 10:59
  I mean, if you get the debt wrong in a REIT, you implode. So give me the numbers.
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  How deep in the hole are they?
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  Their aggregate leverage is 37.3%. Okay, 37.3%. Contextualize that for me. Is that high?
• 11:12
  Low? It's very healthy. The regulatory limit in Singapore is 50%.
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  Most wheat managers get nervous if it goes above, say, 40 or 42%. So there's a big buffer.
• 11:22
  A massive buffer. And remember, it went down from 38.2% a year ago.
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  And the cost of that debt, you said it dropped.
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  The weighted average all-in cost of debt is 3.20%. 3.2%.
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  In 2026, that feels like they robbed a bank. I mean, U.S. Treasuries were yielding
• 11:38
  more than that not long ago. It's an excellent rate.
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  And it actually declined for the third consecutive quarter.
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  While other companies are refinancing debt at 4 or 5%, Empathy is driving their costs down.
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  That's the agility part of the theme. So they have a fortress balance sheet.
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  But a fortress is defensive. You build a fortress to hide.
• 11:58
  What's the plan for offense? What's the strategy going forward to actually grow?
• 12:03
  Well, they're doubling down on what works. And this is probably the biggest
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  news in the report, strategically speaking.
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  They're proposing to divest the office component of Festival Walk in Hong Kong.
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  Wait, just the offices, not the mall? Just the tower. They want to sell it for
• 12:18
  about 3.7 billion Hong Kong dollars.
• 12:20
  That's over 600 million Singapore dollars. Why split the baby?
• 12:24
  Why not just sell the whole thing? Because the mall is the performer.
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  The mall is where the retail gravity is. the office market in Hong Kong is. Yeah.
• 12:32
  Well, to put it politely, it's challenging. I've heard that.
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  Vacancy rates in Hong Kong offices are historically high.
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  So they're cutting off the weaker limb to protect the body. Capital recycling again.
• 12:43
  Sell the weak asset, take the cash, pay down more debt, or maybe reinvest in Singapore. Exactly.
• 12:49
  But think about what this does to the shape of the portfolio.
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  Post-investment, Singapore will make up 66% of their net property income.
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  66%. Two-thirds of their income will be from Singapore. Yes,
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  and 58% of their total assets by value.
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  They are effectively becoming a Singapore-heavy REIT with some international satellites.
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  That's a huge shift from when they first merged and, you know,
• 13:13
  promised this grand Pan-Asia diversification.
• 13:16
  It really feels like a retreat. It is a retreat to safety. And in this market,
• 13:20
  you have to ask, would you rather be diversified into weakness or concentrated in strength?
• 13:25
  Management is clearly choosing strength. Speaking of weakness,
• 13:29
  we have to touch on China.
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  Gateway Plaza in Beijing. I saw a note about a lease renewal there that looked
• 13:33
  painful. Yeah, this is a classic take the medicine moment.
• 13:37
  They had a top 10 tenant at Gateway Plaza. The lease wasn't even expiring until
• 13:40
  2028, but MPact-T went ahead and renewed it early, extending it all the way to 2031.
• 13:47
  Locking in a tenant for five more years sounds good. What's the catch? The catch is the price.
• 13:52
  The report says it required a mid-teens rental reduction. Ouch.
• 13:56
  So they slashed the rent by, what, like 15%? Roughly, yes.
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  Why would you voluntarily cut your own revenue if the lease wasn't even up yet?
• 14:04
  That sounds a little desperate. I don't think it's desperate. It's pragmatic.
• 14:08
  The Beijing office market is brutal right now. Vacancy is high.
• 14:12
  If that tenant decided to walk away in 2028, MPAT-CT might have been left staring
• 14:18
  at an empty floor for two years.
• 14:20
  So they're buying certainty. It's the bird in the hand strategy.
• 14:24
  Exactly. They are trading potential upside for guaranteed cash flow.
• 14:29
  It hurts the top line today, but it protects the dividend tomorrow.
• 14:32
  Okay. Before we wrap up, I want to briefly mention the Green Angle.
• 14:35
  I thought they partnered with SP Group.
• 14:37
  Yes. For the Harborfront Precinct, they're building a distributed district cooling system.
• 14:42
  District cooling. That's basically a giant shared air conditioner for multiple
• 14:46
  buildings, right? Pretty much.
• 14:47
  Instead of every building running its own inefficient chillers,
• 14:50
  you have one centralized high-efficiency plant.
• 14:53
  It saves energy, it cuts carbon emissions, and crucially, it lowers operating
• 14:58
  costs in the long run. And it's expected to be ready by 2031.
• 15:01
  That's right. And this helps with the ESG scorecards big time.
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  They've been included in the FTSA for Good Indices.
• 15:07
  Which is important for institutional money. Very. And for our listeners who
• 15:11
  think ESG has just fluffed those big pension funds, they often cannot buy a
• 15:16
  stock unless it hits these ESG benchmarks.
• 15:18
  So staying in that index literally keeps the stock price supported.
• 15:22
  Got it. Okay, let's bring it all home.
• 15:25
  Conclusions. What is management telling us about the future?
• 15:28
  Well, they're being realistic.
• 15:30
  They aren't painting some rosy picture of a global boom. They cite geopolitical
• 15:33
  tensions, trade disputes, and shaky business confidence as major risks.
• 15:38
  So don't expect a V-shaped recovery in China or Japan next quarter. No.
• 15:42
  Their outlook is basically, Singapore anchors stability.
• 15:46
  They're going to focus on cash flow protection, so keeping buildings full,
• 15:49
  even if it means lowering rent slightly, like in Beijing and tenant retention.
• 15:53
  It's a safety-first strategy. 100%. They're shrinking the top line,
• 15:57
  slightly selling assets, cutting rents where they have to clean up the balance sheet.
• 16:01
  They are retreating to the safety of the Singapore market.
• 16:03
  And for the people holding the stock right now, when do they get that check? Mark your calendars.
• 16:08
  The distribution is payable on Wednesday, March 18th, 2026.
• 16:13
  March 18th. Nice. So, to summarize, M-Pass Heat Tea is navigating a storm.
• 16:19
  They are doing it by tightening the ship, tossing some heavy cargo overboard
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  the divestments, and steering toward the calmest harbor they know, which is Singapore.
• 16:28
  Which leads me to my final thought for the day. And this is something for you,
• 16:31
  the listener, to chew on. Means hear it.
• 16:33
  The trust is called Maple Tree Pan-Asia Commercial Trust.
• 16:37
  But as we just discussed, after they sell the festival walk office,
• 16:41
  66% of their income, two-thirds, is going to come from Singapore.
• 16:45
  That is a dominant majority.
• 16:46
  So the question is, at what point does this stop being a Pan-Asia play?
• 16:50
  If you're buying this for broad Asian exposure, are you actually getting it anymore?
• 16:55
  That's the multi-billion dollar question. Or are you effectively buying a Singapore
• 16:59
  REIT that just happens to own a few foreign souvenirs?
• 17:02
  It's a strategy of concentration versus diversification.
• 17:06
  And right now, looking at this report, concentration looks a lot safer than diversification.
• 17:13
  But investors need to ask themselves if that is the exposure they signed up
• 17:16
  for. Definitely something to think about before you place your next trade.
• 17:20
  And that is all we have time for today on The Deep Dive. Thank you for listening,
• 17:23
  and we'll catch you on the next one.
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  This content is intended to serve strictly and only as an informational,
• 17:28
  independent, objective summary of recent events and should in no way be interpreted,
• 17:33
  construed or relied upon by any party as inside information or financial advice. See you next time.