Latest / Investor Exchange / A Deep Dive into Mapletree Pan Asia Commercial Trust Q3 Results and Asian Real Estate Insights

Transcript

A Deep Dive into Mapletree Pan Asia Commercial Trust Q3 Results and Asian Real Estate Insights · Investor Exchange

• 0:00
  Music.
• 0:15
  They've just come out with their Q3 FY2425 results.
• 0:19
  And we've got a ton of reports and analyses to unpack.
• 0:22
  Yeah, we do. So what we're going to be doing is figuring out what's behind their
• 0:26
  performance, looking at, you know, what's going well, what's maybe not going so well. Right.
• 0:30
  And then most importantly, what does this all mean for you as someone who's
• 0:34
  interested in the Asian real estate market?
• 0:36
  Yeah, for sure. I think it's an interesting time for MPAC-T.
• 0:40
  You know, they're really trying to make a name for themselves as a key player
• 0:44
  in these major Asian gateway cities.
• 0:47
  And they've got 17 properties across five markets.
• 0:50
  So we're talking Singapore, Hong Kong, China, Japan, and South Korea.
• 0:56
  That's a big footprint. Yeah, it is. But, you know, the global economic picture
• 0:59
  is a little shaky right now. So there are definitely some challenges that they're navigating.
• 1:03
  Yeah, for sure. And that's one of the first things that kind of jumped out at
• 1:06
  me when I was looking at their results.
• 1:08
  You know, their gross revenue is down 7.4% year on year.
• 1:11
  Right. And then net property income also took a hit, down 8.5% compared to last year.
• 1:18
  Yeah, that's definitely something to pay attention to. You know,
• 1:21
  it makes you wonder what's happening behind the scenes. For sure.
• 1:24
  So is there anything in particular that is contributing to that?
• 1:28
  Well, one of the things that MPAC-C has highlighted themselves is the strengthening Singapore dollar.
• 1:33
  Okay. So a good chunk of their earnings are coming from properties outside of Singapore.
• 1:39
  Right. And when the Singapore dollar strengthens, it actually kind of shrinks
• 1:43
  those overseas earnings.
• 1:45
  When they convert it back. Ah, okay. So it's almost like they're earning less
• 1:49
  not because their properties aren't doing well, but because the currency exchange
• 1:53
  is kind of working against them. Exactly. It's kind of like a hidden cost.
• 1:56
  Right. And especially when you're dealing with so many different currencies
• 1:58
  across Asia, that must be a real challenge for them to kind of plan and forecast.
• 2:02
  Oh, absolutely. It's a constant juggling act. And for you as an investor,
• 2:06
  this means that, you know, you can't just focus on how well their properties are doing.
• 2:10
  You got to look at those bigger economic forces at play as well.
• 2:13
  Right. Currency fluctuations can have a huge impact on re-performance.
• 2:17
  Okay. So we've got this currency headwind going on. What about that divestment
• 2:21
  of Maple Tree Anson? Did that play a role in this revenue dip?
• 2:25
  Yeah, definitely. So selling that property brought in a nice lump sum of cash up front.
• 2:29
  Right. But now, obviously, they're not getting that rental income that it used to generate.
• 2:34
  Right. So it's kind of short-term gain, but then long-term loss of that income
• 2:38
  stream. Yeah, exactly. It's a trade-off they had to consider. Okay.
• 2:42
  So we've got the strong Singapore dollar. We've got the Maple Tree Anson divestment.
• 2:46
  Anything else that we need to be aware of that's maybe dragging down their performance?
• 2:51
  Well, the performance of some of their properties in specific markets hasn't
• 2:55
  been as strong as they might have hoped.
• 2:57
  Okay. Which markets are we talking about? Well, China, for one,
• 3:00
  you know, their recovery after the pandemic has been slower than expected,
• 3:04
  and that's impacting consumer spending business expansion.
• 3:08
  And ultimately, it affects occupancy rates and rental income for MPAX.
• 3:12
  Right. So it's kind of a ripple effect.
• 3:14
  That whole economic slowdown in China is putting pressure on MPAX-ET's earnings from that market. Okay.
• 3:22
  And were there any other markets that were kind of underperforming?
• 3:25
  Yeah, Japan in particular, the Makuhari submarket, you know,
• 3:30
  they've got three office buildings there that are facing some headwinds.
• 3:33
  Okay, so not exactly smooth sailing in those markets.
• 3:38
  I'm going to come back to those challenges in a bit. But before we do,
• 3:40
  I want to talk about something that seems to be going really well for them, and that's Vivosity.
• 3:45
  Yeah, everyone's talking about Vivosity. It is. It's like the star performer right now. Uh-huh.
• 3:49
  And I mean, it's Singapore's largest mall, so it's a pretty big deal. Oh, yeah, it is.
• 3:53
  Yeah. And they're seeing increased shopper traffic, strong tenant sales.
• 3:57
  So why is Vivosity doing so well when some of these other properties are kind of struggling?
• 4:02
  Well, I think it's a few things. First of all, location, location,
• 4:05
  location. Of course, prime location.
• 4:06
  Exactly. And they've also got a really smart mix of tenants.
• 4:10
  So something for everyone.
• 4:12
  But most importantly, they're not just sitting back and watching the world go by.
• 4:16
  They're actively adapting to, you know, how consumer trends are changing.
• 4:20
  Okay. So how are they doing that? Well, they're realizing that people don't
• 4:23
  just want to go to the mall to buy stuff anymore. Right. They want experiences.
• 4:27
  So you're seeing those Instagrammable pop-up events, celebrity appearances.
• 4:32
  They're really creating a buzz. Right. So they're making Vivosity the place
• 4:36
  to be. Exactly. It's savvy marketing. Yeah, very smart.
• 4:39
  So Vivosity, definitely a bright spot for them. But we still need to unpack
• 4:44
  those underperforming markets in China and Japan.
• 4:47
  Yeah, we do. So let's dig deeper into those and see what's really going on.
• 4:50
  Let's do it. All right, so let's start with China.
• 4:52
  You know, their recovery post-pandemic has been slower than expected.
• 4:55
  And this is having a ripple effect on MPaxte's properties there.
• 4:59
  Businesses are hesitant to expand. And that all translates into lower occupancy
• 5:05
  rates, weaker rental income for impact, right?
• 5:08
  So it's like this domino effect, the overall economic slowdown in China is putting
• 5:12
  pressure on their earnings from that market.
• 5:14
  Are they just riding this wave out or are they doing anything to try to mitigate this impact?
• 5:20
  Yeah, they're definitely not just sitting still. They're actively exploring
• 5:24
  different options to try to improve the performance of their Chinese properties.
• 5:28
  Okay. What kinds of things are we talking about? Well, it could involve things like, you know,
• 5:32
  adjusting rental rates to attract new tenants, maybe offering more flexible
• 5:37
  lease terms, or even repositioning their properties to appeal to a different segment of the market.
• 5:43
  Right. So really kind of being agile and adapting to what's happening on the
• 5:46
  ground. Exactly. Okay. So what about Japan? What's going on in the Makuhari sub-market?
• 5:52
  Well, Japan's office market as a whole, especially in certain sub-markets like
• 5:55
  Makuhari, is facing some challenges.
• 5:57
  Okay. You've got the rise of remote work, which is obviously reducing demand for office space.
• 6:02
  And you've also got this shift in corporate preferences towards newer,
• 6:06
  more centrally located buildings.
• 6:08
  Okay. So the older properties, like the ones that Impacte owns in Makuhari,
• 6:12
  are kind of at a disadvantage. Exactly. It's a tough spot to be in. Yeah.
• 6:15
  So what are they doing about it? Well, they're exploring options to potentially
• 6:19
  redevelop or repurpose those properties to make them more attractive to tenants.
• 6:23
  This could mean anything from, you know, upgrading the facilities to maybe converting
• 6:28
  some of the space for alternative uses like co-working spaces or even residential
• 6:33
  units. Oh, interesting.
• 6:35
  Okay. So really trying to think outside the box and find new ways to utilize those spaces. Okay.
• 6:41
  So we've talked about these challenges in China and Japan. It makes me wonder
• 6:44
  about their overall financial health.
• 6:47
  You know, we saw those drops in revenue and net property income,
• 6:50
  and now we're hearing about these market-specific headwinds.
• 6:53
  What's the impact on their bottom line? And I guess more importantly,
• 6:57
  for people like you who are interested in potentially investing in this REIT,
• 7:00
  what does it mean for you? Yeah, well, one of the key metrics that investors
• 7:05
  look at is the distribution per unit or DPU.
• 7:08
  And for this quarter, MPAC-T announced a DPU of 2.00 Singapore cents.
• 7:13
  Okay. And how does that compare to last year? Well, it's down 9.1% compared
• 7:16
  to the same period last year. Okay, so not exactly the news that gets investors excited.
• 7:21
  No, not really. This decrease in DPU is a direct reflection of all those challenges
• 7:26
  we've been talking about. you know, the strong Singapore dollar,
• 7:29
  the divestment of maple transin, and the weaker performance in certain markets.
• 7:33
  Right. So those challenges are having a real impact on their ability to,
• 7:36
  you know, distribute profits to unit holders. Yeah, for sure.
• 7:40
  Okay, well, let's shift gears for a second and talk about vivacity again.
• 7:43
  We talked about their impressive performance, but can you give us some more
• 7:46
  concrete numbers in terms of shopper traffic and tenant sales?
• 7:49
  Yeah, so shopper traffic in Q3 FY2425 surged by 15.6% compared to the previous
• 7:57
  quarter. Wow, that's huge.
• 7:59
  And tenant sales jumped even higher, recording a 13.1% increase.
• 8:03
  Okay, so they're really defying the odds and drawing those crowds. Absolutely.
• 8:07
  And that's clearly a result of their strategy to create those engaging experiences
• 8:10
  that we were talking about earlier. Right, they're giving people a reason to come to the mall.
• 8:13
  Exactly. But with all this economic uncertainty and those challenges in China
• 8:18
  and Japan, do you think they can keep this momentum going?
• 8:22
  Or is this just a temporary bright spot? Yeah, well, I think that's the million-dollar question.
• 8:27
  Vivosity's current performance is great, don't get me wrong,
• 8:30
  but no business is completely immune to those bigger economic forces at play.
• 8:35
  Right. If the global economy takes a downturn, everyone's going to feel it.
• 8:38
  Exactly. So it's definitely a wait-and-see situation. Yeah. But I do think it's
• 8:42
  encouraging to see that they're being so proactive, especially at Vivosity.
• 8:46
  Yeah, absolutely. They're not just sitting back and letting things happen.
• 8:48
  They're trying to make things happen. Right.
• 8:51
  And speaking of being proactive, they're also moving forward with those asset
• 8:54
  enhancement initiatives at Vivosity.
• 8:56
  Remember that 10% projected return on investment we talked about?
• 9:00
  Well, they're currently in the process of upgrading Basement 2,
• 9:03
  and they expect that to be completed by the end of 2025.
• 9:07
  Okay. So what are they actually doing down there in Basement 2?
• 9:10
  Well, essentially, they're maximizing every square foot of space to create a
• 9:14
  more dynamic and engaging shopping experience.
• 9:17
  So think more food kiosks or reconfigured layout to accommodate more retail
• 9:22
  space and even converting some car park areas for retail use.
• 9:26
  Interesting. So really kind of squeezing every drop of potential out of that space. Exactly. Okay.
• 9:31
  Well, another thing that they've been talking a lot about are their sustainability initiatives.
• 9:36
  And these days, you know, investors are really paying attention to a company's ESG performance.
• 9:41
  Oh, for sure. Sustainability is not just a buzzword anymore.
• 9:43
  It's a key factor that investors are considering.
• 9:46
  Yeah. Well, so what's the story with Impact Tea and sustainability?
• 9:49
  Are they walking the walk or just talking the talk? Well, they seem to be taking it seriously.
• 9:54
  They've got a comprehensive program in place built around four key pillars,
• 9:58
  building a resilient business, upholding high ethical standards.
• 10:02
  Safeguarding against the impacts of climate change, and enhancing social value
• 10:06
  in the workplace and community.
• 10:08
  Okay, so it's not just about being green. It's about this holistic approach to sustainability.
• 10:12
  Right, encompassing all those environmental, social, and governance factors.
• 10:17
  Exactly. So what are some concrete examples of what they're actually doing?
• 10:20
  Because, you know, I'm always a little bit skeptical of companies that just
• 10:23
  talk about it, but don't actually take any action.
• 10:25
  Yeah. Well, for example, they've committed to planting over 320 trees across
• 10:29
  their properties in Singapore, China and Japan. OK.
• 10:32
  It's symbolic, but it's also a tangible commitment to environmental stewardship.
• 10:38
  Right. Shows they're putting their money where your mouth is.
• 10:40
  Yeah. And they're also focusing on employee training and development with a
• 10:43
  target of achieving a minimum of 40 training hours per employee. Oh, wow.
• 10:48
  OK, so investing in their workforce. Exactly.
• 10:51
  But let's be honest, investors ultimately care about returns.
• 10:55
  How do these sustainability initiatives actually translate into value for unit holders?
• 11:01
  Well, the link between sustainability and financial performance is becoming clearer and clearer.
• 11:05
  And by incorporating sustainability into their operations, MPAC-C is positioning
• 11:10
  themselves as a responsible and forward-thinking company, which can attract
• 11:14
  investors who prioritize ESG factors.
• 11:17
  Right. So it could potentially lead to increased demand for their units. Yeah.
• 11:21
  Exactly. Okay. So it's a win-win situation. They're doing good for the planet
• 11:25
  and society and potentially reaping financial rewards in the process.
• 11:29
  That's the idea. OK, well, let's zoom out for a second. We've been talking about
• 11:31
  MPAS-CT, but the global economic backdrop is constantly shifting.
• 11:37
  How are those broader economic trends impacting MPAS-CT and the Asian real estate market as a whole?
• 11:44
  Yeah, that's a crucial point to consider. The global economic landscape is facing
• 11:48
  some headwinds right now.
• 11:50
  You know, geopolitical uncertainties, evolving economic and monetary policies.
• 11:54
  Remember how we talked about the Fed's.
• 11:57
  Cautious approach to rate cuts. It's creating a complex and dynamic environment
• 12:02
  for businesses to navigate.
• 12:03
  And real estate is certainly not immune to these pressures. Yeah.
• 12:06
  And real estate is often seen as kind of a barometer of economic health.
• 12:10
  So what's the outlook for MPAC-ST in the Asian real estate market in light of all of this? Yeah.
• 12:15
  Well, I think predicting the future is always a tricky business.
• 12:18
  Especially when it comes to the economy.
• 12:20
  But by analyzing MPAC-AT's own statements And considering what the experts are
• 12:25
  saying, we can at least get some insights into their outlook and what it might
• 12:29
  mean for potential investors.
• 12:30
  OK, so let's dive into those statements and expert opinions and see what they're saying.
• 12:35
  OK, so digging into MPATI statements and kind of the general consensus from
• 12:38
  experts, one of the key themes that keeps coming up is this idea of stability.
• 12:43
  Stability, OK. Yeah, they're really emphasizing their commitment to maintaining
• 12:46
  healthy occupancy levels across their entire portfolio.
• 12:50
  Which makes sense, right? Right. I mean, that's that's kind of their bread and
• 12:53
  butter. It's like making sure that foundation is solid before you try to build
• 12:56
  anything else on top of it. Exactly.
• 12:58
  And in a volatile market like this,
• 13:00
  that kind of stability can be really attractive to investors. For sure.
• 13:04
  For sure. So steady occupancy equals more predictable income stream,
• 13:08
  which is, you know, a lot of investors are looking for. Absolutely.
• 13:11
  And they're also talking about implementing cost management measures to,
• 13:15
  you know, make sure that they're operating as efficiently as possible. Right.
• 13:19
  Tightening the belt a little bit. Yeah. Making sure every dollar counts.
• 13:22
  Exactly. It's all about being prudent in uncertain times. Yeah.
• 13:26
  And in addition to that, they're still investing in those asset enhancement
• 13:29
  initiatives to further boost the performance of their properties. Right.
• 13:34
  They're not afraid to put money back into the business, especially when it comes
• 13:37
  to vivacity. Remember that 10 percent projected return on investment we talked about?
• 13:42
  That's pretty impressive. Yeah. So they're not just sitting back and collecting rent.
• 13:45
  They're actively looking for ways to add value and increase returns.
• 13:49
  For sure. So they're thinking long term.
• 13:51
  Exactly. And then finally, they're
• 13:53
  also exploring what they call portfolio optimization opportunities.
• 13:57
  Okay. What does that mean? So it could involve things like acquisitions,
• 14:00
  divestments, maybe even strategic bignerships.
• 14:02
  They're really keeping all their options open and looking for ways to,
• 14:06
  you know, create value for unit holders.
• 14:09
  Well, I think we've covered a lot of ground today. We've looked at EmpathCT's
• 14:12
  performance, their strategy, their challenges, their outlook.
• 14:16
  Yeah, I think we've given a pretty good overview. But I want to leave our listeners
• 14:19
  with something to think about as they continue to learn about EmpathCT and the
• 14:23
  Asian real estate market. Okay, all ears.
• 14:25
  So we've talked a lot about numbers and strategies, but there's this bigger
• 14:29
  question that we need to consider.
• 14:31
  What does the future hold for retail and office spaces in Asia?
• 14:35
  Yeah, that's a big one. Think about it. e-commerce is
• 14:39
  booming hybrid work models are becoming the
• 14:42
  norm and sustainability is becoming more and more important
• 14:45
  yeah so are traditional retail malls and office towers
• 14:48
  going to become obsolete it's definitely something to think about you know the
• 14:52
  way we live work and shop is changing and that's going to have a huge impact
• 14:56
  on real estate right so will shopping malls become more like these experiential
• 15:00
  playgrounds blending entertainment dining and community events with traditional retail.
• 15:06
  Yeah. And will offices become more like collaborative hubs designed for creativity and connection?
• 15:12
  Right. These are just some of the questions that we need to grapple with as
• 15:15
  we move forward. Absolutely.
• 15:17
  And the answers are going to shape not just the future of real estate,
• 15:20
  but the future of our cities and the way we live our lives. Exactly.
• 15:23
  Well, on that note, we've reached the end of our deep guise into Empath C.
• 15:27
  I hope you found this discussion insightful and informative.
• 15:30
  Music.