Photo by Lippo Karawaci

JAKARTA (TheInsiderStories) – Publicly listed property developer PT Lippo Karawaci Tbk (IDX: LPKR) has announced that a proposed joint acquisition of Lippo Plaza Jogya (LPJ) and Siloam Hospitals Yogyakarta (SHY) by Lippo Malls Indonesia Retail Trust (LMIRT) and First REIT, for a total combined value estimated at Rp 834.6 billion (US$61.82 million) is on again. Both trusts are affiliated with Lippo Group.

LMIRT and First REIT have concluded a Joint Venture deed in connection with the Joint Acquisition of an integrated development in Yogyakarta, from LPKR. The Property comprises a retail mall component known as Lippo Plaza Jogya and a hospital component called Siloam Hospital Yogyakarta.

The transaction of these properties acquisitions is conditional upon the approval of Unitholders, and as well by approvals from the Monetary Authority of Singapore and Singapore Exchange Securities Trading Limited.

The Joint Acquisition structure is based on the absence of any regulations permitting the regional government of Yogyakarta to subdivide property and issue separate strata titles for LPJ and SHY.

SHYG has a Gross Floor Area (GFA) of 12,474 sqm, with a maximum capacity of 220 beds; it commenced operations in July 2017 with a Centre of Excellence for Neuroscience and Cardiology. LPJ has a GFA of 66,098 sqm (comprising of 35,965 sqm for mall space and 30,133 sqm for the parking area) with a diverse range of tenants including a cinema, food retailers and a hypermarket.

LPKR President Director Ketut Budi Wijaya stated, “In the midst of a weak property market, we have reversed the trend by launching a high quality yet affordable new modern township in the heart of Indonesia’s industrial center, Meikarta”.

Within the first 4 months of its initial launch date in mid-May 2017, Meikarta revenue reached Rp 4.9 trillion and boosted LPKR nine months’ marketing sales to Rp 5.4 trillion.

“We believe that Indonesia’s property market will start to recover by end-2017. We will work hard, and consistently implement our asset light strategy to grow our business.”

Lippo Karawaci is one of the largest property developers in Indonesia, with a sizable land bank of around 1,330 hectares as of Dec. 31, 2016. It owns and manages — either directly or via its real estate investment trusts — 46 malls, 23 hospitals and nine hotels. Lippo Karawaci owns a 33 percent stake in First REIT (unrated) and a 29 percent stake in LMIRT (Baa3 stable).

Lippo Karawaci achieved only Rp1.2 trillion of marketing sales in 2016, significantly below its target of Rp3.5 trillion. The developer also completed only Rp938 billion of asset sales compared to its target of IDR1.7 trillion for the same year.

While the developer targets to achieve Rp3.1 trillion of marketing sales and IDR6.8 trillion of asset sales in 2017, Moody’s Ratings believes those targets are optimistic and expects the developer to lower its targets in the second half of this year.

The developer has not launched any new projects since the beginning of this year, as it did not receive sufficient demand for priority passes at its key project, Urban Homes — a residential property development targeting the lower-middle income group. Indonesian developers typically use sales of priority passes to gauge market demand before deciding on a new launch.

Moody’s base case expectation is for Lippo Karawaci to achieve marketing sales of Rp2 trillion and complete asset sales of Rp800 million in 2017.

US$1: Rp13,500

Writing by Linda Silaen, Email: linda.silaen@theinsiderstories.com

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