JAKARTA (TheInsiderStories) – An Indonesian Real Estate Investment Trust (REIT) publisher company, Lippo Malls Indonesia Retail Trust (LMIRT), plans to acquire Lippo Mall Puri for US$4.97 billion or around Rp3.70 trillion, from PT Mandiri Cipta Gemilang, a subsidiary of PT Lippo Karawaci Tbk (IDX: LPKR), said an official statement on Tuesday (03/12).
According to CEO of REIT manager, LMIRT Management Gouw Vi Ven, with positive economic conditions in Indonesia, for example with the strengthening of the rupiah against the US dollar, the conditional buying and selling agreement for Puri Mall allowed the company to lock in attractive prices, because the mall was “an iconic and main asset,” with a surrounding prosperous residential area.
He expects that the purchase can generate mall property net income to around 9.41 percent, above the net property portfolio output of 8.94 percent at the end of 2018.
He explained, the purchase price was a 5.13 percent discount lower than the two independent mall evaluations from Cushman & Wakefield VHS and Colliers International Consultancy & Evaluation in Singapore.
In addition, because Puri Mall is still due in the shopper’s recognition, tenant’s performance, and leasing that passes, PT Mandiri Cipta Gemilang will provide collateral for net property income of Rp348 billion by the end of 2019, which will increase to Rp356 billion in December 2023.
As known, Puri Mall is a retail component of St Moritz Jakarta Integrated Development, the largest mixed-use development in West Jakarta. The mall has been operating since 2014, with many rents still in the first term and will expire in 2019 and 2020. While, the development of St. Moritz will not be completed until 2020.
PT Mandiri Cipta Gemilang once filed a civil suit with the Jakarta regional government in an agreement that included the retail space and connecting two eight-story buildings of Lippo Mall Puri with the demand that the government return the company’s ownership of land under the trail and issuing licenses to use and operate walkway.
After the agreement is expected to be completed in the second half of this year, the LMIRT portfolio will have 31 properties, including 24 retail malls and seven retail spaces. With that, assets can increase by 19.0 percent to Rp23.21 trillion from Rp19.51 billion.
Such sales for Lippo have significant market uncertainties and risks that are beyond management’s control. If this purchase is really, the LMIRT is likely to have to increase equity to finance purchases because the trust does not have enough headroom to meet the 45 percent gearing limit regulation to fully finance the purchase.
Lippo must also contribute to its equity portion in accordance with 31 percent of its share ownership in LMIRT or sell its portion of shares.
It was reported that LPKR did have a limited capacity to continue selling its assets because large and mature inventory assets with good quality continued to decline.
In October 2018, Lippo sold 17.6 percent of First REIT shares to an affiliated company, OUE Lippo Healthcare Limited. It’s estimated that these funds can support Lippo liquidity in the next 12 months and allow the company to pay debt obligations that are due.
Written by Daniel Deha, Email: email@example.com