JAKARTA (TheInsiderStories) – The manager of Lippo Malls Indonesia Retail Trust (LMIRT) said it will pay the upcoming distribution for its S$120 million (US$86.33 million) or S$6.6 per perpetual securities. Last May, the LMIRT Management Ltd., did not accrue a distributions to perpetual holders to an upcoming payable on June 19.
At the first quarter of 2020, the manager shared a distribution per unit of S$0.12, being 24.1 percent of the amount available for distribution of S$14.6 million. The balance has been retained as prudent contingency from the potential pandemic impact, including the loss of rental income as a result of the closure of all LMIR Trust’ retail malls and retail spaces.
LMIRT has issued perpetual securities of S$140.0 million at a distribution rate of 7.0 percent per annum and $120.0 million at a distribution rate of 6.6 percent per year in September 2016 and June 2017, respectively. The issuer is required to give not less than three days’ notice to the note trustee, whether any any distributions to the perpetual security holders would be made.
“In light of the COVID-19 pandemic that impacting all economies and businesses globally, we have taken a precautionary stance to conserve cash for capital. Especially when we will be seeing greater impact of the pandemic in the second quarter as our malls have been temporarily closed in a staggered way from March, “ said the statement.
On March 27, the Trust announced the temporary closure of 11 retail malls within the Greater Jakarta region, Bandung and Bali from to April 9. This temporary closure was extended to entire portfolio of 23 retail malls and seven retail spaces on 1 April and continues in effect until May 13.
During the temporary closure period, the Trust will not be collecting rent from those tenants unable to operate their businesses in the mall. Despite reducing operating costs by 30 to 40 percent with a 70 percent reduction in utilities and 50 percent in outsourced security and cleaning services, net property income is expected to be significantly lower in 2Q of 2020 due to the mall closures.
“Nevertheless, the Trust remains in compliance with our debt financial covenants and has adequate financial reserves to fulfil our obligations into the foreseeable future,” said James Liew, CEO of the REIT Manager.
For the quarter, gross rental income dipped 2.3 percent to S$36.6 million, largely due to the expiry of master leases under Lippo Mall Kemang on Dec. 16, 2019, which resulted in a rental income reduction of approximately S$2.1 million for 1Q 2020, partially offset by positive rental reversions.
Carpark income for the 1Q of 2020 was weighed down by a S$1.9 million slide from the expiry of the Lippo Mall Kemang master leases, impact from the increasing use of ride-hailing applications and the commencement of the impact from the Pandemic. This was partially offset by the increase in service charge and utility recovery compared to 1Q 2019, resulting in total gross revenue for 1Q 2020 slipping 1.5 percent to S$64.9 million.
Consequently, net property income for 1Q 2020 decreased 1.9% to S$39.8 million from S$40.5 million in 1Q 2019. Total property operating expenses for 1Q 2020 declined 0.9% YoY or S$0.2 million to S$25.2 million on slightly higher property operating and maintenance expenses of S$20.8 million. These expenses were partially offset by lower allowance for doubtful debts of S$1.0 million compared to 1Q 2019.
As of March 31, LMIR Trust’ gearing ratio stood at 42.1 percent, below the new regulatory limit of 50.0 percent , with interest cover at 4.3 times. The increase in the company’ current gearing ratio compared to 35.9 percent as at Dec. 31, 2019 was mainly due to the sharp depreciation of the Indonesian Rupiah against the Singapore Dollar in 1Q of 2020.
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