Property own by Lippo Group - Photo by Lippo Group

JAKARTA (TheInsiderStories) – Lippo Malls Indonesia Retail Trust (LMIRT) priced a US$250 million five-year bond offering at 7.25 percent, in Asia’ first US Dollar high-yield bond issued by a REIT, the trust said in a filing to SGX on Thursday (06/13), Shentonwire reported.

The offering met with a “robust response” from fixed income investors in Asia and Europe, with 78 percent of the bonds sold to Asian investors and the remainder to European and offshore U.S. investors, LMIRT said. The investor base included high quality institutions, insurance companies and private banks, the trust said.

“This is the trust’s inaugural U.S. dollar bond offering, allowing us to diversify our financing tools and to tap on both a wider institutional investor base and new currency markets for our funding resources,” James Liew, CEO of the REITs manager, said in the statement.

He added: “Proceeds from the notes will primarily be used to refinance the majority of our debt maturing this year and in 2020, thereby extending our weighted average maturity of debt from 2.0 years to over 4.3 years.”

The notes will be issued at 98.973 percent of the principal amount, the filing said. The trust also said it entered a swap transaction to swap the US Dollar proceeds into Singapore dollars at a fixed interest rate of around 6.75 percent, the filing said.

BNP Paribas, CIMB Bank’s Singapore branch, Credit Suisse (Singapore) and Deutsche Bank’s Singapore branch were appointed joint lead managers, LMIR Trust said.

The notes are expected to be rated Ba3 by Moody’s and BB by Fitch, LMIR Trust said.

Previously, LMIRT reported its first-quarter net income dropped 7.8 percent on-year to $29.98 million from $40.30 million a year ago. The decline was due to lower rental income from Lippo Plaza Batu and Palembang Icon on the expiry of the master leases in July 2018, and the perennial weakening of the Indonesian Rupiah by 1.6 percent from first-quarter 2018.

Total gross revenue increased 34.2 percent on-year to $36.34 million in the quarter ended March 31, as the trust took over the collection of service and utility recovery charges from tenants, the trust said. But gross rental income fell 7.1 percent on-year in the quarter to $27.70 million, pointing to lower rental income from Lippo Plaza Batu and Palembang Icon on the expiry of their master leases in July 2018, and as the rupiah continued to weaken.

The distribution per unit (DPU) was 0.55 Singapore cent for the quarter, down 17.9 percent from 0.67 Singapore cent in the year-ago quarter. But the trust added that on a quarter-on-quarter basis, its results were showing a recovery. Net property income rose 5.5 percent on-quarter in the first quarter, it said.

Gouw Vi Ven, CEO of LMIRT Management, the REIT manager notes that LMIRT has also commenced asset enhancement initiatives at Sun Plaza, which is expected to be completed by 2021. The refurbishment works include a total uplift of its façade and interiors, as well as reconfiguration of the mall’s layout to maximize useable space.

The trust is also looking to boost long term growth inorganically with the proposed acquisition of the iconic Lippo Mall Puri for $354.7 million.

“Puri Mall has high growth potential in the long run as it is part of the largest premium mixed-use development in West Jakarta,” says Gouw.” Moreover, with rental support from our sponsor, this property is NPI yield accretive and will generate long-term value for our unitholders.”

As of end-March, the REITs said its portfolio occupancy was at 91.5 percent, compared with an industry average of 80.7 percent. LMIR Trust’ portfolio has 23 retail malls and seven retail spaces in other malls. Units of LMIRT closed 1.0 percent lower at 19.8 cents on Monday, before the announcement of its first quarter 2019 results.

Written by Staff Editor, Email: theinsiderstories@gmail.com