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First Reit agrees to Surabaya asset swap with sponsor

HOSPITAL owner First Reit has inked a deal to sell an empty plot of land in Surabaya for S$8.2 million and later on an existing hospital building next to the plot for at least S$27.5 million to its sponsor Lippo Karawaci.

Lippo Karawaci intends to use the land plot for part of an upcoming mixed development that will include a new hospital, mall, hotel and apartments, First Reit said, adding that it has agreed to buy this new hospital for S$90 million.

First Reit will sell the existing hospital - one of its oldest assets - to Lippo and buy the new hospital from Lippo only after the new hospital is completed, which it expects to occur in 2019.

In total, First Reit will get at least S$35.7 million from selling the land parcel and the existing hospital building. This sum was more than double the combined S$16.8 million it had paid to acquire the two properties in December 2006 as part of its initial portfolio, it said.

It added that the sum was 7.5 per cent above the two properties' combined appraised value of S$33.2 million as at Oct 31, 2014.

As for its acquisition of the upcoming new hospital, First Reit said the S$90 million purchase price was at a 12.3 per cent discount off the average of two independent valuations.

It plans to fund its purchase of the new hospital with debt and cash, including the proceeds from selling the land plot and the existing hospital.

A First Reit spokesman said that the plot of land to be sold to Lippo Karawaci originally had some ancillary structures on it but was now empty.

The asset size of First Reit's portfolio will grow 6 per cent from S$1.17 billion to S$1.24 billion when the asset swap is completed.

Lippo Karawaci, a property developer, is a unit of Indonesian conglomerate Lippo Group.