First Reit, Lippo Malls Trust buy integrated development in Yogyakarta

FIRST Reit has entered into a joint venture with Lippo Malls Indonesia Retail Trust (LMIRT) to jointly buy an integrated development in Yogyakarta, Indonesia, from their sponsor PT Lippo Karawaci Tbk.

The property comprises Siloam Hospitals Yogyakarta (SHYG) and a retail mall component known as Lippo Plaza Jogja (LPJ).

The purchase consideration for SHYG at S$40.82 million, which will be borne by First Reit, represents a discount of 9.69 per cent to S$45.20 million, being the higher of two independent valuations.

The lower valuation by KJPP Willson & Rekan (in association with Knight Frank) put its value at S$41.52 million as at end-September 2015.

The property is held under one "Right to Build" (Hak Guna Bangunan) title certificate and currently, in Yogyakarta, there are no regulations permitting the regional government of Yogyakarta to subdivide the property and issue separate strata titles for SHYG and LPJ.

First Reit and LMIRT have, therefore, decided to jointly acquire the asset. They own mostly hospitality and retail assets in Indonesia respectively.

The property, comprising a hospital and a retail mall, is a 10-storey building including one basement and one mezzanine level on a total land area of 13,715 square metres, with a shared multi-storey parking area on the upper levels and a rooftop helipad.

The joint acquisition will boost First Reit's portfolio to 18 properties and strengthen its asset base by 3.15 per cent to S$1.31 billion, from S$1.27 billion.

First Reit will finance the SHYG portion of the joint acquisition by a drawdown from its debt facilities and internal cash.

As for LPJ, its purchase consideration of S$51 million, which will be borne by LMIRT, represents a discount to both the independent valuations it obtained.

LMIRT will finance the retail mall acquisition using debt financing.

The manager is currently exploring the options of bank loan facilities and/or issuance of unsecured bonds under the EMTN programme it set up last September.

On the stock market, at 10.44am, LMIRT was flat at S$0.31, but First Reit rose 0.4 per cent to S$1.16.