First Reit restructures master lease agreements effective Jan 1, 2021

FIRST Reit's manager announced on Tuesday after trading hours that it has restructured its master lease agreements (MLAs) effective from Jan 1, 2021 to provide for a more sustainable long-term master lease structure.

Previously, First Reit had announced the restructuring of MLAs for 11 hospitals which First Reit had leased to either former parent company PT Lippo Karawaci Tbk (LPKR) and certain subsidiaries of PT Siloam International Hospitals (Siloam), as well as the three hospitals which First Reit had leased to PT Metropolis Propertindo Utama (MPU).

Perpetual (Asia) Limited, as trustee of First Reit, had on Nov 28, 2020, entered into memorandums of understanding with LPKR and MPU to restructure the LPKR MLAs and the MPU MLAs respectively.

From Jan 1, 2021, the restructured LPKR MLAs and the restructured MPU MLAs have extended the lease term for the LPKR hospitals and the MPU hospitals to Dec 31, 2035, with an option for a further 15-year renewal term with the mutual agreement of both the relevant master lessors and the relevant master lessees.

It also extended First Reit's weighted average lease expiry for its entire portfolio from 6.4 years to 12.3 years as at Dec 31, 2020.

In addition, Siloam has been added as a party to each of the LPKR MLAs and a subsidiary of Siloam has been added as a party to each of the MPU MLAs.

First Reit has secured a term loan facility of S$178.5 million and a revolving credit facility of S$42.5 million, with an option for a S$39 million increase in commitments from OCBC and CIMB Bank, Singapore Branch, in December 2020. With this, First Reit has no refinancing requirements until 2022.

The weighted average debt maturity has also been extended to 1.78 years as at March 1, 2021, as compared to 1.22 years as at Dec 31, 2020.

Following the completion of its rights issue and as at May 18, 2021, through its interest in Clifford Development, OUE Lippo Healthcare Limited (OUELH) and First Reit's manager, OUE Limited has a deemed interest of 28.53 per cent or approximately 458.3 million units in First Reit.

As at May 18, 2021, the outstanding receivables due from LPKR amounts to approximately S$5.5 million.

First Reit's manager said that LPKR has committed to a payment plan and will address the outstanding receivables in three equal tranches within the third quarter of FY2021. First Reit has received from LPKR the required security deposits in the form of bank guarantees amounting to eight months of the total monthly rent for each of the LPKR hospitals, in accordance with the terms of the restructured LPKR MLAs.

Against the backdrop of the ongoing Covid-19 pandemic and with the completion of the restructuring exercise for its Indonesian hospitals, the manager said that it will continue to evaluate the existing assets of First Reit. This includes reaching a resolution for the two master leases which are due for renewal in 2021: Sarang Hospital due in August 2021 and Imperial Aryaduta Hotel & Country Club due in December 2021.

The manager added that it will also be looking at the strong network of healthcare assets from its sponsor group, comprising OUE Limited and OUELH, and also assets from third parties within and outside Asia to boost future growth and improve returns for unitholders.