First Reit's problematic rent structure with master lessee brought to fore

THE dilutive rights issue proposed by the manager of First Reit last Monday to raise some S$158 million at a 50 per cent discount is a painful but necessary remedy to its persistent problems of tenant concentration and excessive rental support given by its master lessee Lippo Karawaci (LK).

Just as a tide going out reveals those who have been swimming naked, so Covid-19 also surfaced problems with First Reit's rental structure with LK.

LK itself has been plagued with weak operating cash flows and an inability to divest assets since a few years ago when its parent Lippo Group's US$21 billion Meikarta property project near Jakarta got embroiled in alleged bribery.