Hot stock: First Reit units sink 11% after news of Lippo Karawaci rental restructuring

FIRST Real Estate Investment Trust (First Reit) saw its unit price fall on Monday, after its former parent company Lippo Karawaci announced plans to start discussions to restructure its leases as the Covid-19 pandemic renders its rental subsidies to the Reit "unsustainable".

Units of First Reit dropped 11.3 per cent or 10 Singapore cents to 78.5 cents as at 11.46am before it called for a trading halt. About 6.6 million units had changed hands by then.

The Singapore Exchange (SGX) queried First Reit about the "unusual price movements". On Monday afternoon, First Reit's manager replied SGX that Lippo Karawaci's announcement is a possible reason for the trading activity.

However, the manager clarified that Lippo Karawaci has not approached it in respect of the proposed restructuring and rent matters.

After the manager's announcement and the lifting of its trading halt, First Reit units were down 17 cents or 19.2 per cent to trade at 71.5 cents as at 3.24pm.

Under the current rental structure, the Reit is guaranteed a certain rent level, where any declines in the revenue of Lippo Karawaci's hospital subsidiary, Siloam, increase the rental support First Reit receives.

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The Covid-19 pandemic has dealt a blow to Siloam's business as patient volumes declined "drastically" across Indonesia, with revenues at some hospitals down 40 per cent to 50 per cent year on year, according to Lippo Karawaci's press statement.

Lippo Karawaci on Monday morning said the level of subsidies it provides First Reit is "prohibiting spending to expand medical care and improve medical facilities across Indonesia".