LMIRT faces opposition from unitholders on Lippo Mall Puri acquisition
Uma Devi
THE acquisition by Lippo Malls Indonesia Retail Trust (LMIRT) of Lippo Mall Puri has been in the works for over a year. But two weeks before unitholders are due to vote on the transaction, opposition has arisen to the deal.
This week, LMIRT management revealed that it had on Dec 4 received a letter from some LMIRT unitholders requesting the addition of a new resolution for the upcoming extraordinary general meeting (EGM) on Dec 14.
Some 41 unitholders with over 6 per cent of the vote have asked that voting on the acquisition be postponed by at least three months so that a new valuation can be commissioned for the property.
Since then, The Business Times has seen two other letters sent by the same group of unitholders to LMIRT management.
Approached for comment, LMIRT's manager confirmed it had received another letter but said it would not be responding. It did, however, say it had received further queries from Singapore Exchange Regulation and would be responding to those.
One of the issues that the dissenting group has raised is the early termination of some leases after property valuations were completed. A particularly large termination was that of department store Parkson, which vacated 8,290 square metres (sq m) of the mall's net lettable area (NLA) at the end of October. That works out to roughly 6.7 per cent of Lippo Mall Puri's 122,862 sq m of NLA.
A supermarket called Ranch Market has since taken over 1,499 sq m of the space vacated by Parkson, and will commence operations in the first quarter of 2021. Another 435 sq m have been leased to three food and beverage tenants. LMIRT's manager has said the remaining 6,356 sq m of space will be reconfigured in an exercise slated to be completed by March next year.
This information was disclosed in LMIRT's circular to unitholders, filed last month. But the unitholders are contending that the circular's use of a headline occupancy rate of 91.9 per cent for the mall (and 89.9 per cent after the conversion of some parking space into retail space), painted a rosier picture than warranted of the mall's prospects.
After taking into account the early terminations, the mall's occupancy rate would fall to between 79.8 and 81.8 per cent - depending on whether the converted parking space is included.
The average occupancy rate in Jakarta, according to the circular, is 89.7 per cent. In West Jakarta it is 90.4 per cent. Lippo Mall Puri's key competitors report average occupancies ranging from 83.1 to 99 per cent.
Although the independent valuations done by both Colliers and Cushman & Wakefield for the transaction assumed a low occupancy rate of 83 per cent in year one, the unitholders want LMIRT's managers to exercise greater caution. They have asked for a new valuation of the property and are concerned about the price LMIRT is paying.
The dissenting unitholders have the support of LMIRT's single largest minority unitholder, according to documents viewed by BT. But the acquisition only requires the approval of more than 50 per cent of the total share of votes cast at the EGM.
LMIRT's sponsor and its associates have control of 32.3 per cent of the trust, and will abstain from voting on three of the four resolutions up for approval at the EGM. All resolutions must be passed for the Lippo Mall Puri acquisition to take place.
One of the unitholders in the group, who spoke to BT on condition of anonymity, said she bought into LMIRT earlier this year when it was trading at around 20 Singapore cents. Units in the trust closed on Tuesday at 8.4 cents.
A former auditor, she had hoped the investment would be able to supply her some income now that she has retired. Although her units in LMIRT constitute a substantial portion of her savings, she said she is not as badly off as some of the other unitholders she has spoken to - among them retirees, airport security staff and MRT station employees. Some of these investors bought into the Reit (real estate investment trust) when it was trading above 30 cents.
She acknowledges that unitholders have run out of time to gather the support needed to stall the deal.
LMIRT's trust deed allows a meeting to be requisitioned by at least 50 unitholders, or unitholders collectively holding at least 10 per cent of the trust.
But unitholders must also be given 14 days' notice before such a meeting. LMIRT has said the request by this dissenting group for a new resolution at the upcoming Dec 14 meeting would not meet this 14-day requirement.
In response to queries from BT, the manager of LMIRT said: "As things stand, the manager presently believes that it would only be appropriate to allow unitholders the opportunity to exercise their right to vote on the resolutions which have been validly tabled in accordance with all applicable requirements."
