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LMIRT to buy strata title units of Lippo Mall Puri at lowered price of 3.5t rupiah

THE manager of Lippo Malls Indonesia Retail Trust (LMIRT) has reached an agreement with its sponsor's wholly-owned subsidiary to buy the strata title units of Lippo Mall Puri at a lower revised price of 3.5 trillion rupiah (S$330.2 million).

This followed an update revaluation of Lippo Mall Puri to account for the impact of the Covid-19 outbreak, the real estate investment trust's (Reit) manager said on Monday in a regulatory update. Previously, LMIRT's manager proposed to acquire the mall for 3.7 trillion rupiah.

The revised purchase price of 3.5 trillion rupiah represents a discount of 9.47 per cent to the two independent valuations with vendor support and 3.47 per cent without vendor support.

The Reit's trustee and manager had commissioned independent valuers Cushman & Wakefield VHS and Colliers International Consultancy & Valuation (Singapore) to re-value the property. As at June 30, 2020, the average of the updated valuations of the property with vendor support is 3.86 trillion rupiah.

The seller, PT Mandiri Cipta Gemilang, will provide support and financing as part of the proposed deal. It will agree to lease certain areas of uncommitted space on a quarterly basis from the deal's completion date to Dec 31, 2024.

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The leasing of certain areas of uncommitted space will be for an amount of rent equivalent to the difference between the actual net property income (NPI) and target NPI for the relevant quarter.

If the actual NPI exceeds the agreed target NPI, 50 per cent of the excess above the target NPI will be carried forward to subsequent quarters to satisfy any shortfall between the actual NPI and target NPI. The remaining 50 per cent of the excess will be retained by LMIRT.

LMIRT is also entitled to retain any cumulative surplus of actual NPI over the target NPI following the end of the vendor support period. The target NPI for the mall from FY2021 to FY2024 is 340 billion rupiah.

The Reit's manager plans to finance the estimated acquisition cost of S$391 million through a combination of debt financing of up to S$120 million - comprising a bank debt and a S$40 million loan facility from PT Mandiri Cipta Gemilang - as well as proceeds from a S$280 million rights issue.

If the proposed acquisition is completed, Lippo Mall Puri will become the flagship asset of LMIRT's portfolio, according to James Liew, executive director and chief executive of LMIRT's manager.

Lippo Mall Puri is located in the Puri Indah central business district and is the only mall in the St Moritz Jakarta Integrated Development. It has 333 tenants, including international brands such as Adidas, Best Denki, H&M, Marks & Spencer, Uniqlo and Zara.

The mall reopened in June 2020 following a temporary closure from April as part of Indonesia's efforts to curb the spread of Covid-19. 

LMIRT’s manager said the mall has seen a gradual improvement in shopper traffic to about 45 per cent of pre-outbreak traffic. This is higher than the 41 per cent achieved by Greater Jakarta malls within the trust’s portfolio. 

"The Covid-19 outbreak has highlighted the superior characteristics of Puri Mall, which is part of the premium St Moritz Jakarta Integrated Development, the largest mixed-use development in West Jakarta, Indonesia," he said.

The manager said the proposed acquisition of Lippo Mall Puri and the vendor financing will constitute interested-person transactions.

LMIRT's audit and risk committee has appointed KPMG Corporate Finance as independent financial adviser (IFA). The former will form its views on the proposed acquisition - which includes the vendor support and vendor financing - after taking into account the opinion of the IFA.

Units of LMIRT closed at 11.8 Singapore cents on Friday, up 0.2 cent or 1.7 per cent.

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