Lippo Malls Indonesia Retail Trust in dark chapter

Trouble come in troops for Lippo Malls Indonesia Retail Trust, which reported a set of terrible FY2018 financial results on 22 February 2019. Distribution per unit (DPU) for FY2018 dropped by a whopping 40.4% to 2.05 cents on the back of weakening Indonesian rupiah, new tax regulation and increased total operating expenses. It was certainly a revelation for Lippo Malls Indonesia Retail Trust investors for the past one year!

For those investors who bought Lippo Malls Indonesia Retails Trust at IPO price of $0.80 in 2007 and hold it till now, they would be staring at massive paper losses even if total DPU had been factored in. This is because the unit price has free fell to a dismal level of $0.192.

For sure, it had been a roller-coaster ride for unitholders of Lippo Malls Indonesia Retail Trust. But then again, who said that investing in REITs is safe? Should Lippo Malls Indonesia Retail Trust investors throw in the towel or hang on for their dear lives?

Sinking feeling for Lippo Malls Indonesia Retail Trust

As if the above is not enough, investors of Lippo Malls Indonesia Retail Trust should expect maelstrom for its unit price as parent company, Lippo Karawaci, is unleashing its mall assets to Lippo Malls Indonesia Retail Trust in a bid to raise funds for its Meikarta township project.

On 12 March 2019, Lippo Karawaci announced a stunning USD1billion funding aimed at strengthening balance sheet and paring down debts. USD280million is expected to be raised from asset divestment plans. Now, investors must be wondering what’s that got to do with Lippo Malls Indonesia Retail Trust?

Plenty. On 11 March 2019, Lippo Karawaci entered into a conditional sale and purchase agreement with Lippo Malls Indonesia Retail Trust to which Lippo Karawaci would sell the retail components of Lippo Mall Puri for USD260million. This strategy of capital funding is called “asset recycling”, something which ex-CEO of CapitaLand used to do when he launched a series of S-REITs to raise funds for CapitaLand’s China real estate adventure.

To fund the purchase, it is likely that Lippo Malls Indonesia Retail Trust would make [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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