LMIR Trust is acquiring a retail mall located in Kuta, Bali, while Starhill Global REIT has completed the divestment of its Japanese property for a profit.
LMIR to acquire mall in Bali
LMIRT Management, the manager of Lippo Malls Indonesia Retail Trust, is acquiring Lippo Mall Kuta, a three-storey retail mall located in Kuta, Bali, from sponsor PT Lippo Karawaci Tbk. for a total consideration of S$92.7 million (US$64.25 million). This is subject to approval by unitholders.
LM Kuta, located in the popular tourist district of Kuta, is to be integrated with a premium 180-room hotel. Based on the pro forma financial statements for the financial year ended Dec 31 2014, the net property income contribution from LM Kuta would be $7.3 million, representing on a historical pro forma basis a 5.8 per cent increase in LMIR Trust’s net property income for the financial year ended 31 December 2014.
Upon completing the acquisition of the retail mall, the size of LMIR Trust’s portfolio is expected to increase by 4.5 per cent, reaching a capitalisation of S$1.9 billion (US$1.31 billion).
Up until 1H2015, there was strong growth in visitor arrivals, and comes as Indonesia plans to boost tourist arrivals across the archipelago. According to the Wall Street Journal, the Indonesian Ministry of Tourism aims to increase tourism’s contribution to the country’s GDP from 9 per cent in 2014 to 15 per cent by 2019.
As part of its efforts to achieve this objective, the Indonesia government is promoting new locations and attractions beyond the popular resort island of Bali, such as Manado in North Sulawesi, which offers extensive coral reefs and diving. It is also hoping to draw more locals to domestic travel.
Though some problems have affected key Indonesian tourism markets, long-term prospects for Bali are robust. The Wyndham Group recently opened their latest Ramada hotel in Kuta, These strong tourism arrivals are likely to buoy the commercial prospects for the retail mall.
Starhill Global REIT completes divestment of Japan properties
Starhill Global REIT (SGREIT) has completed its divestment of its Roppongi Terzo property, located in Tokyo, Japan, for a consideration of S$29.9 million (US$20.7 million), representing a premium to its latest valuation, estimated at $29.2 million and translating to a yield of 4.4 per cent and a profit of 2.5 per cent.
The divestment leaves SGREIT’s portfolio in Japan down to four properties, reducing its exposure there by asset value to about 2 per cent, a reduction from 2.9 per cent before.
According to SGREIT, this is its third divestment in Japan in the last three years and part of an ongoing strategy to streamline its overall portfolio and to focus on its strengths. Post-sale, the company expects its gearing to decline to 35.1 per cent from 35.7 per cent, as of 30 September 2015.
SGREIT explained that net sale proceeds would be used to repay yen loans used to fully hedge Japanese assets. However, the divestment saw units of Starhill Global REIT Management close 0.68 per cent lower at 73.5 cents on Friday, 8 January 2016. The REIT achieved an intraday high of 75 cents.