Singapore Subsidiary Acquires Lippo's Rp 3.6t Asset

Singapore-listed Lippo Malls Indonesia Retail Trust Ltd. (LMIR Trust), subsidiary of Jakarta-listed developer Lippo Karawaci (LPKR), has revealed the acquisition of Rp3.6trillion (US$300.72million) Lippo Mall Kemang (LMK) from its sister company. This is in a transaction that will shift ownership of the assets towards a Singaporean entity.

LMIRT Management Ltd., manager of LMIR Trust, are to issue up to 301.37million consideration units (shares) representing 12.2% of the current shares to aid in funding the Lippo Mall Kemang acquisition from its current owner, Lippo Karawaci’s subsidiary, PT Almaron Perkasa (AP), according to Monday’s statement on the Singapore Stock Exchange website.

The statement went on to explain Rp3.18trillion of the LMK purchase is to be paid in cash as the remaining Rp420billion would be produced by way of the consideration units.

The cash amount of the LMK acquisition cost is expected to be financed via a variety of internal cash, debt, plus net proceeds from the equity fund raising.

As Indonesian agrarian law currently prohibits a foreign individual or entity from direct ownership of real estate within Indonesia, LMIR Trust, via its Singapore-based subsidiary, KMT1 Holdings Pte. Ltd., are to nominate an Indonesian company to participate in a conditional sales and purchase agreement (CSPA) with AP on the LMK acquisition.

The Indonesian company which KMT1 are planning to nominate to participate into the new LMK CSPA, will be a new Indonesian limited liability company which has of late been incorporated (‘IndoCo’), entirely owned by KMT1. In turn, KMT1’s entirely owned subsidiary, KMT2 Investment Pte. Ltd.. is a company incorporated in Singapore. This is according to LMIR Trust said in the statement, explaining that KMT2 and KMT2 would own 75% and 25% of the IndoCo Indonesian entity respectively.

LMK is an incorporated real estate area composing a middle and upper class segmented shopping centre, a hotel, apartment and school amongst other buildings. It is located in the prosperous area of Kemang, South Jakarta. The mall saw an occupancy rate of 92.8% as of 30^th June this year, indicating high interest in retail business.

The acquisition will increase LMIR Trust’s assets by about 27 percent, from S$1.41 billion on June 30 this year to S$1.79 billion after the transaction. It will also enlarge its presence in Indonesia’s growing retail sector, according to the company’s statement.

The vice president and head of corporate communications for LPKR, Danang Kemayan Jati, explained that the acquisition was one of the company’s strategies for raising profits and lowering costs. Lippo Karawaci will still operate LMK without requiring to physically hold the property.

The operating income is to rise due to the acquisition value meeting Rp3.6trillion. It is thought Lippo is the first company to make such a move, as the majority of property developers tend to acquire physical assets, such as properties or land lots.