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Jakarta Post

Lippo moves Rp 3.6t asset to Singapore subsidiary

Singapore-listed Lippo Malls Indonesia Retail Trust Ltd

The Jakarta Post
Jakarta
Tue, September 16, 2014

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Lippo moves Rp 3.6t asset to Singapore subsidiary

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ingapore-listed Lippo Malls Indonesia Retail Trust Ltd. (LMIR Trust), a subsidiary of Jakarta-listed developer Lippo Karawaci (LPKR), has announced a Rp 3.6 trillion (US$300.72 million) acquisition of Lippo Mall Kemang (LMK) from its sister company in a transaction that will move ownership of the assets to a Singaporean entity.

LMIRT Management Ltd., as the manager of LMIR Trust, will issue up to 301.37 million consideration units (shares) representing 12.2 percent of the existing shares to partially fund the Lippo Mall Kemang acquisition from its current owner, Lippo Karawaci'€™s subsidiary, PT Almaron Perkasa (AP), according to a statement published on Monday.

Rp 3.18 trillion of the LMK purchase would be paid in cash and the remaining Rp 420 billion would be generated by way of the consideration units, LMIR Trust said in a statement published on the Singapore Stock Exchange website.

'€œThe cash portion of the LMK acquisition cost is expected to be financed via a mixture of internal cash, debt and the net proceeds from the equity fund raising,'€ the statement reads.

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

'€œFor the avoidance of doubt, the Indonesian company that KMT1 intends to nominate to enter into the new LMK CSPA will be a new Indonesian limited liability company that has recently been incorporated ('€˜IndoCo'€™) and is wholly owned by KMT1 and KMT1'€™s wholly owned subsidiary, KMT2 Investment Pte. Ltd., a company incorporated in Singapore,'€ LMIR Trust said in the statement, adding that KMT2 and KMT2 would respectively own 75% and 25% of the IndoCo Indonesian entity.

LMK is an integrated real estate area that comprises a middle- and upper-class segmented shopping center, an apartment, a hotel and a school, among other buildings. It is situated in the affluent area of Kemang, South Jakarta. The mall saw an occupancy rate of 92.8 percent as of June 30 this year, revealing 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.

Danang Kemayan Jati, vice president and head of corporate communications for LPKR, told The Jakarta Post that the acquisition was one of the company'€™s strategies for increasing profits and reducing costs.

Lippo Karawaci will still control LMK without needing to physically hold the property, he said.

'€œOur operating income will increase because the acquisition value reaches Rp 3.6 trillion. I think Lippo is the first company to conduct such a move, because most of property developers tend to acquire physical assets, like properties or land lots,'€ Danang said. (gda)

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