First REIT’s Indonesian properties are master leased to Lippo Karawaci and operated by Siloam International Hospitals. Its sponsors are OUE and OUE Lippo Healthcare (OUELH). All four entities are controlled by the Lippo Group and the Riady family.
Unitholders of First REIT have two options on Jan 19: To vote in favour of the restructuring of the REIT’s Indonesian master leases and a whitewash waiver, or against them. But these are not really options. As The Edge Singapore has said before, this is Hobson’s choice. Not voting in favour of any of the two resolutions would result in default. So, to preserve what little value there is left in First REIT, unitholders should — in their own interest — vote in favour.
How unitholders should vote to save the REIT should in no way excuse the manner in which the former sponsor and current master lessee Lippo Karawaci has behaved. Although Lippo Karawaci has experienced negative operating cash flow since 2015, Lippo Karawaci’s management has put a positive spin on its performance, causing confusion among unitholders. Now is the time for Lippo Karawaci’s management to tell its shareholders that its prospects hinge on First REIT’s recapitalisation.
