Lippo Malls Indonesia Retail Trust (LMIRT) D5IU will not be paying any distributions per unit (DPU) for the 1QFY2023 ended March 31.
The REIT manager, on March 20, announced that it will not be paying distributions to holders of its $140 million perpetual securities scheduled for March 27. As a result, the dividend stopper provisions under the perpetual securities are applicable, which means that its unitholders will not receive any dividends, distributions or any other payment on the units or on the $120.0 million perpetual securities unless and until certain conditions are made.
The REIT had paid a DPU of 0.09 cents in the corresponding quarter the year before.
In an April 6 note, Fitch Ratings further downgraded the trust to ‘CCC-‘, nearly a month after LMIRT was downgraded to ‘CCC’.
“The outlook on all ratings remains negative. Its senior unsecured notes due 2024 and 2026, issued by LMIRT’s wholly owned subsidiary, LMIRT Capital Pte Ltd, has also been downgraded to ‘CCC-’ from ‘CCC’ with a recovery rating remaining at ‘RR4’,” said Fitch at the time.
During the 1QFY2023, LMIRT’s rental revenue fell by 9.0% y-o-y to $27.8 million due lower rental contributions from Lippo Plaza Kendari and Lippo Plaza Jogja after their master leases expired in June 2022 and December 2022 respectively. The lower revenue was also due to lower contributions from the malls that were undergoing asset enhancement initiatives (AEI), as well as the 7.8% y-o-y depreciation of the IDR against the SGD. In rupiah terms, rental revenue fell by 1.9% y-o-y to IDR317.1 billion ($28.7 million).
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Gross revenue fell by 3.9% y-o-y to $48.9 million due to the depreciation of the IDR although in rupiah terms, gross revenue rose by 3.5% y-o-y to IDR558.6 billion due to higher service charge and utilities recovery as tenants gradually returned to full operations.
Net property income (NPI) fell by 1.4% y-o-y to $30.8 million although it rose by 6.2% y-o-y in rupiah terms to IDR352.1 billion.
As at March 31, LMIRT’s net asset value (NAV) stood at 7.49 cents per unit. Its gearing stood at 42.9%, down from 44.6% as at Dec 31, 2022. The trust’s interest cover stood at 2.2x excluding perpetuals as at the same period. Its fixed rate debt ratio was at 38.7%.
As at March 31, LMIRT’s occupancy rate rose by 0.2 percentage points q-o-q to 80.4% while its weighted average lease to expiry (WALE) stood at 2.94 years by net lettable area (NLA), down from the 3.0 years as at Dec 31, 2022. Average rental reversion stood at 3.0% as at March 31, up from 1.7% in the quarter before.
Cash and cash equivalents stood at $95.3 million as at end-March.
Looking ahead, LMIRT says it has taken “prudent measures” to stabilise the trust as it focuses on addressing its debt obligations in the next 12 months and amid the current macroenvironmental factors especially the prevailing interest rates environment, foreign exchange volatility and tightening credit market.
The trust adds that it has reduced almost all of its rental support or reliefs to specialty tenants – with the exception for those operating in underperforming malls – on the back of improving operating conditions and as its tenants gradually return to full operations. It has also restructured some of the tenant leases in these malls to gross turnover rent structure to facilitate their recovery. However, rental support remains in place for selected related and non-related tenants such as those in the hypermarket and supermarket sectors as they continue to face intense competition and protracted recovery.
“We are taking strategic and prudent measures to evaluate various options available to stabilise the trust, as we remain in active discussion with our bank lenders for a comprehensive solution to address our debt obligations. We are also exploring asset recycling opportunities to divest our non-core nonstrategic assets at reasonable market prices to boost our financial flexibility,” says James Liew, CEO of the manager.
“As we remain steadfast in navigating the current macro challenges, we are also focused on supporting the recovery of our portfolio. Although some malls are still underperforming due to increased competitions from new malls in the areas, our resilient and income-producing retail assets remain fundamentally strong with some of our more upmarket malls recovering near to pre-Covid levels,” he adds.
Units in LMIRT closed flat at 1.7 cents on April 27.
