Lippo Malls Indonesia Retail Trust holds back on DPU for fifth consecutive quarter

The REIT manager first announced the dividend stopper provisions in March 2023, declaring no DPU until certain conditions are met.

Lippo Malls Indonesia Retail Trust (LMIRT) D5IU will not be paying any distributions per unit (DPU) for its 1QFY2024 ended March 31, the fifth consecutive quarter in which LMIRT will not be paying distributions to holders of its $140 million perpetual securities.

The REIT manager first announced the dividend stopper provisions in March last year. Under the provisions, 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.

For 1QFY2024, LMIRT announced rental revenue of $27.5 million, down 0.9% compared to the same period last year.

Gross revenue for the period inched up 0.7% to $49.2 million on higher carpark revenue and service charge and utilities recovery

In rupiah terms, rental revenue for the quarter increased 1.2% to IDR321.0 billion, while gross revenue rose 2.8% to IDR574.4 billion.

Net property income (NPI) fell by 3.1% y-o-y to $29.9 million, also slipping 1.0% y-o-y in rupiah terms to IDR348.6 billion in 1QFY2024, due to higher property operating and maintenance expenses and a lower net reversal for impairment losses  on trade receivables compared to 1QFY2023

As at March 31, LMIRT’s net asset value (NAV) stood at 6.19 cents per unit, up over 5.63 cents per unit at the same time last year. Its gearing stood at 43.7%, with an interest cover of 1.88x and a fixed rate debt ratio of 41.6%.

LMIRT’s occupancy rate improved marginally by 0.5 percentage points (ppts) q-o-q to 79.5% as at the end of 1QFY2024, as the REIT secured new leases for 19,140 sqm and renewed 61.8% of expiring leases.

Its weighted average lease to expiry (WALE) stood at 2.2 years by net lettable area (NLA) with an average rental reversion of 3.0% as at end-1QFY20234, up from 1.9% in the quarter before.

Cash and cash equivalents stood at $49.8 million as at end-March.

According to a recent Fitch Ratings Agency report, Indonesia’s gross domestic product (GDP) growth in 2024 is broadly stable at 4.9%, slightly down from 5.05% in 2023. It expects slower export momentum in the first half of this year, given weakening global demand, but strong domestic investment and consumption will most likely support growth, due in part to spending related to local elections to be held countrywide in November.

LMIRT notes that Bank Indonesia (BI) recently raised its key benchmark rate by 25 basis points (bps) to 6.25% as a response to the recent pressure on the Indonesian Rupiah, which reached 16,200 against the US dollar.

The rate hike aims to bolster the stability of the foreign exchange rate amid escalating global risks, and to ensure inflation remains within the target range. BI remains committed to enhancing its policy aimed at stabilising the currency exchange rate, says the REIT.

James Liew, CEO of the manager, says that despite the exit of a hypermarket tenant from the REIT’s malls, its portfolio remains resilient and continues to show signs of recovery. “Overall, we have achieved an average positive rental reversion of 3.0% year- to-date, indicating positive momentum in our leasing activities.”

“We are actively pursuing asset enhancement initiatives to optimise space utilisation, boost mall value, and rejuvenate specific areas, potentially leading to higher rental rates. We have earmarked a total of nine properties for refurbishment works over the next two years. While the positive effects of these initiatives will require time, we aim to attract an interesting mix of tenants from various sectors to offer shoppers a holistic and enriching experience,” he adds.

Units in LMIRT closed unchanged at 1.2 cents on April 26.

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