Lippo Malls to acquire PT MASB for $33.2m

It will be financed through debt and perpetual securities.

Lippo Malls Indonesia Retail Trust recently entered into a share purchase agreement to acquire the entire issued share capital of PT MASB for $33.2m.

PT MASB owns a Kendari property under a Build-Operate-Transfer (BOT) agreement with the Government of Southeast Sulawesi. The BOT period is 30 years from Nov 2012, after which the property has to be handed over to the government. The asset is a four-storey shopping mall, 21.0k sqm in NLA, and has yet to reach stabilized occupancy or full market rental levels.

According to OCBC Investment Research, immediately prior to completion of the Kendari Acquisition, vendor PT MPU will enter into five-year Master Leases occupying 4.7k spm in NLA for RP 15.1b in annual rent.

"With a FY16 NPI of $3.0m, the acquisition cap rate is ~9.0%. Upon completion of the acquisition, LMIRT’s portfolio is estimated to increase by ~1.6%," it said.

Here's more from the brokerage firm: 

In FY16, the underlying tenants of these would-be Master Leases contributed only 36.4% of Rp. 15.1b rent. Nonetheless, we note that the two independent valuers expect this total underlying revenue to be sustainable from the sixth year onwards.

PT MPU has also committed at its own cost, to provide an asset enhancement initiative to the mall mainly to convert part of the existing major tenants area into specialty tenants area and casual leasing area to improve rentals. The areas that will undergo asset enhancement will form part of the Master Leases.