First REIT to divest Indonesian assets for $471.5 mil; REIT to pivot to developed markets

Felicia Tan04-01 01:40

The REIT says it intends to make a special distribution of $9.7 million upon completion of the transactions.First REIT has proposed to divest its assets in Indonesia for a total agreed property value ...

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The hospitals are: Siloam Sriwijaya, Siloam Hospitals Purwakarta, Siloam Hospitals Lippo Village, Siloam Hospitals Kebon Jeruk, Siloam Hospitals Bali, Siloam Hospitals Kupang, Siloam Hospitals Baubau and Siloam Hospitals Manado. The amount represents a 2.8% premium to the average of two latest independent valuations, says the REIT.\nAt the same time, the REIT agreed to divest three non-hospital assets for IDR1.1 trillion or $82.4 million. The divestment comprises the sale of Lippo Plaza Baubau (LPB) and Hotel Aryaduta Manado (HAMD) to PT Lippo Karawaci Tbk (LK) and a prepaid lease agreement in respect of Lippo Plaza Kupang (LPK) with PT Bumi Sarana Sejahtera, a wholly-owned subsidiary of PT Metropolis Propertindo Utama (MPU).\nBoth transactions were divested at a 2.1% premium over the average of the latest two valuations conducted commissioned by the REIT trustee and the manager.\nIn connection with the transaction, the REIT will obtain full recovery of the current MPU rental arrears of $6.9 million.\nAt the same time, First REIT has entered into put option agreements with Siloam, which will enable it to divest the six remaining hospitals in its portfolio at an agreed property value of IDR3.9 trillion or $294.8 million.\nThe potential put option divestments relate to the REIT’s interests in Siloam Hospitals Labuan Bajo, Siloam Hospitals TB Simatupang, Siloam Hospitals Makassar, Mochtar Riady Comprehensive Cancer Centre, Siloam Hospitals Lippo Cikarang and Siloam Hospitals Yogyakarta.\nUpon completion of the proposed divestments, the REIT intends to use the proceeds to pay off its credit guarantee & investment facility (CGIF) bonds, standby letter of credit and syndicated loan facilities. The repayment will reduce the REIT’s aggregate leverage to 16.7%, providing pro forma annual interest cost savings of $18.8 million.\nThe REIT also intends to make a special distribution of about $9.7 million, which is expected to be declared across the next two financial quarters after the completion of the transactions.\n“The proposed divestments, along with the potential put option divestments, eliminate First REIT’s IDR/SGD foreign currency volatility and income drag which had impacted unitholder returns,” says Victor Tan, executive director and CEO of the manager.\n“The two-tranche divestment prioritises DPU (distribution per unit) stability and support distribution resilience while recycling capital from non-core and non-healthcare assets, and assets with rental arrears,” he adds.\n“The manager maintains certainty for the divestment of remaining Indonesia assets and timing flexibility for redeployment for the put option properties. More importantly, the proposed divestments are expected to optimise First REIT’s capital structure to position First REIT for growth, with a focus on developed markets,” Tan continues.\nFirst REIT to focus on developed markets; exploring potential acquisition opportunities\nAs part of its previously-announced strategic review, the REIT says it will be focusing on developed markets, which will bring about various benefits including a more predictable macroeconomic and geopolitical environment, risk adjusted returns with lower equity risk premiums in developed markets as well as lower cost of debt compared to emerging markets.\nOther reasons include higher foreign exchange and currency stability, risk adjusted returns with lower equity risk premiums in developed markets, exposure to tenants with high credit quality, as well as higher property liquidity and valuation transparency.\nFollowing the proposed divestments, the REIT says it will focus on looking at potential acquisition opportunities in Asia-Pacific (APAC) — including Singapore, Japan and Australia — to “fully capture the aforementioned benefits of exposure” to developed markets.\nThe REIT will also continue to manage its existing properties in Singapore and Japan while looking at opportunities for capital recycling on these properties at the same time.\n“The board is encouraged with the progress of the strategic review as the proposed divestments provide transaction certainty amidst an increasingly challenging macroeconomic environment in Indonesia,” says Christopher James Williams, chairman and non-independent non-executive director of the manager.\n“Fully committed to aligning our interests with Unitholders, the manager has undertaken to completely waive its divestment fee of $2.4 million for the proposed divestments,” he adds.\nThe divestments are subject to unitholders’ approvals, which will be sought at an extraordinary general meeting (EGM) tipped to take place this June.\nAccording to the REIT manager, the proposed transactions represent the “best available offer”.\nSAC Capital has been appointed as the REIT’s independent financial advisor (IFA) for the trasnactions.\nUpon obtaining unitholders’ approval, the divestments are expected to be completed in August.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"shareholding","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"tenantId":"TBGLOBAL","deviceId":"web-server-community-laohu8-v3","version":"4.38.0","shortVersion":"4.38.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2624313511","isCrawlerRequest":true}