LMIRT sees real estate net income down 9.2% in Q2; payments still on hold

LIPPO Malls Indonesia Retail Trust (LMIRT) reported a 9.2 per cent decline in net real estate income (NPI) to S$29.4 million in its second quarter ended June 30, impacted by unfavourable interest rate and foreign exchange conditions.

The trust also suspended distributions to unitholders and perpetual securities this quarter, as it has done in recent quarters. LMIRT will continue to do so “pending an improvement in the trust’s financial position and cash flow,” its manager said in an earnings report on Monday (July 29).

The trust’s NPI decline in the second quarter came as rental income fell 4.3 per cent to S$27 million, while gross revenue fell 5.1 per cent to S$48.1 million. However, in Indonesian rupiah terms, rental income and gross revenue rose 2.6 per cent and 1.7 per cent respectively.

“The current high interest rates and volatile currency environment continue to pose challenges for the fund,” the manager said.

Despite this, fund chief executive James Liew said strategic and active asset management initiatives had led to a “positive operational recovery” and the fund maintained a “stable” portfolio occupancy rate of 79.9 per cent.

This is the result of overall shopping traffic returning to 70% of pre-COVID-19 levels in 2019, as well as lease renewals and new agreements.

BT in your inbox

Start and end every day with the latest news and analysis delivered straight to your inbox.

“The shopping mall landscape in Indonesia remains highly competitive due to the rapid growth of online shopping and newer malls in some regions. However, the social and experiential value of shopping malls still matters to shoppers,” Liew said.

“We are actively managing our tenant mix to provide more entertainment and dining options, creating a diverse and interesting environment and offering choices that will attract customers.”

Looking ahead, currency risk has been reduced, said LMIRT’s manager. This is because sponsor Lippo Karawaci has introduced the trust to Indonesian relationship banks, and LMIRT has largely moved to an IDR-denominated funding structure. This acts as a natural hedge against the IDR-denominated asset base.

With 8.5 trillion rupiah (S$700 million) in IDR borrowings, LMIRT fully repaid its Singapore-dollar bank loans in early June. It also repurchased or fully retired its 2024 bonds due in June and reduced its outstanding 2026 bonds due in February 2026 to S$22.6 million.

As a result, the trust’s weighted average debt maturity rose to 6.94 years from 2.75 years at end-December 2023. Still, its leverage ratio remained at an “elevated level” of 44.96 percent as of June 30, Liew noted.

“(T)he society will need to continue to exercise caution in making distributions to participants and perpetual security holders,” he said, citing the need to also repay monthly loan principal instalments and fund expenses and asset enhancement initiatives.

LMIRT units ended Monday unchanged at S$0.02.