LIPPO Malls Indonesia Retail Trust (LMIRT) posted a 9.2 per cent drop in net property income (NPI) to S$29.4 million for the second quarter ended Jun 30, amid a challenging interest rate and foreign exchange rate environment.
The trust also withheld distributions to unitholders and perpetual securities holders in the quarter, as it has done in recent quarters. LMIRT will continue to do so “pending an improvement in the trust’s financial and cash flow position”, its manager said in the earnings report on Monday (Jul 29).
The trust’s Q2 NPI fall came as rental revenue decreased 4.3 per cent to S$27 million, while gross revenue was down 5.1 per cent to S$48.1 million. In Indonesian rupiah terms, however, rental revenue and gross revenue were up 2.6 per cent and 1.7 per cent, respectively.
“The prevailing high interest rates and volatile foreign exchange environment continue to pose challenges for the trust,” the manager said.
Nevertheless, chief executive of the manager, James Liew, said strategic and active asset management initiatives have led to “positive operational recovery”, with the trust maintaining a “stable” portfolio occupancy rate of 79.9 per cent.
This is due to overall shopper traffic recovering to 70 per cent of pre-Covid levels in 2019, as well as rental renewals and new leases secured.
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“The shopping mall landscape in Indonesia remains highly competitive with the rapid growth of online shopping and newer malls in certain regions. Nonetheless, the social and experiential value of malls continues to be significant to shoppers,” said Liew.
“We are actively managing our tenant mix to incorporate more entertainment and dining options, creating a diverse and interesting environment and choices to attract shoppers.”
Looking ahead, foreign currency risk has been reduced, LMIRT’s manager said. This is because sponsor Lippo Karawaci introduced the trust to Indonesian relationship banks and LMIRT has largely transited into an IDR-denominated financing structure. This acts as a natural hedge against its IDR-denominated asset base.
With 8.5 trillion rupiah (S$700 million) of IDR loan facilities, LMIRT fully repaid its SGD-denominated bank loans in early June. It also repurchased or fully redeemed its 2024 Notes due in June, and reduced its outstanding 2026 Notes due in February 2026 to US$22.6 million.
As such, the trust’s weighted average maturity of debt increased from 2.75 years as at end-December 2023 to 6.94 years. That said, its leverage ratio remains at an “elevated level” of 44.96 per cent as at Jun 30, Liew noted.
“(The) trust will need to continue to exercise prudence with its distributions to unitholders and holders of perpetual securities,” he said, also citing the need to meet the monthly principal loan repayments and fund expenditures and asset enhancement initiatives.
Units of LMIRT ended flat at S$0.02 on Monday.
