Singapore-listed Indonesian Retail REIT Lippo Malls Indonesia Retail Trust (LMIRT) (SGX:D5IU) has announced a novation of leases with tenant PT Matahari. The novation will be subjected to 13 lease agreements previously held by PT Matahari at various retail malls across Indonesia currently under the portfolio of LMIRT.

The novation will affect 13 lease sites at various malls across Indonesa under the portfolio of Lippo Malls Indonesia Retail Trust. Photo by Lippo Malls Indonesia Retail Trust. 

The leases will be novated to another Indonesia entity, PT Multipolar. The purpose of the novationss is to effect the transfer of PT Matahari's non-core assets to PT Multipolar, allowing to effectively focus on its core competencies.

PT Matahari and PT Multipolar are both controlled by the same shareholder group as PT Lippo Karawaci, the sponsor of Lippo Malls Indonesia Retail Trust.

In an official company statement, LMIRT has stated that it considers both companies to be of similar financial standing and expects the new tenant to be able to fully discharge its obligations under the leases which are novated to it. The value of the leases novated is approximately Rp. 309.0 billion (approximately S$ 39.5 million), which comprises 3.21 percent of the net assets of LMIRT as at 31 December 2012. LMIRT currently has 8 shopping malls and 7 retail spaces across Indonesia under its portfolio.

Units of Lippo Malls Indonesia Retail Trust are currently trading slightly higher from its previous close at S$0.505.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.