Lippo Malls Indonesia Retail Trust's property, Lippo Malls Kemang. (Photo: Lippo Malls Indonesia Retail Trust)Lippo Malls Indonesia Retail Trust's property, Lippo Malls Kemang. (Photo: Lippo Malls Indonesia Retail Trust)

Indonesia-focused retail REIT, Lippo Malls Indonesia Retail Trust (SGX:D5IU), announced on 12 June that it has been assigned a first-time issuer rating of ‘Baa3’ with a ‘stable’ rating outlook by Moody’s Investors Service.

The agency has highlighted expectation of continued predictable cash generation from the REIT’s current portfolio and steady occupancy levels for the rating. Moody’s also expects the REIT to maintain financial discipline and keep its credit profile within targeted parameters.

The rating means that Lippo Malls REIT now has more flexibility with its gearing ratio. Under guidelines issued by the Monetary Authority of Singapore, a REIT may increase its aggregate leverage limit to 60% of the value of its deposited property, provided it obtains and publishes a credit rating from a major rating agency.

Prior to obtaining a credit rating, aggregate gearing ratio is capped at 35% of a REIT's total asset value.

“Whilst LMIR Trust has diversified its sources of funding for the past few years, the credit rating will enable LMIR Trust to tap on a broader suite of debt instruments to minimise funding costs and to improve the overall efficiency of our debt funding”, said Alvin Cheng, Executive Director & CEO of the REIT’s manager. “We envisage a target average leverage ratio of approximately 40% going forward, which will be a key consideration in maintaining the rating”, he added.

Units of Lippo Malls Indonesia Retail Trust ended the trading day 1.37% higher than its previous close to finish at SGD0.37.

Lippo Malls Indonesia Retail Trust's property, Lippo Malls Kemang.
Lippo Malls Indonesia Retail Trust's property, Lippo Malls Kemang.

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.