While the BT Article states that the value of the Transaction is 200 billion Korean won (S$206.4 million), the Manager wishes to clarify that the proposal from Mirae (which is non-binding) does not contain reference to such a figure, and the only monetary amount in the proposal relates to the purchase price of the shares of the Manager*. The Manager also wishes to state that due diligence is ongoing (including diligence regarding the amount of new units in Manulife US REIT which Mirae and its affiliates can subscribe for taking into account the need for Manulife US REIT to maintain its US REIT qualification).

For the avoidance of doubt, the proposal from Mirae in relation to the units of Manulife US REIT relates to a subscription of new units in Manulife US REIT and does not include any offer to acquire any existing units in Manulife US REIT. No binding definitive agreements have been entered into and there is no certainty or assurance that any definitive agreements will be entered into or that any transaction will materialise from the current discussions. The Manager will make further announcement(s) in accordance with the Listing Manual of the SGX-ST if and when there is any material development.

*For the avoidance of doubt, the shares of the Manager are 100% held by Manulife Financial Asia Limited and none of the purchase consideration in relation to the shares of the Manager will be received by Manulife US REIT.

Digital Core REIT Management Pte. Ltd., as manager of Digital Core REIT, wishes to clarify that Digital Core REIT does not have any customer or banking relationship with Silicon Valley Bank, First Republic Bank or any other U.S. regional bank. None of Digital Core REIT’s customers are financial services firms, technology startup companies or backed by venture capital. Substantially all (>99% of annualized revenue) of Digital Core REIT’s customers are publicly traded companies and the vast majority (75% of annualized revenue) are investment grade or equivalent.

The Manager wishes to update Unitholders that the Manager and Forchn Holdings Group Co., Ltd., the sponsor of EC World REIT (the “Sponsor”), are actively working with the Lenders to finalise the New Repayment Plan and, as at the time of this announcement, approximately 86% of the Lenders under the Existing Onshore Bank Loans (calculated based on the principal amount outstanding under the Existing Onshore Bank Loans) and 89% of the Lenders under the Existing Offshore Bank Loans (calculated based on the principal amount outstanding under the Existing Offshore Bank Loans) have obtained their relevant internal approvals and confirmed that they are agreeable to the New Repayment Plan to extend the Mandatory Repayment deadline to 30 April 2023, subject to the finalisation of the terms and conditions under the New Repayment Plan.

The remaining Lenders are in the process of obtaining their internal approvals in relation to the New Repayment Plan to extend the Mandatory Repayment Deadline to 30 April 2023. The Manager has been advised by the facility agents under the Existing Bank Loans that the remaining Lenders have no internal directive to call for an event of default under the Existing Bank Loans pending their internal approval process.

Digital Core REIT shareholders beware: https://www.theedgesingapore.com/news/reits...e-has-been-weak

Simple solutions for these two REITs​

The unit prices of Manulife US REIT (MUST) and Lippo Malls Indonesia Retail Trust (LMIRT) pummelled new lows in March, signalling distress. Charts such as these would usually imply the end of the stock, but that is not necessarily the case for these two REITs. Indeed, they can be saved.

In the case of MUST, its manager simply acquired too many properties in too short a time, and it now needs to either regurgitate those properties that it cannot digest or raise equity.

LMIRT’s acquisition pace was more measured. However, the structure of the REIT — with Indonesian assets, risk-free rates and rupiah rental income and net property income — was simply not tenable for a Singapore entity, and not suitable for Singapore retail investors. Instead, unitholders of LMIRT may have paid a higher price for their assets than they could have paid.

However, this was disclosed in the IPO prospectus. LMIRT’s IPO prospectus back in 2007 clearly stated “certain Indonesian rupiah amounts have been translated into Singapore dollars based on the exchange rate of IDR5,908.2 to $1.” This was despite the average rupiah rate in 2007 at the time of the IPO being IDR6,155.4 to $1, which was also stated in the prospectus.

The problem with LMIRT is that it is a structured REIT. Its assets are in Indonesiam where the risk-free rates are higher than Singapore’s, with rental income and net property income priced in rupiah, and then translated into Singapore dollars. LMIRT’s unitholders are essentially investing in rupiah assets and taking on rupiah risk, hence the original high yield of 8% or so. The rupiah is now at IDR11,321 to $1.

Despite this loss in translation, in 2020, during Covid, LMIRT’s manager announced the acquisition of Lippo Mall Puri for the equivalent of $330 million, partly financed with Singapore dollars raised from a dilutive rights issue.

On Feb 24, LMIRT’s manager announced that it planned to stop distributions on its $140 million perpetual securities and its $120 million perpetual securities. On March 20, LMIRT’s manager announced it would not be paying distribution for the $140 million tranche which was due on March 27. This triggered a dividend stopper, requiring LMIRT not to pay distributions on its units (DPU).

On March 6, LMIRT’s manager announced the appointment of Sterling Coleman Capital to advise on capital management. Similarly, MUST’s manager appointed Citigroup to undertake a strategic review. The task isn’t that complicated. Both REITs have three options or combinations of these three options.

These are: a placement that will dilute all unitholders; a rights issue that will dilute all unitholders but is a more fair distribution than a placement; and divesting properties. Interestingly, LMIRT has divested properties in previous years and surely it is still able to do that. MUST should also be able to divest properties. Many times in the past, MUST’s manager has said that the US is the largest, deepest market for commercial property.

While investors await the Citigroup review with anticipation, all that has emerged, to date, is news from Korean media that Mirae Asset Global Investments is in talks with MUST’s manager. In a Singapore Exchange announcement, MUST’s manager has said there is no certainty of a transaction:“The Manager wishes to emphasise that there is no certainty or assurance that any definitive agreements will be entered into or that any transaction will materialise from the current discussions.”

Interestingly, Mirae did not go through on a KRW4 trillion ($4 billion) purchase of International Finance Centre Seoul, according to the Korean press. Mirae had agreed to acquire the asset from Brookfield Corp (formerly Brookfield Asset Management) and paid a deposit of KRW200 billion after signing an memorandum of understanding with Brookfield, according to the Korean press. The parties are reported to be in litigation. Mirae had planned to set up a private REIT to finance the purchase but the permit was rejected, Korean media reports say.

The recent REITs rally gave my portfolio a boost. 

Q1 2023 Portfolio Update

LMIRT slides to CCC from CCC+.

https://links.sgx.com/FileOpen/Fitch_Downgr...t&FileID=749331

Fitch Ratings has downgraded Lippo Malls Indonesia Retail Trust’s (LMIRT) D5IU 0.00% long-term issuer default rating to “CCC-” from “CCC”.
The rating agency has also downgraded the rating on LMIRT’s senior unsecured notes due 2024 and 2026 to “CCC-” from “CCC”, with a recovery rating of “RR4”.

The downgrade reflects material delays in the refinancing of LMIRT's term loans due in Nov 2023 and Jan 2024, Fitch says in a statement.

“This has increased the risk that arms-length financing may not be available to repay debt, in Fitch's view. The independent auditor has also given an unmodified audit opinion with an emphasis of matter on material uncertainty related to going concern in its audit report on the audited financial statements for 2022,” it adds.

In its key rating drivers, Fitch says that LMIRT’s internal liquidity is insufficient to meet its debt maturities of around $547 million in the next 18 months. The trust had $111 million in cash at the end of 2022.

Fitch notes that LMIRT’s financial flexibility can improve marginally by halting distributions as the trust did for 1QFY2023 to holders of perpetual securities and units. However, it can only conserve up to $43 million of cash in 2023 by Fitch’s estimates.

“LMIRT plans to sell non-core assets as a longer-term solution, but we expect disposals to be small and subject to execution risk,” it adds.

Fitch forecasts that LMIRT’s net property income would reach $136 million in 2023, supported by a gradual improvement in the occupancy rate to 84% and falling rent rebates to tenants as footfall and tenant sales rise.

The rating agency expects LMIRT’s occupancy to stabilise, but remain below pre-pandemic levels of over 90% for the next two years. This is due to a post-Covid-19 pandemic structural weakening occupancy at several malls and redevelopment activities at two malls, Fitch says.

Units in LMIRT closed 0.1 cent lower or -5.88% down on Apr 6 at 1.6 cents.

With the cancellation of the Xiaolan Master Lease and E-Colour Master Lease and entry into lease agreements directly with third parties, the Trust's rental income would be expected to decrease having regard to the generally lower current market rental rates.

The Trust is in the process of obtaining an independent valuation from Jones Lang LaSalle Corporate Appraisal and Advisory Limited of its investment properties. The Board expects the
valuation to be completed soon and will make appropriate announcements in the event of any further material developments.

In the Board’s announcement dated 17 January 2023, it was stated, amongst others, that:

(i) the Group met the stipulated debt covenants, namely gearing ratio, interest coverage ratio, property interest coverage ratio and loan to valuation ratio during the period up to 30
September 2022; and (ii) the Group is in the process of finalising its financials for the year ended 31 December 2022 and the calculation of the stipulated debt covenants will depend
largely on the Group’s valuation of its investment properties as at 31 December 2022.

Due generally to higher interest rates, the Trustee-Manager’s exercise of its entitlement for its fees to be paid in cash instead of Units and the consequential derecognition of the rental
income from the two master leases recognised for the financial year ended 31 December 2022 in accordance with International Financial Reporting Standards IFRS 16 Leases, there has
been a breach of the interest coverage ratio which the Trust is obliged to maintain under its Offshore Facilities.

The Trustee-Manager intends to seek a waiver from the lenders of any breach of the financial covenants as part of the discussions with the lenders to restructure and reschedule the Group’s debt obligations.

EC World REIT’s external auditors will require approximately one month from the completion of the Proposed Divestment to complete the audit process and issue their auditors’ report, taking into consideration the completion of the Proposed Divestment as well as the status of the Mandatory Repayment and the April 2023 Outstanding Loans. Time will also be required to finalise and issue the relevant documents in connection with the 2023 AGM. In particular, the annual report (which will contain the FY2022 Financial Statements and the auditors’ report) and the accompanying notice of AGM must be issued to Unitholders at least 14 clear days before the date of the 2023 AGM.