Everyday Malls Primed for Growth CONTENTS
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ANNUAL REPORT 2008 Everyday Malls Primed For Growth CONTENTS 01 Corporate Profile - About LMIR Trust 02 Our Vision 03 Our Mission 04 Group Financial Highlights Delivering Performance 08 Letter To Unitholders 10 The Board Of Directors 12 Management Team 14 Trust Structure 15 Corporate Information Delivering Quality 18 Portfolio Summary 20 Portfolio Review - Retail Malls 23 Portfolio Review - Retail Spaces 25 Portfolio Location Map Reaching Out To Customers 28 Market Report 34 Financial Review 36 Capital Management 37 Risk Management 40 Operation Review 44 Investor Relations & Communications 45 Corporate Governance FINANCIALS 52 Financial Contents 104 Statistics Of Unitholdings 107 Related Party Transactions CORPORATE PROFILE - About LMIR Trust Everyday Malls Primed For Defensive Growth Lippo-Mapletree Indonesia Retail Trust (“LMIR Trust”), the first real estate investment trust (“REIT”) in Singapore to provide exposure to Indonesia’s growing retail sector, is focused on enhancing shareholder value through active asset enhancement and sound financial management that ensure steady and defensive income for investors. LMIR Trust’s portfolio comprises eight high-quality retail malls and seven retail spaces located within other malls with a combined net lettable area (“NLA”) of 402,632 sqm1 and valuation of S$830 million2 as at December 31, 2008. Strategically located within large urban middle-class population catchment areas in Greater Jakarta, Bandung and Medan, LMIR Trust’s portfolio properties are everyday malls popular with middle-to-upper-middle-income domestic consumers in Indonesia. Top tenants include well- known international and domestic retailers and brandnames, such as Matahari Department Store, Hypermart, Giant Hypermarket, Gramedia Bookstore, Starbucks, Giordano, Fitness First, Sports Station and Studio 21 Cinema. Since its listing on November 19, 2007, LMIR Trust has undertaken prudent acquisition to prime the vast potential of its portfolio for long-term growth. Ekalokasari Plaza. This included the acquisition of Sun Plaza, a landmark retail mall in Medan, the third most populous city in About the Sponsor and the Manager Indonesia after Jakarta and Surabaya. To-date, LMIR Trust’s malls and retail spaces continue to enjoy a The Sponsor of LMIR Trust is PT Lippo Karawaci Tbk, strong average occupancy rate of 95.7% compared Indonesia’s largest listed property company and an to the 84.6%3 industry average. internationally recognised corporation with a track record and dominant position within the property Going forward, LMIR Trust will look towards industry in Indonesia. focusing on organic growth through proactive asset management to maintain its strong occupancy. The Manager, Lippo-Mapletree Indonesia Retail Trust Management Ltd, is incorporated in Singapore and 60.0% indirectly owned by the Sponsor and 40.0% owned by Mapletree Management Pte. Ltd, a wholly- owned subsidiary of the Mapletree Group, a leading real estate company in Singapore with an asset base of S$4.5 billion comprising office, logistics, industrial, retail and lifestyle properties. 1 As at December 31, 2008. 2 Valuation from Knight Frank as at November 30, 2008. 3 Cushman & Wakefield Indonesia Q4 Market Review. L I PP O -M A P let R ee I N D onesia Retail T R U st A NN U A L R E P O R T 2 0 0 8 • 0 1 OUR VISION To be the premier retail REIT in Asia, creating and utilising scale whilst leading the way in innovation and quality. We aim to create long term value for stakeholders by providing access to high growth malls as well as strong economic and consumer growth. Istana Plaza. Ekalokasari Plaza. 0 2 • L I PP O -M A P let R ee I N D onesia Retail T R U st A NN U A L R E P O R T 2 0 0 8 OUR MISSION We are committed to: • delivering regular and stable distributions to Unitholders • growing our portfolio by way of investments in retail and/or retail related assets • enhancing returns from existing and future properties • achieving long-term growth to provide Unitholders with capital appreciation on their investments Outdoor dining. L I PP O -M A P let R ee I N D onesia Retail T R U st A NN U A L R E P O R T 2 0 0 8 • 0 3 GROUP FINANcial Highlights Summary of FY20081 Results 2008 Actual S$’000 Forecast S$’000 Change % Gross Revenue 101,761 94,202 8% Property Operating expenses (13,464) (5,942) 127% Net Property Income 88,297 88,260 0% Distributable Income 59,492 68,863 14% Distribution Per Unit (cents) 5.60 6.48 14% LMIR Trust recorded gross revenues of S$101.8 million Notwithstanding the challenging economic climate, for the Financial Year 2008 ended December 31, 2008 LMIR Trust still managed to achieve high average (“FY2008”), which was above forecast, mainly due to occupancy of 95.7%, above the industry average of the contribution from Sun Plaza, which was acquired 84.6%. LMIR Trust’s gearing of 12.4% is well within the on March 31, 2008. aggregate leverage limit as set out in the guidelines for real estate investment trusts in Appendix 2 of the Property operating expenses for FY2008 came Code on Collective Investment Schemes issued by to S$13.5 million. The unfavourable increase of the Monetary Authority of Singapore. LMIR Trust’s $7.5 million compared to forecast is due mainly to portfolio is well diversified with no single property allowance for impairment charge on outstanding accounting for more than 21% of total net property receivables of S$7.0 million comprising outstanding income. Tenant diversification is balanced with no rent from wholesaler tenants. single trade sector accounting for more than 17% of total NLA, which provides stability in the current Distribution to unitholders for FY2008 is S$59.5 economic climate. million, which is S$9.4 million below forecast. This is mainly due to impairment charge for the For 2009, LMIR Trust will focus on organic growth outstanding receivables of $7.0 million as explained through proactive asset management to maintain above, and the writing off of the arrangement fee of strong occupancy, balanced property and tenant S$2.8 million for the balance S$225 million loan to be diversification across its retail malls and spaces. Asset syndicated in 2009. This translates into a DPU of 5.60 acquisitions are unlikely. cents for FY2008. 1 FY 2008 includes private trust period from 8 August 2007 to 18 November 2007 and public trust from 19 November 2007 (“Listing Date”) to 31 December 2008. 0 4 • L I PP O -M A P let R ee I N D onesia Retail T R U st A NN U A L R E P O R T 2 0 0 8 Balance Sheet as at December 31, 2008 Debt Information S$’000 Loan drawdown S$125 Million Non current assets 882,438 Tenure1 5 Years Current assets 125,317 Average cost of debt 6.42% p.a. Total assets 1,007,755 Gearing ratio 2 12.4% 1 Term loan repayable after 5 years from March 31, 2008. Current liabilities 22,185 2 Based on deposited property as defined in the Trust Deed. Non current liabilities 217,408 Net assets 768,162 Total Units in Issue Unit Price Performance FY20081 Excluding management fee 1,065,959,234 IPO Offering Price $0.80 payable in units As at First Trading Day $0.68 Including management fee 1,067,525,766 As at Last Trading Day $0.31 payable in units Highest $0.77 Lowest $0.17 Net Asset Value (NAV) Trading Volume (Million Unit) 540.69 Excluding management fee 1 FY 2008 includes private trust period from 8 August 2007 to 18 November S$0.7206 2007 and public trust from 19 November 2007 (“Listing Date”) to 31 payable in units December 2008. Including management fee S$0.6729 payable in units L I PP O -M A P let R ee I N D onesia Retail T R U st A NN U A L R E P O R T 2 0 0 8 • 0 5 DeliveRing PeRfoRmance Prudent capital management and proactive asset enhancement has been the cornerstone of LMIR Trust’s performance. It is a strategy that has yielded high occupancy, balanced property and tenant diversification across LMIR Trust’s retail malls providing for resilient, stable earnings. LETTER TO UNITHOLDERS Ms Viven Gouw Sitiabudi, CEO and Mr Tan Bar Tien, Chairman. areas in Greater Jakarta, Bandung and Medan, a LMIR Trust contended with challenging macro-economic conditions in sound balance sheet and strong management team. FY2008 and emerged financially stable with low gearing, defensive and FY2008 witnessed LMIR Trust’s maiden acquisition steady revenues and a well-balanced, diversified portfolio of retail properties of Sun Plaza, one of the largest shopping centres located within high population urban middle-class catchment areas. in Medan, North Sumatra at a purchase price of approximately S$146.73 million, which increased our total portfolio NLA by approximately 20% since our Dear Unitholders IPO. As at December 31, 2008, our total NLA stands at 402,632 sqm. On behalf of the Board of Directors of Lippo-Mapletree Indonesia Retail Trust Management Ltd, manager of Against the challenging backdrop of high inflation LMIR Trust, we are pleased to share with you the key and slowdown in discretionary consumer spending, milestones and progress that LMIR Trust has made gross revenues in FY2008 came to S$101.8 million, 8% in the Financial Year ended December 31, 2008. higher than forecasted due mainly to contribution from the acquisition of Sun Plaza. Year in Review FY2008 was a historical year which saw However, property operating expenses for FY2008 unprecedented volatility in the global financial was high at S$13.5 million, due mainly to allowance markets.