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What Is Lippo Group Planning For Its Two REITs?

On 28 October 2015, Business Times Singapore broke the news that Lippo Group was planning to delist both its real estate investment trusts (REIT), namely First Real Estate Investment Trust (SGX: AW9U) and Lippo Malls Indonesia Retail Trust (SGX: D5IU) from the Singapore Stock Exchange. The plan, according to Lippo Group, was to relist them on the Bursa Efek Indonesia (Indonesian Stock Exchange).

The intention to delist came after the Indonesian government’s decision to provide tax incentives to encourage companies to list REITs on the Indonesian stock market.

He said, she said

The news has come as a bit of a shock for unitholders.

On one side, the sponsor is announcing its plan to delist. On the other side, according to their latest announcements, both REIT managers have said that it has not been informed by its sponsor, PT Lippo Karawaci Tbk, of any plans for delisting.

The ensuing confusion appears to be affecting the prices of both REITs. At the time of writing, units of First REIT have fallen nearly 7% since its close on 28 October 2015.

There have been no new information from either REIT since last Wednesday. Given the magnitude of the issue, it does seem rather unprofessional for Lippo Group to leave other unitholders of both REITs stranded, without any further information.

Firstly, minority unitholders were not informed of any plans for the delisting. Instead, unitholders were left to find out from an outside news report instead of directly from the REIT’s disclosure on bourse operator Singapore Stock Exchange‘s platform. Secondly, five days have passed since the news report. There has been no additional information from the REIT managers or the sponsor on what exactly is being planned.

All these actions can be seen as extremely unprofessional and unfair to unitholders of both REITs.

The power of minority unitholders

Yet, if the sponsor and managers continue to disregard the needs of its unitholders, it might come to regret this if the plan is to delist the REITs.

According to the latest annual reports, PT Lippo Karawaci only owns 33.5% of First REIT and 30% of Lippo Malls Indonesia Retail Trust. This suggests that Lippo Group would need the support from other unitholders to successfully delist both REITs from the Singapore Stock Exchange.

However, the way the current situation is playing out may leave a bad taste in their mouth. If I were to put myself into a minority unitholder’s shoes, I would have my doubts of supporting them.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.