LIPPO-MAPLETREE - Lippo Malls Indonesia Retail Trust - Investor ...

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Risk factorsFactors that affect shoppers’ volume at the Retail Spaces and, thereby, the ability of the Master Lessee tomeet its obligations include, but are not limited to:• the financial position of the Master Lessee;• unemployment levels in Indonesia;• the local economies;• seasonal retail cycles;• local retail competitors and competition in the retail industry;• the Master Lessee’s ability to attract and retain successful tenants;• unfavourable publicity;• material losses in excess of insurance proceeds;• a possibility of union activities disrupting the operations of the Retail Spaces, severely impacting on itsreputation and ability to function normally;• social unrest; and• natural disasters.There can be no assurance that the Master Lessee will have sufficient assets, income and access tofinancing in order to enable it to satisfy its obligations under the respective Master Lease Agreement.The Master Lessee may not renew its leases of the Retail Spaces.No assurance can be given that the Master Lessee will exercise any option to renew its leases of the RetailSpaces upon the expiry of the initial 10-year term of the Master Leases. If the Master Leases are notrenewed, LMIR Trust may not be able to find a suitable purchaser of the Retail Spaces or a suitablereplacement master lessee, as a result of which LMIR Trust may lose a significant source of revenue. Inany event, it may not be possible to replace the Master Lessee immediately upon the expiry of the MasterLeases and this may lead to temporary vacancy.The failure to renew the Master Lease Agreements, or the termination of any of these Master LeaseAgreements, may have a material adverse effect on LMIR Trust’s Gross Revenue.The Master Lessee may terminate its leases of the Retail Spaces due to change in law.Under the Master Lease Agreements, the Master Lessee is entitled to terminate the leases if, as a result ofany change in the laws or regulations, it is prohibited from carrying out its current operations at the RetailSpaces. In the event of such termination, the security deposit of the Master Lessee will be forfeited to thelandlord but no compensation is payable by the Master Lessee.The termination of the leases will have a material adverse effect on LMIR Trust’s Gross Revenue.The loss of key tenants of any of the Retail Malls or a downturn in the businesses of any ofthe Retail Malls’ key tenants could have an adverse effect on LMIR Trust’s financial conditionand results of operations.Based on Committed Leases as at 30 June 2007, the 10 largest tenants of the Retail Malls (in terms of theircontributions to the total Gross Rent) accounted for approximately 37.5% of the total Gross Rent of theRetail Malls.LMIR Trust’s financial condition and results of operations and ability to make distributions may beadversely affected by the bankruptcy, insolvency or downturn in the businesses of one or more ofthese tenants, as well as the decision by one or more of these tenants not to renew its lease or to terminateits lease before expiry. The Manager expects that LMIR Trust will continue to be dependent upon thesetenants for a significant portion of its Gross Revenue. There is a risk that an anchor tenant terminates itslease or does not renew its lease at expiry. It may not be feasible to operate such large-scale retail malls inIndonesia without an anchor tenant. It may be difficult to secure replacement tenants at short notice or on66
Risk factorssimilar tenancy terms. In addition, the amount of rent and the terms on which lease renewals and newleases are agreed may be less favourable than those of current leases.The loss of key tenants in any one of LMIR Trust’s Properties or future acquisitions could result in periodsof vacancy, which could therefore adversely affect the revenue of the relevant Property, consequentlyimpacting the Indonesian SPCs’ ability to make distributions to LMIR Trust.There are potential conflicts of interest amongst LMIR Trust, Mapletree Capital, the Sponsorand the Master Lessee.The Manager is 40.0% owned by Mapletree Capital and 60.0% owned by Peninsula Investment Ltd.Peninsula Investment Ltd is in turn 100.0% owned by Jesselton Investment Ltd, a wholly-owned subsidiaryof the Sponsor. The Sponsor, Mapletree Capital, their respective subsidiaries and associates are, or maybe, engaged in, among other things, portfolio management, investment in, and the development,management and operation of, retail properties in Indonesia and elsewhere in the region.The strategy and activities of LMIR Trust may be influenced by the overall interests of the Sponsor and/orMapletree Capital. The Sponsor does not have any direct or indirect interest in any Units or any directeconomic interest in LMIR Trust, other than through its relationship with the Manager and Lippo Strategic,which is an affiliate. Mapletree Capital is a wholly-owned subsidiary of MIPL. The Sponsor and/orMapletree Capital may in the future sponsor, manage or invest in other REITs or other vehicles whichmay compete directly with LMIR Trust. There can be no assurance that conflicts of interest will not ariseamong LMIR Trust, the Manager, the Sponsor and/or Mapletree Capital in the future, or that LMIR Trust’sinterests will not be subordinated to those of the Sponsor and/or Mapletree Capital whether in relation tothe future acquisition of properties or property-related investments or in relation to competition for tenantswithin the Indonesia market or regionally (see “The Manager and Corporate Governance—Related PartyTransactions”).Mapletree Capital confirms that currently, the Mapletree Group does not own, invest or intend to developany retail malls in Indonesia. However, there is no assurance that this may not change in the future giventhat this is a future commercial decision. In the event that the Mapletree Group decides to undertake anyfuture investments and/or development of retail malls in Indonesia, any potential conflicts of interest thatmay arise will be addressed together with the Manager.There can be no assurance that the Sponsor and/or Mapletree Capital will not favour properties that it hasretained in its own property portfolio or which it manages or operates over those owned by LMIR Trust.The Master Lessee, its subsidiaries and associates are engaged in, and/or may engage in, among otherthings, portfolio management, investment in, and the development, management and operation of, retailproperties in Indonesia and elsewhere in the region.Any conflicts of interests could have an adverse impact on LMIR Trust’s operating results, as well asdistributions made to Unitholders.There are potential conflicts of interest amongst LMIR Trust and the Property Manager.The Property Manager has entered into an Existing Property Management Agreement with each of theRetail Mall Indonesian SPCs holding the relevant Retail Mall under which the Property Manager willoperate, maintain, manage and market the relevant Retail Mall. (See “Summary—Structure of LMIRTrust—Property Manager: PT. Consulting & Management Services Division”.)The Property Manager is a full service property management company which is engaged in the businessof managing properties in Indonesia. Therefore, the Property Manager may manage retail propertiesowned by other clients. There can be no assurance that the Property Manager will not favour otherproperties which it manages or operates over those owned by LMIR Trust.In addition, the Property Manager is a wholly-owned subsidiary of the Sponsor. The Sponsor, itssubsidiaries and associates are engaged in, among other things, portfolio management, investmentin, and the development, management and operation of, retail properties in Indonesia and elsewhere in theregion. There can be no assurance that conflicts of interest will not arise among LMIR Trust, the PropertyManager and the Sponsor in the future, or that LMIR Trust’s interests will not be subordinated to those of67
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LIPPO-MAPLETREEINDONESIA RETAIL TRU
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Metropolis Town SquareMall WTC Mata
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KeyInvestmentHighlightsStrong acqui
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Locked-in master leases with rental
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1. Mall WTC Matahari UnitsRetail Sp
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Notice to investorsNo person is aut
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Forward-looking statementsCertain s
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Market and industry informationThis
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SummaryThe following summary is qua
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a right of first refusal (the “RO
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• The management of all the Retai
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information was extracted are based
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2006. It is estimated that the urba
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Further, the Retail Malls are manag
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Key Information on the PropertiesA
Page 31 and 32: Location of the Properties in Indon
Page 33 and 34: INFORMATION ON THE PROPERTIESThe Re
Page 35 and 36: Pictures of Gajah Mada Plaza19
Page 37 and 38: Percentage of contribution to LMIRT
Page 39 and 40: Number of tenants as at 30 June2007
Page 41 and 42: Car parking lots . . . . . . . . .
Page 43 and 44: Occupancy rate as at 30 June 2007.
Page 45 and 46: Year of building completion . . . .
Page 47 and 48: NLA as at 30 June 2007 . . . . . .
Page 49 and 50: Year of building completion . . . .
Page 51 and 52: Appraised value by Knight Frank as
Page 53 and 54: NPI for Forecast Period 2007,Projec
Page 55 and 56: Note:(1) Based on Strata Titles Own
Page 57 and 58: Note:(1) Based on Kiosks Sale and P
Page 59 and 60: Appraised value by Colliers as at30
Page 61 and 62: Percentage of contribution to LMIRT
Page 63 and 64: Notes:(1) These 14 Singapore SPCs (
Page 65 and 66: (See “Strategy—Capital and Risk
Page 67 and 68: Operating Companies: PT Multi Nusan
Page 69 and 70: Payable by LMIR Trust(c) Any other
Page 71 and 72: The offeringLMIR Trust . . . . . .
Page 73 and 74: Lock-ups . . . . . . . . . . . . .
Page 75 and 76: Listing and Trading . . . . . . . .
Page 77 and 78: Singapore are made in accordance wi
Page 79 and 80: Forecast Period2007Projection Year2
Page 81: Risk factorsProspective investors s
Page 85 and 86: Risk factors• losses arising from
Page 87 and 88: Risk factorsacquisitions is limited
Page 89 and 90: Risk factorsafter the proposed plan
Page 91 and 92: Risk factorsIf the tenure of the un
Page 93 and 94: Risk factorsThe Properties may be s
Page 95 and 96: Risk factorsRenovation work or phys
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Page 99 and 100: Risk factorsthereby materially and
Page 101 and 102: Risk factorsinterpretation by the I
Page 103 and 104: Risk factors• broad market fluctu
Page 105 and 106: Ownership of UnitsPRINCIPAL UNITHOL
Page 107 and 108: DistributionsThe distributable inco
Page 109 and 110: Exchange rates and exchange control
Page 111 and 112: CapitalisationThe following table s
Page 113 and 114: Unaudited pro forma consolidated ba
Page 115 and 116: Profit forecast and profit projecti
Page 129 and 130: StrategyDate, to the extent that LM
Page 131 and 132: StrategyGiven that there is limited
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Strategyterm funding in a more cost
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Business and propertiesIn addition,
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Business and propertiestheir daily
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Business and propertiesValuationEac
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Business and propertiesThe followin
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Business and propertiesINFORMATION
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Business and propertiesother strata
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Business and propertiesBecause of t
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Business and propertieswell-known c
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Business and propertiesThe largest
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Business and properties“Overview
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Business and properties200 sq m and
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Business and properties• Mal Cima
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Business and propertiesTHE PLAZA SE
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Business and propertiesThe table be
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Business and properties• Epicentr
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Business and propertiesMAL LIPPO CI
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Business and propertiesPercentage o
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Business and propertiesfloor. The o
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Business and properties• Pangrang
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Business and propertiesBANDUNG INDA
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Business and propertiesAmendment to
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Business and propertiesISTANA PLAZA
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Business and propertiesThe Istana P
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Business and propertiesRelevant inf
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Business and propertiesAppraised va
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Business and propertiesDescriptionP
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Business and propertiesSun PlazaMed
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The Manager and corporate governanc
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The SponsorThe business structure o
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The Sponsorshopping, entertainment
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The SponsorKEY SHAREHOLDERS OF THE
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The formation and structure of LMIR
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Certain agreements relating to LMIR
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Overview of relevant laws and regul
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TaxationSINGAPORE TAX IMPLICATIONST
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Taxationbe applied to reduce the co
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TaxationOn the rental payments to t
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Plan of distributionThe Manager is
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Plan of distributionThe restriction
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Plan of distributionNote:(1) Includ
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Plan of distributionArticle 31, sec
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Plan of distributionUnited States o
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Clearance and settlementINTRODUCTIO
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General information(1) The profit f
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General information(f)(g)(h)Rule 74
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Glossary% Per centum or percentageA
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GlossaryColliersColliers Internatio
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GlossaryIndonesian SPCsInterested P
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GlossaryNPIOCBC BankNet property in
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GlossaryRetail Space Singapore SPCs
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GlossaryUnit Lending AgreementUnit
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Appendix AINDEPENDENT ACCOUNTANTS
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Appendix BINDEPENDENT ACCOUNTANTS
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Appendix BLIPPO-MAPLETREE INDONESIA
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Appendix BPro Forma Consolidated Ba
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Appendix B(D)Pro Forma Consolidated
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Appendix B(x)(xi)(xii)(xiii)(xiv)S$
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Appendix BCash and cash equivalents
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Appendix BLeased assets—Leases in
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Appendix Btemporary difference; and
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Appendix B• The Trustee, the Mana
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Appendix BDeferred income represent
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Appendix Bfinancial year exceeds th
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Appendix Bprice is to be negotiated
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Appendix B4. Bandung Indah PlazaPT
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Appendix CINDEPENDENT SINGAPORE TAX
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Appendix CGains on disposal of shar
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Appendix CDisposal of UnitsSingapor
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Appendix DINDEPENDENT INDONESIAN TA
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Appendix DD-3
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Appendix DD-5
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Appendix DD-7
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Appendix EINDEPENDENT PROPERTY VALU
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Appendix EReport No.017/WPA-Report/
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Appendix ERef. No: V/2006/PKG/3819
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Appendix EVALUATION CERTIFICATEProp
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Appendix EPropertiesLandarea (m 2 )
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Appendix EADDENDUM—STATEMENT OF A
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Appendix FINDEPENDENT REPORT ON THE
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TABLE OF CONTENTSREPORT INSTRUCTION
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Report instructionsAbout Jones Lang
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Executive summaryIMPLICATIONS FOR R
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Overview of Indonesia and its Econo
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Retail Market OverviewTable 2.1.1 I
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Retail Market Overview2.3 Changing
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Retail Market Overviewretailers hav
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Retail Market OverviewCompletionyea
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Retail Market Overview2.7.5 Carrefo
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Retail Market OverviewIn view of th
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Overview of PortfolioAs the adminis
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Overview of PortfolioFigure 3.1.4:
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Overview of PortfolioFigure 3.2.2 B
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Overview of PortfolioFigure 3.2.4 S
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Overview of PortfolioFigure 3.2.6 M
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Overview of PortfolioFigure 3.3.1 L
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Overview of PortfolioMall WTC Matah
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Leased MallsFigure 4.1.1 Cibubur Ju
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Leased MallsTable 4.1.3 Major tenan
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Leased MallsTable 4.1.4 Cibubur Jun
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Leased Malls4.1.7 SWOT analysisTabl
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Leased Malls4.2 Plaza Semanggi4.2.1
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Leased Mallsnumber of international
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Leased MallsTaking the survey and t
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Leased Malls• There are two major
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Leased Mallsterms of its very promi
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Leased MallsFigure 4.3.2 Bandung In
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Leased Malls• In terms of reasons
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Leased Mallsand approximately 38,00
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Leased MallsWhile BIP is likely to
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Leased MallsFigure 4.4.2 Istana Pla
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Leased Malls• The main reason sta
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Leased Malls• Cihampelas Walk is
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Leased MallsFigure 4.4.4: Istana Pl
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Leased MallsOn the completion of th
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Leased MallsThe target market for M
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Leased MallsThe current Hypermart e
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Leased MallsFigure 4.6.2 Gajah Mada
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Leased Malls• Of all the malls in
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Leased Mallshypermart. The centre a
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Leased MallsTable 4.6.7: Rental pos
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Leased Malls4.7.3 Tenant mixThe cur
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Leased Mallsprimarily the city of B
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Leased MallsTable 4.7.5: Main compe
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Retail Spaces Malls5. RETAIL SPACES
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Retail Spaces MallsIn addition, loc
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Retail Spaces MallsThe store target
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Retail Spaces MallsTable 5.3.1: Cen
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Retail Spaces MallsFigure 5.3.3: Gr
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Retail Spaces MallsThis relatively
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Retail Spaces MallsStrata title sho
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Retail Spaces MallsMadiun are locat
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Retail Spaces MallsFigure 5.6.3 Pla
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Retail Spaces MallsThe centre has t
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Appendix GTERMS, CONDITIONS AND PRO
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Appendix G(15) The Manager reserves
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Appendix GAdditional Terms and Cond
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Appendix G(10) By completing and de
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Appendix GAdditional Terms and Cond
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Appendix GWhere your Electronic App
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Appendix GApplication to the Manage
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Appendix GTerms and Conditions for
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Appendix HLIST OF PRESENT AND PAST
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Appendix H(6) Mr Tan Boon LeongCurr
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Appendix HCurrent DirectorshipsMapl
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Appendix HCurrent DirectorshipsMapl
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LIPPO-MAPLETREE INDONESIA RETAIL TR
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