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

Risk factorsafter the proposed plans for asset enhancement materialise, the proposed plans may not achieve theirdesired results or may incur significant costs unnecessarily.Triggering events may not occur for the ROFR.The Sponsor has granted LMIR Trust, for so long as (a) Lippo-Mapletree Indonesia RetailTrust Management Ltd. remains the manager of LMIR Trust and (b) the Sponsor and/or any of itsrelated corporations, alone or in aggregate, remains a controlling shareholder of the Manager, a ROFRover any Relevant Asset (i) which any Sponsor Entity proposes to sell or transfer (whether such RelevantAsset is wholly-owned or partly-owned by the Sponsor Entity and excluding any sale of such RelevantAsset by a Sponsor Entity to any related corporation of such Sponsor Entity pursuant to a reconstruction,amalgamation, restructuring, merger or any analogous event) to an unrelated third party or (ii) for which aproposed offer for sale or transfer of such Relevant Asset has been made to a Sponsor Entity.This ROFR is only triggered if, among others, the foregoing events occur. There is a risk that suchtriggering events may not occur or that no suitable properties may be available during the validity period ofthe ROFR. There is also a risk that even after the ROFR is triggered, the Trustee may not enter into abinding agreement with the relevant vendor within the stipulated deadline. (See “Certain AgreementsRelating to LMIR Trust and the Properties—Description of the Right of First Refusal Agreement”.)RISKS RELATING TO INVESTING IN REAL ESTATELMIR Trust may be adversely affected by the illiquidity of real estate investments.LMIR Trust invests primarily in real estate and real estate-related assets. This involves a higher level of riskas compared to a portfolio which has a diverse range of investments. Real estate investments, particularlyinvestments in high value properties such as those in which LMIR Trust has invested or in which it intendsto invest, are relatively illiquid. Such illiquidity may affect LMIR Trust’s ability to vary its investment portfolioor liquidate a portion of its assets in response to changes in economic, real estate market or otherconditions. For instance, LMIR Trust may be unable to sell its assets on short notice or may be forced togive a substantial reduction in the price in order to ensure a quick sale. Moreover, LMIR Trust may facedifficulties in securing timely and commercially favourable financing in asset-based lending transactionssecured by real estate due to the illiquid nature of real estate assets. These factors could have an adverseeffect on LMIR Trust’s financial condition and results of operations, with a consequential adverse effect onLMIR Trust’s ability to deliver expected distributions to Unitholders.There is no assurance that the HGB, strata titles on HGB underlying common land or HGB ontop of HPL titles of the land on which the Properties are sited, can be renewed.Cibubur Junction, Mal Lippo Cikarang, Istana Plaza and Plaza Madiun are sited on land with HGB titles,while Gajah Mada Plaza is held via strata titles on HGB underlying common land.Bandung Indah Plaza is sited on land with HGB titles on top of HPL titles. (See “Business and Properties—Information Regarding the Title of the Properties—Hak Pengelolaan (“HPL”) titles”.)A HGB title is granted for a maximum initial term of 30 years. By application to the relevant local land officeupon the expiration of this initial term, a HGB title may be extended for an additional term not exceeding20 years. Following expiration of this additional term, a renewal application may be made. (See “Overviewof Relevant Laws and Regulations in Indonesia—Rights to Own and/or to Use”.)Under Indonesian land law, there is no limitation on the number of extensions and renewal cycles for HGBtitles. However, there is no assurance that there will be approval for such renewal or extension in the future.The non-renewal of these HGB titles, for any reason, could either adversely affect the operations of theProperties or result in LMIR Trust losing its ownership of the Properties.There is no assurance that the BOT Agreements can be extended.Cibubur Junction, The Plaza Semanggi, Ekalokasari Plaza, Bandung Indah Plaza and Istana Plaza will beindirectly held by LMIR Trust pursuant to the respective BOT Agreement or the Cooperation Agreement.The BOT Agreement does not amount to a legal title and is essentially a contractual arrangement andgoverned by Indonesian Civil Code. Pursuant to Article 1338 of the Indonesian Civil Code the contracting73