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

Risk factorsRenovation work or physical damage to the Properties may disrupt the operations of LMIRTrust and collection of rental income or otherwise result in adverse impact on the financialcondition of LMIR Trust.The quality and design of the Properties directly influence the rental rates of and the demand for space inthe Properties, as well as the ability to attract heavy shopper traffic. The Properties may need to undergorenovation work from time to time to retain their attractiveness to tenants and may also require ad hocmaintenance or repairs caused by structural defects or because of new planning laws or regulations. Thecosts of maintaining a retail property and the risk of unforeseen maintenance or repair requirements tendto increase over time as the Properties age. While the Manager and the Property Manager will endeavourto keep any disruptions caused by such renovation work to a minimum, the business and operations of theProperties may still suffer some disruption and it may not be possible to collect the full rate of, or, as thecase may be, any rental income on space affected by such renovation work. Shopper traffic may also beadversely affected by potential inconveniences resulting from such renovation work.Physical damage to the Properties resulting from fire or other causes may lead to a significant disruption tothe business and operation of the Properties and together with the foregoing may result in an adverseimpact on the financial condition and results of operations of LMIR Trust and its ability to makedistributions.Some of the anchor tenants of the Retail Malls may terminate their leases pursuant to a sixmonthtermination clauseUnder the respective lease agreements, some of the anchor tenants of the Retail Malls may terminatetheir leases with a six-month notice period.The loss of these anchor tenants in the Retail Malls could result in periods of vacancy, which couldtherefore adversely affect the revenue of the relevant Retail Mall, consequently impacting the IndonesianSPCs’ ability to make distributions to LMIR Trust.A substantial number of the leases of the Retail Malls are for terms of three to five years,which exposes the Retail Malls to significant rates of lease expiries each year.A substantial number of the leases for the Retail Malls are for terms of three to five years. As a result, theProperties experience lease cycles in which a substantial number of such leases expire each year. Thisexposes LMIR Trust to certain risks, including the risk that vacancies following the non-renewal of leasesmay lead to reduced occupancy rates, which will in turn reduce LMIR Trust’s Gross Revenue.The inspections carried out during the valuation exercise on buildings and equipment may nothave identified all material defects, breaches of laws and regulations and other deficiencies.The Independent Valuers conducted inspections on the physical condition of the Properties as part of thevaluation exercise. There can be no assurance that such reviews, surveys or inspections have revealed alldefects or deficiencies affecting the Properties. In particular, there can be no assurance as to the absenceof: (i) latent or undiscovered defects or deficiencies; or (ii) inaccuracies or deficiencies in such review,survey or inspection reports, any of which could have a material adverse effect on the operations of theProperties and, consequently, LMIR Trust’s financial condition and results of operations. The risk ofundisclosed defects, breaches and deficiencies is necessarily increased as a result of the time intervalbetween completion of the review, survey and inspection process and the date of this Prospectus.The Master Lessee may not be liable to pay rent if any of the Retail Spaces is damaged ordestroyed.Under the Master Lease Agreements, if any of the Retail Spaces is damaged or destroyed such that theRetail Space cannot be used or becomes inaccessible, the relevant landlord has the option to reinstate orreplace such Retail Space (or the affected part, as the case may be) using insurance proceeds receivedunder the insurance policies. If the relevant landlord opts to reinstate or replace the Retail Space, theMaster Lessee will not be liable to pay rent in respect of the period when the Retail Space cannot be used79