Lippo Offering REITs After Tax Breaks
Jakarta. Bowsprit Asset Management, a fund manager subsidiary of Indonesian property company Lippo Karawaci, is offering a real estate investment trust, aiming to raise $184 million to invest in office buildings across Jakarta.
It was Lippo's first REIT launched in Indonesia since the government offered tax discount on property sales last year.
President director of Bowsprit Asset Management Anggi Lim said on Tuesday (14/02) the company is offering the trust to securities companies and institutional investors from Jan. 18 to Feb. 28. The REIT will be listed on the Indonesia Stock Exchange on March 8.
Investors willing to purchase the REIT need to put down at least Rp 10 million ($750), Anggi said, adding the company aims to raise Rp 2.45 trillion.
Bowsprit will use the proceeds to acquire four office towers and one distribution center currently managed by Lippo Group — Berita Satu Plaza for Rp 393 billion, Menara Matahari for Rp 511 billion, Menara Asia for Rp 395 billion and Balaraja Distribution Center for Rp 448 billion.
Bowsprit is also going to acquire Mitra Wijaya Wisesa, which manages Life Tower in Kuningan area, for Rp 691 billion, Anggi said. The remaining Rp 12 billion will be for Bowsprit's working capital, he said.
Bowsprit expects the REIT to provide an annual yield between 8.78 percent and 9.94 percent over the next five years, based on the fact that rents for Jakarta offices have been rising by around 10 percent annually in the past nine years.
The government has cut the final income tax rate (PPh) on the sales of property to REITs to 0.5 percent from 5 percent to boost the country's property sector.
Selling property to REIT would allow developers to acquire quick cash for their next projects. Investors in REIT, on the other hand, can benefit from the property rents.
Bowsprit's sister company Ciptadana Properti Retail Indonesia is the only other firm issuing REITs in Indonesia, even though the investment instrument has been available since 2007.
Lippo Group has been managing more than $2.6 billion in REITs from Singapore, thanks to the city-state's cheaper tax scheme, but is now committed to shifting them to Indonesia, following the government's tax breaks.
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