Lippo Karawaci Unit Set to Issue Rp6t in REIT Over the Next 2 Years
Jakarta. Lippo Karawaci, one of Indonesia's largest property developers, plans raise Rp 6 trillion ($448 million) from issuing real estate investment trusts at the Indonesia Stock Exchange over the next two years.
In the first stage of the issuance, the company will issue Rp 1.5 trillion REITs through its subsidiary Bowsprit Asset Management, offering investors with the opportunity to invest three office buildings belonging to Lippo Group: Lippo Kuningan, Menara Matahari and Menara Asia.
Bowsprit will be among the first of a string of property developers seeking to issue REITs after the Finance Ministry scrapped its double taxation rule for REITs last year. Lippo rivals Summarecon Agung and Ciputra Development have announced their plans to issue REITs this year in order to fund their expansion.
Angi Lim, Bowsprit's president director, said that the trust could give a dividend of 8.75 to 9 percent a year, excluding capital gain from an increase in property prices.
REIT is an investment instrument with which property investors can collectively own and receive rent. An investment manager will take charge of the property on behalf of the investors.
Under a Financial Services Regulation, an Indonesian REIT must invest at least 80 percent of the funds into a real estate investment instruments, including a minimum 50 percent of its funds in physical real estate assets.
Today, Ciptadana Properti Retail Indonesia, another asset management firm under Lippo Group, is the only firm issuing REITs in Indonesia, even though the government has allowed REITs since 2007.
Lippo has been managing more than $2.6 billion in REITs from Singapore and it has announced a plan to shift them to Indonesia in order to benefit from tax breaks offered by the government.
Parto Kawito, president director of research firm Infovesta Utama, said REITs could offer better return than investing on an individual property and would be more attractive to foreign investors.
"Still, REITs have a liquidity problem. There are only few market makers. Investment managers need to take part to make the market more liquid," Parto said.
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