First REIT proposes $471.5m Indonesia asset divestment

Deal includes a six-asset put option.

First REIT has proposed divesting Indonesian assets worth about $471.5m as part of a strategic review aimed at reducing currency volatility, cutting leverage, and repositioning the portfolio towards developed markets.

The proposed divestments comprise eight hospital assets to PT Siloam International Hospitals Tbk and its subsidiaries for about $389.2m, two non-hospital assets to PT Lippo Karawaci Tbk for $53.3m, and a prepaid lease of commercial rights for Lippo Plaza Kupang to a unit of PT Metropolis Propertindo Utama for $29.1m.

The manager has also secured put options over six remaining Indonesian hospital assets with an aggregate agreed property value of about $294.8m, which would allow First REIT to fully exit Indonesia if exercised. Any exercise would require a separate unitholder vote.

First REIT said the proposed divestments were struck at a 2.1% premium to valuation and would lower aggregate leverage to 16.7% after debt repayment, generating pro forma annual interest cost savings of $18.8m.

The board also intends to recommend a special distribution of about $9.7m, whilst the trust expects to recover $6.9m of current rental arrears from MPU in connection with completion.

The trust said the transactions would help eliminate rupiah-Singapore dollar foreign exchange drag on returns and recycle capital from non-core, non-healthcare, and arrears-linked assets.

It plans to focus future growth on developed Asia-Pacific markets, including Singapore, Japan, and Australia.

The proposed divestments remain subject to unitholder approval at an extraordinary general meeting expected in June, with completion targeted for August. The manager said the sponsors, OUE Limited and OUE Healthcare Limited, and their associates will abstain from voting.