REIT ASIAPAC
TECHNOLOGY
INDEXED PRICE PERFORMANCE
20.0%
10.0%
OUE HOSPITALITY TRUST
0.0%
OUE LTD
-10.0%
OUE COMMERCIAL REIT
-20.0%
FIRST REIT
-30.0%
-40.0% LIPPO KARAWACI
-50.0% LMIRT
-60.0%
Dec
2017
Jan
2018
Feb
2018
Mar
2018
Apr
2018
May
2018
Jun
2018
Jul
2018
Aug
2018
Sep
2018
Oct
2018
Nov
2018
Dec
2018
Source: S&P Global Market Intelligence (as of 31 December 2018)
Fund managers REIT AsiaPac spoke with
see the OUE REITs as being relatively
insulated from the corruption probe at
Lippo. At the same time, they are cautious
over Lippo’s and OUE’s reputation for
not always prioritising minority investor
interests.
The fund managers say the plunge in
OUE Commercial REIT’s share price is
directly traceable to its purchase of the
office components of OUE Downtown
and the deeply discounted rights issue
to fund the purchase. Investors found
the transaction disappointing due to the
short remaining tenure of the asset and
how the acquisition would be dilutive if
the impact of income support is stripped
out. There is also speculation that the
timing of the transaction and associated
capital raise could be remotely linked to
the cash crunch at Lippo.
N E G AT I V E C A S H F LO W S E E N
“Though there have several transactions
between OUE Limited and Lippo Karawaci,
it is still too early to think of OUE Limited
as a ‘white knight’ for Lippo Group,” says
Wong Hong Wei, Credit Research Analyst
at OCBC Bank. “There could be certain
clauses on change in control in the Lippo
REITs’ debt covenants, though it would
Te c h n o l o g y
WILL TOKENISATION DISRUPT
THE REIT INDUSTRY?
Lippo Group's costly high-rise development, Meikarta, seen here in April.(Photo by company)
be likely a waiver would be sought before
any change in control is effected.”
Moody's expects Lippo Karawaci to
continue generating negative operating
cash flows at the holding company level
over the next 12-18 months, given
lacklustre marketing sales of inventories;
a decline in asset management fees from
the sale of Bowsprit Capital, manager of
First REIT; a decline in dividend cash
flows from its Singapore-listed real estate
investment trusts owing to its reduced
stake in First REIT and weaker dividends
24
Tokenisation is maturing with some ventures succeeding in the
most challenging aspect — compliance. But what are the hurdles
preventing its full-scale adoption?
per unit from LMIRT; as well as higher
interest expense on its US dollar debt as
a result of the weaker Indonesian rupiah
against the US dollar and higher cost of
debt.
Steps to ease the longer term credit
concerns could include selling its
remaining 10.6% stake in First REIT (for
which it no longer owns the manager)
or selling retail mall (Lippo Mall Puri) to
LMIRT - which LMIRT will likely need to
finance with a mix of debt and equity,
says Poh.
Tokenisation is the most radical innovation in the
real estate industry since the introduction of REITs
in 1960. Tokenisation is a way of using Blockchain
to represent ownership. Let me break that down:
By Bernie Devine,
Regional Director (Asia),
Yardi Systems
• A blockchain is a form of cryptography –
distributed ledgers allowing the practice
and study of techniques for secure
communication in the presence of third
parties called adversaries.
• It is a register of transactions and allows
25
you to verify the current owner of a token on
the chain. It is much like Torrens title in which
a state creates and maintains a register of
land holdings, which serves as the conclusive
evidence of title of the person recorded on
the register as the proprietor, and of all other
interests recorded on the register.
• As tokens can represent the ownership of
the asset, many tokens can be used to break
down the size of ownership parcels, allowing
fractional ownership.