First REIT to Restructure Master Lease Agreements

News about First REIT

First REIT master tenants have been struggling to keep up with rents as their value in SGD has become heavier with the depreciation of the local currency (IDR). The Covid pandemic has been the last straw and after some negotiations, First REIT is presenting the restructuring agreement that has been ironed out with PT Lippo Karawaci Tbk and PT Metropolis Propertindo Utama. Among the key points:

  • Rent would be denominated in local Indonesian Rupiah (IDR) rather than Singapore Dollar (SGD), with a new rent escalation set at 4.5% per year
  • WALE would be extended from 7.4 years to 12.6 years thanks to new leases replacing old ones
  • Due to falling rental income (which impacts property valuations), NAV is expected to drop from S$0.996 to S$0.518, pushing gearing to 47.9% (from 34.5% in FY2019)

Investment Moat has an in-depth review of the changes.

First REIT
Price0.250 SGD
NAV0.499 SGD
Yield (4 quarters)16.60%
Gearing49.0%