The manager of First REIT has responded to a list of questions posed by unitholders, which were largely focused on the divestment of Siloam Hospitals Surabaya.
On May 19, the REIT manager announced that it will be divesting Siloam Hospitals Surabaya for a consideration of IDR430.0 billion ($40.9 million) to PT Siloam International Hospitals and PT Megapratama Karya Bersama., a 99.99%-owned company by Siloam International Hospitals.
PT Lippo Karawaci (LPKR) indirectly holds the remaining 0.01% interest.
In a bourse filing released on July 18, unitholders pointed out that the sale price stood at a “mere 0.1% premium” to the valuation and asked if the managers had “searched and sourced for better offers”.
In response, the manager explained that the divestment was “an opportunity to recycle a mature asset that was constructed in 1977, instead of taking on excessive development risk arising from the Road Subsidence that took place in 2018.”
The asset was also facing “increased competition” from new facilities as well as competition from existing healthcare competitors with upgraded facilities, says the REIT manager.
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It adds that the agreed property value stood at a gross premium of 143.2% over the REIT’s original purchase price of $16.8 million.
On whether the manager had considered selling the property to other parties apart from its sponsor, First REIT’s manager revealed that none of the 37 healthcare players, that it had marketed the property to, submitted an offer.
On the question of the REIT sponsor waiving and forfeiting its divestment fees considering that there was “less effort” made to search and source for buyers, the REIT manager explained that the divestment fee of $0.2 million was payable to the manager in accordance with their trust deed. The fee will be in the form of units since the proposed divestment is an interested party transaction. The fees will not be sold within one year of the date of issuance.
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Following the sale, First REIT will have 30 properties across Asia in its portfolio. These include 15 properties in Indonesia, 12 nursing homes in Japan and three nursing homes in Singapore.
Units in First REIT closed at 27.5 cents on July 18.
