Lippo Malls Indonesia Retail Trust (LMIR Trust) to Acquire Pejaten Village and Binjai Supermall

Just received a circular dated 26 Nov 2012 from Lippo Malls Indonesia Retail Trust (or LMIR Trust) that states : "This circular is important and requires your immediate attention".  Okay.  All circulars come with that label but even though it requires my immediate attention, I am way to busy to flip through a thick circular at the end of a typical work day.

Well, I finally got some time to flip through the circular and realised that it was in relation to the following 3 items:

• Proposed acquisition of Pejaten Village from an Interested Person;
• Proposed acquisition of Binjai Supermall from an Interested Person; and
• The Whitewash Resolution

Just by reading the title, a few questions started popping in my head.  They are basically:

• Who is this Interested Person?
• How much do these acquisitions cost and are they yield accretive?
• What is the Whitewash Resolution?  (it almost sounds like some top secret codename for something).

A quick flip through the circular has given me the answers.

Who is this Interested Person?

Firstly, an "Interested Person Transaction" is defined in the footnotes as "a transaction between an entity at risk and an Interested Person". The properties are owned by Lippo Karawachi's subsidiaries (?).  Actually, after flipping through the document and taking a quick glance, I am not certain whether this is explicitly stated inside the document or that as an investor, I am supposed to derive that companies like Sea Pejaten Pte. Ltd is a subsidiary of LMIR's sponsor.  Or perhaps, I am just not familiar enough with legal terms like "Interested Person".  Does "Interested Person" in LMIR Trust's case specifically only referring to one single entity (i.e. Lippo Karawachi) ?

How much do these acquisitions cost and are they yield accretive?

Pejaten Village = S$95.1 million

Binjai Supermall = S$30.2 million

The average of independent valuations for Pejaten Village and Binjai Supermall are S$108.8 million and S$31.8million respectively.  So LMIR Trust is buying these two properties at a discount.  The occupancy rates of both the malls look strong at 96.3% and 91.2% respectively.

I was looking for the word "yield accretive" in the document but could not find it.  It does however state that it expects a 16.3% increase in LMIR Trust's Net Property Income.  Also, based on the pro-forma DPU and financial effects, it seems that the distribution yield will actually go down.  So these acquisitions are probably not yield accretive.  Hopefully, LMIR Trust will be able to carry out some asset enhancement initiatives to improve the yield of these properties.

On the plus side, the acquisitions are at a discount, will help enhance the earnings of LMIR Trust, are at locations with sustainable retail traffic, will increase economies of scale, and also diversify the portfolio to minimise concentration risks.

What is the Whitewash Resolution? 

The Whitewash Resolution is perhaps the most important resolution to be passed at the EGM since the purchase of the properties are conditional on this Whitewash Resolution. 

Basically, the manager is seeking approval from Independent Unitholders for a waiver their rights to receive a Mandatory Offer from the Sponsor and parties.  This is simply because the acquisition fees to be paid out the manager could possibly result in the number units held by the Sponsor and parties acting in concert with it to be above 30%.

What this means is that the Sponsor and the parties are not interested in taking over LMIR and thus do not want to make a mandatory offer as required under regulation

Cross Timbers Royalty Trust

I had read about Cross Timbers Royalty Trust (listed on the US stock exchange) many years ago and had placed it in my stock watchlist but never got the chance to look at it.  All along, I thought this monthly dividend paying stock was involved in timbers or harvesting of logs.  And so I was a little hesitant to invest in it.

To my surprise, Cross Timbers Royalty Trust (or CRT as per its ticker symbol on NYSE) has nothing to do with timbers.  One wonders why they give such a name to this trust anyway. As I speak, it is currently trading at US$26.37 and pays out a regular monthly dividend.  The last dividend paid out was in October at around 18.62 cents per share.  Of course, as a foreigner, one will probably incur some kind of withholding tax.

A little about CRT.  It is an express trust and the principal asset of the trust is the net profit interests.  I guess this means it does not hold any physical assets and that the only thing it has is derived from the interests in profits it obtains from various royalty interest properties (oil and gas) located in Texas, Oklahoma and New Mexico.  Its website is also pretty simple and sparse with little information.  All the properties are owned by XTO Energy Inc. Bank of America, N.A. is the trustee.

This monthly dividend paying stock is trading near its  52 week low probably because of a steady decline in its dividends.  DPU for the 3rd Quarter of 2012 was $0.544601 as compared to 3Q2011 of  $0.860987.  The lower distributions have been attributed to lower gas prices, decreased oil/gas production and increased development costs.

Not yet vested but watching it closely.

Spending for Yesterday

This is my spending for yesterday:

Breakfast = $2.90
Groceries = $3.40
Lunch (skipped)
Dinner = $150
Household items = $250

Realised that I have been spending quite a bit on food.

Investments and Dividends for November

Made quite a few investments this month.  Bought into a few stocks/REITs:

• 50,000 shares of Thakral
• 10,000 shares of LMIR
• 20,000 shares of Saizen

Dividends/passive income for November was quite okay.  Roughly $250.  Most of it were contributed by Gamco Global Gold and Natural Trust (GGN) and Armour Residential REIT (ARR). ARR is a mortgage REIT.  Both stock prices hve declined quite a fair bit but I will like to think that my strategy is one where I will diversify a bit into other stocks rather than focusing on just these two stocks.

I also bought some shares of the Coca Cola Company (KO).  

Spending for Today

I read a book about real estate investing and it suggested keeping a budget for one month so that one is aware where all your money is going to.  I don't really live by a budget and I will like to think that I spend my money quite carefully.  But having tracked my daily expenditure for this month, I am quite surprised at what I have discovered.  Will probably share a little of my findings when I am comfortable.

Anyway, here is today's spending:

Breakfast (at home) = Nil
Coffee = $2.20
Lunch = $54.00
Dessert+Coffee = $10
Present/Gift = $23
Dinner (at home) = Nil

Reader's Query

A reader read one of my postings and asked whether he could buy some of the stocks that were listed in that posting.

The short answer to his query is "No".

Let me share why I might from time to time share what is on my watchlist or what I have already bought into my portfolio.  It is basically to let readers know what stocks I own and what stocks I am watching so that they know I have vested interest when I am talking about those stocks.  In a sense, I am also trying to get some feedback and thoughts from readers on why they think certain stocks may or may not be good investments.

Spending for Today

Let's take a look at my spending today.

Breakfast = $3.20
Lunch = $4.75
Coffee = $1.50
Dinner (at Home)
Dessert + Tea = $11.60

Total spending for the day is slightly over $20.  Of course, I did not include transportation costs.  But a quick look suggests that all my expenditure went into food.