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LIPPO MALLS INDONESIA RETAIL TRUST ANNUAL REPORT 2014
14. INVESTMENT PROPERTIES (CONT’D)
Sensitivity analysis on management’s estimates:
1.
Discount rates
A hypothetical 10% (2013: 10%) increase or decrease in the pre-tax discount rate applied to the
discounted cash flows would have an effect on return before tax of – lower by $168,555,000; higher by
$205,346,000 (2013: lower by $112,500,000; higher by $134,291,000).
2.
Growth rates
A hypothetical 10% (2013: 10%) increase or decrease in the rental income would have an effect on return
before tax of – higher by $129,518,000; lower by $128,231,000 (2013: higher by $117,337,000; lower by
$117,306,000).
3.
Terminal discount rates
A hypothetical 10% (2013: 10%) increase or decrease in the terminal discount rate would have an effect
on return before tax of – lower by $67,419,000; higher by $82,405,000 (2013: lower by $29,003,000;
higher by $35,728,000).
By relying on the valuation reports, the management is satisfied that the independent valuers have appropriate
professional qualifications and recent experience in the location and category of the properties being valued. Other
details on the properties are disclosed in the Statement of Portfolio.
The types of property titles in Indonesia which are held by the Group are as follows:
(a)
Hak Guna Bangunan (“HGB”) Title
This title gives the right to construct and own buildings on a plot of land. The right is transferable and may be
encumbered. Technically, HGB is a leasehold title where the state retains “ownership”. However, for practical
purposes, there is only little difference from a freehold title. HGB title is granted for an initial period of up to
30 years and is extendable for a subsequent 20-year period and another 30-year period. Upon the expiration
of such extensions, new HGB title may be granted on the same land. The cost of extension is determined based
on certain formula as stipulated by the National Land Office (Badan Pertanahan Nasional) in Indonesia. The
commencement date of each title varies.
(b)
Build, Operate and Transfer Schemes (“BOT Schemes”)
This title gives the Indonesia subsidiaries (“BOT Grantee”) the right to build and operate the retail mall for
a particular period of time as stipulated in the BOT Agreement by the land owner (“BOT Grantor”). A BOT
scheme is not registered with any Indonesian authority. Rights under a BOT scheme do not amount to a legal
title and represent only contractual interests.
In exchange for the right to build and operate the retail mall on the land owned by the BOT Grantor, the BOT
Grantee is obliged to pay a certain compensation (as stipulated in the BOT agreement), which may be made
in the form of a lump sum or staggered.
A BOT scheme is granted for an initial period of 20 to 30 years and is extendable upon agreement of both
parties. Upon the expiration of the term of the BOT agreement, the BOT Grantee must return the land, together
with any buildings and fixtures on top of the land, without either party providing any form of compensation
to the other.
(c)
Strata Title
This title gives the party who holds the property the ownership of common areas, common property and
common land proportionately with other strata title unit owners.
Notes to the Financial Statements
(Cont’d)
31 December 2014
