Rabu, 01/10/2008

Hiramsyah S. Thaib: “Bakrieland Always Wishes to Remain a Trendsetter”

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Hiramsyah S. Thaib: “Bakrieland Always Wishes to Remain a Trendsetter”

PT BAKRIELAND DEVELOPMENT TBK—a subsidiary of Bakrie Group—is quite a prominent player in the Indonesian property sector. Since the 1997 economic crisis, the company has continued to expand its business by developing prestigious projects. Among them is the 53.5 hectare-Rasuna Epicentrum in Jakarta’s golden triangle area that is said to be the largest and most complete superblock in the capital. The contribution of Bakrieland to its holding firm is 40 percent. Beside Rasuna Epicentrum, at this time Bakrieland is also developing Bogor Nirwana Residence in Bogor, West Java, which is an environmentally friendly residential project that reaches 1,000 hectares and will be extended to 3,000 hectares, and a number of hotels and resorts in several provinces. Also, Bakrieland has entered into the infrastructure sector by building the Kanci-Pejagan toll road that is 35 kilometers long. Other toll roads to be built by Bakrieland are the Ciawi-Sukabumi road, which is meant to support the access to the Bogor Nirwana Residence project, the Pejagan-Pemalang toll road, the Batang-Semarang toll road, and the Pasuruan-Probolinggo toll road. Beside toll roads, the company also has expanded its business to water treatment so as to provide clean water for its superblock that is being built in Jakarta. The company’s entering into the infrastructure sector has strengthened its position as an integrated property company and environmentally friendly estates. In order to know more about Bakrieland’s business plans, Deddy H. Pakpahan interviewed Hiramsyah S. Thaib, president director concurrently CEO of PT Bakrieland Development Tbk. Below are excerpts of the interview:

Bakrieland’s 2007 sales rose 98.9 percent from 2006, or from IDR393.2 billion to IDR782.1 billion. Meanwhile, its operating profits rose 136.2 percent or from IDR170.5 billion in 2006 to IDR72.2 billion in 2007. This year’s sales target is IDR1.1 trillion. Which sector will be the greatest contributor to this year’s income of Bakrieland?

In first half 2008, landed residential projects were the greatest contributor to our income, which formed 43 percent or IDR174.2 billion of it, or a rise from IDR81.5 billion in the same period of 2007. By 30 June 2008, PT Graha Andrasentra Propertindo, a subsidiary of PT Bakrieland Development Tbk. which is developing Bogor Nirwana Residence/landed residential estate, sold 564 houses with monthly sales averaging 94 units, well up from last year’s monthly sales of 33 units.

Up to date, Bakrieland keeps focusing on residential property development, both vertical and landed buildings. As for the development of vertical buildings, we cooperate with PT Bakrie Swasakti Utama, a unit of Bakrie Group that is building Rasuna Epicentrum. Meanwhile, for our landed residential projects, we team up with PT Graha Andrasentra Propertindo that is developing Bogor Nirwana Residence, Ijen Nirwana Residence and Batam Nirwana Residence.

Why does Bakrieland keep focusing on residential property while many other large developers are eyeing commercial property?

Well, up to date Bakrieland indeed still focuses on residential property development. This is because we strongly believe that in developing countries, including Indonesia, the biggest portion of the property business goes to residential property.

As long as many people still do not have own houses, residential property forms the biggest portion of the country’s property market. In developed countries, where the population growth is relatively low and almost all of their people have own homes, their housing sector growth is relatively low. Meanwhile, mixed-used projects like Rasuna Epicentrum are amenities.

At Rasuna Epicentrum, Bakrieland is developing condominiums with quite many units namely 140 units at The Grove for the upper medium market and 2,797 units at The Wave for the medium market. What is the actual demand for condominium in Jakarta?

I think the demand is so big at CBD Jakarta, especially when we look at rising transport tariffs and the ever heavier traffic congestions in Jakarta. Our condominium sales also show a positive trend as 55 percent of The Grove’s total units and 40 percent of The Wave’s have been sold off. These figures have made us even more optimistic considering that the demand for homes, especially at CBD, is so high.

Many property consultants have warned that condominiums in Jakarta are experiencing oversupply. What is your comment on this? Let me ask you: What Jakarta that now experiences oversupply?

I am sorry to say that the data now available in Indonesia about its property markets is less accurate. When talking about strategic locations and not strategic ones, we should be aware that demands for their products differ. I think in certain locations like CBD Jakarta demands are still encouraging.

Concerning the Right of Use for foreigners, which is said to be extended to 70 years, some expect it will help keep down property oversupply in several locations in Jakarta. Your comment?

The extension of the Right of Use for foreigners should be supported by all parties. This is because that move will give so great benefits to all sectors. Just look at the development of property foreign ownership in Singapore, Thailand and Malaysia, which has helped improved their economy. Even Malaysian and Australian governments issue long-term visas for foreigners who buy property in their country. When they stay longer the foreigners will spend a lot of money in those countries.

But, if the Right of Use for expatriates is extended and property prices go up, the government should limit the activities of foreign developers entering into Indonesia by obliging them to form partnerships with local developers. This has to be done so that foreigners can be more easily controlled while the benefits of foreign developers partnering with locals is that their presence can help soften domestic issues. No doubt, the entering of foreign developers into Indonesia will bring in markets and fresh capital. All this will clearly benefit the nation.

Beside Wisma Bakrie 1 and 2, Bakrieland is now building Bakrie Tower that will supply 65,000 sqm of new office space. How do you assess the Jakarta office market at this time?

Sales in our office market segment are quite good. Some 70 percent of the space of Bakrie Tower at Rasuna Epicentrum has been ordered by buyers and renters. Meanwhile, the occupancy rates at Wisma Bakrie 1 and 2, which are the existing projects, are very encouraging at this time, namely 97-99 percent. Thanks to improved office market in Jakarta over the past few years, our income from the office sector rose four times in the first galf of 2008 from the same period of 2007, or from IDR13.4 billion to IDR51.3 billion. Indeed, Bakrie Tower was the largest contributor to our office sales.

As regards hotels and resort projects, Bakrieland has built several new projects outside Jakarta. What are your strategies to win in competition outside the capital?

Well, Bakrieland has always made innovation for giving additional value to its products. We are the first developer that introduced strata-title concepts for hotel sales. Our hotel segment has achieved quite significant growth as evidenced by the sales of the units at our projects: Legian Nirwana Suites (Bali), Ubud Nirwana Villas (Bali), Bali Nirwana Resort (Bali), Krakatoa Nirwana Resort (Lampung), and Balikpapan Nirwana Residences (East Kalimantan). We offered strata-title concepts that helped boost the sales in our hotel market segment. Our hotels contributed 15.6 percent to Bakrieland’s sales in the first half of 2008, which was up from 5.5 percent in the same period of 2007. In the first half of 2008, sales in out hotel segment rose to IDR63.1 billion from IDR15.1 billion from the whole year of 2007.

Bakrieland seems to have ‘big energy’ to continue developing property projects in Indonesia. How big are its land bank potentials at this time?

We should say that Bakrieland is the first developer of superblock concepts in Indonesia, and at this time we are the largest owner of land bank at the prime location of the Jakarta central business district in Kuningan. Our land in the area reaches 17.4 hectares. Also, we have planned to increase out land bank in Kuningan to 20-25 hectares. At the Jakarta CBD, our land bank is the largest and we have always built our projects in strategic locations. Also, we are the only developer with the largest estate land at CBD, which makes one plot. So our land is not spread in different sites at the Jakarta CBD. Additionally, we have land banks in several cities like Bogor, Malang, Batam, Sukabumi, Lampung, Balikpapan and Bali.

Bakrieland has also entered into the low-class residential property market by building Rusunami [rumah susun sederhana milik] that actually generates very small profit margins. What is your motive?

Building Rusnami is the proof of Bakrieland’s care for the programs of providing homes for the common people. Our competence as a developer has prompted us to join in the programs. We have teamed up with Perum Perumnas [Indonesia state housing company] to build Rusunami in Pulogebang, East Jakarta. Perumnas provides land and Bakrie builds the low-cost apartment.

Admittedly, the Rusunami project generates small profit margins as compared with building conventional apartments. Nonetheless, since the Rusunami project is quite high in demand in the short term, profits or internal rates of return of the apartment are still attractive, especially because land for it was provided by Perumnas. The building of the Rusunami is related to Bakrieland’s corporate social responsibility. As a large property developer, it feels obliged to support government programs of providing homes for the people.

I think for Jakarta that has developed into a megapolitan city with a population of 12 million people, Rusunami is a crucial matter. And for building such projects, the government should ease permits and exempt developers from taxes (zero tax).

What is your overall view of the Indonesian property market at this time?

We are very optimistic because the Indonesian property market is so big, especially for residential products. The current market still requires 6 million units of houses. The Indonesian property industry still can develop even faster if the government issues laws on property foreign ownership. Under existing laws, expatriates can obtain Rights of Use for property only for 25 years, which can be extended by 20 years and then by another 25 years. But, such extensions must follow existing legal procedures. So, extending the Right of Use to 70 years or 99 years can significantly raise the exposure of the Indonesian property market to foreign buyers.

Indonesia’s macro economic condition remains stable. Our economic growth was 63 percent per June 2008 and Bank Indonesia rates remain at around 9.25 percent. We expect it will rise to around 10 percent. This gives a positive signal to the national property industry, which especially means that demands for property will continue growing in keeping with rising population growth.

As a matter of fact, Bakrieland projects are not much influenced by rising interest rates because our products are meant for medium and upper medium market segments that are relatively not influenced by rising interest rates. We also offer strategic value of each of our products, thus providing consumers with added value.

Concerning its long-term investments, Bakreland is said to have allocated more than Rp800 billion for mixed-use development projects in Dubai and a hotel in Singapore. What progress have you made with those projects?

To date, we are still in the process of studying investment opportunities in several countries including Dubai and Singapore. Our study covers the two countries because they are quite big markets. Dubai is developing quite fast while Singapore is one of the Asian countries with quite strong property market. Also, we have teamed up with Limitless—a subsidiary of Dubai World, a world class developer from the Middle East. It has built a number of prestigious property projects in Dubai (70 million sq. ft), Riyadh (1,411 hectares), Jordan, Russia, India (4,000 hectares), Vietnam (125 hectares) and Malaysia (1,115 hectares), with project value of US$100 billion, combined. Developing strategic partnership with Limitless LLC strengthens Bakrieland’s financial position and credibility in the eyes of investors, shareholders and consumers. Our world-class strategic partner is also expected to help raise the building and managing of our property projects at Rasuma Epicentrum to world standards. And, this will surely give added value to our projects. Also, our foreign partner can transfer their knowledge to us, which is of so high value.

Bakrieland also has entered into the toll road business. What is your motive?

As a matter of fact, Bakrieland is not fully involved in toll road business. It only builds and operates toll roads. We only take into account accessibilities and act as a trendsetter by becoming an integrated property company. We are fully aware that location is the top priority in the property business. Location is related to accessibility. So those who control accessibility control the property value in the areas concerned. Land prices in undeveloped areas can rise five times if toll roads are built there. Example, toll road construction work is completed within 2 years.

Which business promises return of 500 percent within 2 years only? This shows the importance of synergy between area development and toll road building. We produced a master plan for area development, and then the regional government issued regulations so as to ensure well-organized, integrated and comprehensive development in their area. At this time, we concentrate on the construction of the Kanci-Pejagan toll road. But, we have options and have posted out management teams at several toll road projects including the Batang-Semarang project. Our strategy in owning road projects is that funding and land acquisition have been secured. We give serious attention to this matter solely in connection with risk management.

Since 2007, after your appointment as Bakrieland CEO and president director, you have made big leaps to develop it. What kind of specialized developer do you wish Bakrieland to be known of?

We wish to be known as a developer of integrated and environmentally friendly estates. So we do not just want to become a conventional property developer. We want much higher than that. It is because we have integrated, and will continue integrating, infrastructure projects into property area development. We build toll roads and water treatment plant.

As a property developer we avoid causing damages to the surrounding environment of our property projects. Accordingly, we carry out Bakrieland Goes Green to ensure green and healthy property projects. We materialize this commitment by applying the principles of green architecture, green operation and green attitude, from the planning to the development of property projects including township, residential and also hotel and resort development, and also the development of property-related infrastructure. We try to harmonize our projects with their surrounding environment.

Even, recently we worked together with Suntech Power from China to develop solar power generation systems for each of our property projects and property-related infrastructure projects. Also, we also wish to be known as a developer of integrated areas that are environmentally friendly. Bakrieland also always wishes to remain a trendsetter in the Indonesian property market. In the past, people were not familiar with apartments and then we built Taman Rasuna apartment. Buyers stood in long queues from 6 am to 8 pm only for getting buying forms. And, Bakrieland introduced the concept of superblcok by building 4,000 apartment units at Taman Rasuna. So we wish to be always a trendsetter. (DHP)