Rabu, 02/01/2008

Trihatma Kusuma Haliman: “We Know Every Inch of Land in Jakarta”

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Trihatma Kusuma Haliman: “We Know Every Inch of Land in Jakarta”

THREE DECADES AGO, perhaps many people were not well-informed of Agung Podomoro Group as it was only a small property company developing houses around the Sunter neighborhood in North Jakarta. About five years ago, when the national property industry had recovered from the economic crisis, the group became more popular, thanks to abundant new property projects it had launched. Well-known for sharp intuition and high quality expertise in the property business, now Agung Podomoro develops all kinds of property projects, from residences, trade centers, shopping centers and condominiums to superblocks. Citing its achievement in developing dozens property projects, it is not very surprising that compared to other property groups, including those publicly listed ones, Agung Podomoro Group is the biggest in terms of capitalization. To know more about the Agung Podomoro Group’s 2008 business plan, Deddy H. Pakpahan conducted an interview with Chairman of Agung Podomoro Group Trihatma Kusuma Haliman at his apartment in Menteng, Central Jakarta. The excerpt of the interview is as follows:

Agung Podomoro Group has never stopped developing new property projects in Jakarta in the last five years. The price of land in Jakarta is increasing, but you come up with affordable condominiums. How do you it?

Frankly speaking, we have many pieces of land in many strategic locations in Jakarta, Bogor, Depok, Tangerang, and Bekasi. We bought most of them when IBRA [the Indonesian Bank Restructuring Agency] sold the property assets of highly-indebted developers. At the time, we acquired many pieces of land, considering their cheap prices.

If we buy them now, the money is not enough. On the land, we have several projects like Bukit Gading Mediterania, Gading Mediterania Residences, Mediterania Garden Residences, Mediterania Gajah Mada, Mediterania Palace. Then we have Mangga Dua Square, The Pakubuwono Residences, and The Peak. Agung Podomoro Group has also developed superblocks, including Kelapa Gading Square, Emporium Pluit, Senayan City and many more. Cooperating with Agung Sedayu Group we are going to build Mall of Indonesia. Currently, we are about to finalize a plan to develop Kuningan City at the CBD area and Podomoro City in the Tanjung Duren neighborhood. All of them utilize the superblock concept, mixed use development.

You have developed thousands of condominiums in Jakarta. It seems reckless for some people. What has motivated you?

We know every inch of land in Jakarta. It is not true if you say we are careless, lack of judgment. We build to meet existing demand. One more thing, we always develop property at strategic locations and so far our sales records have been very good. I think the back to the city trend is emerging. People prefer to stay at apartments for practicality.

Do you see any indication of saturation?

Not yet. This is based on our experience as a developer. We even see an extraordinary development in November 2007, when our sales increased by 200 percent. For us this is unusual as consumers often avoid thinking about purchasing property during year-end.

How do you evaluate the national property industry performance during 2007?

2007…, so far so good and for sure we are moving forward in 2008. Agung Podomoro Group has a clear business plan and our locations are proven very good. But, we are not in the position to develop trade centers as the market is oversupplied. Perhaps for locations such as Tanah Abang and Blok B, trade centers are still promising.

Are you discouraged by the unexpected lack of success in constructing the Blok M Square, following the merchants’ defiant opposition?

Not really. Regardless the matter, we always see prospect in the future. For us the most important thing is to develop property projects to meet people’s needs. Before, Blok M was very popular as one of mostly-visited shopping destinations in Jakarta. Now it looks dirty, encouraging us to develop the pedestrian-friendly Blok M Square. Problems with merchants are new to us. They argued that the price of kiosks is too high. They are not well-informed of the concept of allocation, where for a trade center the composition is 25 percent for the kiosks and 75 percent for the public area.

Thus, per meter square price of a kiosk could be more expensive compared to an apartment unit, where the composition is 65:35 percent respectively. Developers hunt for profits, but I am not the man who search for the maximum. My principle is based on the fish and water relationship. They are the fish and I am the water, so we accommodate each other. To come to the point, I don’t want to treat [them] in a wrong way. We have developed several trade centers, such as Lindeteves, Jakarta City Center, and Mangga Dua Square with thousands of kiosks inside.

We have no problems so far. But for a short-term we will restrain ourselves from constructing new trade centers as its market has already been saturated. The recent trend shows that building malls with the superblock system is more reasonable. We have developed Mall of Indonesia at Kelapa Gading and Emporium Pluit. Among the projects, the biggest one is Podomoro City, the masterpiece and icon of Agung Podomoro Group. We are optimistic to expand, thanks to a sizeable market in highly-populated Jakarta. [Agung Podomoro Group] will continue developing property based on the ‘back to the city’ concept. We are going to build superblocks at most-wanted locations. If we develop a trade center, we will find the problem. The merchants are reluctant to move to the new premises because they are afraid of losing customers.

Regarding the matter, have you found a breakthrough?

I think it will be very difficult. It needs four to five years to see our trade centers full of visitors. Extraordinary efforts are needed. We have seen the case at Jakarta City Center. What a tough task, but it has been there already. We made a breakthrough. Kiosks in several floors were empty, prompting us to invite mini anchors. As a result, Jakarta City Center looks like a trade mall. It is not like Senayan City that is swamped by visitors only in one and half years. When commenced operating it, all outlets were open simultaneously, from fashion, food and beverage, to entertainment. Senayan City is more attractive in the presence of apartment and office.

What has inspired you to build Senayan City. You might have been aware that the new premises would be in the head-to-head competition with Plaza Senayan, which has been in operation for years?

I still remember, my father [the late A. Haliman] once told me, “Like a bird you have had strong wings. Now you have to fly with courage.” I learn much from the lesson to flap the wings of Agung Podomoro Group with courage. But once again, what made me develop Senayan City in front of Plaza Senayan is that; first, the location is very strategic.

Second, its design concept is actually brilliant, the atmosphere is nice. I think that the market for such property is definitely in the South. When we developed Senayan City, the rental price at Plaza Senayan had already been very high. Moreover, prospective tenants had to wait in a long line. That was the rationale why I was very courageous in developing Senayan City. When we launched it, potential tenants did not need to queue for opening their outlets. With competitive rental rates, first class quality and on-time delivery at Senayan City, we saw the bright prospect. The result is that in one and half years the occupancy rate is exceptional.

You have been involved in all kinds of property projects. Do you still have any obsessions to materialize?

Now, we are refining the low cost flat concept. We are still in the feasibility study stage. Firstly, we will build 3,000 units of comfortable low cost flat for end users. We would like to show that the private sector also pays substantial attention to housing problems of the middle-low segment. We observe that the locations of government-sponsored low cost flat units are too far away, such as in Marunda. Agung Podomoro Group wants to develop [flats] which are relatively close to downtown. It is expected to become a pilot project and other developers could follow suit.

Dominating the property market capitalization, do you have a plan to go public?

Probably, it is what many people have been waiting for. Agung Podomoro is an old conservative company. In the early time of its existence, [the company] developed a 30 hectare housing project in the Sunter neighborhood before expanding it to 500 hectares. We bought the assets of 20 property companies that were nearly bankrupt. Until today, Agung Podomoro has operated for 44 years. After the economic crisis had abated, we actually attempted to go public through PT Indofika Housing, a subsidiary of Agung Podomoro Group.

We preferred bonds, but we saw the coupons were too expensive, not to mention the fees and other charges. We thought that it was not affordable and started to forget going public. But now the situation has improved much and we hope to go public in near future. We see it as a promising financing source, cheaper and relatively safe. We have good track records. All of our projects have been launched. Reputation is our priority. More or less margins do not matter. The most important thing is, again, reputation.

Some property developers have been hit by higher global oil price, hovering close to US$100 per barrel. Considering increase in the construction material price in the next few months, are you sure to accomplish your property projects on time?

Punctuality influences developers’ reputation. I predict that next year global oil price will continue to rise. We anticipate this scenario by preparing contingency costs for our projects. Thus, there is no reason for developers to postpone their projects.

The domestic property market is still locally-driven. What is your comment on developers’ demand for the government to issue a new regulation on property ownership by foreigners in Indonesia?

I think that the government has no more excuse to continue restricting foreigners of having property in Indonesia. The rights to use land procedure are too complicated for us. We don’t know what to do when Hak Guna Bangunan has expired. If we extend it, we have to deal with difficulty? A certain country grants 99 years and even 999 years. The expiry period in China is 70 years. Compared to other countries, we are definitely left far behind. Then we have the cutthroat luxury tax of 20% on apartment.

It is not surprising if the developers think not to develop high-end property projects since the margins are to low. The tax is high, not to mention abundant retributions. This is inefficiency. Thus, the value of Indonesia’s property is the lowest among many nations. Expecting foreigners to buy our property is a dream. Even Indonesian citizens are reluctant to do it, due to the uncompetitive tax rate. They prefer to buy condominiums in Singapore, Kuala Lumpur, Shanghai, or Australia.

Are you sure that our property is still attractive to foreigners?

I am very sure about it. The yield for apartment is still alluring, above 10 percent in the U.S. dollar. It is tempting for foreigners, since the best figure in Singapore is only 3 percent. [Foreign investors] will invest here if the government lifts the restriction. We will take benefit from foreign exchange, see sustained development and more new jobs. You cannot support the [property] industry by embracing blind narrow-minded nationalism.

Have you found any solution to this problem?

The government should open the sector, although soft restriction is still needed. It is fine if foreigners are not allowed to buy landed houses and land. But the restriction on foreign ownership of condominiums is unquestionably irrational. (DHP)