We would like to open the report with a reminder of how the year 2017 presented itself as a period filled with myriad challenges. Nevertheless, with hard work and prudence in analyzing and understanding the market, Intiland managed to turn the challenges into opportunity to accomplish diverse achievements. We admit it was not a walk in the park; with strong teamwork, however, we could the turn the table and perform our best.
In Indonesia, the property industry remained flat—a condition which has persisted in the last three years and with the market experiencing pressures. In the stock market, the index for the property, real estate and building construction sector dropped 4.42% throughout 2017, despite the CSPI experiencing a significant jump of 19.99%. The performance of the property sector also did not improve as expected even though Indonesian central bank (Bank Indonesia, or BI) lowered the 7 Day Repo Rate interest rate in the second quarter of 2017 and eased the loan to deposit ratio policy. Some economic observers mentioned several reasons why the property industry failed to grow as expected in 2017. One of these reasons is the limited rise in the price of property. The second reason cited is the level of rental yield has been relatively low in the last few years. Thirdly, the price gap between the primary and secondary property markets has been quite wide. The fourth reason is the market remained indecisive as the consequence of the long series of general election processes culminating in the 2019 Presidential Election. And the fifth reason is stringent close supervision of the Financial Services Authority (OJK) which encouraged people to save their funds in the banks and to invest on assets which are secure and promise high yields, such as government bonds.
Furthermore, investors then to wait and see before they decide to invest in the property sector. The sales of property in 2017 was mainly supported by that from the end users, not from those purchasing with investment in mind, either for renting or reselling. Also, the take up rate, especially for new landed house projects, has a large range, from 10.6% to 100%--another factor which indicated that the consumers were very selective in their decision to purchase a property product.
Intiland also bore the impact of the stagnant property and real estate sector. With the effective strategies, however, the Company managed to change the challenges into opportunities and recorded positive results. The Company continued with the strategy of standardizing the system and procedures, which Company initiated in 2016. The objective was to ensure in all activities, the Company always puts to the fore transparency and accountability.
Intiland tended to be conservative in its expansion strategy throughout 2017. The Company opted to further finalize the planning of several of its new projects before introducing them to the consumers. The Company chose to focus on the existing projects and optimize its landbank.
The Company also realizes that everyone in the Company needs to work hard in managing the market challenges. Intiland has always performed market testing and careful study of the plan for any project development. Intiland will only launch a new project if the market is conducive and the timing is impeccable. The Company takes into consideration various aspects to ensure all operational activities and decisions will bear fruit and result in added values for the benefit of the Company’s shareholders and stakeholders.
In 2017, Intiland posted a series of accomplishments by completing several of its projects. One of these is Praxis in Surabaya, which had its topping off ceremony in August. Also in August saw the launch of Fifty Seven Promenade mixed-use project in Jakarta. In the industrial estate sector, in April the Company completed the purchasing process of Ngoro Industrial Park (NIP) plot to one of the biggest automotive companies in the country. This means since early 2017, the Company managed to sell 23 hectares of NIP lands to a various national and multinational companies.
Another accomplishment made in 2017 includes the signing of a strategic partnership with the Singaporebased leading investment firm, GIC. The partnership between Intiland and GIC is a joint venture for developing Fifty Seven Promenade project. The joint venture strategy is Intiland’s way to face the challenges; for, by collaborating with an investment firm of international caliber such as GIC, Intiland can synergize the strengths and expertise of each to create quality property products.
Amid all the challenges, Intiland managed to post marketing sales of Rp3.3 trillion. The value shows a significant increase of 106.3%, compared with the value of marketing sales posted in 2016 which reached Rp1.63 trillion. The marketing sales is also 46% higher than the Company’s annual target of Rp2.3 trillion. The jump in the marketing sales was attributed to the success the Company made with the launch of Fifty Seven Promenade Jakarta in the third quarter of the year and the sales of Ngoro Industrial Park plots of land in East Java. Fifty Seven Promenade contributed up to Rp1.54 trillion, or 45.6% of the total marketing sales. The sales of plots of land at Ngoro Industrial Park contributed Rp531 billion or 15.8% of the total marketing sales. This means, both projects contributed 61.4% to the total marketing sales throughout 2017.
Based on the portfolio segmentation, the mixed-use and high rise segment posted revenue of Rp703.6billion or 31.9% of the total revenue. The industrial estate segment posted revenue of Rp550.9 billion or 25%. As for residential segment, the Company garnered income of Rp420 billion or 19.1% of the total revenue. The property investment segment, which is the source of the Company’s recurring income, contributed Rp528.2 billion as of the end of 2017 (24%).
Based on the types, the development income remained the principal contributor with Rp1.67 trillion, or 76% of the total revenue or income. Meanwhile, the recurring income, which came from office space rental, the management of the golf courses, sports clubs, warehouses and other facilities, contributed Rp528.2 billion or 24%.
The Company continues to present property products which feature innovations and fit the needs and the demands from the public, either the residential products or office and commercial property products. Intiland’s contribution to the national property industry has led to the Company’s receiving myriad awards and acknowledgment from various parties, not only in the national level but also in the international level. Specially in 2017, Intiland took home 25 awards and tokens of appreciation for all aspects of the business the Company is engaged in. This means the awards and acknowledgment are given not only because of its property products, architectural aspects and development projects in general, but also because of the Company’s achievement in corporate governance, social responsibility, and the management of media and communication. One very special note is regarding the achievement and contribution to the industry made by the individual in the Company which resulted in the special awards bestowed by national and international institutions. In 2017, the Company’s founder and CEO received the Lifetime Achievement Award at the Golden Property Awards 2017, Asian Entrepreneur Award for Real Estate Development at the Fortune Times Awards 2017 in Singapore, and The Inspiring Business Leader at Properti Indonesia Awards 2017.
Intiland also won awards in the field of corporate communication and media. This accomplishment proves that Intiland sees the importance of all aspects of the Company’s operations, either those related directly with the property development or the supporting activities. Intiland won the award at the Social Media Awards & Digital Media Awards 2017 in the property developer category due to its success in building a positive image and garnering the most responses from the public on the social media.
The Company never stops developing its human resources and information technology throughout the year as these two factors play an important role in achieving sustainable business. All staff and employees are given ample opportunities to develop themselves and to plan and build their career path with the Company in line with their competence. Throughout 2017, the Company also organized various in-house and external training and education programs.
In the IT sector, in 2017 Intiland also strengthened and optimized its Enterprise Resource Planning (ERP) system which covers five (5) pillars, namely Quality Management, Performance Management, Continuous Improvement, Enterprise Risk Management and Information Technology. With the system, the Company’s business activities are more integrated and generate higher level of efficiency which leads to cost and time efficiency.
The Company always sees the importance of implementing Good Corporate Governance (GCG) in all levels of the organization. The sustainable and consistent implementation of GCG means the Company always adheres to the prevailing law and regulations. It also proves Intiland is determined that everyone in the Company upholds and implements the corporate values in the performance of their duties. The Company also consistently evaluated the implementation of GCG to ensure all activities run in accordance with the law and regulations and the Company can experience sustainable growth.
Due to its consistency in the implementation of GCG principles and best practices, in 2017, the Company was named by Institute for Corporate Directorship (IIDC) as one of the Top 50 Midcap Companies for commendable corporate governance. The Company received the award at The 9th IICD Corporate Governance Awards.
Intiland always sees itself as an integral part of the big house of Indonesia and as a good corporate citizen. Therefore, the Company is of the opinion that Corporate Social Responsibility (CSR) is an important element in the management and running of the Company. The Company formulates and executes CSR programs in line with the Company’s vision. Intiland sees CSR as a way to manage business processes which also give sustainable and positive impacts to the environment and to the society.
In practice, the Company focuses on four of the seven aspects of CSR set forth in ISO 26000, namely environment, manpower, community empowerment, and product and consumers responsibility.
To expand the coverage of the CSR activities, the Company established Intiland Foundation. The foundation becomes the umbrella organization for the Company’s CSR programs and activities, including the planning, execution, management and supervision. Through the foundation, Intiland has developed Intiland Teduh. The Company has also established Intesa School of Hospitality, an education program designed to generate skilled workers ready to enter and contribute to the hospitality sector. In 2017, the Company partnered with regional developers in its participation in the one-million house program, which developed houses for the people in Pacitan region in East Java.
Intiland received an acknowledgment from DKI Jakarta Provincial Government as a form of appreciation for the Company’s role in providing Children-friendly Public Open Space (RPTRA) in several locations in the city. Intiland also won an award at Nusantara CSR Summit & Awards 2017 in the Improving the Quality of Education category. These awards will further strengthen the motivation of everyone in the Company to consistently come up with and execute quality and effective CSR programs.
The 2018 global economy is predicted to improve with the World Bank projected growth of around 3,1%. As for Indonesia, economic growth is projected to reach 5.4% with the inflation rate standing t 3.5%. The government’s massive infrastructure development program is seen as instrumental in promoting the growth in the property sector. With modern mass transportation mode available in the capital, the property sector should be ready to anticipate a high jump in demand for residences located along the mass transportation lanes.
The Company is confident the needs for property products will continue to grow along with the improvement in the Indonesia’s macroeconomic condition and the fundamental of the national economy.
To close, on behalf of the Board of Directors, I would like to express the highest appreciation and gratitude to the Board of Commissioners and the supporting committees for all the direction and inputs, all of which helped us in managing the Company throughout 2017. I also want to say thank you to all shareholders, loyal customers, and business partners for the support, trust, and cooperation. The Board of Directors also wants to thank the staff and employees on all levels of the organization and for the dedication and professionalism in performing their duties and responsibilities, and for consistently and responsibly upholding our corporate values. The Board of Directors is optimistic that in the years that follow, Intiland will grow into an even bigger company, contribute to developing this country, and provide added values to all stakeholders.
Hendro S. Gondokusumo
President Director & CEO