Critical notes hotel valuations in Indonesia

Better understand hotel investment-particularly hotel investment valuation, share personal experience with hotel investment and valuation, ability to relate the theory in valuation of income producing assets with practices and trends in the market.

Characteristics of hotel investments: real estate and business; real estate encumbered with hotel management with potential “good will” or brand equity or liability; real estate-land, brick and mortar; higher risks – only few from rental contracts, mostly subject to daily risks and opportunities; seasonality of demand; sales (revenue) with fluctuation-month of the year or days in the week; while property is location specific; hotel is more universal in reporting uniform system of accounts for easy benchmarking; multiple classifications and hotel category with different investment; characteristics; from budget class to ultra luxury / from themed hotel to boutique.

Real estate and business hotel/resort: hotel as operating business, key commodity (guestroom)-is sold on daily basis with demand shifts, multiple sources of revenue that are dependent on internally generated demand (food outlets, spa, meeting rooms etc), various service costs (transportation, guest loyalty programs) etc, different management or chain affiliations- impact on efficiencies; hotel as real estate assets, complex physical plants-24 hour operation, physical obsolescence (difficult to anticipate), Indirect real estate value (in a mixed used development), changing environment (change in accessibility etc); management agreements, if a hotel is encumbered with management agreements it has relatively, limited pool of potential investors/buyers, mindful of key commercial terms, length of the agreement, termination clauses performance clauses, first right of operator to acquire transferability.

Indonesian hotel investment characteristics: limited transactions (Indonesia is a tightly held market); discounted cash flow valuation versus depreciated replacement cost; information is predominantly held by major brokers or among investors; cycles in hotel trading performance; relatively longer cycle; immature investment market with limited knowledge on potential value; hotels with encumbered by management agreement vs. vacant possession; importance of hotel management on reaching the right target guests; transparency of financial information; new ownership structure for hotels/resorts condotel with multiple owners and revenue share to developer; HGB on HPL or Hak Milik Titles (BOT or leasehold with titles); potential market values based on highest and Best Use valuer/appraisers beware of market value.

Issues with discounted cash flow analysis in Indonesia: it is not easy to determine of discount rates and capitalization rates; Limited transactions to obtain discount rate and capitalization rate from the market; Clues are taken from other property classes or even other investment class (government bonds for example) with subjective premiums; Owners generally benchmark against replacement costs; Relatively high land prices (especially in Jakarta’s CBD); Generally inflated construction costs; Investors, particularly institutional investors, tend to favor pure Income Approach disregarding owners’ background and potential highest and best use; Institutional investors may represent majority of demand in key gateway cities in Indonesia.

Notes: By end of 2010 there were 33,000 hotels with over 500,000 guestrooms from 10 international hotel management companies having over 75 brands of different positioning.

Conclusions; importance of understanding the subject property, trading and investment; market characteristics and the concept of highest and best use; importance of understanding the market cycle and the trend in value – when to use the reference of replacement costs; Importance in understanding the tenure of hotels being valued, importance of not only mastering the techniques but also the understanding the uses of various definitions, methodologies, and assumptions accepted by Indonesia valuer.

Terms technique buy housing in Jakarta

Terms technique buy housing in Jakarta: Consider the following things related to your dream home: Condition of buildings: about the foundation, structure, floor coverings, wall coverings, roof truss, roof coverings, and ceilings as well as utilities in it. Make sure everything is still pretty good, safe, functioning, and does not require much improvement.

Check location carefully; do not just receive reports from third parties. Also make sure the house and its environment rather than termite-prone areas or flood-prone. Status of land, whether the HGB, property, strata title, or other proprietary? If HGB (land certificate), whether the certificate is still valid or needs to be extended? If I had to be extended, if possible, and at what cost? Do not forget to match the owner’s name and house number with a name and number are listed on the certificate.

The size of land and houses are indeed in accordance with the certificate and listed in the (building permit) IMB? Very good if we make repeated measurements, not only so that the current account is true, but also so that the size of houses and land in accordance with the needs and desires of the buyer. Building permit, should the building in accordance with permit, or only slight changes. If the house does not have permission, we cannot get support to buy mortgages from banks. In addition there is the possibility of local government officials demolished the house for violating the provisions of the allotment of house construction.

If you want to renovate it after the purchase, be sure the house was renovated. Environmental conditions of housing, is it good enough and adequate, whether the condition of roads and channels, network utilities, as well as accessibility and public facilities around it? The house is ideally could be passed freely vehicles, road conditions and maintained the line, the security environment is quite conducive, not flooded, and people just accept the newcomers. Telephone network, electricity supply, water, and gas (if any), if available and sufficient to meet the needs of the house and does not often appear the problem? Ask if the house is equipped with telephone networks, and how the capacity of electricity, water, and gas are installed? For that sellers ask for a document showing the installation and final accounts. The history of the house, have the house was burned in whole or in part? If ever how it impacts the foundations and building structures? What to do when the old owner to fix it?

Are there any events happening at home once a shocking crime such as murder and robbery? How it could happen and how to completion? Land and building tax, make sure the seller has always paid regularly, including other costs such as environmental management and other fees.

Should pay attention to the terms and conditions of purchase of the house the house itself before deciding to buy a house. As consideration, the following things you need to consider before buying a house:

1. Distance factor is often a consideration, when choosing residential locations who want to buy. It is not enough to be the benchmark for being the only criterion in selecting the ideal occupancy. Why?, Measuring the travel time based on the distance to the city of Jakarta, where travel time is directly proportional to the access and road infrastructure, not by distance. Distance is also associated with transportation facilities. Residential location in Bekasi within 40 km of Jakarta or in Serpong which is about 26 km from Jakarta would have been different if we traveled by train means than by car for example. Therefore, do not ever consider buying again, or have a shelter just because of the distance factor. You should consider other factors. You definitely excited when going to buy a house for the first time.
2. How is your track record: Borrowing money from banks, is still a common way to get a dream house. Only, in this way will never materialize if your name has been “eliminated” from the list of potential borrowers by a bank where you’ve borrowed money before. This is because you do not have a good record in resolving credit card debt or other credit. Home resale transaction should also be done with facility because it is much more secure mortgages. To that end before the transaction, it is better to ask the bank that will extend credit in order to assess the house. At the very least, the assessment of professional appraisers can be used as benchmark for a decent bargain home price. Resale home prices are usually less expensive than new homes classmates. But this greatly depends on the economic situation, the condition of the building, and prestige environment.
3. Do not hesitate to consult. Ask anyone, either friends or relatives who had used the services of borrowing. Invite them to share experiences and can refer you to a bank that does have credibility. You should check and compare multiple quotes from lenders that. You do not need to worry, because your loan will not be rejected if all requirements have been approved.
4. Buy when the price is still low. Some residential houses are set high prices because the infrastructure is already complete. Construction of highways, for example, could make home prices rose 30% -50%. Therefore, if there are plans to build toll roads in residential areas that you are looking for, please do not hesitate to buy the house before the price goes up. However, it is important to ensure also that you choose a secure area of ​​the affairs of land acquisition.
5. Buy at an average rate is still quite normal. There are times when lending rates fall or even dropped. This is a sign, to immediately invest in the property sector. Quick, buy a home of your choice.
6. Make sure you are sufficient funds. Advances or a sign so of course must be paid away. Ideally, your savings of at least 30 percent of house prices to be purchased.
7. Allocate additional costs. Not enough to just think of the sign so and the money then, because you also have to prepare the budget, particularly the insurance fund, tax, and consulting fees, or administration. This amount should be budgeted as an additional payment each month, in addition to the amount you pay for the mortgage. Do not forget, have also fund home repairs and maintenance.
8. Examine of the house offerings. Carefully assess the homes that will be purchased. Could be, the status of the house to be sold are still confiscated. Prepare a little money to hire experts who can assess and find out the legal status of the house. Do the transaction with the notary deed. Do not believe it at market prices mentioned seller. Ask for proof of payment of the last the property tax There are listed NJOP (property tax) land and buildings. After that, look for information to residents about the market price of the house at the local site. Can also ask questions or seek out the nearest broker’s office, or see ads in the same house nearest location in the newspaper as a comparison.
9. Do not be easily tempted to short supply. You do have to be careful about this. Because, the house does not yet have a certificate of property rights, or the right of land is still “Girik”. Or, the land is still in dispute, so do not be surprised if a house like this offer a cheaper price, but the process will be tortuous and long.

for Valuation for evidence of value link to: http://marketvaluer.blogspot.com/2011/10/valuation-for-evidence-of-value.html

Source: various sources.

Indonesia Mining Conference and Exhibition 2011

Indonesia Mining Conference and Exhibition 2011 to be held on 21-22 September 2011. “The Challenges under the New Mining Paradigm”. Find out: Challenges in new mining paradigm; Balancing mining revenue for central, Regional and local people’s prosperity; Cross subsidy policy and models among rich and poor regions-other mining country; Inventive and innovative approach for geology and exploration encouragement and guidance for junior mining companies; challenges related to developing Indonesia’s Mineral Resource Potential; Financing challenges for mine owners and investors; Managing political risks with good corporate governance in mining projects

Objectives

Provide understanding for investors about a paradigm change in the Indonesian mining industry. Provide government with input and potential solutions for resolving challenges and barriers of growth aimed at achieving sustainability for the mining industry. Focus on optimizing profits through strategic investments to increase stakeholder benefits. Synergy public and private sectors with best practices implementation for mining.

Benefits

The mining event that brings together decision makers, policy makers, advisors and investors from all over Indonesia and an excellent opportunity to network in one place. Over 500 executives exploring new investments and Emerging opportunities from Indonesia, Singapore, India, Malaysia, Philippines, Australia, and the rest of Asia all under one roof.  A content-driven agenda created and delivered by an expert panel of speakers addressing “Mining Indonesia: The Challenges under the New Mining Paradigm”

Registration to:

• IMA Secretariat: Tel/Fax: + 62(0)21-8280763, 8303632, E-mail: mining@indo.net.id  or

• PT. Pamerindo Indonesia: Tel: +62(0)21-3162001, Fax: +62 (0) 21-3161985, 3161983; E-mail: Conference@pamerindo.com/maysia@pamerindo.com

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Fairer trade in the sector of textiles and textile products

Interest rates, until June 2011 decreased, mainly for working capital and investment loans (source: Bank Indonesia). Working capital loans decreased 62 basis points and investment loans dropped 11 basis points, but consumer loans increased 84 basis points. The decline in interest rates also makes the difference between lending rates and deposit rates to decline by an aggregate 5.8 percent.

Textile exports in 2010 approximately 11 billion US dollars and the estimated volume in 2011, with a target at 15 billion U.S. dollars (as an illustration: in the first half of 2011, exports of textiles and apparel foreign exchange reached US$ 2.5 billion). Indonesia occupies the fourth position as a supplier of textile and clothing the world with the United States as its main market. With the composition of Indonesia’s textile exports are dominated by the garment around 60 percent and the remaining yarn and fabric.

Industrial sector of textiles and textile products “TTP”, a determinant of the sector in several Asian countries such as the Country: Pakistan, Vietnam, Thailand, Sri Lanka, and Indonesia. In 2010, TTP export growth of Vietnam, reaching U.S. $ 11.2 billion. In Indonesia, the performance of TTP is also contributing to economic growth in Indonesia. TTP industry contributed 2.18 percent of GDP and 8.01 percent of the processing industry in 2010. Even the non-oil export commodity that contributes the largest for more than 20 years is TTP.

In 2009, TTP industry accounting for 12.72 per cent in foreign exchange earnings of the industrial exports excluding oil and gas and for 9.58 percent of total non-oil exports, while 85 percent of the raw materials are imported cotton. Besides having a huge contribution in GDP and foreign exchange, the industry is also absorbed many workers, whether working directly or indirectly.

Since the lifting of the quota system and must follow the adjustments to the provisions of the General Agreement on Tariffs and Trade, until the 2009 general textile industry and textile products as follows:

• Performance tends to decrease, seen from the decline in sales of fiber, especially in the domestic market sales of synthetic fibers and cotton. Production “rayon fibers” and “apparel” sector, with export orientation, tend to increase.
• “Spinning” and “Weaving” Sector, experience greater pressure as a result of the downward trend in exports and a declining domestic market demand.
• Poor performance of textile industry, due to low competitiveness of this industry. This was as a result of the burden of energy costs, labor, and transportation rates high enough and not competing with other producer countries.

Indonesia has the potential and opportunities are good enough to change the quota system include:

1. Industrial production increased TTP Indonesia may boost employment. Therefore necessary economic incentives, including through lower interest rates for investment banks.
2. Indonesian textile exports increased to boost foreign exchange income. Increased exports of TTP can be driven through the adjustment of the rupiah Rp. 8500/US$.
3. The exchange rate of Rp./US$ of relative stability will help the textile and garment manufacturers in calculating the cost of raw materials and profits.
4. Ensuring safe or secure raw materials, such as the development of cotton “The volume of imports of cotton each year ranges can reach 750000 tons”, or synthetic fiber manufacturing technology in the country.

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Marketing mix

Promotion is one part of marketing (marketing mix). Marketing consists of variables that can be combined companies to influence the demand for products (services) offered. The marketing variables are more commonly known as 4Ps but in service businesses plus 3Ps so the number of marketing mix variables is that 7Ps by Ronal T. Anthony S. Rist Zaholik and Timothy L. Keiningham (1996:11) consists of: Product, Price, Place, Promotion, People, Physical Evidence and Process.

The product is something that can be offered to someone else market to meet the needs and desires of either goods or services. Price is a fee (in cash) must be spent to get products or services offered by the company. Place is where the various activities undertaken by the company in providing products / services in the right amount and place it in the right place anyway, so the product is always available when consumers or customers need it. Promotion is the activity of communicating product / service and advice customers to buy it. People are people directly involved in running the activities of companies and are an important factor for companies that need attention existence. Physical Evidence is the stuff that significantly influences consumer decisions to buy and use products / services offered. Element is the physical environment, such as supplies, logo, colors and others. Process is a venture company in running its activities and seeks to meet the needs and desires of consumers. For service companies in the business realized with the cooperation between the operational marketing.

Cellular and oil reserved market going up

Cellular market

The cellular market in Indonesia has seen spectacular growth over the past three years. The market heating up and is potentially lucrative as the demand for mobile phones continues to grow. However, the market penetration rate still remains the lowest in the Asia Pacific region at around %. In 1997, only about 1 million Indonesians were cellular subscribers; by 2001 the number had own to 5.7 million. By the end of 2002 there were 11.3 million subscribers, surpassing the fixed one line market which stood at 7.6 million at the end of 2002. The market grew 59 percent in 2003 18 million subscribers. In 2002 the total revenue for cellular market was $1.17 trillion, and is estimated to reach $2.2 trillion in 2003. But there is still plenty of headroom. In 2004, the number is likely to reach 23 million subscribers. By 2007, the Indonesia’s cellular-phone market is expected to have 42 million subscribers, about 18 percent of the population.

Oil reserve market

Indonesia have potential hydrocarbon sedimentary basins spread from Sabang to Papua, while the activity of oil and gas industry covers the activity of exploration and production of oil and gas has been conducted only on 38 basins, while the other 22 basins has not been touch by the industrial activity, which geographically located off shore in the Eastern part of Indonesia areas, consisted of Sulawesi, Nusa Tenggara, Halmahera, Maluku, and Papua. Referring to the data of the Ministry of Energy and Mineral Resource the success ratio of exploration in Indonesia, including delineation drilling average of 38% or higher than the other South East Asia region (30%). While the success ratio of wild cat well drilling is averagely 10% higher. Finding cost of basin in the offshore region is also relatively lower than the other countries in South East Asia. Oil reserve in Indonesia is about 7.9 MMSTB (2009), while gas reserve is about 159 TSCF (2009), currently, most of the oil production was derived from the old well with average natural decline rate of 12%, while gas production from the 10 oil and gas Cooperation Contractor during one last decade, was increased up to two times.

Tangerang retail market going up

Until late 2005, supply area shopping centers in Greater Jakarta (Jakarta, Bogor, Depok, Tangerang, Bekasi), about 2.98 million m2, an increase of 3.47% compared to 2004 (2.88 million m2). For the Jakarta area, supply area of ​​a shopping center in 2005 experienced growth of 70,000 m2, the addition of supply from the shopping center strata title, namely Poins, Pasar Tanah Abang Block BA and the Jakarta City Center (JCC).  For shopping centers with lease system in Jakarta has extensive additions to the opening of Pondok Indah Mall 2. While there are additions to the Bodetabek new shopping center area of 30,000 m2.

Retail space about 3.93 million sqm and no additional retail space during the quarter (May 2011).  Nonetheless, the construction progress is still continuing without delay, to ensure that the schedule is still on track. about three retail centre’s are expected to finish this year, including a sizeable retail area in Kuningan City mixed-use compound, and another two shopping arcades the size of retail, i.e. area 51 and Green Tebet Shopping arcade, which is projected to operate in the next or end quarter of 2011. Another retail Kalibata City Square. Potential supply, the expansion of existing ITC Roxy, expand one floor to facilitate electronic products. Alam Sutera Living World, released in May 2011, is the only shopping center ended the quarter. Offers a different environment, the center is designed with a skylight with a facade concept dominated by glass, which optimizes sunlight. the center offers about 70,000 square feet of retail NLA, bringing the total retail space in the Debotabek to 1.86 million square meters m. Tangerang area dominate the composition of the supply of commercial space in the future. Based on the projects in the future 2011 – 2014, will be opened several centers, including the city of Tangerang, serpong mall sumarecon II, alam sutera mall and two department stores in downtown style life: the breeze and the center bintaro lifestyle.

Its mean: Tangerang retail market going up

Pasar Tanah Abang big potential market

Pasar Tanah Abang Blok BB, D, C and E are located in Central Jakarta on Jalan Kebon Jati precisely and Jalan KH Mas Mansyur Kampung Bali Village, Municipality of Central Jakarta with a total area covering approximately 1.5 ha.

The land is bounded by:  Northside is the Tanah Abang Market Block Building BA; Southern Jalan Kebon Jati (Kelurahan Kebon Kacang); West of Tanah Abang Market Block Building BF; Eastside Road KH Fachrudin (Kp Village. Bali)

The location is located relatively close to the area due to commercial and business center close enough to the golden triangle area. At a distance of up to 3 km radius, there are many office buildings or shopping, the Ramayana Market, Metro Tanah Abang and Jakarta City Center (JACC). This location is also located close to office buildings such as Wisma Kosgoro and Plaza Permata at Jl. M.H. Thamrin, and Wisma Atrhaloka and Landmark Building in Jalan Sudirman and public facilities such as Rubber stations, hotels and some apartments are apartments Pavilion Park and Four Seasons Apartments which provide added value to the location of this project in terms of value of economic activity.

Some investors interested in the potential and capabilities, they are likely to be involved in the work of structuring PRTA Block B, D, C and E become PRTA Block B. As a follow-up of the plan, investors will draft proposal to act as a developer on the project Rejuvenation and Structuring PRTA Block B to PD Pasar Jaya.

In PRTA Block B, D, C and E at this time there are as many as 3519 stall space. Of these, there are as many as 555 traders who still have the right to lease until the year 2024, so investors who will act as the developer will replace the stalls at the PRTA Block B to be constructed. Rejuvenation and Structuring PRTA Block B to be done is to rebuild the old building became the location-story building 17 (seventeen) plus 1 floor roof. From 17 floors, as much as 9 (as much) the floor is the location of business space, while the rest of the car parking facilities and other facilities.

This market is aimed at wholesalers who sell products, especially garment and textile.

Various facilities and means a market is provided in order to facilitate activities and provide comfort to the visitor and tenant kiosks. Facilities and support facilities are planned in Block B PRTA are as follows: Central air conditioning & ventilation, electricity from PLN, Generator Set, telephone line that can be connected to each kiosk, the passenger elevator located in 8 or 9 places on each floor, where in each place there are 2 to 3 lifts. For basement parking floor there are 4 places elevator, Escalator many as 24 units on floors 1 and Semi Basement Lower Ground, 18 units at lower ground and ground floors, 12 units on floors 1 and 14 units on 3 floors above it, male and female toilets each each 2 units on each floor, Fire hydrant, hydrant pump (diesel and electric), Sound and car-call systems, emergency stairs at 4 to 6 places on each floor, car parking facilities that will accommodate 727 cars and 1566 motorcycles.

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Palm oil mills are still marketable

Development of palm oil mills in Indonesia began in 2001 is expected to tend to increase along with the continued increase in world crude palm oil consumption in 2000 amounted to 20.645 million tonnes and production amounted to 19.962 million tonnes and continued to increase until 2010, when world crude palm oil consumption is expected to reach 29 million tons with production reached 28.571 million tons.

From the projection of world crude palm oil production when compared with its needs are still there is a large market opportunity. Meanwhile, CPO demand in the country, both CPO and PKO until today generally can be met from domestic production. Under these conditions means the market opportunities both domestically and to export up to now is still pretty good, this shows that the prospect of building the capacity of 60 tons of IBS / hour palm oil mills are still quite good and in terms of marketing to be marketable.

By looking at the development area, production and potential new opening new areas of oil palm plantations as described previously, the opportunity to develop oil palm plantations and oil palm processing plant now and the future still has a good prospect. But this must be supported by all parties, especially related institutions and facilities in terms of funding from banks.

To support this industrial sector, the Government of Indonesia still needs to created special regulations to condition for CPO can be processed into the final results in the country. Regulation is needed to prevent the escape of CPO Indonesia to Malaysia, and then exported as a product of Malaysia. As Indonesia’s main competitor, Malaysia with exports valued institution is superior in being able to organize the CPO market quality products to importers lobbied state. Conditions like this will harm Indonesia’s CPO marketing positions in the markets of potential.

Malaysia can do a re-export of Indonesian CPO to claim as their product. If this happens Indonesia will have difficulty in penetrating new markets of the world, because it has been flooded with Malaysia. Demand for oil palm seedlings in Indonesia in 2005 reached 500 million sprouts.

While oil palm seedling production capabilities excel in Indonesia per year maximum of 90 million. Number of opening a new oil palm plantation since 2004 caused demand superior soaring oil palm seedlings. With the supply of sprouts that size, large companies will have difficulty in terms of procurement of oil palm seedlings, so they would not want to import palm sprouts from the outside. In the face of fluctuations in CPO prices, the companies engaged in the business sector should be able to export crude palm oil with a minimum contract period of 6 months. This needs to be done in order to maintain the company’s performance, especially when the CPO price has decreased.

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