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Meikarta’s first phase to finish in early 2021
Property giant PT Lippo Karawaci is confident the initial phase of the Meikarta megaproject will be completed in the next one to two years
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span>Property giant PT Lippo Karawaci is confident the initial phase of the Meikarta megaproject will be completed in the next one to two years.
Chief executive officer John Riady, the grandson of Lippo Group founder Mochtar Riady, said the company expected the Meikarta project to be completed in the fourth quarter of 2020 or the first quarter of 2021, starting with the topping off of the first four towers in August.
He said first part of the initial phase, dubbed phase 1A, had been built on 28 hectares of land consisting of 22,500 apartments in 56 towers.
Despite the completion of phase 1A, the property holding company still has a long way to go as the project, designed to become the “Shenzen of Indonesia”, sits atop 22 square kilometers (2,200 hectares) of land in Cikarang in Bekasi, West Java.
Moreover, the project was left in limbo when Lippo Group executive Billy Sindoro was accused of bribery last year.
The case was brought to the Bandung Corruption Court in West Java where Billy was sentenced to 3.5 years in prison after he was found guilty of giving Bekasi Regent Neneng Hasanah Yasin Rp 16 billion (US$1.13 million) and S$270,000, while other officials in the administration were given project permits to handle 438 ha of land in Cibatu in South Cikarang, Bekasi.
Although Billy’s sentencing marred the project’s image and hurt demands, John said the ambitious project would still go on.
“Meikarta is our commitment,” he stated on Thursday during a press briefing event in Jakarta. “We assure you that we will complete this project and deliver our promise to the buyers.”
He also told buyers and investors not to worry about the project as it planned to raise US$1 billion to finance Meikarta as well as Lippo Karawaci’s other projects, which would be focused on urban housing, shopping malls and health care. It also planned to use the funds to pay off some of its debt and improve the firm’s liquidity.
One of the ways the company could gather the necessary funds is through a rights issue.
John said the Financial Services Authority (OJK) gave the company the green light last week to issue 47.82 billion new shares and raise Rp 11.24 trillion.
According to a prospectus, most of the funds will be used to pay off its bank loans, buyback bonds worth US$650 million before they matured and liabilities as well as allow for its subsidiary PT Lippo Cikarang to participate in the rights issue. Meanwhile, 9.7 percent of the funds will be used to fund the expansion plan of several property projects in Jakarta and Makassar, South Sulawesi, and the remaining 10.1 percent would be used for working capital.
John expressed confidence that the rights issue would be absorbed by investors as it had received an advanced subscription from its major shareholder PT Inti Anugerah Pratama and its subsidiary. The firm had also received commitment statements from private investment firms to participate in the corporate action, he said.
“Foreign private investment firms such as Tiga Investments, Gateway Partners and Swift Hunter Limited have voiced their interest in participating in the rights issue,” he said, adding that he expected the rights issue to be conducted before the end of the month.
Another way the company would raise the funds, John said, was through a series of asset divestments in two Myanmar-based hospitals and the selling of its stake in Lippo Mall Puri in West Jakarta to Lippo Malls Indonesia Retail Trusts. These moves would give the company an estimated US$280 million.
John, noting that fundraising attempts would hopefully help the company’s expansion plans, was upbeat that the country’s property industry would improve in the future due to the government’s plan to provide an exemption on the luxury goods tax for houses and apartments worth below Rp 30 billion.
Securities firm Arta Sekuritas analyst Dennies Christopher echoed John’s sentiment, saying that the new regulation could result in positive sentiments toward property firms as it would revive the dormant mid-to-high-end property market.
“That, coupled with the increasing possibility of an interest rate cut in the near future, will push the slumping property sector forward this year,” he said.
