BUSINESS STRATEGY

PROPOSAL
Get Lower Price, Get Recurring Income and Sale at Higher Price

Prepared by Firman Siahaan

 ∞ What are the possible business opportunities
∞ Why PT PP Properti Tbk
∞ The Business Strategy Summary
∞ Acquisition & Purchase Strategy
The Proposal
What’s in this proposal ∞ Payment Strategy
∞ Selling and Reselling Strategy
∞ The Financial Illustration
∞ How to Start
BUSINESS OPPORTUNITIES WITH PT
PP PROPERTI

Building
Service Apartment
Management Partner
Revenue : Capital Gain + Recurring Income Revenue : Recurring Income

Exclusive Marketing
Partner
Revenue : Professional Fee
Why PP Properti?

Rp 21 Trillion Market Capitalization in Backed with State owned construction

Jakarta Stock Exchange company with strong management and
reputation

19 Projects across Indonesia with

sell able area more than 350.000
Square Meter
Business Strategy

This proposal is about how to be developer without too much burdens

 Start with The Ayoma as one of PT PP Property Project located in Serpong

 Serpong in South Tangerang Area is home of top tier private schools in Indonesia
including Japanese International School and new home of many multinational company
including Unilever, Apple Inc, Ikea,
 Serpong area is a rapid growing area for middle up class in Indonesia
 Purchase with lower risk and half of cost
 Get recurring income
 Sales at right time and high capital gain
BUSINESS STRATEGY SUMMARY
Possible Business Model
Business Benefits
Purchase Commitment
Acquisition Strategy to mitigate risk
Acquisition Strategy benefits
Sales and Reselling Strategy
Holding Period Until Disposal
Projected Capital Gain
Rental Income/Revenue
: Service Apartment with rental and sales
: Leopalace can design own features and strategy
: 60 Units or Equal to 4 Floor in 2 years with
option to cancel if market gone bad
: Purchase and Payment divided into 5 Stages, no need to buy 60
units at once through installment
: Leopalace can get early price while acquiring and selling
(flipping) units at higher price for capital gain
: Buy To Sell Strategy & Buy To Let Strategy
: 5-8 Years
: 50% in 3-5 years, 100% in 6-8 Years
: 8%-12% p.a
ACQUISITION OR PURCHASE STRATEGY
To manage and mitigate risk

1ST Stage 2nd Stage 3rd Stage 4th Stage 5th Stage

6 8 10 12 24
Unit Unit Unit Unit Unit

6 Months long before 2nd Stage 6 Months long before 3rd Stage 8 Months long before 4th Stage 8 Months long before 5th Stage
Purchase Purchase Purchase Purchase

All 60 Units Purchased divided into 4 stages in 2 Years more

PAYMENT STRATEGY FOR 1st Stage – 4th Stage
To manage and mitigate risk

Down Payment 1 Down Payment 2 Down Payment 3 Final Payment

5% 10% 10% 75%

1st Down Payment in 8x 2nd Down Payment in 8x 3rd Down Payment in 8x 4th Final Payment paid with Bank
installment in 8 months installment in 8 months installment in 8 months Financing or Customer
Installment if sold to end
consumer/investor with grace
period 6 months after 3rd
Payment
SALES/RESELLING STRATEGY
Buy To Sell Strategy Buy To Let Strategy
Definition: Leopalace buy and resell to Customer with normal property Definition: Leoplace sell portion of ownership for example 40% ownership
flipping strategy price e.g. Leo Palace purchased unit at Rp 1 Mio and later in an apartment unit to a 1st customer and the unit will be retained for few
on resell to customer at Rp 2 Mio years for rental or service apartment and dispose (unit sales) after 3-5 years
hold
Customer Payment : Customer payment follows payment schema to PT PP Customer Payment : Leo Palace sets own payment strategy
Properti Tbk as developer
Legal Documents: PPJB or Legal Documents issued & signed after 30% Legal Documents : Only business agreement with notary between
payment and 20% construction progress, AJB issued and signed after Leopalace and 1st Customer for ownership sharing. PPJB or any other legal
complete payment and handover by Customer documents if customer would acquire 100%
Applicable Taxes and Transaction Cost: Customer will pay for VAT, BPHTB Applicable Taxes and Transaction Cost: Customer will pay for VAT, BPHTB
and other cost when AJB signed and other cost only when sold to 2nd Customer
Advantages : Advantages:
• Less financial headache • Leo Palace can set own selling and branding strategy
• No financial liabilities • 50% or more lower price for acquisition because customer will share
portion of payment for unit acquisition
Disadvantages • Faster sales, customer can acquire unit at 50% of original price or lower
• Longer sales price
• Capital gain only from corporate discount and price increase during • Retain ownership for longer holding period to get higher capital gain
construction to finishing
Disadvantages
• Bigger financial liabilities
• More financial headache
FINANCIAL PROJECTION
For Purchase, Rental and Disposal
Primary Assumptions

 Rental year calculation started after unit handover

 Target for all unit holds until disposal is 5-6 years
 During rental tenure Leopalace can sell apartment unit
gradually
 Leopalace can continue to manage the service apartment
and receive management fee as part of rental management
services after unit disposal during or after unit hold period
Forecasting Property Value

Assumption of Potential Gross Rent Input

Anticipated holding period: 6 years 1. Price assumption below exclude hotel services e.g. breakfast, laundry
meeeting room and categorized as other income
Potential Gross Rent inputs: Units Monthly Income Per Unit 2. Service Apartment for Studio & 1 BR Average Cost in South Tangerang : Rp 600.000 per night
Type 1: Studio & 1BR 40 Rp 13,500,000 3. Service Apartment for 2 BR Average Cost in South Tangerang : Rp 1.000.000 per night
Type 2: 2 BR 15 Rp 22,500,000 4. Service Apartment 3 BR Average Cost in South Tangerang : Rp 1.500.000 per night
Type 3: 3 BR 5 Rp 45,000,000 5. Other income include premium business services
e.g. transporation,spa, medical services etc
Square Feet Annual Rent / SF
Non-residential input: 1400 0.00 Annual gross rent estimate: Rp13,230,000,000.00

0* 1st Year 2nd Year 3rd Year 4th Year 5th Year 6 7 8 9
Increase in Income: 5.0% 5.0% 3.5% 3.5% 3.5%
(to the following year) * fill in this box only if monthly rents above are current and need to be adjusted for the first year of operations

1st Year 2nd Year 3rd Year 4th Year 5th Year 6 7 8 9 10
Estimated vacancy : (for each year) 70.0% 45.0% 30.0% 25.0% 20.0% 20.0%

Other income: 10.0% (enter as a percentage of collectable rents)

Potential Gross Rent Estimate for first year: Rp13,230,000,000

Operating Expenses

Annual Operating Expense Increase: 3.5% Management Fee (% of EGI): 7.0%

Notes; Management fee is fee paid to Leo Palace or service residence operator
0* 1 2 3 4 5 6 7 8 9
Increase in income taxes: 10.0% 10.0% 10.0% 10.0% 10.0% 0.0%
(to the follow ing and continuing years)

Table 6.1 First-year Operating Forecast

Potential Gross Rent Rp 13,230,000,000

Less : Allowance for Vacancies 9,261,000,000
Rp 3,969,000,000
Plus : Other Income 396,900,000
Effective Gross Income Rp 4,365,900,000
Expense Estimates in 1st Year:
Operating Expenses
Management Fee (% of EGI) 305,613,000
Salary Expense Rp 436,590,000.00 10.0% 451,870,700
Utilities Rp 873,180,000.00 20.0% 903,741,300
Insurance Rp 43,659,000.00 1.0% 45,187,100
Supplies Rp 218,295,000.00 5.0% 225,935,300
Marketing Rp 87,318,000.00 2.0% 90,374,100
Maintenance & Repairs Rp 65,488,500.00 1.5% 67,780,600
Income Taxes Rp 436,590,000.00 10.0% 436,590,000 2,527,092,100
49.5%
Net Operating Income (NOI) Rp 1,838,807,900 42%

Note: all numbers are annual and rounded to the nearest Rp 1 Mio
Operating Statement

Table 6.2 Operating Forecast

1 2 3 4 5 6 7 8 9 10
Potential Gross Rent 13,230,000,000 13,891,500,000 14,586,075,000 15,096,587,600 15,624,968,200 16,171,842,100 0 0 0 0
Vacancy Allowance 9,261,000,000 6,251,175,000 4,375,822,500 3,774,146,900 3,124,993,600 3,234,368,400 0 0 0 0
3,969,000,000 7,640,325,000 10,210,252,500 11,322,440,700 12,499,974,600 12,937,473,700 0 0 0 0
Other Income 396,900,000 764,032,500 1,021,025,300 1,132,244,100 1,249,997,500 1,293,747,400 0 0 0 0
Effective Gross Income 4,365,900,000 8,404,357,500 11,231,277,800 12,454,684,800 13,749,972,100 14,231,221,100 0 0 0 0

Operating Expenses
Management Fee 305,613,000 588,305,000 786,189,400 871,827,900 962,498,000 996,185,500 0 0 0 0
Salary Expense 451,870,700 467,686,200 484,055,200 500,997,100 518,532,000 536,680,600 0 0 0 0
Utilities 903,741,300 935,372,200 968,110,200 1,001,994,100 1,037,063,900 1,073,361,100 0 0 0 0
Insurance 45,187,100 46,768,600 48,405,500 50,099,700 51,853,200 53,668,100 0 0 0 0
Supplies 225,935,300 233,843,000 242,027,500 250,498,500 259,265,900 268,340,200 0 0 0 0
Advertising 90,374,100 93,537,200 96,811,000 100,199,400 103,706,400 107,336,100 0 0 0 0
Maintenance & repairs 67,780,600 70,152,900 72,608,300 75,149,600 77,779,800 80,502,100 0 0 0 0
Income Taxes 436,590,000 480,249,000 528,273,900 581,101,300 639,211,400 703,132,500 0 0 0 0

Total Expenses 2,527,092,100 2,915,914,100 3,226,481,000 3,431,867,600 3,649,910,600 3,819,206,200 0 0 0 0

Net Operating Income 1,838,807,900 5,488,443,400 8,004,796,800 9,022,817,200 10,100,061,500 10,412,014,900 0 0 0 0

Table 6.3 Forecasted Operating Expense Ratios

1 2 3 4 5 6 7 8 9 10
57.9% 34.7% 28.7% 27.6% 26.5% 26.8% 0.0% 0.0% 0.0% 0.0%
After Tax Cash Flow

Input in yellow cells only.

Marginal Tax Rate: 10% Input Input Cost Depreciation IRS Mid-month
Depreciable Basis Recovery Period Deduction Convention*
Calcs for depreciation expense: 9,300,000 / 27.5 = Rp 338,200.00 Rp 324,100.00
* applies to first and last year

Tax Calculations 1 2 3 4 5 6 7 8 9 10
Net Operating Income 1,838,807,900 5,488,443,400 8,004,796,800 9,022,817,200 10,100,061,500 10,412,014,900 0 0 0 0
- Interest Expense 0 0 0 0 0 0 0 0 0 0
- Depreciation 324,100 338,200 338,200 338,200 338,200 324,100 0 0 0 0
Taxable Income (Loss) 1,838,483,800 5,488,105,200 8,004,458,600 9,022,479,000 10,099,723,300 10,411,690,800 0 0 0 0
x Marginal tax rate 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10
Income taxes 183,848,400 548,810,500 800,445,900 902,247,900 1,009,972,300 1,041,169,100 0 0 0 0

Table 10.2 Projected After-Tax Cash Flows from Operations

1 2 3 4 5 6 7 8 9 10
Potential Gross Rent 13,230,000,000 13,891,500,000 14,586,075,000 15,096,587,600 15,624,968,200 16,171,842,100 0 0 0 0
Vacancy Allowance 9,261,000,000 6,251,175,000 4,375,822,500 3,774,146,900 3,124,993,600 3,234,368,400 0 0 0 0
3,969,000,000 7,640,325,000 10,210,252,500 11,322,440,700 12,499,974,600 12,937,473,700 0 0 0 0
Other Income 396,900,000 764,032,500 1,021,025,300 1,132,244,100 1,249,997,500 1,293,747,400 0 0 0 0
Effective Gross Income 4,365,900,000 8,404,357,500 11,231,277,800 12,454,684,800 13,749,972,100 14,231,221,100 0 0 0 0
- Operating Expenses 2,527,092,100 2,915,914,100 3,226,481,000 3,431,867,600 3,649,910,600 3,819,206,200 0 0 0 0
Net Operating Income 1,838,807,900 5,488,443,400 8,004,796,800 9,022,817,200 10,100,061,500 10,412,014,900 0 0 0 0
- Debt Service 0 0 0 0 0 0 0 0 0 0
Before-Tax Cash Flow 1,838,807,900 5,488,443,400 8,004,796,800 9,022,817,200 10,100,061,500 10,412,014,900 0 0 0 0
- Income Taxes 183,848,400 548,810,500 800,445,900 902,247,900 1,009,972,300 1,041,169,100 0 0 0 0
After-Tax Cash Flow 1,654,959,500 4,939,632,900 7,204,350,900 8,120,569,300 9,090,089,200 9,370,845,800 0 0 0 0
Property Disposition
Asumption :
1. All price exclude tax and applicable corporate discount
2. Capital Gain 60% from purchased price for 6 years holding period
3.Full disposition in year 6th or partially unit disposal during 6 years

Purchase price: 72,348,500,000 Selling price: 115,757,600,000 Table 11.2 Estimated Income Tax Consequences
Transaction costs: 1,085,227,500 Selling costs: 1,736,364,000
Selling Price Rp 115,757,600,000.00
Tax rate on capital gains: 10% - Adjusted Basis (from Table 11.1) Rp 75,168,090,500.00
Tax rate on depreciation recapture: 10% Gain on Disposal Rp 40,589,509,500.00
- Gain from depreciation recapture Rp 2,001,000.00
Long-Term Capital Gain Rp 40,587,508,500.00
Anticipated holding period: 6
Tax on depreciation recapture Rp 200,100.00
Capital funding balance: Rp - Tax on capital gain Rp 4,058,750,900.00
(from Table 9.6) Total Tax Liability on Sale Rp 4,058,951,000.00

*-
Table 11.1 Estimate of Investor's Adjusted Tax Basis Table 11.3 Estimate of After-Tax Equity Reversion

Purchase Price Rp 72,348,500,000.00 Selling Price Rp 115,757,600,000.00

+ Transaction Costs Rp 1,085,227,500.00 - Selling Costs Rp 1,736,364,000.00
Initial Tax Basis Rp 73,433,727,500.00 Net Sales Proceeds Rp 114,021,236,000.00
- Cumulative Depreciation Rp 2,001,000.00 - Mortgage Balance Rp -
Adjusted Basis Prior to Sale Rp 73,431,726,500.00 Before-tax Equity Reversion Rp 114,021,236,000.00
+ Selling Costs Rp 1,736,364,000.00 - Taxes due on sale Rp 4,058,951,000.00
Adjusted Basis at Time of Sale Rp 75,168,090,500.00 After-Tax Equity Reversion Rp 109,962,285,000.00
OPTION FOR NEXT STEPS

1 2 3 4 5

Booking or Sales
Establish Marketing Execute Buy
deposit fee Pay for first
MoU and Strategy& To Sell and
through
representati
Create joint stage down
operation Tools Buy To Let
ve to hold payment
company Developme Strategy
unit nt

3 Weeks Long 2 Month Long 1 Month Long

 Thank You

For More Information :

Firman Siahaan
Email : firman@telecious.com
Phone : +62 8567009960