Ikea may buy part of Sentul City

Swedish home furnishing retailer Inter Ikea Group might acquire a stake in property developer Sentul City as it enters the Indonesian market.

Photo: Finance Today

Ikea might buy the stake through its subsidiary Vastint Holding.

“The level of consumption in the middle- to the upper-class of Indonesia is quite high. This pushed Ikea to enter Indonesia,” said a source close to the matter.

Vastin Holding BV is Ikea’s property division, and is based in the Netherlands. It currently holds 750 million euros ($1 billion) worth of assets, according to the company’s website.

It operates mostly in Europe with most of its assets in Poland, Belgium, Spain and England. It has 28 buildings with total leasable area of 318,000 square meters.

Adrian Budi Utama, vice president director of Sentul City admitted that Vastint has expressed interest, but refused to share any details.

“We cannot elaborate yet because we are still in the early stage of discussions,” he said.

He insisted that Sentul City has not agreed to anything with Ikea, including plans to build Asia’s biggest retail store.

Ikea will open its first local store in 2014 though a franchise deal with Hero Supermarket, a Jakarta-based retailer that operates Giants hypermarkets and Hero supermarkets. Ikea’s first store will be located in a complex owned by Alam Sutera Realty in Serpong.

Rising consumer demand in Indonesia, coupled with the growing economy, has resulted in more overseas investors putting their funds into the country. Still, weak law enforcement, especially against corruption, has been a stumbling block for many foreign investors.

Sentul City is a satellite city located in Sentul, Bogor, which also home to the Sentul International Circuit, a race course.

Andrian said that the company will spend Rp 460 billion in capital expenditure this year to continue the construction of its projects. He said the company will finish Pertamina Hospital, as well as continue its work on apartment projects, a condotel, and four additional residential clusters.

About 26 percent of its capex will be used for infrastructure in its property complex.

He said the company will use its internal fund to finance the investment, with some help from bank loans.

In the first nine months of 2012, the company saw its net income jump by 130 percent, to Rp 212 billion from Rp 92 billion over the same period in 2011.

Revenue grew by 88 percent to Rp 545.29 billion from Rp 289.53 billion.

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