LIPPO-MAPLETREE - Lippo Malls Indonesia Retail Trust - Investor ...

Executive summaryIMPLICATIONS FOR RETAILWith moderate to strong economic growth forecast over the next five years, the outlook for the Indonesianretail market is positive. Growth in the middle and upper income classes and continuing urbanisation will beprime drivers, providing a critical mass of customers to support modern retailing formats. Furthermore, theshift away from traditional wet markets towards modern shopping malls will continue to support thedevelopment of new shopping centres in major urban areas.Retail sales growth has generally been stronger than GDP growth, due to continued increases in domesticconsumption as a proportion of GDP.Since the recovery from the Asian financial crisis, nominal retail sales growth has averaged 11% perannum, with a similar rate forecast to continue over the next five years to 2011. In real terms, retail salesare expected to grow by an average of 5.9% per annum between 2007 and 2011.While per capita wealth and retail spending are highest in Jakarta, the strongest growth has been in theurban areas surrounding Jakarta, i.e. Bogor, Depok, Tangerang and Bekasi, the location for a number ofthe assets within the LMIR Trust portfolio.With the easing of foreign investment regulations, increased urbanisation and the growth of the middle andupper income groups, foreign retailers have successfully entered the Indonesian market. Thisglobalisation of retailing and increased brand acceptance have also been influenced by other factorssuch as television, international business (expatriates) and tourism (both inwards and outwards).International brands such as Carrefour and Sogo have not only gained strong market acceptance but haveinfluenced the development of domestic operators such as Matahari and Hypermart.Furthermore, the Indonesian consumer has shown increased preference for shopping at modern centresrather than at traditional wet markets due to more comfortable shopping environment, a more completerange of goods, guaranteed quality of products (food safety and cleanliness), competitive prices, goodservice, and easier accessibility. This trend is expected to continue.SHOPPING CENTRE PROVISIONThe opening of the domestic retail industry to global players in 1998 has provided a boost to thedevelopment of retail shopping malls in Indonesia, initially in Jakarta but more recently in other citiessuch as Surabaya, Medan, Bandung and Semarang.The shopping centre boom is set to continue, with 19 proposals potentially entering the market in Jakartaalone over the next three years. In the longer term, smaller urban markets and growing areas withinGreater Jakarta (but outside Jakarta Province) may experience greater retail development. In addition,competing development pressures from alternative land uses for scarce but strategically located siteswithin Jakarta may restrict opportunities in the longer term.FUTURE OUTLOOK FOR RETAIL PROPERTYWe consider the outlook for the retail property market in Indonesia to be sound. Economic growth isforecast to pick up over the next five years and the growth in the urban middle and upper income groups willsupport the retail market. While the supply pipeline is strong, particularly within Jakarta, well maintained,and suitably located centres with an established customer base and strong anchor tenants shouldcontinue to perform well.Increased brand acceptance and the growing number of national and international retailers should providea steady supply of sought-after anchor and specialty tenants for existing and new retail centres. Expansioninto urban areas outside of the Greater Jakarta is expected, in line with the increase in middle and upperincome households in these markets.LIPPO-MAPLETREE INDONESIA RETAIL TRUSTThe majority of LMIR Trust’s properties are within Greater Jakarta, with other properties being located inmajor cities in Java and North Sumatra.F-7