Getting a foothold on the ‘Island of the Gods’ from $200,000

/ EdgeProp Singapore
March 9, 2019 12:30 PM SGT

Genesis Indojaya, a property development group founded by Singaporeans Darren Chua and Remy Ng, is offering Singapore buyers first bite of an investment opportunity in Bali, with guaranteed rental returns of 5% per year over seven years

Indonesia’s most famous island, Bali, has suspended 468 international and domestic flights for 24 hours starting from 6am on March 7 to mark the Day of Silence or Nyepi, which is the New Year’s Day in the Balinese Saka Calendar.
On this Balinese Hindu religious holiday, regular activities stop for a day – from the use of electricity and electronic devices as well as all forms of entertainment including travelling outside the house. Nyepi observances for Balinese Hindus include meditation and fasting. Foreign visitors to Bali are expected to respect the religious observances.
If anything, Nyepi amplifies Bali’s allure as a mystical place, with its temples, natural beauty and picture-perfect landscapes.
Bali’s allure as a mystical place, with its temples, natural beauty and picture-perfect landscapes which drew over 6.5 million visitors (Credit: Bloomberg)
For Singaporean developers Darren Chua and Remy Ng, co-founders of the Jakarta-based Genesis Indojaya, the March 9-10 weekend after Nyepi is therefore ideal to soft-launch in Singapore their maiden project in Bali – Citadines Berawa Beach Bali.
Genesis Indojaya is the Indonesian developer of the 226-unit serviced residences located on a 17,800 sq m (192,000 sq ft) site at Berawa Beach, one of the beaches in the coastal village of Canggu. It is within just a 10-minute drive to the dining and shopping hub of Seminyak.

Managed by The Ascott

The Ascott Ltd, hospitality arm of Singapore-listed property group CapitaLand, will manage the property on a 10-year management contract with an option for another 10 years. With 19 properties offering a total of 3,479 serviced residences, The Ascott is the biggest serviced residence operator in Indonesia, says Philip Lim, the firm’s country general manager. Currently, nine of the properties are operational, with another 10 (including Citadines Berawa Beach Bali) under development.
The upcoming Citadines Berawa Beach Bali will be managed by The Ascott Ltd under a 10-year management contract with an option to renew for another 10 years (Credit: Genesis Indojaya)
Citadines is The Ascott’s mid-tier brand, where rooms are slightly smaller relative to the group’s upscale Ascott and Somerset brands. The rooms under the Citadines brand are predominantly suites and one-bedroom apartments. “As such, the Citadines brand is ideal for the Berawa Beach property as the area mainly caters to the mid-market leisure travellers,” says Lim. The Berawa Beach property is also The Ascott’s first Citadines in Canggu.
Another Citadines-branded property in Bali is Citadines Kuta Beach Bali, which is currently operated under the franchise model. “The Kuta area is more touristy and caters to the mass market segment,” adds Lim.
“We are hoping to start operations in 4Q2020,” says Ng, managing director of Genesis Indojaya. “We are already building the foundation and we are going to start plumbing construction.”
The serviced residences at Citadines Berawa Beach Bali range from studios to one- and two-bedroom apartments. Some are adjoining apartments for those who want bigger three- or four-bedroom units (Credit: Genesis Indojaya)
The architectural firm for the design of the project and landscaping is El Colectivo Architectural Design Studio, whose principal partners are Chilean architect Nico Caceres and Spanish designer Kiko Tous.
“We love greenery and nature, and it was one of our key design aspirations,” says Chua, equity adviser of Genesis Indojaya. “Remy and I even wanted to name the property ‘Rainforest @ Canggu’ initially.”
The serviced residences at Citadines Berawa Beach Bali range from studios to one- and two-bedroom apartments. Some are adjoining apartments for those who want bigger three- or four-bedroom units. A sole presidential villa of 225 sq m (2,421 sq ft) with a private pool will sit in one corner of the land.
Studios of 31 sqm are priced from $230,000 and buyers have three different payment options with different discounts offered (Credit: Genesis Indojaya)

Payment schemes and discounts

Prices start from about $230,000 for a 31 sq m (333 sq ft) studio suite. The developer is offering buyers a guaranteed rental return (GRR) of 5% net per annum for seven years. Three payment schemes will be made available this weekend, according to Ronald Lim, business development manager and project lead manager for Bali at Huttons International, the international property agency of Huttons Asia. Huttons International will be marketing the Citadines Berawa Beach project this weekend.
A buyer who opts for the full payment scheme will be entitled to a 15% discount on the purchase price, which brings the absolute amount to under $200,000. Those who opt for the progressive payment scheme will enjoy a 10% discount. Buyers who choose the seven-year payment scheme will enjoy a 5% discount.
Those who book a unit over the weekend will have to pay a reservation fee of $2,000. A 30% downpayment on the purchase price is due within seven days. For the progressive payment scheme, the balance 70% will be payable according to the stage of construction, similar to Singapore’s progressive payments for a project under construction. For the seven-year payment scheme, the remaining 70% can be paid by monthly instalments from the rental returns generated.
The common area at Citadines Berawa Beach Bali, where buyers are given a notarial lease of 80 years (Credit: Genesis Indojaya)

Notarial lease for 80 years

Genesis Indojaya is offering buyers a notarial lease of 80 years on their investment. “We will have a notary public who will witness the signing of the lease and issue a notarial certificate to the buyer,” says Chua. “It’s almost as good as a property title as it is prima facie evidence that the buyer owns the property. This solves the problem of restrictions on foreign property ownership in Indonesia, including Bali.”
Many of the enquiries so far have been from Singaporean investors looking at the rental return perspective, while others are interested in the prospect of capital appreciation, says Huttons’ Lim. “Citadines Berawa Beach is located just 300m from the beach. The Canggu area is not as congested or built-up as Seminyak and Kuta. But there’s potential for capital upside.”
There are a lot of new developments coming up in Canggu. “When we first looked at the site in 2016 and did our due diligence and feasibility studies, there were just 20 to 30 F&B outlets,” says Genesis Indojaya’s Ng. “Today, there are about 100. The value of our land in Bali has also doubled from the time we purchased it.”
The Canggu area is an up-and-coming area with new developments including F&B outlets and beach clubs (Credit: Bloomberg)

Mid- to upper-scale segment: an under-served niche

According to Ng, Citadines Berawa Beach Bali will be positioned as a serviced residence in the mid- to upper-scale segment.
The Ascott's Lim is expecting blended average room rates at the Citadines Berawa Beach Bali to be about Rp1.1 million ($106) per night for a studio unit. Besides catering to leisure travellers, he expects the property to appeal to domestic tourists and business travellers, which is fast-growing market with rising affluence.
The resorts in the Canggu area are either small, locally managed resorts in the lower-tier segment or luxury properties, such as Singapore-listed Hotel Properties Ltd’s Como Uma Canggu or Haven Suites Bali Berawa located adjacent to Citadines Berawa Beach. While Haven Suites, which is in the 4.5-star category, has room rates upwards of $180 a night, Como Uma Canggu is priced from $300 a night.
“The mid- to upper-mid-tier segment in Canggu is currently under-served, and the Citadines Berawa Beach Bali fills that niche,” says Alice Tan, director of residential project marketing, Knight Frank.
One of the key attractions of Bali is the sunset view from the beaches of Kuta, Seminyak and Canggu
The property is located just opposite Potato Head Beach Club, one of the top beach clubs in Bali. Another beach club consistently voted among the top two in Bali is Finns Beach Club, which is also located near Citadines Berawa Beach. In the Canggu area, there’s also Vue beach club at the pool area of Lv8 Resort Hotel. Café Del Mar, the famous Ibiza lifestyle club, will open in Bali later this year, and will be just a five-minute drive from Citadines Berawa Beach resort, says Genesis Indojaya's Ng.
“One of the key attractions of Bali is the sunset view from the beaches of Kuta, Seminyak and Canggu,” says Knight Frank’s Tan. “And beach clubs like Finns Beach Club truly stand out. It’s also very near the Citadines Berawa Beach.”

Riding on the strength of the tourism market

Bali was ranked the world’s No. 1 travel destination in the TripAdvisor Travellers’ Choice Awards in 2017 and No. 4 in 2018 – after Paris, London and Rome. Tourist arrivals in Bali totalled more than 6.51 million last year, up by more than 10% y-o-y from 2017. The target this year is 6.8 million visitors.
Bali tourism figures showed that in December, Austalia was once again the biggest tourist contributor, followed by China, India, Malaysia and Singapore (Credit: Bloomberg)
For decades, Australians had taken the lead as the biggest group of tourists to Bali. But they were overtaken by the Chinese for the first time in 2017. Chinese visitors to Bali vaulted from 987,000 in 2016 to 1.39 million in 2017, while Australian visitors dipped from 1.14 million to 1.09 million over the same period.
According to Indonesian Minister of Tourism Arief Yahya in an interview in January, Indonesia welcomed 2.6 million Chinese visitors in 2018, and Bali was the No. 1 destination. Indonesia aims to increase the number of Chinese visitors to 3.5 million this year.
“The strength of the tourism market is set to grow further,” says Knight Frank’s Tan. “The full potential of the spending power of the Chinese tourists has yet to be unleashed.”
Average occupancy rates in Bali dipped 1% to 67% as of July 2018, compared to Jakarta, which saw occupancy rates increase by 3.8% to 62% over the same period, according to hospitality consultancy HVS in its Asia-Pacific Market Snapshot 2018 released on Nov 7, 2018. However, Bali, buoyed by the entrance of new products, saw room rates increase by 5.4% last year, while room rates in Jakarta remained stable.
“The outlook for Bali remains positive in 2019, with stable occupancy rates and slight increase in room rates due to new hospitality products,” says Chee Hok Yean, HVS president for Asia-Pacific.
Bali tourism figures showed that in December, Austalia was once again the biggest tourist contributor, followed by China, India, Malaysia and Singapore. In fact, visitors from Singapore showed the biggest month-on-month jump of 97.4% from November.
Hotels in Bali saw average occupancy rate of 67% last year, and are expected to remain stable this year (Credit: Bloomberg)

Canggu: an ‘up-and-coming area’

“Citadines Berawa Beach is located in Canggu, an up-and-coming area,” says Chee of HVS. “Whether it will do well will depend on the selling price and the monthly maintenance cost. It’s a competitive product. While Canggu is a fairly residential area, there are increasingly more commercial developments, with several beach clubs nearby.”
According to Genesis Indojaya’s Chua, the intention is to set aside part of the returns for maintenance of the property. “Our specific instruction is to fully utilise the maintenance budget; otherwise, after six to seven years, if a property isn’t well maintained, it will start to show.”
The Citadines Berawa Beach Bali is offering a 5% net return per annum for seven years, “which is attractive because most projects typically offer GRR of just three years”, says Huttons’ Lim. “Bali is an international tourist destination and the average occupancy rate is about 70%. If you’re looking at an average room rate of $100 a night, the returns are reasonable.”
Investors in the Citadines Berawa Beach Bali property are assured that their serviced residences will enjoy the same consistent management quality as any other Ascott-managed property, emphasises The Ascott’s Lim. He was involved in the design of the property, the layout of the serviced residences, the planning of the facilities and common areas from the inception stage to ensure that the property is consistent with the brand. “To us, fire safety is a primary concern, and Genesis Indojaya has been very cooperative in complying with our requirements.”
Remy Ng (left) and Darren Chua of Genesis Indojaya (Credit: Samuel Isaac Chua/EdgeProp Singapore)

‘Sustainable returns’

Given Bali’s positioning and its location on Berawa Beach, Huttons International's Lim believes that the project offers “sustainable returns over the longer-term and will have resale potential”. Beyond the GRR investment period of seven years, investors will also be able to enjoy the facilities of the property.
The utilisation of the room nights will be awarded based on a point system, Lim adds. Owners will be given 30 points. During the off-peak season, one point is equivalent to one night’s stay in an apartment of a similar size within the property. During the peak season, one night’s stay is equivalent to six points. “The points are also transferrable to your friends and family members, to enable them to enjoy a slightly lower room rate,” says Lim.
This weekend, the Citadines Berawa Beach Bali will be showcased at The Great Room at Ngee Ann City Tower B, Level 22-01. Genesis Indojaya is also planning to showcase the Bali project in Australia, Bangkok, China, Hong Kong and Macau.
The duo at Genesis Indojaya was initially a little worried about the perception of GRR in the hospitality industry: there have been cases where the returns were inflated and built into the selling price, developers offered a buyback guarantee but never fulfilled their promise, and projects never got off the ground.
However, the Citadines Berawa Beach Bali project is already fully equity-funded, says Chua. “For us, we’re doing it the Singaporean way, and we’re very transparent. The 5% return is really 5% net return after VAT [value-added tax].”
Ng adds: “We’re pricing the units at very digestible sums from $200,000 for a studio of 31 sq m. We think it’s a palatable amount for the average emerging affluent investor.”