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THE CIPUTRA GROUP: SHAPING THE CITY IN ASIA

Marleen Dieleman wrote this case solely to provide material for class discussion. The author does not intend to illustrate either
effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying
information to protect confidentiality.

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Copyright © 2009, Ivey Management Services Version: (A) 2009-11-18

“If you have the will, and the spirit, and you have confidence, you follow up with forecast, all will
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happen.” Mr. Ciputra

Mr. Ciputra, founder of the Ciputra Group, looked back on his long career as one of Indonesia’s most
prominent entrepreneurs. As a developer in the real estate sector, he had provided modern and comfortable
spaces for millions of Indonesians to live, recreate, shop and work. Ciputra’s courage, vision and expertise
led to extraordinary successes in the 1990s. But the Ciputra Group also went through a particularly difficult
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period during the Asian Crisis of 1998, a crisis that exposed the vulnerabilities of the Ciputra Group’s
business model. Ciputra had felt relieved when the last debt restructuring agreement was signed in 2005.
Yet, right at the moment when the Ciputra Group was gearing up for a new era of growth, a global
economic crisis struck in late 2008. Ciputra, who was now 77 years old and planning to retire, was again
forced to reassess the Ciputra Group’s strategy. He thought about the appropriate balance between his
many ideas for innovative real estate projects and the level of risk the company could manage. The
ongoing transfer of leadership toward his children and children-in-law also required his attention. How
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could the business continue the tradition of entrepreneurship while also building a professionally managed
family business group? The Ciputra family needed to work out a comprehensive strategy to prepare the
family business for the next decades.

AWAKENING THE SPIRIT OF ENTREPRENEURSHIP

Ciputra, who, like many Indonesians, went by one name, was born into an ethnic Chinese merchant family
in 1931 in Sulawesi, an island in the Indonesian archipelago. During the Pacific War, his father was
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interned by the Japanese on false charges of spying for the Dutch, and he passed away in prison in 1943,
when Ciputra was only 12 years old. Ciputra, now a fatherless child, was raised in poverty, but he was able
to continue his schooling after the war. After completing high school, he subsequently went to the famous
Institute of Technology Bandung (ITB) in Java, where he studied architecture. His career would be one
that showed, as he himself explained, his “spirit of entrepreneurship.”

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Because the allowance he received from his mother during his university days was not sufficient, he started

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his first venture as a student in 1957. He established an architecture consulting agency with two friends,
Budi Brasali (who passed away in 2006) and Ismail Sofyan. After graduating in 1960, Ciputra decided that,
rather than working as a consultant for others, he wanted to implement his own ideas as a developer. He
subsequently managed to convince the then governor of Jakarta, Soemarno, of his talents. His proactive
attitude and vision must have played a role in his early success as a young man. The timing was also

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conducive as Indonesia, formerly a colony of The Netherlands, had become an independent nation, and
Sukarno, its first president, had sent most foreign experts away. As a consequence, there were few
architects capable of supporting the rapid development of Jakarta. Ciputra was bold and full of ideas, and
was an ideal candidate to become a major force in shaping Indonesia’s capital city.

Ciputra subsequently became the chief executive officer of Pembangunan Jaya, a developer partly owned
by the Jakarta provincial government, where he stayed for 35 years and worked closely with several of

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Jakarta’s former governors. In this capacity, he shaped Jakarta, including building or renovating several
prominent markets, a recreation park and various housing projects. In exchange for his services, Ciputra
received a minority shareholding in the company. Behind his property projects were original and visionary
ideas for the future social conditions of Indonesia, for example on how to integrate housing projects with
their natural surroundings. Never afraid of problems, Ciputra did not shy away from large-scale projects,
despite his young age and the relative lack of experience of Pembangunan Jaya.

Aside from this job, he and his friends also established the Metropolitan Group after graduation, where
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Ciputra became the president commissioner, a non-executive role in which he actively provided guidance
and facilitated the development of this expanding group. Other investors, such as the Salim Group, were
also involved in a subsidiary of the Metropolitan Group, which developed the first privately built satellite
city of Jakarta. The group also had investments abroad. In 2009, his long-term partner, Ismail Sofyan, was
still playing an active role within the Metropolitan Group.
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In the 1980s, the three friends, who had hitherto shared their projects, decided that they could now start
their own groups once their children grew up. So, when Ciputra’s children graduated and returned from
their university studies overseas, Ciputra started his own family group, the Ciputra Group, in which his
children, children-in-law, wife and brother were active. The new Ciputra Group was created for his
children, whom he hoped would grow as professionals and continue his entrepreneurial spirit in the
property sector.
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In contrast to his fellow entrepreneurs at the time, who diversified into a range of different industries,
Ciputra thus became the co-founder of three business groups: the government-linked Pembangunan Jaya
Group, the Metropolitan Group, and the Ciputra Group, all of which were active as developers in the real
estate sector. Ciputra himself explained that the focus on being a developer was a conscious choice: “There
are two options, and both are good. The first is that I have knowhow as an architect, how I can use this
knowhow . . . to create wealth. The second option is: which is the best business: a, b, c, so I enter this
business. Whether or not I have background in that business, I can hire people to do it. The second one is
more successful than the first one. You can become successful and very rich, but sometimes you don’t love
the job. The first one may not be as big as the second one, but you love the job. This is a choice. I chose the
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first one.” Due to this, he earned the nickname “Mr. Developer” in Indonesia.

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THE CIPUTRA WAY: THINK BIG, LOOK AHEAD

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Ciputra was considered the pioneer of the Indonesian property sector, and was often credited and awarded
for his visionary ideas. One of his achievements was to think big. He could see opportunities where others
could not. In the late 1960s, while heading Pembangunan Jaya, he transformed a swampland, infested with
mosquitoes and monkeys, into the now popular Jakarta seaside, re-positioning Jakarta as a beach city.

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According to Ciputra: “Every problem is an opportunity. The more difficult the problem, the more
opportunity: that is entrepreneurship.” Some of his colleagues at Pembangunan Jaya at the time were
reluctant to take up the project because of its many problems, but Ciputra simply put the director who
voiced objections in charge of the project, because, according to him, the director already understands the
problems, and now his task was to overcome them.1

When his colleagues were thinking mere buildings, he was thinking new towns. The development of entire

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satellite cities, or new towns, was a business model that became one of the trademarks of Ciputra, although
it was gradually copied by other players in the market. His first project, while still with Pembangunan Jaya,
was a project called Bintaro Jaya. Since the 1960s, Jakarta, like many other Asian cities, witnessed a large
influx of people from the rural areas (see Exhibit 1). In the decades to come, Indonesia would witness
impressive economic growth as well as urbanization, all of which put a strain on the existing infrastructure
in Indonesia’s capital. According to some estimates, on average 167,000 people were added to Jakarta’s
population each year between 1961 and 1971,2 and Jakarta’s population growth continued. The Jakarta
administration was struggling to find the funds to put in place infrastructure such as roads, sewerage, water
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and public markets. Given the government’s budgetary constraints, several of Jakarta’s governors and
housing ministers were eager to work with private or semi-private parties in the planning and development
of the capital city.

Just like other Asian cities, there were two ways to grow the city: either to increase the density in the
existing area or to expand the boundaries of the city into the rural areas. The phenomenon of the satellite
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city was part of the second strategy, namely expanding the city at the fringes. The advantages were
numerous. Land in the rural areas was often cheap, and a larger land area could be acquired which offered
possibilities for development projects on a larger scale, with more freedom for the architect to design
modern living spaces.

In the absence of government services and facilities, developers often built schools, roads and other social
and physical infrastructure themselves, paid for through the higher prices of the housing and office real
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estate. While such infrastructure was often officially the task of the government, the latter frequently
lacked the skills or budget to actually construct and maintain it. Especially after 1985, a period of
deregulation in Indonesia, the government warmed up to the idea of using the private sector to develop
housing and public infrastructure. It was in this vacuum that Ciputra saw commercial opportunities.

With a keen eye for promising new business models, Ciputra moved into these large-scale property
projects, and provided middle- and upper-class citizens with living conditions that the government could
not provide. Economic development, especially in the era in which the country was led by President
Suharto, from 1966-1998, also created a growing middle class, which was willing and able to pay for
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spacious living in surroundings with privately built facilities. Exhibit 1 gives an overview of some key
economic and population indicators in Indonesia.

1
B. Winarno, Tantangan jadi peluang: Kegagalan dan sukses Pembangunan Jaya selama 25 tahun, Pustaka Grafiti Press,
Jakarta, 1987.
2
C. Silver, Planning the megacity: Jakarta in the twentieth century, Routledge, New York, 2008, p. 92.

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The inconveniences of living in Jakarta were many. Most inhabitants suffered from polluted air, traffic

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jams, lack of security, lack of parking space, poor public transport, pavements taken over by vendors and
parked cars, regular flooding and poor basic services, such as garbage collection and sewerage. The
Ciputra Group targeted the upper middle class for its large-scale property projects, and offered services and
facilities beyond what other areas offered, including healthcare, security, maintained roads and greenery.
Middle-class Indonesians were willing to pay for much more pleasant and convenient living conditions.

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Ciputra’s love for the arts also seeped into the projects, as many of his new town developments were
marked with sculptures and other art objects, adding to the experience of living in a modern and vibrant
city.

As such, the satellite city provided a business model where economies of scale could be employed, and real
value could be added to the experience of living in a city. Given that the government was only partially
able to provide such basic things as security, clean air and well-maintained roads, developers like Ciputra

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turned problems into opportunities and provided their own solutions. These projects were naturally also
more complex, since they involved the technical skills to design and run larger areas, as well as to manage
traffic flows, do flood prevention and master other aspects of urban planning. The projects tended to be
carried out in phases and could altogether amount to hundreds of hectares and more than a decade of
development, requiring a substantial amount of capital.

GROWING THE BUSINESS IN THE 1990S

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The Ciputra Group developed rapidly into a developer with a broad portfolio of residential and commercial
projects. Its activities were a mix of different projects. The group had housing projects in the city centre of
Jakarta, it built hotels, and serviced apartments, offices and malls, often in an integrated manner. It also
developed large plots of land into new towns at the boundaries of the city. Eventually, the Ciputra Group
became known for its large property projects, such as the satellite city CitraLand in Surabaya.
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The 1990s were a period of rapid growth in Indonesia as well as Southeast Asia. In 1994, Ciputra floated
one of his companies, Ciputra Development, on the Jakarta Stock Exchange, and it witnessed a very rapid
growth, in line with the growth of the Indonesian economy at the time, and a boom in the property sector.
Its turnover jumped from around US$50 million in 1992 and 1993 to just under $250 million in 1997, with
the number of projects and their scale rapidly increasing. Exhibit 2 gives key indicators for the group’s
main listed company, Ciputra Development, while Exhibit 3 gives an overview of the company’s
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milestones. Aside from listed companies, the Ciputra Group also owned various other companies.

By 2009, the group was into hotels, offices, malls and entertainment projects, which were spread out over
different places in Java, including the larger cities such as Jakarta, Surabaya and Semarang. In Surabaya,
the second largest city in the country, the group operated one of its largest projects, CitraLand, a satellite
city with more than 1,000 hectares under development. CitraLand was launched in 1993, and was dubbed
the “Singapore of Surabaya” with its motto of a green, clean and modern city. The facilities within the area
included a golf course, a university (The Ciputra University of Entrepreneurship), various schools, and a
water park, in addition to the usual infrastructure and greenery. It also contracted a large group of security
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guards to supplement the government police. Some of its services were offered against fees from residents.
The tap water, which was sold at government-mandated prices to residents, was a money-making venture
which the group used to subsidize other services, including maintenance of greenery and security. While
the area catered to different customer segments, it was mostly targeted at middle- and upper-income
customers.

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Increasingly, the group started to use the word “Ciputra” in its projects as part of a strategy to develop the

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brand. The group believed that it had something unique to offer in the market, which other real estate
developers did not. In the words of an executive: “We don’t just rely on consultants and architects. We
believe that regardless of whom you use as consultant, the concept should come from us. Because the
architect does not understand the commercial aspects of the project, and the consultant does not understand
the design. We have the whole picture. We own the concepts.” Whereas in the past, the group often used

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the name Citra (“image” in the Indonesian language), which was confusing because other groups also used
that name, now many of the projects were termed “Hotel Ciputra,” “Mall Ciputra,” and so on.

Ciputra wanted to develop his land bank in the centre of Jakarta’s business district into a shopping street
lined with shopping malls, modeled after Singapore’s Orchard Road. This was an even more ambitious
project in terms of its planned budget, which exceeded $3 billion, and was to be developed with various
partners over a period of 20 years under the name “Ciputra World Jakarta.” In addition to the usual mix of

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property, Ciputra, who was an avid arts lover and collector, planned to construct the largest fine arts
museum in Jakarta as part of the project.

In addition to this, Ciputra started to look abroad and envisioned his group as a multinational company. He
had acquired permission from the authorities in Hanoi, Vietnam, to build a large satellite city there
encompassing 300 hectares of land between the city centre and the airport. When asked what made the
Vietnamese government select him for the project, Ciputra insisted that his concepts were the main reason.
“I recommended an international city for Vietnam. At the time the Vietnamese built only less than 10
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hectare, but I built more than 100 hectares, and I stretched to the international community. We already
have the international school, and the American embassy will be in our project. We have a hospital,
houses, condominium, golf course, something like that. It is a joint venture with the local government.”

These large projects required advanced technical skills and project management. Ciputra hired
professionals and modernized his company, which was often admired for its concepts and its skill in taking
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on complex projects involving multiple stakeholders. Despite his advanced age, Ciputra was still active in
the company as a mentor and was now considered its “creative navigator.”

THE ASIAN CRISIS: EXPOSING THE VULNERABILITIES

The Asian Crisis started in 1997 in Thailand and quickly spread to other Asian countries, including
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Indonesia. In addition, the Asian Crisis also caused the demise of the Suharto regime after 32 years in
power. As is common in economic cycles, the property sector was among the first and worst hit.

In Indonesia, the Asian Crisis caused a severe depreciation of the local currency, the rupiah, exactly at a
time when many companies were borrowing to fund a very rapid pace of expansion. Since, at the time,
loans denominated in U.S. dollars were cheaper than in rupiah, most Indonesian companies took out
foreign currency loans, and therefore were vulnerable to a depreciation of the currency. This also happened
to the Ciputra Group, which had hedged very little of its foreign currency loans, and was faced with
ballooning debts, declining income and declining demand for real estate. The group started to post losses
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each year between 1997 and 2001 (see Exhibit 2).

In May 1998, the economic crisis turned into a political crisis when Suharto was forced to step down
amidst severe riots, targeted mostly at the Chinese minority, to which the Ciputra family belonged.
Looting, violence and gang rape occurred in Jakarta, and several of the satellite cities with their middle-

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and upper-class populations, amongst which there were many Indonesians of Chinese origin, were attacked

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and set to fire.

These circumstances plunged the Ciputra Group into a very dark period. Unable to service its debts, the
group was faced with oblivion. Most projects had to be put on hold. Fortunately, the Ciputra projects were
not severely damaged by the May 1998 riots, but the outlook for the group was very dark. Ciputra’s son-in-

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law Harun Hajadi commented later: “I really felt sorry for Ciputra, we thought it was the end of the
company. It was all collapsing. He had nothing left to be proud of.”

However, the Ciputra family was able to solve its many problems and re-negotiate its debts. Harun took the
lead in this. He recalled having to go to a difficult meeting of angry debt holders who threw things at him
when he told them the Ciputra Group was unable to pay. Despite this, he was able to cope, cut costs, and
negotiate with contractors, buyers and debt holders. The Ciputra Group moved to a small office that was

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originally a marketing office for one of the real estate projects, as it could not afford the rent anymore. The
group worked on the principle that people who had pre-paid their houses and apartments should get it
delivered, although those who had not fully pre-paid were sometimes paid in kind, such as pieces of land.
Most of the contractors were also paid, although some prices were re-negotiated.

Some of the bondholders received equity in the company, and to give them an option to exit their
investments, another Ciputra company, Ciputra Surya, was listed on the stock exchange in late December
1998 after negotiations with the stock exchange authorities. Harun recalled: “There is a rule that you can
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become a public company if you have more than 300 shareholders or something. Usually you list a
company through an IPO. Finally we became the first company listed on the Jakarta Stock Exchange
without an IPO. We issued the shares for Rupiah 500 par value, on the first day of the listing, the
bondholders dumped the shares, and they dropped to Rupiah 100.”

The most difficult issue was to deal with the foreign currency loans. In 2005, much later than most other
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Indonesian companies, the Ciputra Group finally wrapped up the last unresolved debt issues, and the
family could sigh with relief. Ciputra, in the meantime, had found consolation in religion, and attributed
the narrow escape of the company to God. Finally, after almost eight years of struggle, the Ciputra Group
was ready to regain its position as a prominent player in the property market.

NEW POST-CRISIS STRATEGIES

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Indonesia was the country in Southeast Asia that was most seriously hit by the Asian Crisis, and took
longest to recover. The political regime change that coincided with the economic crisis also changed many
of Indonesia’s political realities. Almost overnight, the country turned into a large democracy, and the
centralized bureaucracy built up by Suharto to maintain his grip on the country was decentralized, giving
more autonomy to the provinces, which often differed widely from each other in terms of cultures,
languages and provincial economies. Some of the provinces received a fairly large degree of autonomy.

The Asian Crisis had severely weakened the Ciputra Group and had exposed some of the vulnerabilities of
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its business model. It was active in a very volatile sector — property — which was the first to be hit in the
event of an economic crisis. Political stability, an issue in Indonesia, also affected its business as it lowered
prices for housing and office space, and reduced hotel occupancy. Compared to surrounding countries,
Indonesian real estate prices were still low.

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In addition, its focus on ever larger projects had initially seemed beneficial, since the economies of scale

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such projects offered could help cover more facilities such as healthcare and schools alongside the property
projects, which would be paid for by affluent inhabitants eager to live in areas with greater service levels.
But the downside of this strategy was that large amounts of capital were tied up in these projects, which
typically lasted for a decade.

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Also, given their long-term nature and interaction with various authorities, the projects were vulnerable to
changes in governments and government policies. For example, the governments’ inability to maintain or
build sufficient roads could cause traffic jams or flooding on the roads to and from the satellite city,
making the travel time for inhabitants to and from their offices prohibitively high. Lastly, the group’s
competitors were also aggressively building satellite cities around Jakarta, thus creating more supply, while
the size of the affluent middle class, and thus the demand, was limited.

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Many other Indonesian companies were widely diversified, but the Ciputra Group focused on property. As
a consequence, other groups could restart the engines earlier after the crisis, because they had cash-
generating businesses that were in less volatile economic sectors, for example in food or in mining. The
Ciputra Group, because of its dependency on property, did not have the ability to use funds from elsewhere
in the group to overcome the downturns.

Therefore, Ciputra had to act. “After the crisis I changed the strategy. I don’t build big cities any more. I
created a good brand, the Ciputra brand. Although we continue in Java [Indonesia’s most populous island],
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we also explore outside Java. There is potential in the provinces for projects of 25 hectares or more. When
we sell the property, we split the income with the landowner. We don’t do borrowing. In Jakarta and Java,
it is already full, land is difficult to get, so we moved to the other provinces. The provinces achieved a
much larger degree of autonomy. The money is now outside Java. We need to expand.” Exhibit 4 shows
the geographical segment information for Ciputra Development. Indonesian economists estimate that
around 70 per cent of all the money that circulates in Indonesia is located in Jakarta, which demonstrates
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the importance of the capital city in comparison with the many provincial capitals (see also Exhibit 1).
Ciputra’s son-in-law, Harun, remarked regarding the smaller projects in the provinces that “with our brand
name we can capture the entire market. After you launch your real estate, the market is gone. It takes about
three years for the market to come back.”

The new model was to reduce borrowing by working with landowners and equity partners. The landowners
would share the revenue of the project without contributing anything more than the land they already
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owned. Harun explained, “We work with the land owner, we contribute our expertise in development. We
spend the development costs, the landowner sits nicely, and we share the revenue. We don’t share the
profits, so if I want to spend on something, say advertisement, it is not a problem because we share the
revenue. Usually the landowner does not have ideas. I always tell him, this model is like an autopilot for us
already. I spend, but we split the revenue. It works well.”

The equity partners also benefited from Ciputra’s reluctance to borrow. One of the partners said: “Ciputra
needs us. They are too conservative. They are too scared to borrow. I understand it too. Their assets are
tied to property, but we have different businesses. Property is always initiating a crisis. Ciputra needs us to
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grow. If he stays where he is, he cannot grow.” With Ciputra supplying the excellence in building, and the
partner supplying the money by taking calculated risks where the Ciputra Group was reluctant to take
them, the equity partnerships worked for both parties.

An expert in property considered the Ciputra Group a land-based property player, in contrast with what he
termed the sky-based players, who sought to accelerate growth and reduce risks through innovative

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financial structures — something that the Ciputra Group did not get involved in. He commented that the

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sky-based players often grew faster than the land-based players. Thus, from the perspective of an avant
garde property player, the Ciputra Group now seemed to opt for a slower and more conservative approach.

Internally, the company sought to stimulate an entrepreneurial spirit. All employees — from directors to
administrative staff — were encouraged to develop their sales qualities, and one executive spoke highly of

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Ciputra’s secretary, who had already sold several apartments. The group held competitions between
different project teams, and the winning project teams would go abroad on trips together. Ciputra explained
that all project staff would be rewarded: “Yes, until servants and security people go there. All go there.
One group went to Paris — the Citra Garden team — they chose where they wanted to go. We gave them
an extra bonus of 3-8 months.” Ciputra liked to involve staff at all levels in projects, and he regularly
interacted with younger staff members and stimulated them to express their views. All employees looked
up to Ciputra, and several insiders remarked that “he is so outstanding.”

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The Ciputra Group also started to devote more of its attention to projects abroad. According to Ciputra’s
son-in-law Budiarsa Sastrawinata: “Our way of diversifying is to go abroad. This will help when the storm
comes. We do not put all our eggs in the same basket. Also, the large scale means that it is
interdisciplinary, e.g., residential, office, etc. so the one will support the other. These will not all go down
at the same time. This is how we try to be crisis-resistant.”

Many developing countries in Asia did not yet possess the capability to develop real estate on a large scale
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as the Ciputra Group did, and the leaders thought that this was something they could leverage in other
countries that had similarly large populations, upcoming middle classes and growing economies. This
added to the group’s reputation. A person familiar with the group commented, “Ciputra is a hero in
Vietnam. He is a man with vision, he actually built entire cities. While other companies focused on
commercial and real estate, Ciputra goes much further. He opened new paths in this business. He has
maintained his good reputation in city development, despite the crisis.”
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In Vietnam, the Ciputra Group could leverage the skills built up in designing satellite cities in Indonesia. A
partner of the group commented that “to build a satellite city you need a design team, the internal resources
and the technical capabilities. It must be our core business. You need to put in sewerage, urban planning,
etc. Ciputra did very well in Indonesia. When they went to Vietnam, he already knew how to do it. They
already had a master plan.”
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NEW GENERATIONS

Ciputra had four children: the eldest two were daughters, and the youngest two male twins. Because he
considered them all talented, the eldest two daughters with their spouses (respectively, Rina Ciputra
Sastrawinata and Budiarsa Sastrawinata; and Junita Ciputra and Harun Hajadi) each led one division of the
Ciputra Group, while the twins (Cakra and Candra Ciputra) led another. Budiarsa focused on the
international projects, including the new town in Vietnam, and had built contacts with officials in that
country. Harun, amongst others, ran several large projects in Surabaya, another large city in Indonesia. The
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twins were mainly active in commercial buildings like offices in Jakarta. Although the official structure of
the group and its listed companies did not reflect this, informally the projects were divided amongst the
children, who were engaged in subtle competition.

There were differences in style between the children. An executive of the Ciputra Group commented that
“Candra is only involved in the strategy, not in the daily operations. Harun is involved in everything, he is

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more in the details. He also has an architect background, so he is also involved in the design. Budiarsa is in

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the middle. Candra is more interested in the financial aspects, such as the stock market.” The division led
by Rina and Budiarsa had become reluctant to borrow after the crisis, and tried to avoid this at all costs,
instead choosing to work with partners who provided financing and land. Harun, however, thought that this
might be too conservative, and took a slightly different approach. As such, within one company, there was
a diversity of managerial styles and project preferences. One of the insiders remarked: “Are the sub-

rP
holdings going to go on their own or is it one person that will succeed Ciputra? Sometimes I try to talk
about it with the family members. But they say, if Ciputra has not decided, why should we talk about it.”

As the children all had the same level of ownership, and there was no legal separation between the
different divisions, they equally benefited, irrespective of how much profits their projects contributed. It
was Ciputra’s vision that his children and children-in-law would work together harmoniously to continue
to be a “legend in property.” For Ciputra, this was one of the most important goals, since he had started the

yo
Ciputra Group primarily as a vehicle for his family. In terms of ownership, the Ciputra family had a
holding company, the ownership of which was structured as follows: 15 per cent of the shares for each
child, 15 per cent for Ciputra’s wife, Dian Sumeler, and 25 per cent for Ciputra. The holding company then
held controlling stakes in the listed companies that belonged to the group, while the public held the rest of
the shares. Exhibit 5 shows the structure of the different listed companies and their holding structure.

The boards of the listed companies (Ciputra Development, Ciputra Surya, Ciputra Property) were mostly
composed of family members, with the minimum seats for independent directors as was required by
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Indonesian law. In line with Indonesian law, companies had a two-tier board structure with a board of
directors that was overseen by a separate board of commissioners. Day-to-day management was in the
hands of a team of family members, complemented by professional executives. Exhibit 6 provides a
description of the directors and commissioners of Ciputra Development.

Other large competitors hired more professionals on the board of their real estate companies. As such, the
tC

Ciputra Group could be seen as an old-fashioned family firm where all top positions were held by family
members, and where it was difficult to attract sufficient managerial talent. A person close to the group
commented: “If you compare LIPPO Group with Ciputra, they are both good. Perhaps Ciputra has the
better vision. But for the technical competences he relies too much on his children and sons-in-law. LIPPO
has hired the best outsiders, and they have better people. That is why I think that, in the future, the Riady
family [who controls LIPPO] will overshadow Ciputra in real estate.”
No

The shortage of talent was all the more constraining as the Ciputra Group moved into projects outside
Jakarta. In order to maintain the unique “Ciputra” brand, it was necessary to work not only with local staff
in the provinces and abroad, but to develop people who would be familiar with the “Ciputra spirit” and
quality levels. However, all the provincial cities had different cultures and it was sometimes hard to find
the right project managers who could work on location.

THE FUTURE OF THE CIPUTRA GROUP: PLANNING FOR THE FAMILY AND THE BUSINESS
Do

Since emerging from its ashes after the Asian Crisis, the Ciputra Group had started to expand again, and it
had changed its direction. The company expanded into others cities in Indonesia, mainly capital cities of
provinces with big enough populations. As most capital cities outside Java were smaller than capital cities
in Java, it was more difficult for the company to develop new large satellite city projects because the
markets were small. Furthermore, the group accelerated its internationalization and worked on various
large satellite city projects abroad, including in Vietnam, Cambodia and China. Because of the bitter

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experiences during the crisis, the group tried to avoid large borrowing, instead stepping up its local and

os
international partnerships, raising capital through the capital market, creating limited partnership funds and
leveraging its unique brand.

While the group had slowly restarted from 2001 onward, by the end of the year 2008 it became clear that a
global downturn was set to affect property sectors worldwide. Whereas before 2008, the Ciputra Group

rP
mapped out a range of strategies, it was not so clear anymore whether all these could be pursued
simultaneously in times of crisis. Should the group focus on its large-scale projects abroad and, if yes, how
should it divide its attention? On a larger number of smaller regional projects? On town development or on
integrated projects within city boundaries? Would the group be overshadowed by its competitors if it
maintained its conservative strategy?

It was also clear that each of the informal “divisions” of the company, run by different people, was taking a

yo
slightly different direction. What would happen if the company were to miss the inspiration and vision of
the founding entrepreneur? Without a new strategy, the family harmony might be lost and diverge into
three different approaches to running the business. Anticipating that Ciputra would step back, how was the
company going to retain its entrepreneurial flavor, while also moving on towards a more professional
structure? How was the group to deal with the dilemma of the requirements of the business and those of the
family? Harun Hajadi said that Ciputra “is now thinking about how to leave his legacy, how to ensure that
the brand name and image will be extended into the future.”
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Now was a good time to plan the strategy for the firm and for the family and to strengthen the business for
the coming decades. Whereas the group had been designed along the way by the founder, as it grew larger,
a more systematic view of the progress of both the business and the family in different stages could support
its future development.
tC

The research on which this case is based was supported by the Singapore Ministry of Education, Academic Research
Fund Tier 1, R-313-000-079-112.
No
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 Page 11 9B09M084

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Exhibit 1

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KEY ECONOMIC AND POPULATION INDICATORS FOR INDONESIA

Indicator 1970 1980 1990 2000

GNI per capita Purchasing Power Parity n.a. 620 1,440 2,260

rP
(current international $)
Population (million) 120 151 182 211
Urbanization (% of population) 17 22 31 42
Population of Jakarta (million) 3.9 5.9 8.2 8.4
Population of other major cities (million)
Surabaya 1.5 2 2.5 2.6
Bandung 1.2 1.5 2.0 2.1
Semarang 0.6 1.0 1.2 1.4

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Medan 0.6 1.3 1.7 1.9
Palembang 0.6 0.8 1.1 1.4
Malang 0.4 0.5 0.7 0.8

Sources: World Bank, World Development Indicators; United Nations, World Urbanization Prospects, 2007 revision.

Exhibit 2
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KEY FINANCIAL INDICATORS FOR CIPUTRA DEVELOPMENT

Indicator
1999
1995

1996

1997

1998

2000

2001

2002

2003

2004

2005

2006

2007
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Turnover 229 243 121 13 32 32 33 46 68 84 110 127 147

(US$ million)
Profits 41 56 -17 -59 -25 -89 -59 84 14 -25 8 61 18
(US$ million)
Total Assets 930 1,225 1,203 457 564 573 505 492 546 562 554 552 815
(US$ million)
Total Liabilities 626 702 863 409 526 621 608 485 539 587 564 247 403
(US$ million)
No

Gross Profit 52 51 52 46 39 50 58 51 48 49 46 47 44
Margin (%)
Return on 4.5 4.6 -1.4 -12.9 -4.3 -15.5 -11.7 17.1 2.6 -4.4 1.5 11.1 2.2
Assets (%)
Total Debt to 2.1 1.4 2.5 8.5 14.0 -12.9 -5.9 64.8 83.1 -23.1 -56.0 0.8 1.0
Equity (%)

Source: Annual Reports of Ciputra Development.

Do

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Exhibit 3

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CIPUTRA DEVELOPMENT MILESTONES

1981 Established under the name of PT Citra Habitat Indonesia

1984 Launched the first residential project, namely CitraGarden (now CitraGarden City), which
is located in Cengkareng, West Jakarta.

rP
1993 The first and largest project developed in greater Surabaya, CitraLand City (now
CitraRaya), was launched in April. The first commercial project, CitraLand Mall and Hotel
(now Ciputra Mall and Hotel) located in Grogol, West Jakarta is opened for public. In the
following year, the Company developed a similar project in Semarang.
1994 CitraGrand City (now CitraRaya) Tangerang, which has the largest development area
(more than 2,700 hectares), was officially launched. Initial Public Offering (IPO) of
50,000,000 shares and listed on Jakarta Stock Exchange (JSX).

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1996 Rights Issue I of 250,000,000 shares. Listed on Surabaya Stock Exchange.
1997-1998 Economic crisis in Indonesia. The Company started to restructure its debts.
1999 PT Ciputra Surya Tbk, a subsidiary, listed in JSX.
2005 The launching of CitraGarden Lampung and CitraGarden Banjarmasin, which marked the
beginning of business expansion to outer Java.
2006 The issuance of 2,307,276,912 shares without Pre-emptive Rights regarding debts
settlement. Rights Issue II of 2,449,860,570 shares.
2007 IPO of PT Ciputra Property Tbk, a subsidiary. Ciputra World Surabaya, a super block
development which consists of shopping center, apartment, office and hotel in Surabaya,
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was officially launched.

Source: Annual Report of Ciputra Development, 2007.

Exhibit 4
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CIPUTRA DEVELOPMENT GEOGRAPHICAL SEGMENT INFORMATION (% OF REVENUES)

2007 2006 2005

Greater Jakarta 38 37 40
Greater Surabaya 49 54 52
Other* 13 9 9
No

* Foreign investments are not included in these figures.

Sources: Annual Reports of Ciputra Development, 2005 and 2007.
Do

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Exhibit 5

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OWNERSHIP STRUCTURE OF CIPUTRA’S LISTED COMPANIES

Family Holding Companies Public

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Ciputra (25%)
Dian Sumeler (15%)
Rina Ciputra (15%)
Junita Ciputra (15%)
Candra Ciputra (15%)
Cakra Ciputra (15%)

47% 53%

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Ciputra Development

40% 51%
Ciputra Surya Ciputra Property
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grey = listed company

Source: Annual Report of Ciputra Development, 2007, company interviews.

tC
No
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Exhibit 6

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BOARD OF DIRECTORS AND BOARD OF COMMISSIONERS OF CIPUTRA DEVELOPMENT

Board of Commissioners
Ir. Ciputra President Commissioner. Ir. Ciputra is the founder and chairman of Ciputra
Group. He also founded PT Pembangunan Jaya in 1961 and PT Metropolitan

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Development in 1971 and currently serves as a Commissioner of the both
companies. He is actively involved in many social and organization activities,
such as Indonesia Architectural Engineers Association, Indonesian Real Estate
Association, Jaya Raya Foundation, Association of Foundations for the Nation,
Ir. Ciputra Educational Foundation and Tarumanagara Foundation. He is often
granted awards from both domestic and overseas institutions, the latest was
Entrepreneur of the Year 2007, organized by Ernst & Young. Ir. Ciputra earned
his bachelor degree in engineering from Bandung Institute of Technology.

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Dian Sumeler Wife of Mr. Ciputra. Dian Sumeler has held the position as a Commissioner
since 1997. Currently she also serves as a Commissioner of PT Ciputra Surya
Tbk and PT Ciputra Property Tbk, the subsidiaries. She is actively involved in
social and educational activities through Ir. Ciputra Education Foundation and
Citra Kasih Foundation. Dian Sumeler graduated from Surabaya Pharmacy
School in 1954.
Bayan Akochi Brother of Mr. Ciputra. Bayan Akochi has served as a Commissioner since
1993. He has also served as a Director of several subsidiaries, namely PT
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Cakrawala Respati and PT Lahan Adyabumi since 1991.
Cosmas Batubara Independent Commissioner. Cosmas Batubara has extensive experience in
organization and governmental institutions. He formerly served as a Minister in
several governmental periods and a member of parliament. In worldwide
organization, he used to serve as the President of International Labour
Organization in 1991. Currently he is the Chairman of Cosmas Batubara &
Associaties. He has been appointed as the Chairman of the Company’s Audit
Committee since 2007. Cosmas Batubara graduated from Social and Political
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Science Faculty and earned his Doctoral degree in the same field, both from
University of Indonesia, Jakarta.
Henk Wangitan Independent Commissioner. Henk Wangitan has held the position as an
Independent Commissioner since 2001. He formerly served as a Director, who
was responsible in land acquisition. Currently he also serves as a
Commissioner of PT Citra Gelombangkencana and as a Director of PT Cikupa
Buana.
Widigdo Sukarman Independent Commissioner. Widigdo Sukarman has excellence experience in
No

banking sector. He formerly served as President Director of Bank Papan

Sejahtera and Bank Negara Indonesia 1946 and as a Director of Bank
Tabungan Negara. Currently he also serves as a member of Indonesian Bank
Supervisory Agency and as a lecturer in several universities. He has also been
appointed as an Independent Commissioner of PT Ciputra Property Tbk since
2007. Widigdo Sukarman earned his bachelor degree in economy from Gadjah
Mada University, Yogyakarta, his MPA degree from Harvard University, USA,
his MBA degree from Boston University, USA and his Doctoral degree in
economy from Gadjah Mada University.
Do

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Exhibit 6 (continued)

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Board of Directors
Candra Ciputra President Director, son of Mr. Ciputra. Has held the position as the President
Director since 2002. He has experience of more than 20 years in property
business. Currently he also serves as the President Director of PT Ciputra
Property Tbk and Vice President Commissioner of PT Metrodata Electronics

Budiarsa Sastrawinata
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Tbk. He earned his bachelor degree in finance from the University of San
Francisco, USA and an MBA in finance from the Golden Gate University, San
Francisco, USA.
Son-in-law of Mr. Ciputra. Joined the Company in 1990 and has served as a
Director till now. Currently he also serves as the President Commissioner of PT
Bintaro Serpong Damai and as a Director of PT Damai Indah Golf. He is also a
member of parliament (MPR/DPR) for the 2004-2009 periods. He earned his
bachelor degree in civil engineering from Plymouth Polytechnic, UK and an

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MBA from Prasetya Mulya Management Institute, Jakarta.
Harun Hajadi Son-in-law of Mr. Ciputra. Has joined the Company since 1988 and has served
as a Director since 1990. Currently, he also serves as the President Director of
PT Ciputra Surya Tbk and as the Vice Chairman of the Infrastructure, Property
and Transportation Committee in Indonesian Issuer Association (AEI). He
earned his bachelor of architectural engineering from the University of
California, Berkeley, USA and an MBA in finance and real estate from
University of Southern California, Los Angeles, USA.
Cakra Ciputra Son of Mr. Ciputra. Joined the Company since 1990 and was appointed as a
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Director since then. Currently he also serves as the President Director of PT
Ciputra Semarang and as a Director and a Commissioner of several
companies within Ciputra Group. He earned his bachelor degree in civil
engineering from San Francisco State University, San Francisco, USA.
Rina Ciputra Sastrawinata Daughter of Mr. Ciputra. Has an experience of more than 20 years as a
Director and a Commissioner of several companies within Ciputra Group. She
served as the Company’s President Director from 1983 to 1990. Currently she
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also serves as the President Director of Century 21, a company engaged in

property brokerage. She earned her Bachelor of Commerce from University of
Auckland, New Zealand and an MBA from Claremont Graduate School, Los
Angeles, USA.
Junita Ciputra Daughter of Mr. Ciputra. Has joined the Company since 1988. She used to
serve as a Commissioner of the Company in 1996. Currently she also serves
as a Commissioner and a Director of several companies within Ciputra Group.
She earned her bachelor degree in finance from University of San Francisco,
No

Tulus Santoso Brotiswidjojo
Tanan Herwandi Antonius
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USA and an MBA in finance and real estate from University of Southern
California, Los Angeles, USA.
Has served as the Company’s Director since 2001. Currently he also serves as
the Corporate Secretary. He is actively involved in the Indonesian Real Estate
(REI), as the Chairman of Jakarta Region for the 2005-2008 periods and has
acted as a member of Finance and Trading Committee in the AEI since 2005.
He earned his bachelor degree in accounting from Satya Wacana Christian
University, Salatiga and a master in accounting from University of Indonesia,
Jakarta.
Joined the Company in 1987 and was appointed as a Director in 2003. He has

also served as the Vice Chairman of the Indonesian Humanity Habitat

Foundation since 2004. He earned his bachelor of civil engineering from
Parahyangan Catholic University, Bandung, an MBA from Prasetya Mulya
Management Institute, Jakarta and a Master of Science from University
College, London, UK.

Source: Annual Report of Ciputra Development, 2007.

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