EPISODE 12:
The Kedungu Fund: All the Answers

00:01
Alrighty, and we’re back with Omri Ben-Canaan As I said previously, we’re going to do just some questions, FAQs that we get asked from investors all the time. As I said previously, you can just navigate through the question you want to get the answer to. And here we are with Omri. Thank you. So I saw you have a list of how many pages you have. So this is not prepared, so I’m just going to answer as best as I can to those questions. Yeah, Shoot. Whenever. Yeah, sure. Okay, so we’ll start off with some easy answering.
00:38
So why don’t you just give us a little bit about The Kedungu Fund and what was the inception? What was the inspiration? Why did you start it? Ah, interesting. So actually, it’s a funny story. It started with me investing some of my money in Kedungu back in almost two years ago. I put around half a million dollars, acquired a few land, leasehold. and then my friends heard about it. And then they asked me, “Omri, can I give you 100? Can I give you 50? And on your next deal, can I invest with you?”
01:21
They know I’ve been doing real estate for so many years and quite successful at it. So I’ve done that before, and I wasn’t making any profit on them. It was just out of friendship. And I said, “Okay, no problem.” And a couple of friends became 10, 12 friends. that’s when I said, “Sorry, guys. You just going to have to do a thing on your own.” I’m going to monetize my friendship. Yeah, I have to monetize my friendship. No, no. I didn’t think about the fund back then. So I said, “Okay, so you just do your own thing.
01:52
I do my own thing, and I can’t handle 10 people. It’s not possible.” And then I heard about funds. So I don’t have a financial background, as you know. And I didn’t know anything about funds, except everyone, the common knowledge. So I started to look into it, and I studied. You were there. I spent three, four months, five months maybe studying it. I read and learned by heart, all investopedia.com I watch every single YouTube video that can be watched on the subject. There was this one guy called Bridger Pennington,
02:34
quite helpful. We put the link in the description. He has a YouTube channel that talks about funds. Young guy in the States, very, very smart, and I really like what he does. So I learned a lot of things with him, and I also took a lot of mentors and advisors to help me shape the project, basically. And then we launched in March, 2023. It was a bit chaotic at first. It was complicated. That’s all start-ups. Yeah, exactly. But we solved problem after problem, and now it’s working fine. So yeah, that’s how it started.
03:23
Great. I mean, the last few months has been really successful, so things are going really well. Yeah, very happy with the outcome, and I think everyone in the fund is very happy. So that’s it. So why the name, for those that don’t know, I mean, it’s the region, it’s the namesake, but why don’t you just give us a little touch on, like, Kedungu, why Kedungu, why the name of the fund, how does it all link together? For those that don’t know. Is there a question here? I mean, it’s pretty self-explanatory, yeah?
03:50
The Kedungu Fund. Why did you not understand? Why Kedungu? Okay, why Kedungu? So I mean, we’ve said that over and over in all the podcasts, Kedungu was a region, is a region that we identified as being the next… Hot spot. Hot spot in Bali, yeah, the next… I don’t like to say the next Canggu, because there’s a very, very negative feeling vibe about Canggu being over developed, badly developed, and so on and so forth. But when I say the next Canggu, it means the next place that is going to develop
04:29
quite fast. What we’re trying to do is to make it different than Canggu. So applying some… trying to make some rules or some guidelines on how to develop and so forth. And we’re getting to that. I think there’s a whole kind of CSR, how we’re getting involved with community guidelines on the subak and roads. Yeah, but back to your question, why Kedungu and not Nyanyi or Seseh or further? So in order to understand how we pick, how we identify a region, you have to understand three things. So first, in Indonesia, government has
05:13
been pushing for years and years for more and more tourists all the time. Before the president, Jokowi, the exiting president, who’s been in power for eight years, it was organic. And after Jokowi… and when Jokowi came into power, it was actually a promise, a campaign promises, a promise of Jokowi. We said he would double the number of tourists within the first five years of his mandate. So I think Jakarta, a central government, understood that tourism is, I mean around 2014-2015 he understood that tourism is a
05:55
crazy source of revenue. And that Indonesia… I remember back then, Singapore had 24 million tourists per year and Indonesia had only 9.7. So Singapore is big like this and Indonesia is huge. Indonesia is the size of Europe. So it’s 5,000 kilometers wide. It’s crazy. There’s no limit to how many tourists you can bring. I think France is 100 million. I’m French. So that give you a bit of benchmark. Yeah, I think it’s number one tourist location, France Yeah, yeah, it is. So anyway, so this is the first rule is
06:37
that there are more and more tourists coming every year. Because there are more tourists, I mean, more people need more accommodation, need more food. I mean, restaurants, gyms, schools, whatever. And it’s not only more tourists, it’s more tourists and more expats as well, because the population of expats grows according to the population of the tourist population as well So first rule is much more tourists all the time, every year. The second rule is there’s a rule in Bali, there’s a law in Bali
07:10
that says you cannot build above 15 meters of what we call the coconut tree law, which dates 1966, if I’m not mistaken, around 66. And because of that rule, so you can’t stack people up, you can’t put them in tall buildings. So expansion is horizontal. right? And to understand where that that expansion is going, you just look at the map and look at where the ocean is, and it just follows the coast. So you have, you know, already you have this in your equation, yeah So more tourists, expansion is following
07:52
the coast, but to fine tune that expansion pattern, surf is coming into play. So it follows the coast, yes, but it goes from surf spot to surf spots, primarily. It will follow, it will develop everywhere. So there’s a general westward trend and then hotspots around the surf spot. Exactly. Westwards and go from surf spot to surf spot. So Pererenan is, I mean, you have like Berawa, Batu Bolong, Pererenan, surf spots, yeah? And then nothing until Kedungu.. So Kedungu is developing out of fast space because of that.
08:32
basically the, so the three underlying reasons as The Kedungu Fund investment thesis, really. That’s the investment thesis. And it started with me, like I said before, it started with me investing because this is what I do. I do what I call pioneer investments. So I invest in locations where development has not yet hit heavily. I did it in Sumba, I did it in Pererenan, I did it in Kedungu and other places. And now as development is coming and starting, has already started, we already have like historical data a couple of years.
09:13
So yeah, there’s more and more people investing now. So the fund structure, I suppose, is probably the number one question we get. How is the fund structured? How does it work? And where is it registered? The corporate entities, etc? Sure. So the way we structured it, and we can insert maybe a little graphic here. So the fund is in Singapore, the Holdco, the holding company is in Singapore. So the shareholder of the fund, investor in the fund, sorry, becomes shareholder of the Singapore company,
09:51
one of the Singapore companies because we have a few. And then those companies control a PMA here called PMA The Kedungu Fund, PTPMA The Kedungu Fund, which is an SPV, special purpose vehicle, which is basically the PMA that handles all the assets, do the operational, payroll, and so on and so forth. So the Holdco owns the SPV? Yeah. So the holdco controls the SPV together with the GP, so general partnership, which is the fund manager. So fund manager is 2%, and then Holdco is 98%. That’s the way we structure.
10:31
And the fund manager is controlled by our group, Kosong Satu group, 100%. Okay. So I suppose the other, I would say, overarching mechanism in the fund is the five-year investment term. Yeah. Why five years? What is the thinking behind that? Yeah. And how does it work? So we discussed previously the three golden rules of how the investment thesis work. So you have your government, the government pushing from what risks, the law that prohibits building 15 meters, and the surf spots, yeah. So if you have that, you can predict
11:17
when you know the data of the first how many tourists are going to come, are coming and are going to come. When you have good enough projections, you can predict how long it will take for an area to develop from scratch, from zero to Undevelop to mature. Yeah. I say from rice field to Canggu. Basically, rice field Canggu is eight years. Rice field to Pererenan is five and a half, six years. So that gives you kind of like a benchmark. So basically, from rice fields to fairly developed is around five years.
11:59
And we’ve seen that over and over again. This is not something new. We have so much historical data on that. Yeah, maybe just so a development trend started in Kuta by the airport, went up the coast, westward, Seminyak, Berawa. So those are generally five to eight year development cycles. Well, the five year thing, so what we noticed is that the land price, the real estate value to reach its peak, not its peak, but the peak at which the point at which before it starts plateauing. To reach that point, which is around 40,
12:40
45 million rupiah per are so per hundred square meter per year, this is five years. So to go from a land price of five million rupiah per are per year to 45 million rupiah per are per year, it takes about five years, which is super fast. Yeah, so it’s a solid medium term investment, five year fund. So we use that matrix to define the investment term the lifespan of the fund, yeah OK, I swear the other one question is obviously the You have a lot of number one questions. OK, top three or four. So it’s the ticket.
13:26
Minimum ticket, why is it set at that? 30k, so 30.000$ USD, all of this is USD. We will probably go back up in a couple probably Q1 2025, we’ll go back up to 75. OK. And how many investors you’re on currently? Currently, there is 50 something, 53 or 54, I forgot What’s the average ticket? So currently is mid-November 2024. Let’s say that. And the average ticket is around $100,000. OK. So then dividends and returns. How does it work? So there is dividend, as in a drawdown, regular drawdowns. How does that work?
14:18
And then how does the funds at the end of the fund get distributed? OK. So originally, there was no dividends along the way, OK, as how the fund was when the fund was created and how we shaped it. It was just an investment, wait five years. Yeah, because it was mainly land banking in the beginning, yeah? In the beginning, yeah. And then along the way, we decided to change that a little bit. I mean, we listened to our investors and to people that we talked to about the fund. So there will be some dividends
14:52
distributed along the way. And those dividends are coming from the rental income we get from the land we have developed. So for example, the school, a very, very concrete example. The school has a rent fixed rate and a variable rent, so around a little bit over $100,000 in Rupiah. Around 70% of that, 60% to 70%, will be redistributed to the shareholders at the end of each year. So the school is being built right now. We are in November 2024. We are opening in the first term will be August 2025.
15:33
So by the end, so the rent will be paid at that time. So at the end of 2025, around 70% of that will be distributed to the shareholders. That’s annually or like a quarterly distribution? Anually, annually, yeah. But understand this. So right now, we only have one project being actually developed, yeah? By the end of 2025, we probably have more because we have smaller projects, smaller developments. I don’t know yet what the rent will be or whatever. And by the end of 2026, we’ll have many more.
16:12
But those dividends won’t be as big as when we liquidate the fund. So the main focus of the fund is the capital appreciation at the end of the term? Absolutely, yeah, absolutely. OK, well, just touching on property and actually what are the development plans? How do you select the properties? And let’s talk about selection next. But what is actually in the portfolio now? And how did you select those? So from experience, every time I’ve been in the past, I’ve been pioneer investing in Pererenan, for instance,
16:49
the first thing we do, I do, is acquire street fronts properties. So properties that can be developed into some for commercial purpose. So high street retail. The reason behind that is that because there’s so many properties, there’s a scarcity of plots. So the price rises even higher than the residential properties. So when you reach your peak, if you add 40, 45 million for one residential property, the street fronts commercial property will be around 70, 80 million. Let’s say 70 million. So your markup is much bigger.
17:37
Your profit is much bigger. Exactly. So we focused since the beginning of the fund, the inception, when we, all the investments we’ve done basically is commercial properties. We are just now acquiring our first residential properties. So that’s off main road, a little bit back, away from the coast. Exactly. But the problem, to be honest with you, I wouldn’t if there were some properties left, but it’s very, very hard today in Kedungu, if not impossible, to find a plot on the main streets. And everything we find, we
18:13
don’t even put it on the market. Everything we find, we just grab it instantly. Maybe run through just a couple of those kind of like flagship properties that we have in the portfolio. Yeah. Like the bigger ones and what is the plan? Because you obviously got the school. There’s a couple more green spaces that we plan, which we’ll get into later. But maybe the school, opposite the school, what’s the kind of So the school is really in the center of Kedungu. What we did is we acquired, we’re lucky
18:45
to acquire, a 30 are plot right across the street from the school. And the idea on that plot is to develop some small shopping plaza with a little bit of mixed use. There will be like about 15, 20 apartments. Mixed use as in residential? Mixed use as in Yeah, residential and commercial and maybe a bit of entertainment, sports. We are still working on the concept. Our architect, Lucas. So that together with the school will be kind of like the anchor. So if you have the school and then you have the shopping plaza
19:23
in front, and then we also control the land that’s at the crossing where the banjar is near the Padel. So we have both corners. So we have quite a bit of land concentrated in that small space, that small area. And the idea is to make of this the center of Kedungu, the real, hypercenter of Kedungu OK. And because you have also roads going back to the main street from a back way, there’s a, I mean, the circulation for the traffic makes sense there. So if things are well prepared and well planned,
20:04
we could have a no-traffic situation. Oh, wow. Yeah. I mean, not to get to Kedungu, but in Kedungu. To get to Kedungu is another animal all together. Let’s look back on that later when we talk about all that kind of sustainable, how we’re trying to get involved more with the planning of Kedungu, et cetera. But that’s interesting. That’s an interesting point. So OK. So that’s the kind of strategies thus far. Looking forward, what are you going to continue on that? Are you going to develop more? Is it more residential focus?
20:40
Or are you going to keep that split as far as commercial-residential mix? What is the future plan? The split is 80-20. That’s how I plan. 80% residential sorry, 80% commercial, 20% residential. let me explain the reason behind that. There are thousands of people, hundreds of developers on the island. Some of them do a horrible job. Some of them do an amazing job. You have guys like Oxo. They do very, very proper residential development. And fighting against all these guys didn’t make sense to me.
21:20
And also, just the idea of just buying a land, putting a villa on top, or an apartment building, or whatever, selling it, and making money, for me, it just didn’t make sense. I thought, OK, if we do this fund, if we do it correctly, we have a very, very long-term approach to how we do the fund, how it will impact the life in Kedungu, and trying to make all of this better and sustainable. So instead of going residential and building a bunch of villas, we decided to go into more community/structural developments.
22:00
So the school was the first one. The school actually makes less money than, I mean, as a developer, it makes less money than any residential development. However, the school brings 100-120 kids in the school. So you multiply this by three. That’s 300, 400 people, the families that will come to Kedungu or have an interest in Kedungu So those people need houses, restaurants, supermarkets. It’s a lot of footfall for the area. Yeah, exactly. So we may make less money, and it’s a much bigger headache
22:42
than developing villas, but it’s much more complicated to develop a school, of course, and it’s not as profitable. However, the ripple effect of developing this is huge. And if everything is done in the right way, then we have a situation where we can actually bring Kedungu where we want to bring it, which is not Canggu, basically. So yeah, that’s how we plan the future. All right, so just looping back on that. So your other neighbor developers, do you have any idea who they are and what they’re building?
23:24
Because we get asked that quite a lot as far as what kind of company The Kedungu fund is in and what the plans are outside of what we’re doing. Yeah. Well, there are some big players in Kedungu, much bigger than us. The biggest of all being Ciputra Group. So Ciputra is a very, very well-known Indonesian conglomerate. They have banks, they have everything. Everything you can think of, they probably have it. These guys don’t develop a compound of ten villas. They develop cities. And what they did, which is pretty
24:02
visionary and amazing, they purchased or leased about 88, I believe, hectares of land. So it’s not in Kedungu per se, it’s a little bit westward of Kedungu We call Kedungu the wider Kedungu, let’s say. But their area is called Pangkung Tibah. It’s just next to Kedungu. So you’re talking west, yeah? Westward, yeah. But it’s part of the wider Kedungu, yeah? So they have a plan to develop 400 villas and a bunch of other things. They already built beautiful roads, very wide, very well done, well-maintained.
24:49
They are doing a great job. There was a couple of hotels that were supposed to come at some point. It was the Ritz Carlton, I believe, and Rosewood Hotel. So I understand the Ritz Carlton said they would postpone their involvement in Kedungu in the pandemic, and Rosewood, I think, is still in the… But they’re still holding land, okay, yeah? Yeah, yeah, yeah. Oh, they said it. Those would be on Ciputra land, from what I understand. The same as the glamping. So Roger that we did the podcast with.
25:30
So the glamping is on Ciputra’s land. And the beach club, the family beach club, they are developing next to the glamping, which is not a beach club like Atlas or Finns, it’s not crazy noise, yeah? Is on Ciputra’s land as well, yeah? So you have these guys, biggest of all, yeah? And then you have smaller developers, so you have… So there was one company, called LimeTree Capital. It’s a Hong Kong-based fund, and they have this brand called Belong Bali. And they have 32 hectares of land between
26:11
Ciputra and the actual Kedungu If you know where Joshua district is, so like in whatever is in front of Joshua district, you’re only a bit on the left, yeah? And they are selling everything now. So they had a plan to develop, which was great. And now they are liquidating, I don’t know why. Potato Head has some land over there. I don’t know what their plan is. They started to develop something pre-pandemic, and then pandemic, they stopped. And then you have another company, a large developer called Ombak,
26:45
PT Ombak, which is Jakarta-based Indonesian company. And they have, if you’re in Kedungu, if you’re in the school, at the school, for instance, and you go towards the beach, after you pass Kedungu real estate, on that big, long piece of road that goes to the beach, near Tipsy Pigs and Swell. So all the right side belongs to that company. And I understand that I was told recently, actually this morning, that they were selling some of their land, yeah? And then there’s another developer that has land on the ocean fronts,
27:29
where the beach, Pantai Cinta, beach love, is the little cafe with the beanbags. So the restaurant belongs to him. You know, that restaurant they are currently building on the bamboo. Yeah, the bamboo one, yeah. Yeah, so those are the big guys. And then there’s us, yeah, I guess. We are number four or something like that, five maybe. And then there’s a bunch of others. You have Baza. Baza, we developed origins in Nyanyi, so they have some building, beautiful. Yeah, loft and one-bedroom, and also river mixed use.
28:13
Yeah, absolutely, very, very nice. And nice people, too. Yeah. So that’s next to Swell. And then, what else is there? I forgot some. There’s a bunch of others. Yeah, there’s many, there are many like smaller ones. Medium to small. Yeah. Yeah. Okay. Well, I suppose this gets to another question that is getting thrown around Bali at the moment. It is, okay, so let’s talk outside of Kedungu, because with all these developments and major developers, etc, there’s a strain on infrastructure, roads, etc, etc
28:47
So what is happening, you know, medium to long term, as far as improvements to Bali to be able to manage this capacity problem? Or is it even a capacity problem? What are your thoughts on this whole situation? Well, I’ve been in Bali 30 years. And I hear sometimes people saying, okay, Bali’s finished, there’s too much traffic. Wow, they said the same thing 30 years ago. So there’s nothing new here. The traffic is no good. The infrastructure, the road infrastructure is not so good. But we have a problem of traffic in Paris
29:27
as well, and in many major cities in the world. People tend to forget when they come to Bali that prior to coming to Bali, they were commuting for one hour every day, or at least one hour. Three hours to get to the airport in traffic. Yeah, exactly. So, I mean, Bali definitely has a problem, a traffic problem. There are some things that are done to mitigate that problem. I think the main projects being developed now is the metro. So there is, for those who don’t know, there is an underground and above ground,
30:08
but mainly underground metro being built from the airport to right now, until Munggu, which is Seseh, Munggu. So airport, Central Parkir in Kuta, Sorry, a T-junction of Sunset Road and Kerobokan, then the soccer field in Berawa, and then Munggu. Okay. And Tanah Lot, no? Maybe. Not official. Not confirmed yet. There were talks about Nyanyi as well. People talk yeah, but nothing is confirmed yet. So that’s underway. We know the financier’s here We’ve met him. We are involved in a way, in some way in
30:58
the project, with one of our companies, Baliprod. So yeah, it’s happening. It’s a three-year development. I mean, it’s a many, many years development, but this leg is three years. And then after this is finished, it will be from central parkir here. It will go to Sanur, I believe. And once this is finished, it goes from Sanur to Sukawati to Ubud. Okay. And once this is finished, it goes from the airport to Jimbaran and to Nusa Dua, or the other way around. I forgot maybe Nusa dua first, Ubud after.
31:36
So you’re doing the one leg first and then building the second leg. Yeah. So the Munggu one is confirmed. It’s happening now, being built. And then the Sanur one is confirmed. It’s happening right after. Okay. And the next two, so the Ubud one and the Jimbaran one, Nusa Dua one, is still under study from what I understand. And things change. Things change a lot in Bali. So most of this will be underground, but there will be some parts that’s above the ground, yeah. Okay. let me go back quickly on the metro thing.
32:09
It’s not a transportation project. It is a transportation project, but it’s also a real estate project. So there’s a couple of things that are pretty sweet that will happen with that. So first, at each station, there will be a number of businesses, underground businesses that will be developed. Okay. Very much like Tokyo or Hong Kong or, you know, underground. Yeah. Like retail, little retail units. Yeah, absolutely. Or Singapore. Yeah. And first of all, and secondly, the plan is from what we were
32:44
told by the metro team to have, you know, like in Hong Kong, you can check in. If you go to the airport and you want to check in, you can do the check in in the city. I forgot the name of the station. I think it’s central station something. You can check in your luggage, just like an airport check in, but it’s in the city, which is amazing for people that have a late flight. So you check out, imagine a tourist in Bali with their family. They are in Seseh or something and they check out at 11 or 12 a.m.
33:22
and their flight is 10 p.m. What do they do? You want to like your bags around? They are what they do. I can tell you what they do. They have their bags in the car of the driver and they roam around and they create more traffic. Yeah. So now this is alleviated by the fact that they can check in their luggage, in Seseh directly. Luggage is transported to the airport. They don’t see their luggage until they arrive at their destination in another country. Yeah. And then they can do whatever they want, take the metro,
33:50
take the, you know, gojek, whatever, and then show up at the airport. They already have their boarding pass, everything. So that’s, I think that’s a… That would be interesting. Yeah, that’ll be super cool. Yeah, that would be super cool Okay. And then just touch on the airport because that’s big news. I think there’s both expansion plans for existing, which are a little bit dubious because we don’t quite know if it’s been, if they are expanding the current airport, international airport, and then the new airport up north.
34:16
So the expansion of the airport, I mean, there’s nothing new here. It’s been, I’ve been coming since 1994 and the airport is in constant expansion. It is constantly being expanded. So main runway is being built. I am not sure about that, to be honest. I could, I don’t want to say things that I don’t know for sure. So I don’t know about that. It’s been in the talks, yeah. But you can always reclaim on the ocean, you know, which is already the case for the airport, you know. So the current Ngurah Rai airport,
34:55
I don’t know. But I mean, I know what everybody knows. So I read the news that they want to expand, blah, blah, blah. And the other airport, it’s a project that’s been in the works for over 10 years. And on and off and on and off. It’s picked up every new kind of legislation, not legislation, every new president that’s about the election. But yeah, so Prabowo, the new president, the Indonesian president, said right at the beginning of his mandate that he will build the airport. And more than that, he
35:31
said that he wants to do, he wants to make Bali become a hub like Singapore or Hong Kong. So like a financial hub. Business, corporation, banking. A hub. I don’t know. I don’t know. That’s why I read it. It’s a big statement. Yeah, it’s a big statement. But what the north, so the airport will be around the Singaraja, Lovina, Singaraja, like North. And that will obviously develop the region. Yeah, it’s a real game-changer. It will kind of give the island more equity because it’s just all south development.
36:03
Yeah. It will balance things. It will balance things. North of Bali is beautiful. So hopefully it can develop. It’s so under-visited and underdeveloped. Absolutely. People forget, five minutes outside of Canggu, etc, it’s just green. Rice patties, you don’t see anybody for days. Exactly. I was in Bali is a big place. I was in Pemuteran two weeks ago. It’s near Menjangan. I mean, you swim on your own in the ocean. And there’s crazy, beautiful hotels there, like really, really nice. And it’s really peaceful.
36:36
And it’s beautiful. A lot of corals because there’s a coral conservation program being developed 30 years ago. So now you go in the water, you just go like this, and it’s full of fish. And the coral is beautiful. Pemuteran Taman Selini, good hotel. On the beach. Yeah, yeah. Free ad, free info. Free local info, inside info Exactly, yeah. All right, so let’s get back to the fund and the financial tax, fee structure, etc, because we get asked this a lot. As far as fees go, you’ve got I’ll read them off here.
37:09
You’ve got acquisition, asset management, disposal, capex, and arrangement fees. So acquisition. What is that? How does it work? So you’re missing one. But OK, so let me walk you through the fees. So we have the main fee is a 2% management fee. That is a yearly fee, OK? It’s very, very industry standard. And that’s the only fee that is based on the capital. So that’s the only percentage that will be taken from the actual investments of the shareholders, the investors. And every year. So it’s on a AUM.
37:48
Yearly, yeah, yeah. Every March. so this one fee, OK? And then you have a few different fees that are based on events. So I forgot them, so you have to tell me acquisition fee. Yeah, acquisition. OK, so we have a 3% acquisition fee. So the 3% acquisition fee means whenever the fund acquire an asset so let’s say we acquire an asset for $100,000, I mean, equivalent in IDR, then the general partnership, the fund manager, which is us, will take $3,000 of that. Yeah, 3%. So then we have asset management fee, 3% as well.
38:29
So this is revenue from operational activities. So for instance, the school rental is $100,000 per year. So we’ll get the fund manager will get 3% of that. And then you have disposal fee. So that’s also 3%. So when we liquidate, we are not liquidating anything right now, but when the time comes and we start liquidating. So very much like a real estate agent. When we liquidate, say like LAM-A is liquidated, is sold for that for $100,000. So the fund will get 3% of that. So at the end of the fund.
39:13
Yeah, exactly. And then there’s the capex. So what is that? What does it mean? And what’s the fee? So this fee is based on is basically construction. So the school, for instance, to build the school, it costs around $700,000, something like that. So the fund will get 3% of that as well. OK. And the final one is the arrangement fee. So the arrangement fee is a 1% fee, and it’s based on loans if we decide to raise debt at some point, which was something we talked about. So the fund manager, the fund manager,
39:57
the GP, the general partnership, will get 1% of whatever volume of loans is If that happens. If that happens, yeah. OK. So all those fees are based on events, are based on operational activities or trading land and whatever, not based on the capital. The capital stays the same, yeah. OK. And then obviously, the big one is the performance fee. Yeah. How’s that work? And they’re just throwing the claw back there also. so let’s put the little graph here, insert the little graph here, because it’s Yeah.
40:31
OK. So the way the fund pays itself, so the fund manager, the GP, is as follows. So I’m hoping we have a little graph here. But basically, the first 8% of any proceeds that the fund makes at the end of the fund At the end of the fund. At the end of the fund. Yeah, at the very end. Once we’ve let’s say we’ve liquidated everything, and we have a bunch of money in the bank, just to make it simple. So that money, what happens with that money? So the first 8% goes to the limited partners, to the investors.
41:06
No question. First 8% for them. from 8 to 14%, so there’s 6% here. It’s called the catch-up, and goes to the general partnership, goes to the fund. Then from 14% to 24%, there’s 10% so 14% to 24%, is split 80% to the LPs, limited partners, so the investors, and 20% to the GP, the fund manager. And then from 24+, whatever, 10,000%. So it’s split again, 65% to the LPs, and 35% to the GP, to the fund manager. So we did that. I did that. And I didn’t invent it. I copied a fund I was following in the
42:05
States, and I saw it was pretty smart, because it gives the fund an incentive to aim for higher returns. I suppose the GP and the LPs then in the same boat. We’re all in the same boat. I consider the LPs as partners. We’re all partners. We’re all shareholders. Yeah, we’re all shareholders. So yeah, absolutely. And me even more, because I’m also an LP. So I have half a million dollars invested in the fund as well. So I’m skilling the game, so to speak. Okay, so then share price. How does that work?
42:49
Because it does change every month or two months. Walk us through that. So the share price is only relevant. This is something, there’s a misconception about this in many investors’ minds, and I want to set the record straight here. The share price is only relevant. It’s a good indicator all along the way, but it’s only relevant at onboarding. So there’s a share price today. As of today, mid-November, it’s $102.50. I mean, equivalent in rupiah. Actually, no, because it’s in Singapore, so $102.50.
43:35
At the inception of the fund, the share price, which is a year and a half ago, was $44.50. So we’ve more than doubled the share price within the span of a year and a half. The way it’s calculated, basically, so today is pretty easy, because the fund doesn’t hold “complicated assets” The school is starting, yeah, it’s getting there, yeah but so far, the school is just a land with a construction contract on top. There’s no business yet. So it’s pretty simple, because the way we calculate it is, we basically look at the
44:14
price, we have a bunch of land, so we look at the price for each of these lands we acquired the land at, and then the fair market values today. And so the difference, basically, is your profit. So we are putting ourselves in a situation where, if we were to liquidate that land today, how much we would get, basically. And so that difference is the profit we would make. So it’s unrealized, because it’s just a fair market value. This is done by a valuer that we hired called KJPP. K-G-P-P, sorry. Can you touch on them a little bit?
44:54
So who are they? They are Indonesian government stamped valuer, they are partnered with CBRE, they are the guys you go to to value your assets. So it’s a paper valuation, and they rubber stamp it. They are third party, so they are not involved, and they don’t have any objective, yeah, basically. So they go and they do a market study, and they ask a bunch of people, and they have their own data. And I know it’s not government, but it’s almost government, yeah. Okay, so they obviously value cash on hand,
45:32
and they would value bay land assets, and then on ongoing development. So those three So, well, they don’t value cash on land, because I just look at the bank accounts. I don’t ask them. But yeah, the land assets, undeveloped assets, and developed assets, yeah. Yeah, yeah, yeah. So yeah. But okay, so we do that, and on an almost monthly basis, we check all the assets we have, we look at the value of each one of them, and we add them up, and this makes basically the value of the fund, and thereby we divide by
46:09
how many shares outstanding, and we have the value of the shares, basically. So that’s how it goes. So I think that wraps up valuation quite clearly. I think another thing around the kind of financials is tax. So let’s talk about tax with the fund, and then we’ll talk about tax with investor. Yeah, just quickly before we wrap this up, we’re also using Mazars. So KJPP is the, so it’s more about compliance, yeah. KJPP is the valuer for assets, and then we use another company called Mazars . Very, very famous around the world.
46:48
So those guys are basically auditing our accounts, yeah. And they are stamping And they do that quarterly, yearly. Yeah. A yearly account. There’s both, there’s a light one and a less light one, a heavy one. So both quarterly and yearly. Okay. Yeah, so just touching on, we’ll look back on this. So tax. So yeah, tax for the fund and tax for the investor. How does that work? So there are many, I mean, it’s an It’s an indonesian company We pay our tax. We have corporate tax or a bunch of taxes, income tax, when we sell our land,
47:25
and so on and so forth. So I don’t think I’m going to go on that because that doesn’t have an impact on the investors. What does have an impact is when we funnel up the money of the dividends back up to Singapore, there’s a 10% withholding tax, which is by law we have to do that. So every investor, once they’re on board, they have access to a dashboard, which we’ve developed internally. And that dashboard gives you how much money they invested, like their start capital, and then a bunch of data
48:08
on the health of the fund, and how much money they basically made with their capital. So those data are net. So whatever they see on the dashboard is a net value. So they are already, all the taxes have been accounted for in there. But basically, for tax, regarding the funds tax, this is it. Now, regarding, so I’m asked this all the time. How much tax am I going to pay? Yeah, yeah, yeah. My answer is I don’t know. So every person in the world has a different tax exposure and tax situation. You can be two citizens of the same
48:55
country, and you pay different you have different tax exposure. So I don’t have an answer for those people, for anyone. This is something they need to ask their CPA or their tax consultants in their own country, because I cannot know what people’s situation is. So some countries are taxing more than others. I’m French, so I know a lot about that. American are double taxed, and some countries have tax treaties. If you’re in the buying no tax, Singapore Yeah, it’s really hard for us to give a straight answer to that,
49:41
because it really depends on everyone’s situation. It also depends if the investor is a person or a company. We have also like companies. I think like 20%, 30% of our investors are companies, whether private limited or LLCs or SIS or whatever. All right, then just going back on to share valuation, and a question we get asked a lot is dilution, and is the fund open or closed ended? Yeah. Okay, so just going back to the kind of valuation, and a question I get asked a lot also is dilution. How does that work?
50:20
Okay, so we basically, when a shareholder is onboarded, what we do is we emit new shares. Okay, so the fact that a new shareholder comes in doesn’t change the nav per share, the net asset value per share, the price of the share. What changes the price of the share is the activity of the fund, so the value of its assets, which is evaluated like we said by KGPP and so on. So whenever a new shareholder is in, the percentage that the other shareholders hold diminishes, because people, investors get diluted as
51:09
far as the percentage. However, the number of shares always stay the same, and the value of those shares increases. So the percentage, the fact that the percentage decreases is irrelevant, doesn’t matter, basically. Okay, so let’s link back then to onboarding, which you just mentioned. So how does onboarding process work, and why did you set it up in this way? Like who does it? Okay, let me explain exactly like the step by step. So when we onboard someone, so first of all, it was a handshake, real
51:50
or virtual, where we say, okay, we are interested, like an investor is interested in investing so many dollars in the fund, so let’s say $100,000, whatever. The next step, so we get some information from that shareholders, which is namely full name, address, email address, passport copy, and the currency that will send their capital injection. Once we have that, we feed that information to Sleek, So Sleek, S-L-E-E-K, is a company in Singapore, is basically our corporate agent. These are the guys that
52:28
have created our company, and that are doing our accounting in Singapore, doing all the onboarding, everything that’s corporate is done by them, including the KYC. So we feed that information to Sleek, Sleek then send an invitation email to the investors to do the KYC. So KYC AML, so for those who don’t know, KYC means know your client or customer, and AML is anti-money laundering. Basically, it’s a quick check that financial institutions do before onboarding someone. If you open a bank somewhere, a bank account somewhere,
53:17
then they will do the same process. Basically, what they ask is proof of domicile, and there’s a couple of things, source of wealth, these kind of things, which you need to prove. Once this is green lighted, it takes around one week. It can be a bit longer for corporate entities. If the investor is corporate, then it will take probably two, couple of weeks. If it’s simple, maybe they have more questions, or it adds up. But for a normal investor, like a person, an individual, it takes about anywhere
53:56
between three days to one week. Once this is done, sorry, at the same time, we have sent an investor agreement to the… The shareholder agreement to investors, sorry, which they sign. And once we have this, and then the KYC is green lighted, then we send a payment request to the fund’s bank. Once the funds are transferred, the day they hit the account, this is when the investment starts, their investment starts to work, we give them access to their dashboard. They can see the date, and the capital, and everything.
54:39
And we also send the proof of payments to to Sleek again, who sends it to Acra. Acra is the corporate arm of the Ministry of Finance in Singapore. And those are the guys that emit the share certificate. That process, that share certificate process, takes anywhere between one week and five weeks. I have zero control on that. This is Singapore government, and sometimes it takes… Sometimes it’s super fast. Sometimes it takes a couple of days, and sometimes it’s like three, four weeks. I have no idea why.
55:12
But a fairly easy onboarding process. It’s very, very smooth. So then, I’m a shareholder now. So we’ve gone through onboarding, done that. What kind of updates, regular, what kind of communications do I receive, regular updates? And then what is actually on that dashboard? What do I actually see as an investor? Basically, it says how much we invested, the net asset value per share, so the price of the share today, the price at which it was bought, when it was bought, how long more until exit. Sorry.
55:49
What else? The properties, updates. Yeah, all the properties. The monthly newsletter, I think you… Yeah, yeah. So let me get to that in a second. So all the properties, I mean, the assets of… I said portfolio, basically. I know for each property, the price it was purchased at, and the price, it’s valued at today. And then we have like little newsroom, sort of. So those are quite informal, actually. It’s me writing every couple of months, two, three months. I send some sort of updates on what’s
56:26
going on in Kedungu, about the fund, but also about Kedungu, the new developments, these kind of things. And yeah, that’s basically it. Also our social media always updated with. Our social media, daily updated. Updated, yeah. Oh yeah, and all the documents are also about the companies, the different companies are in the dashboard, so people can check them out. All right, so corporate social responsibility. what is The Kedungu Fund do for Kedungu? How’s it involved? I mean, it’s still an undeveloped little town, really.
56:59
A village, not a village, a little region. And I know Kedungu fund’s heavily engaged in what goes on there, trying to improve the community, improve everybody’s lives, the standard of living, etc. Maybe just touch on a couple of the projects and then go deeper into some others. First, I’d like to say that whatever we do, we’ll do it in a sustainable way. I’ve always believed that you can make money and be sustainable. Some people think it’s one of the others. Yeah, it cannot be used in the same sentence,
57:40
and I think it’s a huge mistake. And what do you mean by sustainable? What does sustainability mean to you? Green space, I mean, as far as construction is concerned, so green spaces, green energy, recycling, these kind of things. And also on an aesthetical standpoint, I mean, the cosmetic you know, it’s important. It has to be agreeable to the eye. The problem in Bali, unlike major cities, unlike most countries, most Western countries anyway, that I know, there’s no urban plan, or not that much anyway.
58:21
In France anyway, if you want to build something, you can only build something that matches with the rest of the buildings around, right? And tthey have laws, until the color of your blinds. I mean, some cities, you cannot put like a red blinds or blue blinds or whatever, because there’s a rule about that. It’s just so it stays harmonious. And in Bali, there’s nothing about that. You can, there are rules about the roof and the height, whatever, but you can do whatever you want. And so you have a very,
59:02
it’s not harmonious at all. And I think it’s a bit sad. It gives much more freedom to developers, of course, but on a general, I love this island. I’ve been living here like 30 years almost. Actually, 30 years. So I think it’s a bit sad that some developments are, I mean, some things are really ugly. Let’s just… It is a big pity, especially green spaces and that Bali needs, the traditional Bali needs aesthetic. Even if it’s got a modern edge or a modern take on it, I think it’s so important not to kind of lose that,
59:41
especially green spaces. Yeah, I think what would be beneficial to the island is to have, whenever you apply for, before the IMB and SLF, PBG, those building permit, it should go through a committee that agrees on not only the height and the size of the roof and these kind of like measures and data, but agrees on the general, stamped, the general project. I think it’s a pity that there’s no more oversight over the aesthetical point. Which I mean, then leads us back to this kind of thing, if it happens at all,
01:00:27
and generally doesn’t, needs to happen on a community level. So it’s how much sway or influence you can kind of muster on the community or the Banjar level to try and get buy-in to any kind of aesthetic that you want to follow through. And I think that’s a kind of thing that we’re trying to do or achieve, I think we with The Kedungu Fund is get as much buy-in with the community to at least do some offset on construction of the main road, green spaces, trees, you know, those kinds of things. I don’t know if I answered
01:00:57
your question previously. I forgot what it was. Okay, let’s move on. So yeah, I mean, yeah, there is a number of things that can be done. The problem is that because there’s no oversight, then no one does it, you know, does them. So there are things that as a group, you have more power to do them. So for example, in Pererenan, you know, I’m part of the Pererenan group, which I basically created with my friend Dodo years ago. And there’s 800 people in that group. Yeah, and we’ve done great things.
01:01:37
We’ve built the shortcuts, the Pererenan shortcuts where it didn’t exist until we built it. Yeah, we have a group of the early, the OG’s, the Pererenan OG’s, so we’re like 20, 30 people. I remember we were digging holes and laying concrete. Yeah, yeah, yeah. We actually did it with our own hands because we ran out of money at some point. But it was an adventure, it was funny. And that was a game changer for Pererenan. So those kinds of initiatives are so important. People don’t understand, I mean, they do understand,
01:02:09
but the importance of circulation of shortcuts. Shortcuts is the key to everything, basically. If you remove the Canggu shortcut, you remove the Pererenan shortcut, that is a hell hole. It’s already a hell hole, as far as traffic is concerned. But this is not a lot of transport. There’s no, you can’t, it will all just be dead gridlock from a train wreck. It wouldn’t have developed, actually. It would have, yeah. So yeah, shortcuts are very important. And I have a few ideas for Pererenan, for Kedungu as far as
01:02:44
shortcuts are concerned as well. But yeah, in Pererenan, we’ve planted like hundreds of trees. We’ve installed, we built a security box near the shortcut. And I keep paying every month the security team there. What have we done yet? Also, I mean, so many things, so many smaller things as well. There were donations to the community a while back. Plenty, yeah. Today, the Pererenan community is quite wealthy. So there’s no, I mean, the local community, there’s no need for much donations. But I mean, there’s poorer community
01:03:24
or more communities more in need, Kedungu, for instance. But yeah, so basically what we did here, I want to apply the same system in the same practices in Kedungu. But we have now the experience of years of managing this community here. So I know what not to do. So what I’m really, really interested in, in Kedungu is getting people together. And together as a community create things, build shortcuts, plant trees, make, we have ideas of wooden pathways in the rice field for a nice promenade. We have all bunch of things.
01:04:11
We recently installed electricity in the, I mean, lights, sorry, in the… Along the main road, yeah. Not only the main road, on some back roads as well. We put 80 lamp posts. So basically what I learned, a funny story, I didn’t know how it worked, but basically, government is not paying for the lights. And neither is PLN, PLN is the electric companies. So it’s up to the village to pay and they didn’t have the money. So we stepped in and we paid for that. Was 20,000 dollars each. But so PLN is giving the electricity,
01:04:54
but they’re not buying the little thing with the bulb. So that’s basically what we purchased. So now it’s been installed. It’s almost finished now. And so there is light on all, not all the main street because it’s different banjar, but on the Kedungu banjar, yeah. From the beach upwards to the school, basically. So there are some things I’m really, really interested in doing, is talking to the banjar. Something that would be amazing is to have, at least on the main streets, a rule where businesses, mainly businesses,
01:05:37
cannot build within the first two, three meters from the road. Yeah, because the rest of Bali, I think you build on top of the road. The law is 60 centimeters from the subak. The subak is the irrigation. Can’t do it. Next to the road, we have the road, we have the irrigation left and right. And so the law is 60 centimeters from the irrigation. Which barely gives you any space for any trees. Nothing. No greenery. Nothing. And then the sidewalk is built on top of that subak, yeah. So you have a one meter
01:06:10
sidewalk and then straight away, a one and a half meters, straight away, the buildings. If we had two, three meters, I mean, that would be the Champs-Élysées of Bali, yeah. Yeah, yeah, yeah. It would be amazing. It would be a part from every other neighborhood. Absolutely, absolutely. Can plant a bunch of trees. One thing very cool about Pererenan is you have to build, you have to plant, sorry, I forgot the ratio, but so many trees per are. So every 100 square meters, maybe like two trees or one or two trees,
01:06:39
but there have to be fruit trees. So the birds can come and pollinate other things, yeah. So to bring the birds back. So if you were to do that, so if you have birds, then you have more trees and more flowers because they pollinate other areas. It starts becoming like how Bali was and how it should be developed, you know. How it is in many other areas where it’s underdeveloped, yeah. But yeah, it could be great. As soon as it starts getting developed, those things just disappear in all these other places.
01:07:07
Then it just becomes a concrete jungle that nobody wants to live in. Because there’s no other sites. Because there’s no oversite. So I think the advantage with what we’re trying to do is that we’re getting in early, at least there’s a little bit of a sway because there’s some, you know, we’ve got a mass of properties that we own and control. We can influence the community from where it is now to where it should be in five years. And I think we have the potential to really grow, Kedungu into something that’s separate from.
01:07:33
And we’re not alone. We created, so we did in Kedungu what we did in Pererenan. And we created the Kedungu Lovers community. So it’s a WhatsApp group, basically. But we have, I think a hundred people now in there. And those are residents of Kedungu, as well as people that are not necessarily living there, but have vested interest in the area or want to move in or have some investments. Like myself, I don’t live in Kedungu yet. I will next year, but I’m not living there yet. And we do meetups every
01:08:06
month, month and a half. So everybody meets, we have some food and drink. And then we talk about projects, how we can help, what we can do. And then people meet people, you know, it’s interesting. So I think that’s like, as far as what we can do to kind of influence the community as a whole, but then also some of the land holdings that the Kedungu Fund has is specifically set aside for little park or at least just some jungle regrowth. So there’s some break of monotony of the concrete. Yeah. So I mean, one thing
01:08:40
that’s sadly missing in Bali, especially in the touristy areas is public gardens. So… There are none. There are none. Too few. Zero. Yeah, absolutely. So this is something we want to change. And so because we hold so many lands, some of the land that we are not developing will create gardens there for kids to come and play around in a safe way. So yeah, this is something that we plan to do very, very soon. Okay. So that’s the green spaces. I mean, there is a large local community in Kudungu. Yeah.
01:09:23
Traditionally farmers, they’ve been farmers for generations, so rice farmers. Yeah. And I suppose that community we’re also engaged with, what kind of activities are we doing to support that kind of growth, apart from the school, which we’ll touch on? Well, we’ve done a… I mean, we donate money here and there, you know, even to… I remember there was this kid in a hospital. We helped him, you know, family don’t have money. One thing we did a month ago, two months ago, we donated 201 kilos of clothes.
01:10:04
Yeah. We weighed them. So there was a bunch of Zara clothes and H&M clothes that we had somewhere from Kedungu Lover community, but a big bunch. The bulk was from from Baliprod actually,, actually. It was basically the whole Baliprod wardrobe. So all the clothes that we’ve accumulated over the years… From productions. From productions, yeah. From shoots. Very well-dressed local Kedungu residents Yeah. Very stylish. I mean, there was… We had 200… I mean, it’s all Zara and H&M, basically. So yeah, it’s pretty cool.
01:10:40
So we donated that. I think they were very happy about that, you know, because a lot of… Like in Pererenan, there’s no poor, but families in need, more politically. But in Kedungu, there are still some families that could need a bit of help. So we’re very happy to donate that to those families. Okay. And then I see here, there is some kind of pre-planning or it’s in discussion as far as like a Kedungu shortcut, like there is in Pererenan. How far along the road do you have? We are looking into it.
01:11:16
It’s very, very early stage. The idea would be to somehow connect the Kedungu street to the next one. So Pangkung Tibah, yeah. Where Joshua District is. I don’t know where we can connect it. We’re looking at the map with my partner Gede. We’re looking at the maps, still looking at the maps and inquiring with landowners. And there’s a river in the middle. So… Little bridge. Yeah, there’s a bridge, but also it needs a permit, yeah. Because you can’t… Yeah, so you need a government permit. If it’s only private
01:11:52
properties, it doesn’t matter. You just do your own access, but there’s a river in between. So we need to find the exact spots where we can buy some land from different owners and get the permit from the government. Yeah. But that would be a game changer because it’s a bit of a pain in the neck, you have to go up and down. It’s a big pain in the neck. Yeah. Okay, so yeah, I think that pretty much sums everything up. I think we’ve covered off everything that investors or potential investors ask us,
01:12:29
unless there’s something you want to kind of throw in there. There are many more things we could talk about, but I think for now it’s fine. But we’ll do more FAQ. Yeah, as in when they come up, I think it’s a good idea. Yeah. But if you want to get any questions, please just reach out to myself or my email address, I think in the description. So just drop me an email or WhatsApp. I’ll happily answer anything. And so will Omri. But yeah, thanks for the time. Thank you. Hope everybody learned something.
01:13:01
I really appreciate it. And yeah, I hope to be in touch soon. Yeah. Bye guys. Thank you.