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INDONESIA's aggressive Lippo Group will use Singapore and Shanghai as its headquarters instead of Hong Kong as it scours the region for more property and retail deals, according to its chief executive officer.

Lippo CEO James Riady told BT in a recent interview that the group, which has entrenched itself as the largest property and retail group in Indonesia, can be a major player in the region in the next few years.

'We have the size, comparative advantage and experience in both these two sectors to compete and grow,' he said. 'We are now comfortable investing anywhere in Asia and beyond,' he added.

The Indonesian group has moved away from the financial sector following the near collapse of its crown jewel at the height of the regional financial crisis in 1998. The family subsequently sold off Lippo Bank to Malaysian government investment arm Khazanah Nasional after a recapitalisation exercise.

The transformation of Lippo, founded by patriarch Mochtar Riady in the mid 1980s, into a regional property and retail heavyweight is already evident.

The transformation of Lippo, founded by patriarch Mochtar Riady in the mid-1980s, is already evident.

Lippo has pumped nearly S$2 billion into Singapore in less than two years, snapping up prime residential and commercial real estate, and the controlling stake in retail giant Robinsons.

Lippo recently partnered Malaysian tycoon Ananda Krishnan to buy a 55 per cent stake in Singapore-listed hotel and property company Overseas Union Enterprise from United Overseas Bank for about $1.8 billion after the general offer is completed.

It does not intend to stop just yet.

In China, under Lippo China Resources, the group is looking to acquire more property assets and possibly a retail outfit in Hongkong, Macau and southern China.

Its current investments in greater China are worth about US$1.7 billion.

To fund its expansion drive, the group is now building a war chest to possibly acquire more assets in Singapore as well as China.

Sources told BT the group will launch two real estate investment trusts (Reits) by the end of the year with combined assets worth well over US$1 billion to fund its expansion drive.

The Reits, one for its retail assets in Indonesia, and the other possibly for its China assets, are most likely to be listed in Indonesia.

Apart from its own cash reserves, estimated to be around US$1.4 billion, Lippo is also working with several international investment banks, including UBS, Merrill Lynch and BNP Paribas to raise funds from the capital markets.

The group is also rumoured to be working on a Reit to be launched in Singapore sometime this year which could incorporate the OUE assets plus its Indonesian healthcare and hospitality assets.

It expanded its retail operations outside Indonesia for the first time last month when it paid OCBC $203 million for a 29.9 per cent stake in up-market retailer Robinson.

'Lippo sees Singapore as a major investment destination as it grows its business outside Indonesia primarily because it has confidence in the government of PM Lee Hsien Loong and because of the potential growth in its property market,' noted a source close to the Riady family.

He noted that the funds raised will also be used to fuel the group's expansion in Indonesia where it plans to grow its retail business through Jakarta-listed Matahari by investing US$100 million a year over five years.

On the property side, Lippo Karawaci, the group's listed property arm, is continuing to build new townships in secondary cities across Java.

Matahari currently has an annual turnover of US$1.2 billion and is growing by 25 per cent a year.

Analysts predict that the company will grow to between US$8 billion and US$10 billion in 10 years' time.

Lippo Karawaci, which has a market capitalisation of US$600 million, is estimated to own and manage property assets of nearly US$1.3 billion within Indonesia and about US$1 billion outside the country.

The Lippo group is one of Indonesia's largest conglomerates but unlike other large conglomerates such as the Salim Group and Sinar Mas, it emerged relatively unscathed from the Asian financial crisis.

It, therefore, invested heavily in Indonesia post-crisis while other conglomerates consolidated their operations.

The group has also formed a partnership with Malaysia's Mr Krishnan to launch satellite television in Indonesia under Astro as well as enter the country's telecommunications sector with Maxis.

The Riady family also operate the country's largest private university, Universitas Pelita Harapan (UPH) and Sekolah Pelita Harapan (SPH), a private primary and secondary school. They also built and run Sekolah Lentera Harapan in villages across the country to provide education for the needy.