Balindo holds first property auction

Balindo holds first property auction

JAKARTA (JP): Private auction company PT Balai Lelang
Indonesia (Balindo) held its first property auction Friday,
selling off houses, office buildings and land worth over Rp 20
billion (US$2.2 million).

Balindo's managing director G. Gunawan said the company would
be holding further auctions on a biweekly basis, in cooperation
with international auction company Ray White.

Selling company or private assets through auction should serve
as an alternative in liquidation and asset sales, especially amid
the economic crisis, because it is a fast and easy process and
there is assurance of satisfactory results, Gunawan said.

He said an auction also ensured transparent, effective and
efficient transactions.

"Moreover, buyers will have permanent and safe legal certainty
because for every transaction, the auction officer will issue an
auctioning report that can be used as the basis for the
registration of transfer of ownership," Gunawan said.

He added that auctions in Indonesia had not yet gained much
popularity, but now seemed to be the right moment to promote the
use of private auctions as a way to obtain liquidity quickly,
efficiently and safely.

Statistics in Australia, for instance, show that 80 percent of
Australian properties offered through auction companies achieve a
90 percent selling success, he said.

Gunawan said auctions, especially privately organized ones,
would eventually develop rapidly.

Private auction companies began to operate in Indonesia after
the government deregulated the auction business in 1996. Balindo
is one of five private auction companies operating in the
country.

Before the deregulation, auctions could be held only by the
State Auction Office.

Hotels

Meanwhile, property consultant First Pacific Davies Indonesia
said five-star and diamond-class hotels were surviving the
economics crisis better than three and four-star hotels.

The company said in its latest weekly report that luxury
hotels could survive because their market segments were, to some
degree, insulated from the crisis.

Besides, the management of five-star and diamond hotels had
managed to maintain better cash flows through special offers and
packages.

First Pacific Davies said only 45 percent of the total revenue
of a five-star or diamond hotel was generated from rooms, while
the remaining revenue came from food and beverages, laundry
services, business centers, telephone and other facilities.

"With five profitable years prior to the crisis, we have found
that such hotels can survive for up to four years in the crisis
even if their occupancy rate falls to between 40 and 45 percent,"
the company said.

As three and four-star hotels do not have as extensive a range
of facilities as luxury hotels, they are more reliant on room
revenue and consequently suffer more as the market continues to
drop, it said.

It added that the percentage of occupancy rates and room
revenue in a hotel's total revenue, plus bank interest rates,
would have an influence on a bank's investment decision. (gis)