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)