Modernland Realty may sell projects

JAKARTA (JP): Publicly listed Modernland Realty of the Modern Group is considering selling some of its property projects to foreign investors to pay its offshore debts, a company executive said yesterday.

Commissioner A.F. Hasan said that some foreign investors from Singapore and Japan had expressed interest in buying some of the projects, especially those located in the greater Jakarta area.

He said the negotiations with the Singaporean and Japanese investors began in the middle of last year and were still ongoing.

"We have not reached any agreement yet as talks are still in a preliminary stage."

Selling the company's property projects was one of several alternatives in tackling its debts, he said, adding that other options included the conversion of debt into equity.

"The company is working out the best possible options to solve its huge debts," he said after the company's general shareholders meeting.

Hasan said the company's debts amounted to Rp 972.13 billion (US$114 million at the current rate) as of the end of 1997, including short-term debts amounting to Rp 615.93 billion and long-term debt of Rp 356.2 billion.

"Of the total debt, around US$45.7 million is denominated in American dollars," he said declining to mention the maturity date of the overseas debts.

Modernland Realty developed the Kotamodern housing complex in Cipondoh, Tangerang, West Java; Bukitmodern in Pondok Cabe, Tangerang; Padang Gold Modern in Cipondoh and Tamanmodern in Cakung, East Jakarta.

Hasan said the company had ceased work on its newest property project, ModernJakarta in Cakung, East Jakarta, for financial reasons.

The sharp depreciation of the rupiah against the American dollar has caused a sharp increase in construction costs.

The construction of ModernJakarta, which was scheduled to be launched in August 1997, was estimated to cost between Rp 30 billion and Rp 40 billion last year.

"But the rupiah's sharp plunge against the American dollar has caused the total investment to rise sharply in rupiah terms," he said.

The rupiah fell to its lowest level of 17,000 against the U.S. dollar in January this year from 2,450 before the crisis began in July. The rupiah closed at around 8,600 to the greenback yesterday.

He said the property sector would remain gloomy this year due to a decline in people's purchasing power and higher interest rates.

"Modernland Realty does not have any projection for this year," he said. The company recorded a net profit of Rp 29 million in 1997, down sharply from Rp 14.16 billion in 1996.

Hasan said the company booked a total operating income of Rp 23.4 billion in 1997, down 43 percent from Rp 41.12 billion in 1996. (aly)