Indonesians Selling Off Southland Properties

Hoping to cash in on the red-hot U.S. economy and reduce their debts back home, Indonesian tycoons are quietly selling off Southern California assets, including a hotel, downtown property and San Marino-based East-West Bank.

Because of the relatively small amount of Southeast Asian investment in California, this retreat will not have the same impact on the local economy as the exodus of Japanese investors did in the early 1990s, according to real estate and banking sources.

But analysts expect sales by Asian investors to pick up momentum as overextended companies and banks come under increasing pressure to improve their credit picture at home. Last month, Japanese giant Sumitomo Bank sold its U.S. subsidiary to Salt Lake City-based Zions Bancorporation for $546 million.

“The reason it’s happening is not so much that [Asian banks] got into trouble in the United States, but because their governments want them to pull their capital back home,” said Bert Ely, a banking consultant based in Alexandria, Va.

The recent flurry of activity involves investors from Indonesia, which has suffered a 70% devaluation of its currency, the rupiah, and a stock market collapse. On Wednesday, the government signed a new agreement with the International Monetary Fund designed to get its crippled economy back on track.

East-West Bank, a U.S. commercial bank with $1.7 billion in assets, is owned by Sjamsul Nursalim, head of Gajah Tunggal Group, one of the giant Indonesian conglomerates hit hard by the meltdown of the Indonesian economy.

East-West’s likely buyer is a Singapore financial powerhouse, DBS Bank, according to banking sources. Picking up East-West would give DBS a major inroad into the Chinese ethnic banking community in the U.S.

Sinar Mas Group, Indonesia’s second-largest conglomerate, is selling a six-property California portfolio valued at $250 million to a U.S. firm, according to local real estate sources. Those properties include the Pasadena Hilton and the 801 Figueroa St. office building in downtown Los Angeles.

A spokesman for Sinar Mas Group could not be reached for a comment.

Not everyone has put out a “for sale” sign. One local consultant said his Indonesian clients are holding on to their U.S. investments, or even expanding their stakes here, because the United States is viewed as a safe haven during a time of uncertainty back home.

Those seeking quick profits, however, see good reason to send money back to Asia. Richard Alter, managing director of Los Angeles-based Financial Capital Investment Co., said some Asian investors believe the U.S. real estate market, with the exception of California, is near its peak.

They think it’s time to sell their U.S. properties and invest in countries where the real estate prices are plunging.

“They are looking at opportunities in places like Bangkok, where prices have gone down 80% in the last 10 months,” said Alter, who represents a group of Chinese investors.

Some Asian investors have little choice but to sell their U.S. assets because they face severe financial pressures back home, where bank credit has virtually disappeared and the cost of repaying dollar-denominated debts has skyrocketed.

But unlike their Japanese counterparts, who suffered heavy losses when they unloaded their overpriced properties, these investors are usually making money because they bought low and are selling during an upswing in the California economy.

“Although they’re having to sell because of perceived problems in the Orient, they’re not selling at a loss,” said one Los Angeles broker. “They’re making huge amounts of money doing so.”

Nursalim, whose U.S. assets include East-West Bank and the much smaller United Pacific Bank, is feeling the squeeze at home. Nursalim’s vast Indonesian business empire includes Bank Dagang Nasional Indonesia (BDNI), the country’s third-largest bank.

Last weekend, BDNI, reportedly weighed down by huge dollar-denominated loans, was among seven major banks taken over by Indonesia’s new bank restructuring agency.

The sale of East-West would give Nursalim a badly needed infusion of hard currency. East-West showed strong growth in the first quarter of this year, thanks to continued expansion of the California economy, according to bank President Dominic Ng.

Ng said he could not comment on reports that DBS Bank was buying East-West Bank. But he acknowledged that many Indonesian investors are looking for good opportunities to raise funds to repatriate back home.

If East-West is sold, it would not have an impact on the bank’s operations or its employees, Ng said.

“If they [the Nursalim family] look into offers from anybody, their philosophy has been to keep the East-West philosophy and the management intact,” he said.

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Foreign Assets

Japan holds the majority of foreign bank assets in California, with about 72% of the $116.2 billion total as of June 1997. Even so, foreign institutions account for only 28% of total bank holdings in the state. Asian bank asset in California by country, in billions:

Japan: 84.10

South Korea: 4.10

Taiwan: 3.11

Hong Kong: 1.04

Singapore: .81

Indonesia: 0.60

China: 0.35 Thailand: 0.27

Philippines: 0.25

Sources: California Trade & Commission Agency, Federal Reserve System

Researched by JENNIFER OLDHAM / Los Angeles Times