NORTHERN MARIANA ISLANDS PROPERTY PRICES PLUMMET

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By Lindablue F. Romero

SAIPAN, Northern Mariana Islands (December 9, 1998 - The Saipan Tribune)---Prices of real estate property on the islands have plummeted by as much as 90 percent as Asia's economic problems force foreign investors to abandon their land leases and flee the Northern Marianas after filing bankruptcies.

Amid the plunge in prices of prime real estate property since Asia's financial crisis began in July 1997, many landowners who depend on land leases as their main source of income have entered into desperate deals.

"While it has become more and more difficult to sell properties, I have also helped people get good deals through liquidation sales. There are just so many desperate sales out there," said Tim Goodwin, owner of Pacific Rim International, a real estate company.

Goodwin, who has been involved in the real estate business since the '80s, recalls that not a single day passes without his office getting a call from businessmen looking for commercial spaces to lease. Now, he's lucky to get three calls a week for inquiries

"We are all struggling to survive and stay afloat since very few properties are changing hands right now," said Roy Alexander, President of Alexander Realty and Development.

According to Alexander, the few remaining clients he has in real estate are factory owners who are in search for land to lease for expansion of their businesses. In fact, the last big deal he closed was a multi-million dollar land lease to a garment factory in 1997.

"I used to close two or three big deals a year and that helps us get through . But now fewer and fewer deals are harder to come by," said Alexander.

Alexander's Korean and Japanese clients who paid a premium for their property are now selling these for one-fourth of their original price. A 5,000 sq.m. property on Beach Road, which was bought by an investor for $1,200 per sq.m., has asked him to sell it for $300 per sq.m.

"Time is against those who want to liquidate their assets, including their leaseholds, and could not find any buyer because of the crisis because they have debts to pay," said Alexander. "The main reason is because people are living on a paycheck."

It may take the businessman who is holding a 50-year lease a long time to sell the property. In the meantime, the clock is ticking and nobody knows when exactly he will be able to sell it and get back at least a small amount of what he had invested," said Alexander.

Yuuki Togawa, President of SNE Co., Ltd., said Japanese who were considering retiring on the island are now reluctant to acquire properties here because the recession in Japan saw the prices of real estate go to an all time low. For example, a Japanese can now buy property for $200,000 in Tokyo and other areas.

For several years now, Togawa said he has not sold any property on the island and has concentrated in looking for businessmen who would want to lease apartments owned by SNE.

He said his company has dropped by as much as 15 percent the rentals of their apartments located in Garapan and As Perdido to be able to compete in the business. "We have no choice because there are cheaper apartments out there," said Togawa.

As far as Tony Glad, President of Glad's Saipan, is concerned, the real estate business is dead.

Glad, who has been in the business for the last nine years, said the last deal which he closed was in November 1997. "I have not earned a single dollar from real estate since then. I even convinced some of my Arab friends to buy properties here, but I have not been successful," he said.

Bargain Deals

A beach front property which used to sell for $800 per sq.m. does not even have a buyer although the owner has dropped the price to $200 per sq.m. Goodwin said a Korean company which bought a property on Saipan for $100 per sq. m. is now asking him to sell it for $25 per sq.m.

On the island-municipality of Rota, a property which used to cost $100 per sq.m. cannot even get a buyer for $10 per sq.m.

"Nobody wants to sell at a loss. But you have to understand that these businessmen borrowed money in Japan and Korea, and now they have to sell these properties at any cost to pay the lending institutions," said Goodwin.

As a result of the plunge in the tourism economy, Alexander said he was asked to handle the sale of a dozen small hotels on the island, since the owners have incurred huge debts back in their own countries.

Local property owners on Rota have dropped the prices of property from $20 per sq.m. to $1 dollar and they still cannot find any buyer, said Alexander.

Togawa, who has been shuttling from Tokyo to Saipan to close some deals for the past 12 years now, said he could not even find a buyer for a property which he bought in 1993 for $1 million even if he is selling it for half its price.

When the Asian crisis began in the summer of 1997, Togawa said he was approached by many hotel owners, mostly Koreans, to help him sell their properties.

"I have been in the business for a long time and this is the first time that I experienced this situation," said Togawa.

At least some 20 Japanese businessmen who are friends of Togawa have left the island in search for other places where they can invest.

On the island-municipality of Tinian, Glad said he was asked to sell a property beside the Tinian Dynasty Hotel & Casino for $4 dollars per sq.m. However, since the hotel-casino complex is still struggling to survive, Glad said he could not convince a single buyer to invest on Tinian.

One of the deals which Goodwin recently closed was a condominium originally purchased for $275,000 in 1991 and sold for $90,000.

Alexander, on the other hand, invested on a property in Mt. Tagpouchao for $3 per sq.m. when it used to sell at $50 per sq.m. to $70 per sq.m.

For additional reports from The Saipan Tribune, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/The Saipan Tribune.

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