$2 Million BBX Trade Dollars Used To Purchase $8.3 Million Resort

Australia’s BBX Holding Ltd. (BBX) announced their successfully completed sale of The Apollo Country Resort at Wamberal, New South Wales. The hotel, restaurant, and convention center is located on five prime acres only minutes from Crown Plaza Terrigal Beach.

The contract price of $8.3 million included $2 million BBX trade dollars, with the balance paid in cash. The resulting transaction fees of $440,000 for a single transaction is an Australian record, according to their news release. The company completed $10 million in real estate sales in February.

BBX has $83 million in real estate offerings for members. Additionally, it  plans an IPO (initial public offering) of the BBX Property Investment Fund Ltd., which has $130 million in Australian and New Zealand real estate

Barter gains currency as credit dries up

SOME 30,000 Australian small to medium-sized businesses are expected to put through at least $700 million in cashless trading this year.

They are among more than 80,000 enterprises around the world that are likely to do some $2 billion in transactions this year.

Businesses like the Adelaide-based limousine service operator BK Holdings, which runs Renaissance Limousines and Benson Limousines, will use barter instead of cash to invest in their operations.

The owner of the business, Bill Magoulianos, is a pioneer in the use of Australia's barter system.

Speaking to The Weekend Australian, he says using barter is very much part of his business culture. His was the second company to sign up with the listed BBX barter exchange when it was launched in 1993.

"Credit is tight and cash is scarce today. We have are upcoming expenses like replacing uniform for our office staff and drivers. We can either postpone the purchase to later in the year or put it on BBX," he says.

"We've decided to purchase the new uniform with trade dollars now rather than wait until we have the cash later on."

In barter-speak, a trade dollar is equivalent to a physical dollar and it is treated by the Australian Taxation Office as such for tax purposes.

"By making the purchase now, it helps the uniform supplier and, hopefully, he will use the trade credit to buy my limousine service," he adds.

In their modest ways, Magoulianos says, "we will both help to create credit in the system and stimulate the economy".

BBX and the much bigger Bartercard, which came into being out of the early 1990s recession, are seeing a sharp increase in the number of new members and transactions this year.

BBX founder and chief executive Michael Touma says: "We've seen a huge lift in demand for our services in the last two quarters. We think this is in response to the tightening of credit.

"Our members are relying more on barter to trade out of the recession."

Trevor Dietz, managing director of Bartercard Australia, expects 2009 to be "an outstanding" year. "We signed up 230 new businesses in December -- this is double our monthly average," Dietz says.

BBX seeks to widen its reach through 11 new franchises year across the continent while Bartercard will add 10 new franchises this year.

Touma says: "We've been in this business for 15 years and have seen two recessions.

"This is our third. Our experience is the use of barter expands during a recession."

In the first half of 2008-09, BBX total turnover was about $90million, against $75 million in the corresponding half in 2007.

"We expect to do well over $100 million in the second half this year," he says.

Bartercard's transactions totalled $42 million in December, up from $33 million in November -- traditionally its best trading month of the year.

This year Bartercard will write at least $500 million in deals in Australia, boosting the Bartercard group globally to $2 billion.

"We're seeing a groundswell of members wanting to use trade dollars and preserve hard cash," Dietz says.

In the past, members tended to use their trade dollars on discretionary things such as entertainment (restaurants and holidays), but increasingly they are using it to manage their business.

He says people are discovering that barter is by far the best medium to fight a recession when cash dries up, sales drop and stockand inventory build up.

"We have members who are using the system to manage their stock inventories. Instead of having to shift them at deep discounts, these members are accepting trade dollars for the transactions," Dietz says.

BBX and Bartercard act as central registries for services and merchandise available on barter for their members.

In recent years, both have branched into offering specialist services, including real estate, financing and insurance.

"We are getting 50 new applications a month from members wanting to extend their overdraft facilities from the average 5000 to 10,000 trade dollars," Touma says.

About 20 per cent of BBX's 6000 members run overdraft facilities of up to 100,000 trade dollars.

The exchanges also act as a third party record keeper, providing monthly statements to members -- much like credit card companies -- with complete record of transactions during the month.

Members include these statements in their BAS (business activity statements) for the ATO.

Magoulianos says he treats all his barter transactions -- which represent eight per cent of his business turnover -- as cash.

Touma says the ATO, which did an audit in 2002, was satisfied with the level of compliance.

Tax authorities in overseas jurisdictions where Bartercard operates also treat their barter transactions as cash payments, says Bartercard founder Wayne Sharpe, now chairman and chief executive of Bartercard International.

Both companies have invested millions to develop their software and technology platforms to handle member transactions.

Bartercard expanded overseas more than a decade ago and now has 75,000 members in Asia, the Middle East and Britain.

Sharpe says domestic trades dominate in most countries, but increasingly there are crossborder transactions, especially in real estate.

Another growth area is imports and exports, as manufacturers in China and elsewhere in Asia look for new ways to sell their products overseas. "New Zealand is our poster child. It did $NZ25 million ($20 million) in December and is targeting to reach $NZ500 million this year," Sharpe says.

"The UK is our fastest growing market, but it is coming from a low base." . It does pound stg. 7-pound stg. 8 million ($15-$17 million) a month.

But Sharpe expects Europe to be its largest market eventually.

"There are a billion people on the Continent, and even if we make to make a market penetration of two per cent, our membership will be many times larger than in Australia," he says.

After two years of vetting franchisees and putting its software technology in place, BBX has franchised its systems to operators in India, New Zealand and Costa Rico.

They are due to start trading shortly.

Says Touma: "We have taken application from China, Japan and South Korea."

Sharpe, who started Bartercard on the Gold Coast in 1991, says there has been a resurgence of interest in Asia.

After delivering a speech to a conference in Singapore on innovations in banking late last year, Sharpe has heard from banks in Hong Kong, Indonesia, Romania and South Africa.

He says the banks are exploring whether they can issue Bartercard and become involved with its trading system to generate incremental business for them.

In difficult economic times, companies, be they large or small, all have to think outside the square if they are to survive, says Sharpe.

http://www.theaustralian.com.au/news/executive-lifestyle/barter-gains-currency/story-e6frga06-1111118649290