News Archive : Japan Real Estate

Thursday, November 17, 2005

GM in Talks to Sell 2 Okinawa Hotels to Lone Star, Ishin Hotels

GM in Talks to Sell 2 Okinawa Hotels to Lone Star, Ishin Hotels

Nov. 17 (Bloomberg) -- General Motors Corp., which last week posted a $1 billion quarterly loss, is in talks to sell two hotels in Japan to Lone Star Funds and Ishin Hotels Group Co. to raise cash, people involved in the sale said.

General Motors Acceptance Corp., the lending unit of the world's largest carmaker, is seeking at least 10 billion yen ($83.8 million) for Renaissance Okinawa Resort and Coco Garden Resort Okinawa, said the four people, declining to be named. The two hotels have a combined 500 rooms.

GM is selling assets to raise cash after its junk-status debt ratings were further cut by Fitch Ratings and Moody's Investors Services. The Detroit-based carmaker, which owns stakes in Japan's Suzuki Motor Corp. and Isuzu Motors Ltd., last month sold 20.1 percent of Fuji Heavy Industries Ltd. for $740 million.

``GM is quickly and carefully reassessing its assets and acting on what to sell and what to keep,'' said BNP Paribas Securities Japan Ltd.'s Tokyo-based credit analyst Yasuhiro Matsumoto, who doesn't rate GM's debt. ``It's essential for GM to raise cash to prevent its debt rating from dropping further.''

GMAC's New York-based spokeswoman Joanne Krell said the sale of the two Okinawa hotels may be completed by the end of the year, declining to give details. Ishin Hotels is a real estate company set up by financier George Soros and closely held U.S. hotel operator Westmont Hospitality Group. Soros couldn't be reached to comment.

GM shares, which dropped 44 percent this year, fell 2.2 percent to $22.12 at 11:33 a.m. in New York. GMAC's shares aren't publicly traded.

Okinawa Hotels

The Coco Garden Resort, with 102 rooms, opened in 1989. Renaissance Okinawa, run by HPD Corp. based in western Japan's Osaka, is a 16-year-old hotel with 392 rooms. Located on the northwestern corner of Okinawa, the hotel is 15 minutes drive from the island's Kadena U.S. Air Force Base and has a private beach and hot springs. Room rates begin from 15,000 yen for twin rooms and go up to 120,000 yen for suites at the hotel.

``Whoever the owner is doesn't change our daily operation,'' said Naoki Nakayama, chief manager of both hotels in Okinawa, declining to elaborate. ``We would rather welcome it if new owner improves the facility and service.''

GM's Chief Executive Rick Wagoner is trying to sell off some of the $482 billion of assets the carmaker owned at the end of 2004, including majority of GMAC to raise money, return the finance unit's credit rating to investment grade and cut borrowing costs. GMAC's borrowing costs rose to 4.74 percent of total debt this year, from 3.69 percent last year.

``In general, we are always considering the timing for a sale to exit from our investment,'' said Noboru Fujimori, real estate vice president of GMAC Commercial Holding Asia, the finance company's Japan-based business unit.

Overseas investors such as Lone Star and Goldman Sachs Group Inc. have been buying Japanese property as the nation rides its longest economic expansion in eight years. Lone Star, a Dallas- based investor of real estate and bad loans, owns about 92 golf courses in Japan, and agreed to buy Loisir Hotel Okinawa Ltd. in September.

Japan Affiliates

GM last month ended a six-year investment in Fuji Heavy, selling its stake in the maker of Subaru cars to Toyota Motor Corp. and on the open market.

The investment in Tokyo-based Fuji Heavy, first made in 1999, was wound down after the two companies scrapped a plan to share a marketing network in the U.S. and China. GM's Saab unit and Fuji Heavy also canceled a project to develop a vehicle.

The automakers ``weren't able to generate the synergies we expected'' because of differences in production capacity and lack of designs that complemented each other, Fuji Heavy President Kyoji Takenaka said on Oct. 5.

Takenaka was told by Wagoner during a July visit to GM's head office in Detroit that the U.S. carmaker planned to sell Fuji Heavy shares.

Excluding Suzuki, Isuzu

GM's asset sales may exclude its stakes in Suzuki and Isuzu because the world's biggest automaker gets technology from the two Japanese companies, said Credit Suisse First Boston's Tokyo- based analyst Koji Endo.

``GM will probably hold on to its stakes in Suzuki and Isuzu because their business ties are working out well and can help GM grow in the future,'' he said. ``GM probably won't give up what can lead to its future growth for cash.''

GM bought 34.2 percent of Isuzu, Japan's largest truck maker, in 1971 and pared the stake to 7.89 percent. The two companies produce trucks in Thailand, diesel engines in the U.S. and Poland.

Isuzu President Yoshinori Ida on May 23 said he wants GM to increase its stake in Isuzu to advance the alliance.

GM in 1981 bought 5.3 percent of Suzuki, raising its stake to 10 percent in 1998 and 20 percent in 2000.

GM's factory in Argentina builds Suzuki's vehicles, while Suzuki's Kosai factory in Shizuoka builds their joint product Chevrolet Cruze compact car sold in Japan.

To contact the reporters on this story:
Kae Inoue in Tokyo at kinoue@bloomberg.net;
Takahiko Hyuga in Tokyo at thyuga@bloomberg.net

Last Updated: November 16, 2005 11:43 EST