News Archive : Japan Real Estate

Sunday, November 20, 2005

GM unit looks to sell Japan assets

International Herald Tribune <>

GM unit looks to sell Japan assets
By Kae Inoue and Takahiko Hyuga Bloomberg News

TOKYO General Motors Acceptance Corp., the lending unit of the world's largest carmaker, is in talks to sell two hotels in Japan to Lone Star Funds and Ishin Hotels Group to raise cash, four people involved in the sale said Thursday.

GMAC, as the unit is also called, is seeking at least ¥10 billion, or $83.8 million, for Renaissance Okinawa Resort and Coco Garden Resort Okinawa, said the people, declining to be named. The two hotels, located on Japan's southern-most island of Okinawa, have a combined 500 rooms.

GMAC's parent company, General Motors, posted a $1.6 billion third-quarter loss on Oct. 17 and had its junk-status debt ratings cut nine times this year by Fitch Ratings, Moody's Investors Service and Standard & Poor's. The Detroit-based carmaker, which owns stakes in Japan's Suzuki Motor and Isuzu Motors, last month sold 20.1 percent of Fuji Heavy Industries 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's Tokyo-based credit analyst Yasuhiro Matsumoto. "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 could not be reached to comment.

The Coco Garden Resort, with 102 rooms, opened in 1989. Renaissance Okinawa, run by HPD 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 for twin rooms and go up to ¥120,000 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 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 in September.

GM has been losing U.S. market share to Asian rivals such as Toyota Motor, and is struggling to control soaring retirement and health-care costs, in the midst of the longest stretch it's gone without a profit in 13 years.

Fitch, Moody's and S&P this year cut GM's credit ratings nine times to as low as four notches below investment grade. The credit rating of GMAC was cut four times in the same period.

Isuzu raises profit forecast

Isuzu Motors, a Japanese truckmaker about 8 percent owned by General Motors, raised its full-year profit forecast by 10 percent as it expects sales to increase helped by domestic demand.

The company forecast full-year net income of ¥55 billion compared with an earlier forecast of ¥50 billion, it said. Tokyo-based Isuzu boosted its sales forecast 2.6 percent to ¥1.58 trillion.

Isuzu expects full-year domestic unit sales to rise 18 percent as Japanese truck operators buy new models to meet stricter emission rules. The company says overseas unit sales will grow by 41 percent for the full year. The maker of Elf Trucks is expanding its business abroad as it tries to double its vehicle sales excluding pickup trucks to 300,000 units in the year ending March 2008 from about 150,000 now.

"It's inevitable for Isuzu and other Japanese truck companies to seek profit growth in overseas markets," as domestic demand for their vehicles is expected to fall in the long term, said Atsushi Kawai, an auto analyst at Mizuho Investors Securities, who has an "outperform" rating on the stock.

The higher forecast is still below last year's net income of ¥60 billion. Isuzu is increasing its research and development spending by 26 percent this fiscal year to ¥59 billion. It is expanding its operations overseas and trying to make its trucks less polluting to comply with stricter emissions standards at home.

Net income in the quarter ended Sept. 30 fell 35 percent to ¥13.1 billion as the company paid more for steel and other raw material costs.