General Motors Acceptance Corp, the financial unit of the world's biggest carmaker, plans to increase its Japan-based staff by a quarter as it seeks to boost real-estate lending in the country. GMAC also buys and collects non-performing loans and plans to expand that business into Taiwan.
"We may open an office in Taipei to manage a portfolio of bad loans if we are successful with a bid," said Hirai, who has visited Taiwan 10 times this year. "The non-performing loan transaction sizes in Taiwan are bigger than those in Japan."
Taiwan will sell as much as NT$350 billion (US$3 billion) of bad loans this year, UBS Warburg estimates.
This year, GMAC lost out at two loan auctions in Taiwan. It plans to bid at others. Taiwan President Chen Shui-bian (陳水扁), the first non-Nationalist incumbent, is trying to clean up banks that let bad loans swell for five decades.
The average price paid for bad loans in Taiwan is 20 to 25 percent of their face value, Hirai said. In Japan, loans cost as little as 6 percent of the face value because they are harder to retrieve and carry less collateral.
GMAC, which has lent US$20 billion globally, will expand its staff in Tokyo and Osaka to 250 from 200, said Mikihisa Hirai, executive managing director at GMAC Commercial Holding Asia.
Financing companies are expanding in Japan to help fill a gap left by local banks, which haven't increased lending for six years because of mounting bad loans. GMAC plans to increase non-recourse lending, which charges more interest than regular loans because the lender has no claim on the borrower's assets.
"A lot of Japanese companies are selling real-estate to pare debt and because it's not their core business," Hirai said in an interview. "Real-estate buyers want to borrow money with no recourse to their assets."
GMAC can charge as much as 2.75 percentage points more for non-recourse property loans than for regular lending, Hirai said.
The unit also plans to increase lending to consumer finance companies that are able to charge even higher interest rates.
Average investment returns on Japanese property are attractive, prompting more demand for loans. Real-estate yields, or revenue from rent minus expenses divided by the cost of property, return about 8 percent per year, Hirai said.
"Real estate is a big portion of any corporate balance sheet in Japan," said Kurt Roeloffs, the head of real-estate investment banking in Asia at Deutsche Bank AG.
Property investors are focusing on Tokyo and surrounding areas, where office vacancy rates are the lowest in the country.
Central Tokyo office vacancies were 4.9 percent in the second quarter, compared with 10 percent in Osaka and 13.1 percent in Fukuoka, according to Ikoma CB Richard Ellis.
"The acquisition business is getting tougher and tougher in Japan," said Hirai, who wouldn't disclose financial details on the company's Asian business.
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