UBS AG has been hired to arrange the sale of real estate loans extended by the Japanese unit of failed investment bank Lehman Brothers, four people familiar with the matter said. Swiss bank UBS will seek buyers for loans extended through Lehman Brothers Commercial Mortgage and Sunrise Finance, Tokyo-based real estate lending units, said the people, asking not to be identified because the process has not yet been completed.
UBS will start auctioning the loans by the end of next month and potential buyers will include funds focusing on distressed assets and banks, said the sources. Lehman had provided loans backed by property to developers for offices, commercial facilities, condominiums and hotels, according to Lehman's website. The amount had accumulated to more than 460 billion yen ($4.81 billion) by December 2006, according to the website, the latest figure available.
In addition, Lehman had tied up with Japanese real estate developer Daito Trust Construction Co to extend loans to individuals to help them purchase apartment buildings for rent. That amount exceeded 296 billion yen in March 2007, according to the website.
The loan sales come at a time when tighter lending has triggered a string of failures among Japanese property firms including that of Urban Corp and real estate trust New City Residence Investment Corp.
As Japan's economy slows more bankruptcies are expected, which could increase distressed assets and cause a price slide in property. Lehman Brother's Japan unit filed for court protection in September with 3.4 trillion yen debt, according to a bankruptcy research firm Teikoku Data Bank. Nomura Holdings Inc, which bought Lehman's operations in Asia, Europe and the Middle East, did not take any debt held by the failed US bank.
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