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When Sanwa Bank sold off Financial Square last summer, it marked an about-face for Japanese investors in New York real estate. Not only had the bank foreclosed on a $340 million loan to developer Howard Ronson, but it then sold the property for $130 million to a German group.
That deal marked the end of denial by Japanese banks and trading companies, the biggest investors in the city's office towers and hotels in the 1980s. After years of refusing to deal with their problem real-estate loans in in New York, big Japanese lenders such as Sumitomo, Sanwa and Fuji are now moving to clear their books of these soured investments.
Since the transaction at Financial Square, at least a half-dozen other Japanese-financed mortgages or Japanese-owned buildings have been sold, while 20 or more have been quietly renegotiated. The pace of those workouts-particularly in cases in which the troubled mortgage is held by a Japanese bank but the property is controlled by an American developer--is expected to pick up this year.
A number of forces are pushing Japanese banks to act. For one, a change in policy from Tokyo's Ministry of Finance is providing incentives for banks to resolve their problems rather than penalizing them for recognizing their difficulties. For another, the return of...