GM nets $8.8bn stake in commercial real estate Unit

General Motors Corp.'s latest move in it's efforts to raise cash came on Thursday as it sold a 78 percent stake in its commercial real estate business to private investors for $ 1.5 billion in cash and the repayment of about $ 7.3 billion intercompany loans.

The company seeks to repair its finances and pay for employee buyouts after clinching this deal to sell majority of its commercial mortgage business to the three private equity firms. The deal is hoped to go some way towards restoring the financial health of the ailing automaker which earlier this week announced an early retirement package that will cost billions of dollars but should help shore up the company in the long term.

The consortium of three investors include Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC and Goldman Sachs Capital Partners.The new entity will be called Capmark Financial Group Inc.While the significance of this deal can't be ruled out, the commercialreal estate business is only a small part of GMAC, which has vast operations in the residential property and car financing industry. Analysts hope it will be a precursor to a bigger deal to sell off a majority stake in GMAC itself, something that could raise bn-bn for the company."This transaction means there's another obstacle out of the way in the sale of GMAC" and could speed up a deal, said Burnham Securities analyst David Healy.Eric Feldstein,chairman of GMAC, said, "We are expecting strong returns on the significant investment that GMAC will retain in this business. At the same time, this transaction will enable GMAC to redeploy a significant amount of capital - almost bn - to other critical areas of our business."

The deal comes as G.M. is also negotiating with potential buyers the sale of a controlling interest in the rest of G.M.A.C. for an estimated $ 11 billion. GM wants to sell off a majority stake in GMAC to help raise cash to pay for the massive restructuring costs. That effort is taking longer than some analysts had initially expected,in part because G.M. wants to retain a large minority interest and some measure of control over the financing business. Analysts believe that G.M. would be better off keeping G.M.A.C.- "golden goose that is driving the profits" because the unit, which makes auto and home loans, has been a critical source of earnings as the auto business has lost market share to foreign rivals like Toyota.

Two groups have bid on GMAC, one led by Kohlberg Kravis and another by Cerberus Capital Management LP. GM says only that negotiations are continuing. Selling a majority stake in GMAC would accomplish twofold benefits for GM. First, it could allow GMAC to obtain an investment-grade credit rating, lowering its borrowing cost as GMAC is now rated at "junk" by the three main rating agencies, dragged down by the woes at parent GM. Second, the sale would generate as much as billion for GM, which is building cash to fund massive restructuring costs. GM recently sold its 20 percent stake in Suzuki Motor corp., raising $ 2 billion.

GM shares were up 2 cents at $ 22.03 on the New York Stock Exchange. Bond traders said the deal was widely expected and had no impact on GM's bond price. The deal came the day after GM,which is struggling with mounting losses and foreign competition, said it and former subsidiary Delphi Corp. will offer buyouts to more than 125,000 factory workers as it seeks to slim it's operations.