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Up to $2 Billion : Shuwa Shopping for More U. S. Holdings

September 21, 1986|DAVID W. MYERS | David W. Myers specializes in the financial aspects of real estate. and

Shuwa Co. Ltd. of Tokyo, the real estate conglomerate that formalized its $620-million cash purchase of downtown's Arco Plaza last week, wants to add another $1 billion to $2 billion worth of U. S. real estate holdings to its fast-growing portfolio, a top Shuwa official confirmed.

Executives from Shuwa, Arco and Bank of America called a special news conference last Tuesday so the press could witness the official closing of Shuwa's purchase of the plaza, which originally was owned by an Arco-B of A partnership.

The sale, announced Aug. 4, is the second-largest real estate transaction in California's history.

After the conference, Takaji Kobayashi, a Shuwa official whose father heads the parent corporation, said the company plans to buy another $1 billion to $2 billion worth of U. S. property. A handful of local commercial brokers say they're already scouring the Southland for property that might catch Shuwa's eye.

It's been a big year for Shuwa Investment Corp., the Baldwin Park-based U. S. subsidiary that Shuwa Co. Ltd. formed in 1978. Although the firm had made a few relatively minor purchases in the past, no one really paid much attention to it until it bought the 12-story Figueroa Tower at 800 S. Figueroa St. earlier this year.

Other Firms Interested

But Shuwa really started grabbing headlines when--to many local real estate experts' surprise--Arco and Bank of America announced that they were selling the landmark plaza to the closely held Japanese firm.

Several others were reportedly interested in the property--including local developer Raffi Cohen and Canadian real estate giant Olympia & York--but it was Shuwa that got what many real estate experts say is the crown jewel of downtown's commercial projects.

Nearly all of Arco Plaza's 2.2 million square feet of office space is leased, even though a recent survey by commercial broker Grubb & Ellis Co. found that the overall office vacancy rate downtown is hovering around 17%. The plaza's twin 52-story, granite-sheathed towers have served as a reference point for other downtown developments since they were completed in 1972.

The recent clamor over the deal has almost obscured the news that Shuwa has picked up yet another landmark property downtown.

Chase Plaza Purchased

The company's purchase of the 435,000-square-foot Chase Plaza at 8th Street and Grand Avenue was quietly finalized two weeks ago, and sources say the price tag was about $125 million. All told, Shuwa Co. President Shigeru Kobayashi said, the company now owns $1.7 billion of U. S. real estate. While most of the property is in the Southland, the company also said last week it wants to buy the New York headquarters of American Broadcasting Corp.

Shuwa apparently won't have much trouble paying for future acquisitions. According to the younger Kobayashi, the company owns about 60 buildings in downtown Tokyo worth an aggregate $6.6 billion.

To put that in perspective, the biggest real estate deal in California's history was developer Walter H. Shorenstein's $660 million purchase of Bank of America's world headquarters in San Francisco a year ago.

If Shuwa doesn't want to use the cash already in the company's bulging treasury, brokers say, it can borrow against the equity in its holdings in Japan to finance future purchases in the United States.

Many Thanks Yous

The press conference itself was dull but unique. Shigeru Kobayashi said through an interpreter that he was surprised that more than 75 reporters, cameramen and others showed up for the meeting. By the time it was over, they may have wished they had skipped it.

First, Kobayashi thanked the mayor. Then he thanked those at Arco. Then he thanked Bank of America, lenders involved with the project, and the people of Los Angeles. Then he thanked the mayor again, pointed out that Bradley had given him the key to the city, and that Shuwa had made "a very small donation" of $100,000 to help build a monument to immigrants in Los Angeles.

All of these thanks were made, one by one, through an interpreter, so it took a lot of time.

Kobayashi also talked about the high content of asbestos in the towers. Asbestos has been linked to cancer, and some local brokers say the potential cost of replacing or encapsulating the toxics in Arco Plaza plaza may have lopped off as much as $50 million from the building's asking price.

Experts Consulted

Shuwa had experts from both Japan and the U. S. examine the building, Kobayashi said. The day the tests were run, he added, the examiners found that the air quality inside the building was actually better than the air quaility outside the towers.

Kobayashi was not specific about his company's future plans.

When a reporter asked him if he planned to buy more U. S. real estate, he went into a long, disjointed reply that ended with his disclosure that he had recently enjoyed a steak dinner here with all the trimmings--and a beer--for about $12. That same meal would cost about $100 in Japan, he said.

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