Some Japanese real estate investors aren't really investing in real estate.
And because they're not, the Los Angeles real estate market could shake from a moderate financial quake in about five years.
This warning comes from a Los Angeles-based attorney who serves as an adviser to Japanese investors in the United States and overseas.
He's Stanley McKiernan, a member of the law firm of McKiernan, Gurrola, Moriwaki & Brady. McKiernan helped a Japanese group invest in the new $125-million Long Beach Sheraton hotel.
"Most Japanese investors now buying U. S. real estate are doing so as a long-term investment," he says. "However, some Japanese investors are buying real estate with the objective of selling when the currency market changes.
"Many Japanese believe that the dollar, now in the range of 150 yen to the dollar will rise to about 200 yen to the dollar in about five years, depending, of course, on world conditions.
"At that time, they can sell their property, taking a profit on the currency exchange, as well as on the property's normal increase in value."
McKiernan emphasizes that this property would be sold in ways to preserve the stability of the market.
However, he says, there is always some impact when major players signal they're ready to cash in their chips.
Does the existence of two classes of Japanese buyers affect how sellers should market their properties?
"No," says McKiernan, "Both types of investors want the same thing--prime, attractive property with a good but stable profit potential."
Is there an easy way to tell if a potential buyer is looking for a long-term or a short-term investment?
There's no perfect way, says the attorney, but if it is a privately-owned company and the owner is over 65 years old, you can guess that he would want to see a profit during his lifetime.